3 Undervalued REITs That Could Be Flipped Soon

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Between inflation concerns and signs of recession, the stock market is currently running erratically. Some analysts, such as Fairlead Strategies’ Katie Stockton, have recently noted that stocks are in the early stages of a bear market cycle. After four good days last week in which the major indexes moved higher, stocks gave up their gains on Friday and really succumbed to selling pressure the following Monday morning.

In the face of this turmoil, investors often look to safer stocks, such as real estate investment trusts (REITs), which are mandated to return 90% of their taxable income to shareholders in the form of dividends. As such, REIT stocks often have lucrative dividend yields.

However, REITs as a sector have fallen sharply for several months, so investors are looking for individual stocks that may soon reverse course. Now may be a good opportunity to take advantage of the higher dividend yields that have resulted from falling prices in these stocks. But performance alone is not enough. Investors need to have confidence that stocks are poised for a rebound.

Three REIT stocks with strong returns and a promising future may be worth adding to your portfolio.

SL Green Realty Corp. (NYSE: SLG) is the largest owner of office buildings in New York. The company owns and manages 66 buildings, with over 40 million square feet of rentable space. The 2020 pandemic was devastating for SLG, with a large decrease in the number of tenants and rents received. The falls were so bad that the stock lost 55% of its value in three months.

However, those who predicted the collapse of the office and the demise of SLG were proven wrong when SLG rebounded from $35 to $80 over the next 12 months. The stock then traded sideways for several months, but since April of this year, it has fallen again, to a current price close to $45.

Despite CEO Marc Holliday’s assertions that the company expects office populations to return to full-time levels by mid-2023, some analysts seem sceptical and have factored a potential downturn into their target price. However, SLG’s current occupancy rate is around 93%, with the company expecting over 94% by the end of the year.

And it’s ready for SLG as it continues to build four new skyscrapers in Manhattan, as well as remodel several other buildings in its portfolio.

On a recent earnings call, Holliday also noted that despite a 17% year-over-year decline in revenue, funds from operations (FFO) of $115.8 million were up 7% from the fourth quarter of 2021. That bodes well. monthly dividend of $0.311. which currently has a lucrative annual yield of 7.7%.

SLG is also committed to a multi-year share buyback plan. Unfortunately, nearly two million shares were bought back last year at a high average price of $76.69 per share. CLG plans to buy back another 250 million shares this year, which, considering the current price, will be much more beneficial for shareholders.

Investors can pick up shares now at a reasonable price and perhaps secure an excellent monthly dividend for years to come. This company has proven resilient in recent years and could continue to thrive despite the headwinds it continues to face.

Related: This little-known REIT has produced double-digit annual returns for the past five years

Plymouth Industrial REIT Inc. (NYSE: PLYM) is a Boston-based real estate company that owns, leases and manages single and multi-tenant industrial properties in 13 regions of the United States. It owns and manages 207 buildings, totaling 34 million square feet. Much of its portfolio is located in secondary markets throughout Ohio, Illinois, Tennessee, Georgia and Florida.

PLYM stock more than tripled from the lows caused by COVID-19 in early 2020 through December 2021. But since then the stock has fallen from nearly $32 to a recent low of $17.04. While the company grew revenue well during this period, earnings per share (EPS) lagged because the company’s aggressive acquisitions had yet to pay off.

However, Plymouth’s EPS may rise soon. In the Aug. 3 quarterly earnings call, CEO Jeff Witherell noted, “We’re starting to see the cumulative impact of double-digit rent increases and record leasing volume kick in and accelerate same-store NOI growth. Occupancy was 97.3%. Cash release margins were 22.2%. Same store NOI on a cash basis increased 15.8%. Rental collections far exceeded 99%. Core FFO per share increased 15% and AFFO per share increased 28%. He went on to say that the company will withdraw from acquisition activity in the near future.

PLYM stock rose about 15% in the weeks following that earnings call. The stock is likely due for a breather after this rally, but, longer term, acquisitions may now boost earnings. If that happens, PLYM could return to $20 within the next 12 months. The dividend currently pays around 4%, and with FFO growth, the dividend looks to be safe for a long time.

EPR properties (NYSE: EPR) is a diversified experiential REIT that manages $6.7 billion of entertainment properties in 44 states. It has venues such as amusement parks, cinemas, ski resorts and water parks. And if you’ve ever been to a Topgolf center, it’s also one of its business partners.

Like SL Green, EPR was completely devastated by the onset of COVID-19 in 2020 and the subsequent lockdowns that disrupted the entertainment industry. EPR shares fell from the mid-$60s in February to just $11.40 in mid-March. And while the stock has never approached those highs again, it recently hit $55.90. Revenues have increased as lockdowns have ended and people have booked holidays and are looking more for entertainment outside the home.

However, concerns about inflation and recession have weighed on EPR shares recently, and in recent days, the stock has fallen to $48. Another investor fear was Cineworld’s announcement that it is evaluating options for more liquidity and looking at restructuring its balance sheet. Cineworld is the parent company to entities that lease Regal Theatres, a major tenant of EPR. However, EPR was quick to announce that Regal is aware of all lease payments and not in any negotiations with EPR for future rent payments. This assurance calmed market fears, but only to a small extent.

At its current price, EPR’s annual dividend yield is 6.8%. Like SLG, this dividend is also paid monthly, making it great for paying bills in retirement or even for younger investors to reinvest in stocks. In the near term, EPR could struggle as the market tries to discern how much inflation or recession could affect entertainment spending. However, EPR has already proven its ability to withstand adversity and could be a good source of dividend income for years to come.

Highlights of today’s real estate investment news

  • The CalTier Multi-Family Portfolio Fund recently completed a new investment in a portfolio of four apartment buildings consisting of 185 units. The CalTier Multi-Family Portfolio Fund is one of the few non-traded real estate funds available to non-accredited investors and has a minimum investment of $500. Year to date, the fund has produced an annual cash return of 7.02%.

  • The real estate investment platform backed by Bezos Homes arrived launched a new batch of offers to allow retail investors to buy shares in single-family rental homes with a minimum investment of $100. The platform has already financed over 150 properties with a total value of over $50 million.

Find more real estate investment news and deals at Benzinga Alternative Investments

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