High Conviction REITs
Given the discounts we’re seeing in the REIT market vs. the private market, many of you have asked for our highest conviction real estate ideas.
Below is a concentrated portfolio of 15 positions.
We think this portfolio will achieve an 18%+ IRR (40%+ total return) over the next couple years, which is compelling given limited alternatives for similar returns.
You’ll also clip a decent (and growing) ~3% dividend while you wait.
There are obviously higher dividend options among REITs, but these 15 have been selected to maximize total return over the short-term.
The management teams of these REITs tend to pay out lower dividend yields than the average REIT as they have superior growth and reinvestment opportunities.
And given the quality of the real estate and low debt (<40% LTV) of these REITs we believe this portfolio is dramatically less risky than investing in most private market deals.
Portfolio - Sector Allocation
10% Positions (50% of Portfolio)
VICI - Vici Properties - they own the land under some of the best Vegas hotels.
SUI - Sun Communities - largest mobile home park / marina / RV owner (grows net operating income like clockwork. This is a long-term layup at today’s discounted price.
AMT - American Tower - Largest Cell Phone Tower REIT. Highest return on capital REIT, one of the best business models ever created.
BN - Brookfield - Diversified Real Asset Management Firm - with a giant infrastructure and real property portfolio (which is currently being valued at zero by the market). Technically not a REIT, but it’s cheap and we want the infrastructure exposure.
REXR - Rexford Industrial - Dominant owner of industrial properties (distribution facilities) in supply-constrained So Cal markets.
5% Positions (50% of Portfolio)
INVH - Invitation Homes - $20 billion single family rental portfolio. Huge tailwinds if mortgage rates stay higher for longer. Homebuilders are given Invitation Homes giant contracts. America is becoming a renter nation.
COLD - Americold Realty Trust - Giant cold storage operator. High growth opportunity.
PLD - Prologis - largest industrial property owner in the world. Best in the game. Have unfair data and customer relationship advantages.
VTR - Ventas - Healthcare focused REIT, owns large portfolio of senior housing. Not enough healthcare real estate to keep up with aging boomers.
DBRG - DigitalBridge - asset management firm focused on digital infrastructure - Picks and Shovel bet on AI growth
DOC - Healthpeak - largest owner of medical office properties. Stable niche. Baby was thrown out with the OFFICE bathwater.
CIGI - Colliers International - non-REIT. Commercial real estate brokerage (great business) with the most room to grow. Run by a talented founder known for roll-ups and aggressive M&A. They should buy up a lot of smaller and struggling brokerage firms this cycle.
HLT - Hilton - the premier hotel property management firm. 10x better business than most individual hotels due to hotel’s high operating expenses and capital expenses.
EQIX - Equinix - the best run datacenter company. Largest owner of network dense datacenters. Giant tailwinds due to A.I.
PSA - Public Storage - arguably the greatest REIT of all time - owns and operates the largest self storage portfolio in the world. Near term demand is in question but will be fine and will grow again soon.
Portfolio:
These are world-class REITs & real estate firms that we’re thrilled to own at today’s discounted prices.
Thank you,
REIT Dividends