4 REITs Your Black Friday Shopping Cart Must Have

Americans celebrated nature’s bounty on Thanksgiving Day. Now, Black Friday will kick off the annual holiday shopping season, giving retailers the chance to take advantage of bountiful sales. And why not? With rising incomes supported by wage compensation and huge savings accumulated during the pandemic, consumers are ready to splurge.

According to Jack Kleinhenz, chief economist for the National Retail Federation (“NRF”), “The unusual and advantageous position we find ourselves in is that households have vigorously increased their spending for most of 2021 and retain some power to invest. important purchase for the holidays.

In fact, the NRF’s projections paint an encouraging picture, with holiday retail sales – excluding restaurants, car dealerships and gas stations – expected to increase 8.5-10.5 percent per year. compared to the previous year to reach a total of $ 843.4 billion to $ 859 billion, suggesting the highest level of vacations. recorded retail sales. Online and other non-store sales are estimated to jump 11-15 percent to a total of $ 218.3 billion to $ 226.2 billion, from $ 196.7 billion reported in the same period. last year.

While e-commerce is expected to remain a major contributor, people are expected to go for a more traditional holiday shopping experience this year and return to in-store shopping. In anticipation, hiring for positions in physical stores and warehousing and distribution centers has increased.

This optimism would translate into greater benefits for the real estate industry, especially REITs. Higher retail sales, whether online or in physical stores, generate huge profits for these REITs. The increase in footfall in shopping malls and shopping centers would create additional demand for space. Online sales also need real storage and efficient distribution space.

In addition, retailers use last mile stores as essential distribution and distribution centers to serve the nearby dense population and outperform pure e-commerce players in terms of delivery times and cost effectiveness. Additionally, curbside pickup, combined with click-and-collect options, is likely to continue to gain attention in today’s environment and even in the post-Covid era. And REITs making efforts in this direction are likely to add a competitive advantage today.

Choice of actions

To capitalize on this trend, we have selected four actions for your Black Friday basket. In addition to having strong fundamentals, these top ranked REITs have a strong chance of outperforming the market over the next 1-3 months. These stocks are also experiencing positive valuation revisions, reflecting the optimistic outlook of analysts.

We suggest you invest in Simon Real Estate Group SPG, which is a giant in the retail REIT industry and boasts a portfolio of premium retail assets in the United States and overseas. The adoption of an omnichannel strategy and successful partnerships with high-end retailers have helped Simon Property Group. It also exploits growth opportunities by helping digital brands strengthen their physical presence, as well as capitalizing on buying recognized retail brands in the event of bankruptcy.

Additionally, Simon Property is exploring the mixed-use development option, which has gained immense popularity in recent years among those who prefer to live, work and play in the same neighborhood. In addition, with a strong balance sheet and available capital resources, SPG appears ready to ride this growth curve and capitalize on the opportunities arising from market dislocations.

In the third quarter, Simon Property saw increased rental volumes, occupancy gains, buyer traffic and retail sales. In addition, management has raised the forecast of operating funds (FFO) per share for 2021 to the range of $ 11.55 to $ 11.65, up from the range of $ 10.70 to 10. $ 80 expected earlier, suggesting an 85-cent increase at mid-point. Simon Property announced a 10% sequential increase in its fourth quarter 2021 dividend. The company will now pay $ 1.65 per share, up from $ 1.50 paid earlier. The increased dividend will be paid on December 31 to its shareholders of record on December 10, 2021.

Simon Property Group currently holds a Zacks Rank # 2 (Buy). Over the past month, Zacks ‘consensus estimate for 2021 FFO per share saw an upward revision of 3.8% to $ 11.28, reflecting analysts’ bullish outlook.

Another retail business owner is Federal Real Estate Investment Trust FRT, a North Bethesda, MD-based retail REIT with a portfolio of high-end retail assets – primarily located in major coastal markets from Washington, DC to Boston, San Francisco and Los Angeles – as well as a diverse tenant base, both national and local.

Federal Realty has strategically selected the inner suburbs of nine major metropolitan markets. Due to the high demographics and the infill nature of its properties, the company has been able to maintain a high occupancy rate over the years. In addition, its emphasis on the outdoor format and the concept of “The Pick-Up” has prepared it well to attract tenants even in the midst of the current health crisis. Additionally, with the economy recovering, widespread immunization and strong consumer spending, the retail REIT is poised to take advantage of its superior assets in prime locations and experience an improving business environment. rental.

Currently, FRT is ranked Zacks Rank # 2 and has a long term growth rate of 8.4%. Additionally, for 2021, the stock saw Zacks’ consensus estimate for the FFO per share revised 4.9% up to $ 5.36 over the past month. It also suggests an 18.6% year-over-year increase.

Our next pick is industrial REIT stock – Rexford Industrial Realty, Inc. REXR – which focuses on the acquisition, ownership and operation of industrial properties located in Southern California infill markets. Recently, Rexford announced the disbursement of $ 125.9 million to acquire five industrial properties in major Southern California submarkets.

With these buyouts, Rexford’s acquisition activity in 2021 reached $ 1.4 billion. In addition, more than $ 300 million of acquisitions are under contract or have accepted offers. Southern California is considered a highly valued industrial property market with supply constraints in the United States.

Currently, Rexford wears a Zacks Rank # 2 (Buy). Zacks’ consensus estimate for current year FFO per share has been revised up 2.5% in the past 30 days. This also indicates an expected increase of 23.5% year over year.

The basket will be incomplete without another industrial REIT. One of the most promising on the shelf is Washington-based Bellevue. Terreno real estate company TRNO, which targets functional buildings at infill locations, which benefit from high population densities and are located near high volume distribution points.

Terreno Realty recently spent $ 7.7 million to purchase an industrial property in Los Angeles, California, as part of its acquisition-driven growth strategy. Supported by expansion efforts, TRNO is well positioned to enhance its portfolio in the six major US coastal markets – Los Angeles, Northern New Jersey / New York, San Francisco Bay Area, Seattle, Miami and Washington, DC – which show strong demographic trends. and witness to strong demand for industrial real estate.

Terreno Realty currently has a Zacks rank of 2. Zacks’ consensus estimate for current year FFO per share has been revised slightly up to $ 1.72 in the past 30 days. This calls for a 19.4% year-over-year increase.

Here is the performance of the above stocks over the past three months.

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Image source: Zacks Investment Research

To note: All EPS figures presented in this valuation represent funds from operations (“FFO”) per share. The FFO, a measure widely used to assess the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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Simon Property Group, Inc. (SPG): Free Stock Analysis Report

Federal Realty Investment Trust (FRT): Free Stock Analysis Report

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Rexford Industrial Realty, Inc. (REXR): Free Inventory Analysis Report

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Peggy P. Gilmore