Where To Invest $100,000 In REITs Right Now

A few weeks ago, I wrote an article titled “How To Invest $1,000 Per Month” and in this article, I provided a list of three REITs to own in the month of October.

Later this week I plan to write a follow-up article in which I’ll provide a list of three BDCs to purchase in the current month of November.

Over the course of twelve months, this portfolio will contain a total of 36 (3 picks per month) stocks with a capital investment of $12,000 ($1,000 per month).

Now, in the comment section of the first article, many people liked the concept of investing $1,000 per month.

This obviously appeals to certain investors who take “small bets” and are interested in building a portfolio of income that compounds over time.

Alternatively, other investors are looking to deploy capital more quickly by taking advantage of the deep discounts being offered by Mr. Market today. Instead of owning 36 stocks, they may be comfortable with owning a handful.

As they say, different strokes for different folks!

So, in this article, I want to provide you with a list of 6 REITs that I recommend buying for $100,000. Assuming equal weighting, these 6 picks would make up approximately 16.7% of the invested capital.

Similar to my “how to Invest $1000 per month” portfolio, I will also track the “where to invest $100,000 in REITs Right Now” portfolio to see how the two portfolios perform over time.

This should be fun!

Realty Income (O)

I recently published a deep dive on Realty Income as well as a follow-up article on the recently announced Spirit Realty (SRC) deal. So there’s really no need for a detailed now, however, as shown below, Realty Income is a Strong Buy that iREIT® forecasts could return 20% to 25% annually over the year or two.

VICI Properties (VICI)

VICI Properties is a triple-net lease real estate investment trust (“REIT”) that specializes in experiential real estate and has a portfolio of leading gaming, hospitality, and entertainment properties.

Several of VICI’s gaming properties are iconic trophy properties including Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas.

VICI’s gaming portfolio consists of 54 properties located in 15 U.S. states and 1 Canadian Province.

Their gaming properties contain approximately 4.2 million square feet of gaming space and feature more than 60,000 hotel rooms, approximately 500 retail outlets, and roughly 500 restaurants, nightclubs, bars, and sportsbooks.

VICI also owns 4 championship golf courses and 33 acres of land adjacent to the Las Vegas Strip that is either undeveloped or underdeveloped.

In addition to their casinos and gaming properties, VICI also owns 38 non-gaming experiential properties after their sale-leaseback transaction with Bowlero (BOWL) to acquire 38 bowling entertainment centers in October for $432.9 million at a 7.3% acquisition Cap Rate.

The Bowlero Master Lease is expected to generate an initial annual cash rent of $31.6 million with an initial lease term of 25 years and has contractual rent escalation built in at the greater of 2.0% or CPI-linked subject to a 2.5% cap.

The addition of Bowlero adds another publicly traded tenant to VICI’s roster, giving them a total of 12 tenants, and further diversifies their portfolio with Bowlero properties spread across 17 states, 11 of which are new for VICI, 7 of which do not have commercial casinos.

After the Bowlero transaction, VICI’s portfolio now consists of 92 experiential assets that cover roughly 125 million square feet. I spoke with VICI’s CEO, Ed Pitoniak, last week to discuss Bowlero on the iREIT® on Alpha “Ground Up” podcast.

In late October, VICI released its 3rd quarter operating results and reported total revenues during the quarter of $904.3 million, representing a 20.3% year-over-year increase.

FFO for the 3rd quarter was reported at $556.3 million, or $0.55 per share compared to $340.6 million, or $0.35 per share for the 3rd quarter in 2022.

AFFO during the 3rd quarter came in at $547.6 million, or $0.54 per share compared to $470.7 million, or $0.49 per share for the same period in 2022, which represents a 10.7% year-over-year increase on a per share basis.

VICI updated and narrowed its full-year 2023 AFFO per share guidance from the previous range of $2.11 to $2.14 to its updated guidance of $2.14 to $2.15 in AFFO per share.

Since 2019 VICI has delivered a blended average AFFO growth rate of 7.26% and an average dividend growth rate of 10.80%.

The stock pays a 5.81% dividend yield that is well covered with a 2022 year-end AFFO payout ratio of 77.72% and currently trades at a P/AFFO of 13.58x, compared to their normal AFFO multiple of 16.29x.

At iREIT® on Alpha we rate VICI Properties a Buy.

Rexford Industrial Realty (REXR)

Rexford Industrial is a REIT that specializes in the operation, acquisition, and redevelopment of industrial properties located throughout infill Southern California (“SoCal”).

Many of REXR’s industrial peers have properties spread across the United States or in some cases across the world, but Rexford differentiates its investment strategy in that it has an exclusive focus on the infill SoCal market.

Normally I would be concerned with such geographic concentration, but infill SoCal is the largest industrial market in the country and the fourth largest industrial market in the world and consistently has a supply/demand imbalance with a regional economy that is larger than most nations and a scarcity of supply due to natural barriers (mountains/ocean) and highly restrictive zoning regulations within the state.

Within infill SoCal, REXR operates in 5 markets: San Diego, Orange, Los Angeles, Inland Empire West, and Ventura.

By number of properties and total square footage, Rexford’s largest market is Los Angeles which has a total of 223 properties covering 24.8 million square feet, or 55% of REXR’s total portfolio square footage.

In total Rexford’s portfolio is made up of 371 properties that cover roughly 45.0 million rentable square feet within the SoCal region with an average portfolio occupancy of 97.9% as of their most recent update.

In October Rexford released its 3rd quarter earnings results and reported total revenues during the quarter of $205.4 million, versus $162.7 million in the 3rd quarter of 2022. Funds from Operations (“FFO”) came in at $114.6 million, or $0.56 per share, versus an FFO of $85.7 million, or $0.50 per share during the same period in 2022.

FFO growth represents a year-over-year increase of 33.5% or an increase of 12% on a per-share basis. REXR executed 104 leases in 3Q-23 totaling approximately 1.5 million square feet which consisted of 862,420 square feet of new leases and 667,179 square feet of renewal leases.

Releasing spreads on total leases in the 3rd quarter were reported at 64.8% on a GAAP basis, or 51.4% on a cash basis.

Rexford has delivered a blended average AFFO growth rate of 12.84% and a compound dividend growth rate of 22.03% since 2014.

Analysts project accelerated growth in the next several years with AFFO per share expected to increase by 10% in 2023, and then increase by 16% and 19% in the years 2024 and 2025 respectively.

REXR pays a 3.37% dividend yield that is well covered with a 2022 year-end AFFO payout ratio of 80.25% and trades at a P/AFFO of 26.60x, compared to their normal AFFO multiple of 35.54x.

At iREIT® on Alpha we rate Rexford Industrial a Strong Buy.

American Tower (AMT)

With a market cap of almost $90.0 billion, American Tower is the second largest publicly traded REIT, second only to Prologis (PLD) in terms of its market capitalization.

AMT is a cell tower REIT that specializes in the development, ownership, and operation of multitenant communications real estate which is leased to leading wireless providers, TV and radio broadcasters, and other communication service providers.

American Tower’s U.S. portfolio consists of almost 43,000 sites which includes wireless communications towers and distributed antenna system networks. Their top 3 U.S. tenants are T-Mobile, AT&T, and Verizon. Within its U.S. and Canadian markets, 17% of AMT’s revenue comes from T-Mobile, while 13% comes from AT&T, and 12% comes from Verizon.

The company has a global footprint with communication sites located across 25 countries and on 6 continents. AMT has approximately 182,000 communication assets in its international markets and receives around 45% of its property revenue from its international markets.

In addition to its cell towers and distributed antenna systems, AMT owns or has an ownership interest in 28 data centers which are mainly located within the United States.

In October AMT released its 3rd quarter earnings results and reported operating revenues during the quarter of $2.8 billion, versus $2.7 billion in the 3rd quarter of 2022.

NAREIT FFO came in at $1.5 billion during the 3rd quarter, compared to $1.6 billion for the same period in 2022, representing a negative growth rate of -5.0%.

Adjusted Funds from Operations (“AFFO”) during the quarter was reported at $1.2 billion, or $2.58 per share, compared to AFFO of $1.1 billion, or $2.36 per share in the 3rd quarter of 2022. The growth in AFFO represents a year-over-year increase of 9.3% on a per-share basis.

Over the last decade, American Tower has delivered a blended average AFFO growth rate of 10.89% and an average dividend growth rate of 20.70%.

Analysts expect AFFO per share to only grow by 1% in 2023, but then to increase by 6% in 2024 and by 8% in 2025.

The stock pays a 3.43% dividend yield that is very secure with a 2022 year-end AFFO payout ratio of just 60.04% and currently trades at a discount. AMT shares are currently trading at a P/AFFO of 18.78x, compared to their 10-year average AFFO multiple of 23.19x.

At iREIT® on Alpha we rate American Tower a Strong Buy.

MidAmerica Apartment Communities (MAA)

MidAmerica is an apartment REIT that specializes in the development, acquisition, ownership, management, and redevelopment of high-quality multifamily communities that are primarily located in the Sunbelt region of the country.

MAA has roughly 101,987 apartment homes located across 16 states and the District of Columbia. When measured by same-store net operating income (“NOI”), MidAmerica Apartment’s top 3 markets are Atlanta at 12.6%, Dallas at 9.6%, and Tampa at 7.0%.

At 53%, the majority of MAA’s properties are listed as Class A- or B+, while 39% are listed as Class A+ or A, and 8% are listed as Class B or B-.

Approximately 62% of MAA’s apartments are considered Garden Style, which they define as 3 stories or less, 34% are mid-rise (4 to 9 stories), and 4% are high-rise apartments. At the end of the third quarter, MAA reported an average effective rent per unit of $1,690 and an average physical occupancy of 95.7%.

In October MidAmerica released its 3rd quarter earnings results and reported rental and other property revenues of $542.0 million, versus $520.8 million for the same period in 2022.

Core FFO came in at $274.9 million, or $2.29 per share, versus Core FFO of $259.5 million, or $2.19 per share in the 3rd quarter of 2022. Core adjusted FFO (Core AFFO) during the quarter was reported at $238.5 million, or $1.99 per share, compared to $220.8 million, or $1.86 per share in the 3rd quarter of 2022.

MAA highlighted the strength of its balance sheet with a historically low net debt to adjusted EBITDA ratio of 3.4x and a total debt to adjusted total assets ratio of 27.3%. Additionally, all of their debt is fixed rate with an average effective interest rate of 3.4% and an average term to maturity of 7.2 years.

Since 2013 MAA has had a blended average AFFO growth rate of 6.64% and an average dividend growth rate of 5.92%. Since its public listing in 1994, MAA has never suspended or reduced its dividend and has paid 119 consecutive quarterly dividends since its IPO.

Currently, the stock pays a 4.64% dividend yield that is well covered with a 2022 year-end AFFO payout ratio of 60.95% and trades at a P/AFFO of 14.79x, compared to their 10-year average AFFO multiple of 19.18x.

At iREIT® on Alpha we rate MidAmerica Apartment a Strong Buy.

Alexandria Real Estate (ARE)

Since its founding in 1994, Alexandria has been the pioneer of the life science real estate niche and is the longest-running and most established developer, owner, and operator of collaborative life science properties.

ARE targets AAA innovation cluster locations and its primary markets are located in Boston, San Francisco, New York City, Seattle, San Diego, Maryland, and the Research Triangle.

ARE leases its laboratory space to top multinational pharmaceutical and biotechnology companies such as Bristol-Myers Squibb, Merck, and Moderna as well as leading academic institutions such as Harvard University, New York University, and the Massachusetts Institute of Technology.

16 out of ARE’s top 20 tenants are investment-grade rated by S&P or Moody’s and in total their top 20 tenants only make up 32.4% of their annual rental revenue.

As of their most recent update, Alexandria has a total asset base in North America that covers 75.1 million square feet and consists of 41.5 million rentable square feet (“RSF”) of properties in operation, 14.5 million RSF of properties in development or undergoing construction, and 19.1 million square feet allocated for future development.

At the end of the 3rd quarter, ARE’s operating properties had an occupancy rate of 93.7% with a weighted average lease term (“WALT”) of roughly 7 years.

Alexandria released its 3rd quarter operating results in October and reported total revenue during the third quarter of $713.8 million, versus $659.9 million in the 3rd quarter of 2022, representing an 8.2% year-over-year increase.

Funds from Operations came in at $386.4 million, or $2.26 per share during the 3rd quarter, compared to $344.7 million, or $2.13 per share during the same period in 2022. On a per-share basis, the year-over-year growth in FFO represents an increase of roughly 6.0%.

ARE had solid leasing volume during the quarter totaling 867,582 rentable square feet with a weighted average lease term of 13 years for the leases signed in 3Q-23. Additionally, year-to-date 3Q-23 annualized leasing volume of 4.6 million rentable square feet is in line with ARE’s average leasing results from 2013 to 2020.

ARE also highlighted the strength of its balance sheet during its earnings release with a net debt and preferred stock to adjusted EBITDA of 5.4x and a fixed charge coverage ratio of 4.8x.

ARE’s debt is 99.0% fixed rate and has a weighted average interest rate of 3.70% with a weighted average remaining term of 13.1 years. Plus, ARE has approximately $5.9 billion of liquidity with no debt maturing before 2025.

Since 2013 Alexandria has had a blended average AFFO growth rate of 5.10% and an average dividend growth rate of 8.62%. Analysts expect AFFO per share to increase by 10% in 2023, and then increase by 6% and 4% in the years 2024 and 2025 respectively.

The stock pays a 5.07% dividend yield that is well covered with a 2022 year-end AFFO payout ratio of 72.17% and currently trades at a P/AFFO of 13.84x, compared to their 10-year average AFFO multiple of 24.18x.

At iREIT® on Alpha we rate Alexandria Real Estate a Strong Buy.

In Closing…

I must always remind readers that diversification and equity orientation are very important pillars of constructing an intelligent stock portfolio.

Importantly, personal preferences play a critical role in portfolio decision-making, in which time horizon constitutes one of the most influential variables.

While some folks are perfectly content to own six REITs, I would not recommend it unless you possess the skillset to select these superior investments.

The safest way to gain access to the REIT sector is through an ETF like Vanguard Real Estate ETF (VNQ), which we will be using as a benchmark for the $1,000 per month and the 6-pack portfolio I just referenced.

Here’s a snapshot of the 6-pack with weightings (as per Sharesight):

Personally, I believe that a customized portfolio promises greater satisfaction than the one-size-fits-all alternative, which is why it’s important to design and implement a blueprint that fits your own investment objectives.

However, if your desire is to bet the REIT farm with $100,000 right now, this 6-pack may fit the bill.

As always, thanks for reading and commenting.

Happy REIT Investing!

Note: Brad Thomas is a Wall Street writer, which means he’s not always right with his predictions or recommendations. Since that also applies to his grammar, please excuse any typos you may find. Also, this article is free: Written and distributed only to assist in research while providing a forum for second-level thinking.