Which REITs are performing well? An expert shares his views
A heightened interest rate environment has weighed on real estate stocks, but investors who know where to look within the sector will be rewarded, according to one expert.
The fallout from the pandemic shift to hybrid and remote work arrangements has left many office spaces and retail strips deserted.
While the recovery is ongoing, investors who are interested in buying real estate investment trusts (REITS) should focus on residential and industrial sectors as opposed to office or retail, according to Gavin Graham, contributing editor for the Income Investor and Internet Wealth Builder newsletters.
“You need to be selective in which sectors of the REIT market you’re looking,” Graham told BNN Bloomberg in a Monday television interview.
Graham said he is mostly staying away from office REITS at the moment, as well as retail, as he watches for an economic slowdown.
Instead, he sees opportunities in residential and essential services.
“What we’re seeing are some of the biggest discounts in sectors like apartments or grocery backed retail, which are actually doing pretty well in an operational business and paying a pretty decent yield,” he said.
The apartment sector is particularly attractive at the moment, he added, because of population growth from high levels of immigration to Canada.
TIPS FOR INVESTING IN REITS
Graham suggested investors look for retail REITS that own a part of the operational business, such as an REIT with grocery chain exposure.
“You’ll generally have an arrangement whereby if the operating company wants to, it can actually sell some more of its grocery stores to the REITS, which means there is some growth from that,” he said.
This model provides safety because there is no real risk of a major tenant leaving, Graham said.
“In essence, it’s a mutually beneficial arrangement,” Graham said.
Graham pointed to Canadian Apartment Properties REIT, Boardwalk REIT, InterRent REIT and Minto Apartment REIT as names that have held up better than the rest of the REIT sector as a whole.
Graham owns shares in InterRent, but he does not own shares in any of the other stocks mentioned above. Neither does his publication, nor his family.
The fallout from the pandemic shift to hybrid and remote work arrangements has left many office spaces and retail strips deserted.
While the recovery is ongoing, investors who are interested in buying real estate investment trusts (REITS) should focus on residential and industrial sectors as opposed to office or retail, according to Gavin Graham, contributing editor for the Income Investor and Internet Wealth Builder newsletters.
“You need to be selective in which sectors of the REIT market you’re looking,” Graham told BNN Bloomberg in a Monday television interview.
Graham said he is mostly staying away from office REITS at the moment, as well as retail, as he watches for an economic slowdown.
Instead, he sees opportunities in residential and essential services.
“What we’re seeing are some of the biggest discounts in sectors like apartments or grocery backed retail, which are actually doing pretty well in an operational business and paying a pretty decent yield,” he said.
The apartment sector is particularly attractive at the moment, he added, because of population growth from high levels of immigration to Canada.
TIPS FOR INVESTING IN REITS
Graham suggested investors look for retail REITS that own a part of the operational business, such as an REIT with grocery chain exposure.
“You’ll generally have an arrangement whereby if the operating company wants to, it can actually sell some more of its grocery stores to the REITS, which means there is some growth from that,” he said.
This model provides safety because there is no real risk of a major tenant leaving, Graham said.
“In essence, it’s a mutually beneficial arrangement,” Graham said.
Graham pointed to Canadian Apartment Properties REIT, Boardwalk REIT, InterRent REIT and Minto Apartment REIT as names that have held up better than the rest of the REIT sector as a whole.
Graham owns shares in InterRent, but he does not own shares in any of the other stocks mentioned above. Neither does his publication, nor his family.
