Changing demographics, lifestyle preferences, and the flexibility that renting offers are increasing demand for rental properties. Additionally, the growing preference for properties that offer sustainable and eco-friendly features also contributes to the growth of the real estate market. The global real estate market is projected to grow at a CAGR of 3.4% to reach $729.40 trillion by 2028.
Therefore, top real estate stocks, Brixmor Property Group Inc. (BRX), EPR Properties (EPR), and Simon Property Group, Inc. (SPG) might be worthy additions to the portfolio for property market exposure.
Retail REITs own and manage retail real estate and rent space to tenants. They include REITs that focus on large regional malls, outlet centers, grocery-anchored shopping centers, and power centers that feature big-box retailers.
According to UBS, global REIT earnings are forecasted to rise by over 10% cumulatively in 2024 and 2025. This growth rate already incorporates higher property taxes, payroll costs, and interest expenses from raised rates. The ability of REIT to deliver a mid-single-digit earnings CAGR that is more than twice the rate of real GDP growth is attracting the market.
In light of these encouraging trends, let’s look at the fundamentals of the three best Retail - REITs, beginning with number 3.
Stock #3: Brixmor Property Group Inc. (BRX)
BRX is a REIT that owns and operates a high-quality, national portfolio of open-air shopping centers. The company’s 359 retail centers comprise approximately 64 million square feet of prime retail space in established trade areas.
In terms of the trailing-12-month AFFO payout ratio, BRX’s 74.58% is marginally higher than the 73.94% industry average. Its 36.18% trailing-12-month EBIT margin is 69.8% higher than the 21.31% industry average.
BRX’s total revenues for the fiscal first quarter that ended March 31, 2024, increased 2.7% year-over-year to $320.24 million. Net income and net income per common share stood at $88.91 million and $0.29, respectively. In addition, its total assets, as of March 31, 2024, stood at $8.64 billion, compared to $8.33 billion as of December 31, 2023.
For the third quarter ending September 2024, BRX’s revenue is expected to increase 3.5% year-over-year to $318.15 million. BRX’s FFO for the same quarter is expected to increase 3.6% year-over-year to $0.52. BRX surpassed the consensus revenue estimates in each of the trailing four quarters.
BRX gained 11.9% over the past nine months to close its last trading session at $22.60.
BRX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BRX has a B grade for Sentiment. It is ranked #4 out of 30 stocks in the REITs - Retail industry.
For additional BRX’s Momentum, Stability, Growth, Value, and Stability ratings, click here.
Stock #2: EPR Properties (EPR)
EPR is the leading diversified experiential net lease REIT, specializing in select enduring experiential properties in the real estate industry.
On June 13, 2024, EPR declared its monthly cash dividend of $0.285 per common share, payable on July 15, 2024. This dividend represents an annualized dividend of $3.42 per common share.
In terms of the trailing-12-month EBIT margin, EPR’s 52.04% is 144.2% higher than the 21.31% industry average. Likewise, its 76.13% trailing-12-month EBITDA margin is 42.3% higher than the industry average of 53.50%. Furthermore, the stock’s 91.59% trailing-12-month gross profit margin is 38.2% higher than the industry average of 66.29%.
EPR’s total revenue for the first quarter ended March 31, 2024, was reported at $167.23 million. The company’s net income grew 9.8% year-over-year to $56.68 million, while its net income per common share increased 8.7% year-over-year to $0.75. Moreover, the company’s adjusted FFO was $85.68 million, and its adjusted FFO per common share was reported at $1.12.
Street expects EPR’s FFO for the quarter ending December 2024 to increase 4.7% year-over-year to $1.23, and revenue for the same quarter is expected to be $158.90 million. EPR surpassed the consensus revenue estimates in each of the trailing four quarters.
EPR’s stock has gained 1.9% over the past month to close its last trading session at $41.57.
EPR has an overall B rating, equating to a Buy in our proprietary rating system. It also has a B grade for Sentiment and Quality. It is ranked #2 in the same industry.
To see additional POWR Ratings for Value, Momentum, Stability, and Growth, click here.
Stock #1: Simon Property Group, Inc. (SPG)
SPG is a real estate investment trust that engages in the ownership of premier shopping, dining, entertainment, and mixed-use destinations. Its properties across North America, Europe, and Asia offer community gathering places for millions of people every day and generate billions in annual sales.
On June 14, 2024, WHP Global, in collaboration with an affiliate of SPG, Brookfield Properties, and Centennial Real Estate, announced the formation of PHOENIX, a new retail operating platform, which received court approval to acquire a majority of Express, Inc. operations.
Upon closing, PHOENIX would operate all direct-to-consumer (DTC) commerce in the United States for Express and Bonobos.
On May 20, 2024, SPG announced significant reinvestment to integrate luxury living at Fashion Valley. Following the recent completion of a multimillion-dollar revitalization, the new development further positions the center as the epicenter of upscale shopping, dining, and living in the San Diego area.
SPG’s 81.84% trailing-12-month gross profit margin is 23.4% higher than the industry average of 66.33%. Furthermore, the stock’s 44.57% trailing-12-month net income margin is 416% higher than the industry average of 8.64%.
For the first quarter ended March 31, 2024, SPG’s total revenue increased 4% year-over-year to $1.44 billion, of which its lease income rose 5.8% from the year-ago value to $1.30 billion. The company’s funds from operations were $1.33 billion, or $3.56 per share, compared to $1.03 billion, or $2.74 per share, a year ago, respectively.
Street expects SPG’s FFO for the quarter ending June 2024 to increase 2.3% year-over-year to $2.95. Its revenue is expected to be $1.32 billion for the same quarter. SPG surpassed the consensus revenue estimates in each of the trailing four quarters.
The stock gained 39.8% over the past nine months to close the last trading session at $146.09.
It’s no surprise that SPG has an overall rating of B, which translates to Buy in our POWR Ratings system. SPG also has a B grade for Stability, Sentiment, and Quality. It is ranked first in the same industry.
Beyond what is stated above, we’ve also rated SPG for Growth, Value, and Momentum. Get all SPG ratings here.
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SPG shares were trading at $146.97 per share on Monday afternoon, up $0.88 (+0.60%). Year-to-date, SPG has gained 5.75%, versus a 17.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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