Top-performing real estate investment trusts (REITs) in June include Apartment Investment & Management Co., Service Properties Trust, and Tanger Factory O෴utlet Centers Inc., which have risen 35% or more in the past year, even as the U.S. real es♏tate market wavers under the pressure of high interest rates and commercial vacancies.  

REITs, represented by the Real Estate Select Sector SPDR Fund (XLRE), have declined by 10% over the past 12 months, compared with a 6% ri🅺se in the Russell 1000 In🔜dex.

Here are the top REITs in three categories: best value, fastest growth, and ඣmost momentum. All data a𝄹re as of June 8.

Best Value REITs

These are the REITs with the lowest 12-month trailing 澳洲幸运5官方开奖结果体彩网:price-to-earnings (P/E) ratio. Because profit can be returned to shareholders in the form of 澳洲幸运5官方开奖结果体彩网:dividends and buybacks, a low P/E ratio shows that you're paying less for ea♑ch dollar of 🐷profit generated.

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• Minto Apartment REIT: Minto is an open-ended REIT that owns multi-residential properties in the Canadian provinces of Alberta, Quebec, and Ontario. In May, the company reported first-quarter results, with revenue growing 18% due to higher occupancy rates and rents. Minto recorded a net loss of $24 million for the quarter, compared with net income of $35 million a year ago. The company attributed the loss to non-cash fair value losses on investment properties.
• Apollo Commercial Real Estate Finance Inc.: Apollo Commercial Real Estate Finance invests in 澳洲幸运5官方开奖结果体彩网:commercial real estate loans among properties in Europe and the U.S.
• Slate Grocery REIT: Slate Grocery owns and operates various U.S. grocery-anchored properties with approximately $2.4 billion in total real estate value. The company also trades 澳洲幸运5官方开奖结果体彩网:over-the-counter in the U.S. under the ticker SRRTF.

Fastest-Growing REITs

These are the top REITs as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their most recent quarterly YOY 澳洲幸运5官方开奖结果体彩网:earnings-per-share (EPS) growth.

Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptib♐le to the accounting anomalies of that quarter (such as changes in tax laws or restructuring costs) that may make one figure or the other unrepresentative of the business in gener🐭al. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.

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• National Health Investors Inc.: National Health Investors focuses on 澳洲幸运5官方开奖结果体彩网:leasebacks and joint ventures related to senior housing and other healthcare real estate, with nearly 200 properties located throughout the U.S.
• Farmland Partners Inc.: Farmland Partners is a real estate company that acquires farmland in North America and provides farmers with secured loans. On June 5, the company announced the sale of more than 1,300 acres of land located across four farms in Georgia, Arkansas, Illinois, and South Carolina. The total value of the transaction was approximately $8.9 million.
• Apollo Commercial Real Estate Finance Inc.: See company description above.

REITs With the Most Momentum

These are the REITs that had the highest total stock-price return over the past 12 m♕onths.

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• Apartment Investment & Management Co.: This is a property development company that targets the multifamily market.
• Service Properties Trust: Service Properties is a REIT that invests in hotels and retail net lease agreements, with more than 200 hotels located within North America. In May, Service Properties Trust released its first-quarter earnings. The REIT swung to a profit of $26 million after reporting a $120 million loss in the year-ago quarter. The trust sold 18 hotels in the first quarter, netting it $42 million, a sevenfold increase from the year before.
• Tanger Factory Outlet Centers Inc.: Tanger Factory Outlet operates open-air outlet centers with locations in Canada and 20 states. On April 11, Tanger Factory raised its annual dividend by 11% to $0.98. Tanger Factory Outlet released its first-quarter earnings in April, reporting a 16% increase in net income and raising its full-year guidance for 2023 for 澳洲幸运5官方开奖结果体彩网:funds from operations (FFO), core FFO, and net income per share.

Key Metrics for Analyzing REITs

Investors should have an understanding of specific metrics when analyzing REITs due to their specialized structure. Two key metrics used to analyze these securities include funds from operations (FFO) and 澳洲幸💜运5官方开奖结果体彩网:adjusted funds from operations (AFFO).

FFO: This metric measures a company's 澳洲幸运5官方开奖结果体彩网:cash flow generated through its business operations by adding and subtracting certain items from net income. Investors calculate FFO by adding 澳洲幸运5官方开奖结果体彩网:depreciation and 澳洲幸运5官方开奖结果体彩网:amortization charges to net income while deducting gains from property sales. FFO gives investors a more accurate reflection of operational performance, as real estate investments typically appreciate, rather than depreciate like many assets, in value over time.

AFFO: This measures a real estate company's recurring/normalized FFO after deducting capital maintenance expenditures. Many analysts consider AFFO a superior measure to FFO as it considers the ongoing costs of managing a real estate property over its life. Investors typically use AFFO to determine a company's ability to pay dividends to stockholders in the future.

Practical Example Calculating FFO and AFFO

Let's assume XYZ Ltd. reported net income of $1 million. It also incurred $50,000 and $100,000 in depreciation and amortization costs during the same reporting period. In addition, the company had a $200,000 profit from the sale of a property in its portfolio.

XYZ also reported rents of $75,000 and recurring 澳洲幸运5官方开奖结果体彩网:capital expenditures (CapEx) of $100🦩,000, which it incurred when making maintenance repairs to properties it owns.

Step 1: Calculate the FFO value.

FFO = $1,000,000 + $50,000 + $100,000 – ($200,000)

FFO = $1,150,000 – $200,000

FFO = $950,000

Step 2: ꦗDed𓃲uct recurring capital expenditures and rents from the FFO value.

AFFO = FFO – Capital Expenditures – Rent Adjustments

AFFO = $950,000 – $100,000 – $75,000

AFFO = $775,000

Advantages of Investing in REITs

Two primary advantages REITs provide investors relate to 澳洲幸运5官方开奖结果体彩网:liquidity and 澳洲幸运5官方开奖结果体彩网:diversification. Real estate investments have a time-tested favorable risk/return profile with less volatility compared with other assets. However, closing real estate deals typically takes weeks or months, making the asset class extremely illiquid. REITs solve this problem by having their securities traded on major 澳洲幸运5官方开奖结果体彩网:stock exchanges, allowing investors to buy and sell easily.

Real estate investment requires a significant financial commitment, often limiting buyers to a specific market or type of property. Investing in REITs solves this issue by allowing investors to diversify, with many trusts holding a portfolio of different property types, such as condos, retail space, healthcare facilities, or even telecommunication infrastructure.

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As of the date this article was written, the author does not own any of the above stocks.