In a recent article, I explained that “I decided that I would put together a research report for a 10-stock REIT portfolio. The goal here is to select 10 REITs diversified across property sectors that are trading at a discount.”

In Part 1 of the series, I highlighted these three REITs to include in the new retirement portfolio:

• Sun Communities (SUI)
• Crown Castle (CCI)
• VICI Properties (VICI)

These three REITs are spread across various sectors – manufactured housing, cell towers, and gaming – all resilient categories that generate predictable rental income for investors.

In Part 2, we will continue to diversify into other property sectors such as industrial (logistics), healthcare and net lease. This will further enhance diversification – both geographically and categorically – which should reduce portfolio volatility.

So without further ado, here are our next three “Retire Rich with REITs” picks:

Rexford Industrial (REXR)

REXR is an industrial REIT that owns 422 properties (722 buildings) located in Infill Southern California, the fourth-largest industrial market in the world. Southern California is the nation’s largest market with the lowest vacancy (3.9% vs national average of 6.1%).

The diversified portfolio consists of warehousing/transportation (31%), wholesale trade (23%), manufacturing (23%), professional/tech services (9%), arts/recreation (21%), construction (2%) and other (8%). REXR’s top tenants include:

• TIRECO Inc. 2.8%
• L3 Technologies 1.9%
• Zenith Energy 1.8%
• Federal Express 1.7%
• Cubic Corporation 1.6%
• GCO Logistics Supply 1.3%
• Best Buy 1.3%
• The Hertz Corp. 1.2%
• IBY, LLC 1.0%
• Michael Kors .90%

In Q2-24, REXR had solid earnings of $.60 per share in FFO, reflecting 11% year-over-year growth. Same-property NOI growth was 9.1% on a cash basis, primarily driven by strong lease spreads. As REXR’s CEO pointed out:

“Rexford’s differentiated business model is positioned to continue to deliver near and long-term outsized NOI growth, with $229 million of incremental cash NOI growth embedded within the in-place portfolio realizable over the next three years and irrespective of market growth.”

The balance sheet is also equipped for the growth. At the end of Q2-24, the company had net debt to EBITDA of 4.6x (close to the long-term target leverage range of 4.0 to 4.5x).

REXR had nearly $2 billion of total liquidity, comprised of ~$830 million from forward equity proceeds, ~$126 million of cash, and a ~$1 billion revolving credit facility (with no near-term debt maturities until mid-2026).

REXR has averaged 15% dividend growth over the last 5 years, and I expect this robust growth to continue going forward.

Shares remain cheap, trading at $50.92 with a P/AFFO multiple of 27.7x (normal is 40x).

The dividend yield is 3.3% with a payout ratio of 865%. Analysts forecast growth of 15% in 2025 and in 2026.

iREIT believes that REXR could return 25% annually, which is why we consider this REIT a Strong Buy.

Healthpeak Properties (DOC)

DOC is a REIT that specializes in the development, ownership and operation of commercial real estate with a focus on healthcare. The company has a market cap of $15.4 billion and a diverse portfolio made up of investments in the following healthcare segments:

• life science labs
• outpatient medical
• continuing care retirement community (CCrC)
• other non-reportable

At the end of 2023, the company’s largest segment was its lab properties, which made up 51.3% of its adjusted net operating income (‘NOI’).

This segment consists of properties that are designed for research and development activities of companies operating in the fields of pharmaceutical, biotechnology and medical devices.

Outpatient medical is DOC’s second-largest segment (37.6%) and is comprised of medical office buildings (MOBs) that are leased to healthcare providers such as hospitals, physicians and health systems.

The company’s smallest segment, CCrC (9.3%), provides housing and care for seniors and includes independent living facilities, memory care, assisted living and continuing care retirement communities.

DOC had solid earnings in Q2-24: the company reported FFO of $0.45 per share, AFFO of $0.39 share and total portfolio same-store growth of 4.5%.

The company increased FFO guidance range by $0.01 to $1.77 $1.81 and the AFFO guidance range by $0.01 to $1.54 to $1.58. Analysts are forecasting AFFO growth of 4% in 2025 and 6.5% in 2026.

DOC shares are now trading at $22.28 with a P/AFFO multiple of 14.4x (normal range is 19.6x). The dividend yield is 5.4% with a payout ratio (using AFFO per share) of 77%.

iREIT believes that DOC could return 20% annually, which is why we consider this REIT a Buy.

Realty Income (O)

O is a net lease REIT that owns over 15,500 properties in all 50 states and Europe (an attractive growth avenue with limited direct competition).

O enjoys a significant scale advantage in which the company has demonstrated large scale M&A (Vereit and Spirit) as well as bulk sale-leaseback transactions.

For example, O is able to buy properties in bulk at “Wholesale” prices while maintaining diversification. Peers with smaller denominators lack the ability to buy in bulk without incurring material diversification risk.

In addition to its scale advantage, O also enjoys a cost advantage, as the company is the only A-rated net lease REIT. Best-in-class key credit metrics include 5.3x net debt to annualized Pro Forma Adj EBITDA, 4.6x Fixed Charge Coverage Ratio, 36% Debt to Total Markey Cap.

More recently, the company announced the “pricing of a public offering of £350 million of 5.000% senior unsecured notes due 2029 and £350 million of 5.250% senior unsecured notes due 2041.”

These two key competitive advantages (scale and cost of capital) have led to superior earnings and dividend growth: ~5% AFFO growth and 10+% TOR in both higher and lower interest rate environments and 29 consecutive years of rising dividends.

In Q2-24, the company reiterated full-year investments at $3 billion in the AFFO per share guidance of $4.15 to $4.21, representing 4.5% annual per share growth at the midpoint. Analysts are forecasting (consensus) AFFO per share growth of 3% in 2025 and 4% in 2026.

Shares are now trading at $62.11 per share, with a P/AFFO multiple of 15.1x (normal is 17.5x). The dividend yield is 5.1% with a payout ratio of 75%.

iREIT believes that O could return 20% annually, which is why we consider this REIT a Buy.

In Closing

Now let’s recap the six REITs that I have referenced thus far:

In Part 3 (the final part of the series), I will provide a list of four more REITs that will round out our list of 10 REITs for Retirement.

As always, thank you for the opportunity to be of service.

Author’s 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 to assist in research while providing a forum for second-level thinking.