2 Under-The-Radar REITs

Market Overview - Marko Kolanovic, JPMorgan's MD and Global Head of Macro Quantitative and Derivatives Strategy, predicts a stock market decline of over 20% to 4,200 by year-end, citing a disconnect between US equity valuations and the business cycle [2] - The S&P 500 currently trades at a multiple of approximately 21x earnings, one of the highest valuations since the Dot-com bubble [7] - Historically, valuations above 20x earnings indicate annual returns of only 0-4% over the next five years, suggesting poor risk/reward dynamics [9] Real Estate Sector Insights - Real estate has underperformed the S&P 500 since 2012, making it the cheapest sector in the index [9][11] - Blackstone's global co-head of real estate noted a significant increase in bidders for apartment buildings, indicating a return of buyers to the market [13] - The article highlights two attractive REITs: Kimco Realty Corp. (KIM) and Terreno Realty Corp. (TRNO), both of which are positioned well in their respective markets [28] Kimco Realty Corp. (KIM) - KIM is America's largest publicly traded operator of open-air grocery-anchored shopping centers, focusing on acquiring existing assets and developing mixed-use properties [14][15] - The company benefits from high demand and low vacancy rates, with occupancy rates for anchor spaces over 98% [17] - KIM has a BBB+ credit rating and a 5.6x net leverage ratio, with a current dividend yield of 4.9% and expected AFFO growth of 3% this year [18] Terreno Realty Corp. (TRNO) - TRNO focuses on industrial real estate in six major coastal U.S. markets, with 76.8% of its rent coming from warehouse/distribution assets [22] - The company targets functional properties in supply-constrained markets, maintaining a conservative debt strategy with a net leverage ratio of 2.9x EBITDA [25] - TRNO has returned close to 12% per year since its IPO, with a current yield of 3.0% and expected AFFO growth of 10% this year [27]