In this article, we present the list of Top 10 Real Estate Stocks to Buy According to Land & Buildings Investment Management.
Jonathan Litt’s Land & Buildings Investment Management is a Stamford, Connecticut-based activist hedge fund that primarily invests in real estate assets. The fund was founded in 2008 by Mr. Litt, who boasts more than a quarter century’s worth of experience as a global real estate strategist. The fund seeks to unlock value in its investments by engaging in constructive activism that can include leadership and/or board changes, the sale of companies and/or assets, and operational turnarounds. The fund has also pushed for greater shareholder reforms in the REIT industry.
From its inception in August 2008 through June 2019, the Land and Buildings Capital Growth Fund LP has delivered compound annual returns of 6.39%. The fund’s results have varied widely in recent years, dipping by nearly 25% in 2018 after 13% gains in 2017. After strong double-digit returns in both 2014 and 2015, the fund lost 8.63% in 2016. Land & Buildings held $606 million in assets under management as of March 2021.
As of September 30, 2021, 75% of Land & Buildings Investment Management’s 13F portfolio was invested in the real estate sector. The fund maintains a concentrated 13F portfolio that holds just 18 stocks, several of which the fund is actively engaged with. In this article, we’ll check out the fund’s top 10 real estate holdings.
Taken from: Unsplash
Our Methodology
Let’s check out the top 10 real estate stocks to buy according to Land & Buildings Investment Management. Note that all hedge fund data is based on the exclusive group of 800+ funds tracked by Insider Monkey as part of our market-beating investment strategy.
Top 10 Real Estate Stocks to Buy According to Land & Buildings Investment Management
10. Jones Lang LaSalle Inc (NYSE:JLL)
Hedge fund ownership of Jones Lang LaSalle Inc (NYSE:JLL) is near a six-year high thanks in part to Land & Buildings Investment Management, which owns 84,700 shares worth $21.01 million as of September 30. 31 of the hedge funds monitored by Insider Monkey’s database were long JLL at the end of Q3, a nearly 50% jump from just two quarters earlier.
Another of those Jones Lang LaSalle Inc investors is Ariel Investments, which praised the company’s performance in its Q3 investor letter. The fund praised management for wisely preserving cash during a challenging time for its commercial real estate business. The firm also noted that the company’s diverse business model allowed it to survive headwinds in its capital markets and leasing segments, which rebounded strongly in the summer of 2021, pushing Jones Lang LaSalle’s EBITDA margins outlook higher.
9. First Industrial Realty Trust, Inc. (NYSE:FR)
Another one of Land & Buildings Investment Management’s favorite real estate stocks is First Industrial Realty Trust, Inc. (NYSE:FR). Though the fund did cash out 54% of its stake in FR during Q3, it nonetheless remains one of its 11 largest holdings, consisting of 554,364 shares valued at $28.87 million at the end of September.
The sale of over half of its First Industrial Realty Trust, Inc. stake should only be seen as profit-taking, as FR shares gained 50% between mid-2018 and the third quarter of 2019. Hedge funds like the industrial real estate owner and operator’s secular tailwinds and believe its portfolio should be able to generate stable net operating income growth in the 5% range over the coming years.
8. AvalonBay Communities, Inc. (NYSE:AVB)
AvalonBay Communities Inc (NYSE:AVB) is another real estate stock that has seen profit-taking from hedge funds in recent quarters, as 37% of its former shareholders sold out of the stock during Q2 as AVB shares gained 33% between Q3 2020 and Q2 2021. Land & Buildings Investment Management was not one of them, as the fund has held on to the bulk of its position in AVB since opening a stake in the company during Q1. The fund owned 134,560 shares worth $29.82 million as of September 30.
The third-largest owner of apartments in the United States, AvalonBay Communities Inc is poised for an even bigger 2022 thanks to promising rental growth rates and a projected pipeline that is close to $2 billion in value. Apartment REITs on the whole are projected to have a great year in 2022 thanks to in-place leases being 12% below market.
7. Ventas, Inc. (NYSE:VTR)
Land & Buildings Investment Management owns a 595,585-share position in Ventas, Inc. (NYSE:VTR), which was valued at $32.88 million on September 30. Hedge funds piled into VTR in the first quarter of 2021, as there was a jump of more than 50% in ownership. As VTR shares continued to rise, gaining 73% between mid-2020 and the third quarter of 2021, several hedge funds sold off those newly acquired positions.
In its Q3 2020 investor letter, Nelson Roberts Investment Advisors noted that while it sold off the majority of its Ventas, Inc. stake during that quarter for the purposes of reversing a strategic tax loss in its taxable accounts, the fund did maintain a small position in VTR and believes the company is poised to capitalize on the aging baby boomer population. The healthcare property-focused REIT also pays out a nice dividend of 3.38%
6. Public Storage (NYSE:PSA)
Closing out the first half of our list of Land & Buildings Investment Management’s top real estate bets is Public Storage (NYSE:PSA), the owner and operator of self-storage facilities, which are expected to grow in popularity in the coming years as the value of space increases. The fund’s position in Public Storage was unchanged from a quarter earlier, as it maintained its holding of 113,692 shares which were valued at $33.78 million at the end of Q3.
Overall hedge fund ownership of PSA shot up to an eight-year high in Q3, as there was a greater than 30% jump in the number of shareholders among those tracked by Insider Monkey’s database. Not only does Public Storage have some strong tailwinds behind it, but the entire REIT sector as a whole is expected to have a strong 2022, with Citi predicting 10%-15% gains over the next 12 months.
5. American Homes 4 Rent (NYSE:AMH)
Kicking off the second half of our list of Land & Buildings Investment Management’s top real estate stock picks is American Homes 4 Rent (NYSE:AMH). The fund raised its stake in AMH by 10% during Q3, pushing it to 988,493 shares valued at $37.68 million as of the end of September. Hedge fund ownership of AMH has steadily increased over each of the last six quarters, hitting a record high of 34 during the September quarter.
Third Avenue Management, which initiated a stake in American Homes 4 Rent in Q3 of 2020 and remains a shareholder through the latest 13F filing period, discussed its latest purchase in its Q3 2020 investor letter. The fund expressed optimism over AMH’s unique build-to-rent platform, noting that it was well-positioned to expand the platform thanks to its unusually strong free cash flow for a REIT in addition to already having enough land secured to build another 6,000 homes. AMH is already North America’s second-largest owner of single-family homes for rent.
4. Retail Opportunity Investments Corp. (NASDAQ:ROIC)
Land & Buildings Investment Management built a large new stake in Retail Opportunity Investments Corp (NASDAQ:ROIC) during Q3, buying 2.39 million shares valued at $41.66 million on September 30. It was the fund’s only new purchase of the quarter and made ROIC its fourth-largest stock holding. Hedge fund ownership of ROIC has remained steady since jumping by 50% between the first and third quarters of 2019.
Retail Opportunity Investments Corp completed its departure from the Sacramento market in Q3 and has lined up nearly $123 million worth of grocery-anchored commercial property acquisitions. The company’s third-quarter revenue and FFO were pretty much right in line with estimates and the company announced a special cash dividend of $0.07 per share that will be payable on January 14.
3. Apartment Income REIT Corp. (NYSE:AIRC)
Land & Buildings Investment Management sold off 36% of its former stake in Apartment Income REIT Corp (NYSE:AIRC) during the September quarter, leaving it with 897,592 AIRC shares valued at $43.81 million. 17 hedge funds were shareholders of AIRC in Q4 2020 following its spinoff from Aimco and after dipping slightly in the first half of 2021, that figure returned to 17 in Q3.
Jonathan Litt tried and failed to stop that spinoff from taking place without a shareholder vote being conducted first, which Aimco refused. Litt was particularly concerned about the potential tax implications of the split on some of Aimco’s shareholders, who may have been hit for as much as $8 per share. He also argued that the two separated companies were unlikely to approach the underlying value of Aimco’s assets, which the company had estimated at $59. Litt was slightly off on that prediction, as the two stocks now trade for a combined $62.84.
2. American Campus Communities, Inc. (NYSE:ACC)
Land & Buildings Investment Management’s second-largest real estate holding is American Campus Communities, Inc. (NYSE:ACC), which it owns over 1.43 million shares of as of September 30, valued at $69.52 million. The fund raised the size of its ACC holding by 10% during Q3. Hedge fund ownership of ACC dipped by 37% during the first three quarters of 2021.
American Campus Communities, Inc. is yet another stock that’s been a strong performer for Jonathan Litt in recent quarters, gaining nearly 50% between the middle of 2020 and Q3 2021. The Austin-based student housing developer and operator earned $228.9 million in revenue during Q3, topping estimates by over $10 million while pulling in $0.40 in FFOM. The company also anticipating net operating income returning to pre-pandemic levels during Q4. ACC pays out a dividend that currently yields 3.33% annually.
1. Lexington Realty Trust (NYSE:LXP)
Topping the list of Land & Buildings Investment Management’s top real estate stock picks is Lexington Realty Trust (NYSE:LXP). The stock replaced Apartment Income REIT Corp as the fund’s top pick after it added 267% more shares to its holding in Q3, pushing its stake to nearly 6.78 million shares which were valued at $86.43 million.
Jonathan Litt has reportedly been in discussions with Lexington Realty Trust, ostensibly about its viability as a potential takeover candidate. The company should be highly coveted in the rapidly consolidating industrial REIT space and that prompted KeyBanc to upgrade LXP in November, saying that there was effectively a “for sale” sign on the company now and that a sale is “highly probable”.
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This article is originally published at Insider Monkey.
