REIT investing offers access to real assets with their own sources of value and income, providing a different type of exposure than technology-heavy portfolios.
Sam Adams, Co-founder of Vert Asset Management, recently shared that perspective in a Yahoo Finance article examining where REIT bargains may still exist.
Looking Beyond the Most Popular REITs
Data centers and other high-profile real estate sectors have attracted significant attention.
Yet Sam pointed out that many publicly-traded REITs across hotels, self-storage, warehouses, shopping centers, and other property types are still trading below net asset value despite strong revenue and operating income.
In simple terms, their market price may be lower than the estimated value of the properties they own.
This creates a reason to look beyond the sectors grabbing headlines.
Real Assets Can Add Diversification
Sam also highlighted the role real assets can play when portfolios are heavily concentrated in technology and other intangible assets.
Public REITs add exposure to real estate, a distinct asset class with different economic drivers than sectors such as technology. This can help provide diversification when other parts of the equity market fall out of favor.
During the dot-com era, from 2000 through 2002, REITs returned 14.6% annually while the S&P 500 lost 14.6% annually.
This does not mean all REITs are bargains or that real estate will always outperform. No asset class leads forever. But it is a useful reminder that real estate can play a different role when advisors consider diversification, valuation, and concentration risk.
Vert Asset Management is a registered investment adviser focusing on sustainable real estate investment that helps financial advisors build resilient, future-ready portfolios. We connect institutional-quality investments with the long-term goals of clients, focusing on both financial returns, soundness, and sustainability.
Risks of the REITs are similar to those associated with direct ownership of real estate, such as changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and creditworthiness of the issuer. Investing in REITs may pose additional risks such as real estate industry risk, interest rate risk, risks related to the uncertainty of and compliance with certain tax regime rules, and liquidity risk.
Investors should consult their investment professional prior to making an investment decision.
