Real estate is one of the most sought-after objects for investment in a period of high inflation. Real estate investments have high liquidity.
During the Covid-19 pandemic, the real estate market underwent changes. However, in general, it turned out to be stable.
In the period 2020 – 2021, online shopping and e—commerce were actively developing, which led to the development of warehouse real estate for online retail. Real estate that supports the digital economy is actively developing – data processing and storage centers, communication towers.
The sector of self-storage warehouses received the strongest growth, due to the high activity of buying and selling housing and the release of space in the premises during the pandemic. Thus, industrial real estate has a high growth rate.
The decline in the same period occurred in the sectors of office real estate, shopping and entertainment centers. The long-term perspective of office real estate will depend on whether the new system of work will lead to a reduction in the area per employee or not.
Currently, there is no need for all employees to be present at the workplace for constant communication, while the office remains a necessary element of the business model of most companies. It remains the center of business activity, but with the ability to do work from home.
Currently, there is a trend to invest in the digital economy, high-tech projects, IT projects, crypto projects, which can be both highly profitable and high–risk.
Conservative investors can invest in the development of the digital economy through the investment of real estate serving the digital economy.
Promising areas are:
- data centers;
- server rooms;
- telecommunication facilities;
- objects for online commerce (E-commerce).
Investments can be made directly in real estate, but often the objects are expensive and require large investments for development.
Investment funds are created for collective investment
Mutual funds are the most common in Russia. Investors receive shares (securities of the fund) in proportion to the invested funds. Mutual funds can also be: exchange—traded – the securities of this fund are traded on the stock exchange, and closed. The securities of the fund can be distributed among a certain circle of investors.
The largest investment fund market is the American one. Special companies that own and usually manage real estate are Real Estate Investment Trust (REIT). REITs can be traded on an exchange, and REIT units can also be traded on an exchange in the form of an Exchange Traded Fund (ETF). An ETF is a type of investment fund traded on an exchange and managed by an investment company.
This article will describe in more detail REITs as a liquid and conservative investment option.
Real Estate Investment Trust
Real Estate Investment Trust (REIT) – funds that manage real estate for the purpose of generating income. Funds can buy, build, lease, and also buy mortgage-backed securities from banks.
REITs were created in the USA after the signing of Public Law 86-779 by President Dwight D. Eisenhower. REITs make it possible to diversify into income-generating real estate by buying and selling securities.
Depending on the type of REIT assets , there are:
- Equity — receive income from the management of real estate (sale, lease),
- mortgage (Mortgage) – receive income from mortgage securities.
REITs are required to allocate at least 90% of their taxable income to the payment of dividends.
Funds can specialize in different real estate sectors:
- Office buildings – office buildings and premises;
- Industrial – production areas, warehouses and other areas for industry;
- Shopping centers – shopping centers, outlets, stores;
- Apartment complexes – residential premises for sale and rental;
- Data centers – areas for servers;
- Self-storage– self-service warehouses;
- Health care – areas for healthcare facilities;
- Timberland – forest lands;
- Infrastructure – areas for various types of infrastructure facilities;
- Specialty — outdoor advertising, cinemas, entertainment centers, etc.;
- Diversified – combining different types of real estate.
Advantages of REIT:
- Low entry threshold for real estate investments. Direct investments have a high threshold, because real estate is often expensive and indivisible.
- REIT securities have a high dividend yield.
- They are able to reduce the volatility of the portfolio, have a low correlation with the rest of the stock market.
- They are able to protect against inflation, since the value of real estate and rental payments are indexed in the wake of inflation.
The largest and most profitable real estate investment funds by segment:
- DATA CENTERS
Digital Realty is a fund specializing in real estate for data cents. The Fund owns more than 290 data – cents in 26 countries. The fund’s assets as of the end of 2021 are $36.369 billion. The capital is $18.476 billion.
Digital Realty | Data Center Services
Iron Mountain is one of the highest–yielding funds specializing in electronic data storage. The fund’s assets as of the end of 2021 are $14,450 billion. The capital is $0.857 billion.
Data & Records Management | Shredding | Iron Mountain
- TELECOMMUNICATIONS
American Tower Corp is one of the world’s largest REITs, owns more than 220,000 cellular towers in 25 countries around the world. The fund’s assets as of the end of 2021 are $69,887 billion. The capital is $9.069 billion.
American Tower Global Wireless Solutions | americantower.com
Crown Castle International Corp, a foundation specializing in communication infrastructure, owns 40,000 cell towers and almost 80,000 route miles of fiber. The fund’s assets as of the end of 2021 are $0.39 billion. The capital is $0.008 billion.
Landowners Help Desk | Crown Castle
- WAREHOUSES
Americold Realty Trust is a fund specializing in cold storage. Owns 249 temperature-controlled warehouses. The fund’s assets as of the end of 2021 are $8,216 billion. The capital is $4.029 billion.
Americold – Investor Relations
CubeSmart is a foundation specializing in self–storage warehouses. The fund’s assets as of the end of 2021 are $6.548 billion. The capital is $2.890 billion.
Self Storage Units – Storage Facilities, Moving Guides & More @CubeSmart
STAG Industrial is a fund specializing in warehouses, approximately 40% of the portfolio is leased to online stores. The fund’s assets as of the end of 2021 are $5.833 billion. The capital is $3.393 billion.
Public Storage is a fund specializing in warehouses for self–storage of personal belongings. The fund’s assets as of the end of 2021 are $17,380. The capital is $9.355.
Extra Space Storage – invests in self-storage. The fund’s assets as of the end of 2021 are $10.474 billion. The capital is $3.116 billion.
Self Storage Units at Extra Space Storage: Mini Storage Facilities
- THE MEDICINE
Innovative industrial properties is a fund founded in 2016, a leading provider of real estate capital for the regulated cannabis industry. The Foundation buys cannabis plants and rents them out. The fund’s assets as of the end of 2021 are $2.084 billion. Capital %1.611 billion.
Real Estate Cannabis Investment Firms – Innovative Industrial Properties
Physicians Realty Trust is a foundation specializing in medical office space that is rented to healthcare networks. The fund’s assets as of the end of 2021 are $5.182 billion. Capital &2.987 billion.
Physicians Realty Trust (NYSE: DOC) | Health Care REIT (docreit.com)
Omega Healthcare Investors is a fund specializing in nursing homes in the United States.
Outsourced Medical Billing, Medical Coding, and RCM – Omega Healthcare (omegahms.com)
Sabra Health Care REIT is a real estate fund for healthcare. The Foundation owns 425 objects. The fund’s assets as of the end of 2021 are $5,966 billion. The capital is $3.379 billion.
Sabra Health Care REIT | Leading Healthcare Real Estate Investment Trust
- DIVERSIFIED RENTALS
STORE Capital is a diversified fund with more than 2,600 properties leased to various industries. The fund’s assets as of the end of 2021 are $9.773 billion. The capital is $5.144 billion.
Real Estate Investment Trust Solutions | STORE Capital
Realty Income – the fund is included in the S&P 500 list. The Fund owns more than 11,280 objects, with clients in more than 70 industries. Most customers are retail stores offering non-discriminatory goods and services at low prices. The fund’s assets as of the end of 2021 are $43,137 billion. The capital is $25,129 billion.
Realty Income – The Monthly Dividend Company, O Stock
W.P. Carey is a diversified fund specializing in the “net lease” of critical real estate with one tenant in North America and Europe. The fund’s assets as of the end of 2021 are $15.480 billion. The capital is $7.583 billion.
Leaseback Build-to-suit Real Estate Finance | W. P. Carey (wpcarey.com)
Global Net Lease — Concentration on long-term net lease with contractual rent increase, sale transactions with leaseback. The fund’s assets as of the end of 2021 are $4.152 billion. The capital is $1.595 billion.
SL Green Realty Corp is a fund specializing in office buildings and retail cents in New York City. The fund’s assets as of the end of 2021 are $11.066 billion. The capital is $4,778 billion.
Homepage – SL Green – NYC’s Largest Commercial Landlord
Gaming and Leisure Properties is a fund specializing in real estate for gambling operators in the USA. The fund’s assets as of the end of 2020 are $9 billion.
Gaming & Leisure Properties, Inc. (glpropinc.com)
- HOUSING
Equity LifeStyle Properties – owns plots in resort and tourist areas, which are rented out to accommodate trailers and prefabricated houses, cottages. Owns more than 165,000 properties in 35 US states. The fund’s assets as of the end of 2021 are $5.307 billion. The capital is $1.486 billion.
American Campus Communities is a foundation specializing in student housing in the United States. The fund’s assets as of the end of 2021 are $7.574 billion. The capital is $3.269 billion.
Student Housing & Student Apartments – American Campus Communities – Where Students Love Living®
Essex Property Trust is a fund specializing in residential apartments mainly on the East Coast of the United States. The fund’s assets as of the end of 2021 are $12.997 billion. The capital is $6.176 billion.
Essex Property Trust | West Coast Apartment Homes (essexapartmenthomes.com)
Real estate is a proven way of investing. The real estate market is stable. Along with gold, real estate is not affected by inflation. The real estate market is very diverse, including closely related to the development of the digital economy.
Promising areas are data centers, premises for servers, telecommunication facilities, facilities for online commerce (E-commerce).
Investments in real estate can be made through investment funds. Investments in funds are more diversified, as the fund buys different objects. Real Estate Investment Trust (REIT) is a fund that owns and manages real estate for the purpose of generating income. A REIT can specialize in a certain segment of real estate, or have a diversified portfolio of assets.
Nina Shibalkina
