Real estate investment trust [REIT]companies allow investor to take investment positions in different sectors of the larger commercial real estate space. Some of the sectors - such as high yield mortgage REITs or the high growth potential healthcare REIT stocks - receive a lot of press coverage and attention. The other commercial real estate sectors are not as widely reviewed. Investors who research some of the other sectors may find some very attractive investment opportunities. Here are four REITs which own industrial properties and which have provided great returns in the past and have strong potential to do so in the future.
Digital Realty Trust (DLR) has a business model with several hot buttons attractive to investors. Digital Realty owns data center properties. Data centers are a growth business, providing the company with plenty of future growth potential. The portfolio is geographically diversified with locations on four continents in nine countries. Also, the needed expertise to set up and manage a data center provides high barriers to entry against competition. Customers for data center locations include telecom companies like AT&T (T) and CenturyLink (CTL), data system service providers like IBM (IBM) and Equinix (EQIX) and enterprise customers such as JP Morgan Chase (JPM) and Pepsi (PEP). Channels for growth include built-in rent increases, redevelopment of currently owned property and acquisitions. Since 2005, funds from operations [FFO] have increased at a 19.8 percent annual compound rate and the dividend has been increased at a 16.6 percent compound rate. The Digital Realty share price increased by 34 percent over the last two years. The company has a market cap of $8 billion and the current dividend yield is 3.9 percent.
CoreSite Realty (COR) is also in the data center facilities business. This small cap REIT with a $500 million market cap went public in September 2010, and the share price has appreciated by 44 percent since the IPO. A big boost to the share value occurred when the company increased the dividend 36 percent to 18 cents quarterly, up from the previous 13 cents. The 72 cents of annual dividend is about half of the per share FFO guidance the company has issued for 2012. It is possible the dividend could be increased mid-year or by another 25 to 30 percent at the end of 2012.
Prologis (PLD) is the largest industrial REIT with a market cap of $16 billion. The current size of Prologis is due to the June 2011 merger between Prologis and AMB, producing one of the world's largest industrial property companies. Prologis now owns 600 million square feet of warehouse space in 21 countries. The majority of the properties are located near major seaports and the facilitate are used for the logistics and transport of goods moving through the ports. Logistics and warehouse properties are a play on the global economic recovery and increased international trade. Prologis was believed to be near bankruptcy when the recession hit due to over-expansion and a high debt load. The company currently is strengthening the balance sheet by reducing total debt and funding expansion through private development funds. Prologis also expect to dispose of about $5 billion, out of a $43 billion portfolio, of non-core assets in 2012. The $1.12 annual dividend rate has been in effect for three years. Investor should not expect dividend increases in the near future. The investment value will come from the net asset value growth as the company de-leverages, expands through the private development funding and property values and rents increase along with a resurgence in global trade.
One final industrial REIT which may be of interest to some investors is Monmouth Real Estate Investment Corp (MNR). This $400 million industrial property REIT has paid the current 15 cent quarterly dividend since the first quarter of 2006. The stock consistently yields between 6 and 8 percent. If the share price drops and the yield moves up towards 8 percent, pick up some shares. Monmouth R.E. is like a little cash machine for investors who like an attractive, consistent dividend payment, dropping cash into the brokerage account.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.