Real estate has been one of the most beaten-down sectors in the stock market during the COVID-19 pandemic, but it could hold some compelling bargains for long-term investors. In this October 22, 2020 Fool Live clip, REIT experts Matt Frankel, CFP, Matt DiLallo, and Kevin Vandenboss each share the top REITs they're considering right now.
10 stocks we like better than Duke Realty
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Matt Frankel: But I was going to ask both of you, and then I'll follow with mine, to name your No. 1 REIT that you're watching, that you're thinking of buying right now and why.
Kevin Vandenboss: I'm a little biased. The last few years in real estate, we sell senior housing. I would say I love the healthcare REITs, and of those, Omega Healthcare Investors (OHI 1.58%) is definitely my favorite right now. I mean, I think they'll push on 9% dividend, which in itself is exciting, but they invest in triple-net-lease healthcare properties, primarily, like skilled nursing and senior housing, which, no matter how you spin it, there are just things that can't go away, they're not going to go away. It comes down to the operators and the REITs of who can sustain their portfolio and remain profitable and continue to grow through it. My opinion, it's Omega Healthcare versus is the winner there. Who is going to be able to take advantage of the opportunities from other property owners, having to get rid of [...] properties, and they are going to struggle, so that's my pick.
Matt Frankel: I'm sure a 9% dividend will appeal to a lot of people. I like the healthcare space. It's a pretty recession-proof industry.
Kevin Vandenboss: Absolutely.
Matt DiLallo: I have been eyeing industrial for the past couple of months. I don't have any exposure to it right now, and I'm sorting through Prologis (PLD 1.30%), which is like the behemoth in the sector, Duke Realty (DRE), which is U.S. focused, and they are like that No. 2 player, and then STAG Industrial (STAG 1.03%), which has the warehouses, but also, they do a lot of light industrial or light manufacturing, so they're more diversified. I'm going back and forth between those three.
I think I like Duke the best because Amazon (NASDAQ: AMZN) is their biggest tenant, so they are really a big sheer play into that online e-commerce growth. We need so much industrial space. There was a quote or an estimate by JLL, which is a big research company, and they said we need a billion square feet of industrial space by 2025. So it's down perspective, that's like Prologis' global portfolio. We need that in the U.S. for the next five years. Lots of growth, and Duke's really got a great balance sheet to take advantage of that. So that's where I'm leaning to. That's top of my watch list right now.
Matt Frankel: I know another quote is that e-commerce needs roughly 3 square feet of distribution space for every 1 square foot a normal brick-and-mortar retailer would need. As more shifts to e-commerce, that's where those billions of square footages are going to come from. If I were to say -- and I'll say mine and then we'll get to some questions, because people want their answers; they don't want to just hear me ask questions.
My favorite REIT right now and I've bought several times this year is STORE Capital (STOR), ticker symbol is S-T-O-R, I'll put that in the chat. That is actually the only REIT you're going to find in Warren Buffett's portfolio. They invest in single-tenant, primarily retail and service industry properties. They have been beaten down more than most other net-lease REITs because they have about a third of their portfolio in things like movie theaters and entertainment centers and the businesses you really don't want to be in right now. About a third of their portfolios, and then restaurants is their biggest property type. That's part of that third.
But most of their tenants are very financially stable. They invest in secure national chains, and they're trading at about 30% less than they were before the pandemic, and I don't think they deserve that. I just think that it's going to be a great compound, when they say they have about, there's a $2 trillion market opportunity in mid-tier single-asset real estate that they could potentially go after. They're a pretty small company now. They're only five years old, so there's a lot of room to grow. And that's mine.
