The real estate sector is off to a strong start in 2025, outperforming the S&P 500 (^GSPC 0.11%) by about 6 percentage points through mid-March. However, not all real estate investment trusts (REITs) have outperformed, and there are some excellent buying opportunities for patient long-term investors.
Here are two down by 18% and 23% from their 52-week highs that look especially attractive for investors who measure their returns in years, not weeks or months.
Soft demand but a great long-term opportunity
Ryman Hospitality Properties (RHP +2.73%) is a hospitality REIT with two main components to its business. First, and the larger part of the business, is hotels. Ryman owns the five massive Gaylord hotels and one other group-focused hotel property. In short, these properties are designed to host large conventions, conferences, and attractions, which creates massive demand for its rooms, food, and beverage offerings.
NYSE: RHP
Key Data Points
The other side of the business is Ryman's entertainment segment, formally known as Opry Entertainment Group. This consists of performance venues such as the iconic Ryman Auditorium and Grand Ol Opry in Nashville, as well as the Ole Red dining and entertainment chain, Austin City Limits, and more.
Ryman dropped after its recent earnings report as management expressed disappointment with its holiday-season numbers. But the long-term thesis is intact, and now could be a good chance to buy at a discount.
Group-event demand proved to be surprisingly resilient after the COVID-19 pandemic, and Ryman is investing heavily to take advantage. This includes massive expansions to several of its Gaylord properties, some big investments in entertainment assets, and more. Plus, Ryman aims to eventually spin off its Opry Entertainment Group to unlock the true value of its business.
The proof of this model is in the performance. Since becoming a REIT in 2012, Ryman has generated a 14.1% annualized total return, handily outpacing the S&P 500. Plus, this highly profitable company has a 4.7% dividend yield, making it an excellent choice for income investors.
Excellent assets on sale
Alexandria Real Estate Equities (ARE 3.14%) has fallen by about 20% over the past year and is about 55% below its 2022 all-time high. The short explanation is that, in addition to the interest-rate headwinds that impacted the overall REIT sector in 2022 and 2023, Alexandria specializes in office properties occupied by life science tenants and has suffered from a general downturn in the life science market.
In a nutshell, demand for the megacampus life science properties Alexandria specializes in has cooled off considerably. Vacancies are elevated, net absorption of new properties has been discouraging, and there's still a lot of construction going on.
However, there's a lot to like about this business. Alexandria's properties still have an excellent 94.6% occupancy rate, and there are 7.5 years remaining on the average lease. The company has an excellent balance sheet, with an average of nearly 13 years remaining on its debt and few near-term maturities. Lease renewal activity has been rather strong, with positive rental-rate increases.
At the current valuation, Alexandria Real Estate Equities trades for just over 10 times forward FFO (funds from operations -- the real estate equivalent of "earnings"). It also has a 5.3% dividend yield that's well-covered by its profits.
Management apparently agrees that the stock is a bit too cheap. It authorized a $500 million stock buyback authorization and has spent $200 million of that amount in just a few months. (Note: Buybacks are somewhat rare for real estate investment trusts.)
Great plays for growth and income
These are both excellent long-term investment opportunities. Investors are suffering from recession fears, economic uncertainty, and tariff concerns, and these REITs could be quite volatile in the near term. But if you're a long-term investor looking for solid businesses capable of market-beating total returns, these two REITs deserve a spot on your watch list.
