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3 REITs That Could Double Your Money

Jan 13, 2021 by Matt Frankel, CFP
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The real estate sector as a whole has been one of the worst-performing parts of the stock market, even after the recent vaccine-fueled rebound. Some of the most beaten-down real estate investment trusts (REITs) are still trading far below their pre-pandemic share prices.

However, as the pandemic (hopefully) comes to an end in 2021, some of the hardest-hit REITs also could have the most to gain. While these aren't low-risk investments by any definition of the term, here are three in particular that could double investors' money quickly if things go well.

There's a million-dollar question this REIT needs to answer

EPR Properties (NYSE: EPR) is an experiential REIT, and there's little doubt that most of its core property types will be just fine in a post-pandemic world. The company's ski resorts, waterparks, golf attractions, and family entertainment centers are some examples where pent-up demand should allow business to rapidly rebound when it's safe for people to move around.

On the other hand, there's a big question mark when it comes to EPR's number one property type -- movie theaters.

In fact, there are two big question marks. First, will operators such as AMC Entertainment (NYSE: AMC) survive the pandemic? A large tenant going bankrupt could be devastating to EPR's revenue. Second, and most important from a long-term perspective, will demand for watching movies in theaters return to pre-pandemic levels, given the increase in streaming alternatives that's accelerated since the pandemic began? If the answer is yes, EPR should be just fine long-term, and could certainly double from here.

This REIT could thrive in 2021 and beyond

Outfront Media (NYSE: OUT) is a REIT that owns and operates billboards and various other outdoor advertising structures, particularly in urban areas and transit systems. Not surprisingly, since the pandemic caused the volume of people commuting to plummet, spending on outdoor advertising dropped as well.

However, the company could see revenue rebound and more as the pandemic comes to an end. Not only is outdoor advertising an extremely effective way for businesses to get their messages in front of consumers (in normal times, at least), but the company is still in the relatively early stages of its digital transformation. Digital displays bring in several times the revenue of static advertising faces and have higher profit margins -- and only about 20% of Outfront's revenue comes from digital displays so far.

Tons of potential, but some big unanswered questions

Seritage Growth Properties (NYSE: SRG) is a unique REIT in the sense that it was specifically created to buy a portfolio of undesirable properties -- specifically, properties currently or formerly occupied by Sears (OTCMKTS: SHLDQ) and Kmart. The business model is to gradually redevelop the properties into high-quality, mixed-use developments with elements of retail, residential, hospitality, and more.

The pandemic threw Seritage a bigger curveball than most. Specifically, Seritage has been funding its redevelopment efforts with rental income and sales of non-core assets, both of which (along with some of the ongoing redevelopment plans) were disrupted by the COVID-19 outbreak. If Seritage cannot figure out how to boost its rental income to the point where it can sustain the company's redevelopment effort, it could be a negative catalyst. But if it can, the stock could certainly double.

The Millionacres bottom line

All three of these REITs have tremendous uncertainty surrounding their businesses right now. If that changes, it's entirely possible that they could double investors' money (or more) in the coming year or two. However, it's also important to remember that no REITs capable of quick gains are without high levels of risk, and these three are not exceptions. Invest accordingly.

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Matthew Frankel, CFP owns shares of EPR Properties, Outfront Media, and Seritage Growth Properties (Class A). The Motley Fool owns shares of and recommends Seritage Growth Properties (Class A). The Motley Fool recommends EPR Properties and Outfront Media. The Motley Fool has a disclosure policy.