In this article, we will take a look at the 12 high growth real estate stocks that are profitable. To see more such companies, go directly to 5 High Growth Real Estate Stocks that are Profitable.
A 2023 outlook report by Morgan Stanley presents a hopeful picture of the real estate sector. The firm said in its report that REITs usually have high margins and strong operating efficiency. That’s why they are less impacted by inflationary pressures and their effects. The firm said that any stabilization in interest rates this year would help the real estate investing space.
“While U.S. REITs have historically underperformed U.S. equities during periods of large interest rate increases, they have outperformed three, six and 12 months after a significant rise in interest rates,” the report said.
However, some of the headwinds for the real estate sector include increasing layoffs, hiring freezes and a slowing demand of office spaces as Morgan Stanley said it continues to see a strength in the work-from-home trends.
A report by Nuveen warns that headwinds in the real estate sector are rising. The report said liquidity has been “scarce” in the industry and transaction activity has been slowing. However, Nuveen’s analysts believe fundamentals remain “sound” and the financial planning company “firmly” believes in the long-term case for “carefully sourced private real estate investments.” The report said that a suitable approach to follow during these challenging times is to focus on real estate debt over equity.
According to a report from the Wall Street Journal, companies acquired around 66,000 homes in the 40 markets tracked by real-estate brokerage Redfin during the third quarter of 2022. This shows a huge decline when compared to 94,000 homes bought during the comparable quarter of 2021. The report said this was the largest decline in a quarter since the subprime crisis, except for the second quarter of 2020 when the coronavirus pandemic brought the industry to a halt
While short-term volatility is affecting the real estate industry negatively, long-term investors are piling into the related stocks to profit as they expect the market to rebound sooner or later.
“But with investors’ large cash positions, and with big firms such as JPMorgan Chase & Co. planning to increase its exposure to the home-buying business, investors are poised to resume more aggressive buying when rates or home prices begin to ease,” the WSJ report said.
Our Methodology
For this article we used the Finviz stock screener to identify stocks in the real estate industry which have sales growth of more than 25% on a quarter-over-quarter basis and net profit margins of over 20%. After this initial check we got a long list of stocks. We then sorted the stocks list in descending order of market cap and picked the top 12 stocks.
High Growth Real Estate Stocks that are Profitable
12. Innovative Industrial Properties, Inc. (NYSE:IIPR)
Number of Hedge Fund Holders: 12
Innovative Industrial Properties, Inc. (NYSE:IIPR) is a real estate company with a special focus on the cannabis industry. In the third quarter, Innovative Industrial Properties, Inc. (NYSE:IIPR)’s revenue came in at $70.9 million, up from $70.5 million in the prior quarter and much better than $53.9 million revenue posted in the comparable quarter last year. The revenue figure also crossed the consensus estimate of $68.4 million.
As of the end of the third quarter of 2022, 12 hedge funds tracked by Insider Monkey reported owning stakes in Innovative Industrial Properties, Inc. (NYSE:IIPR), compared to 16 funds in the previous quarter.
11. Arbor Realty Trust, Inc. (NYSE:ABR)
Number of Hedge Fund Holders: 13
Arbor Realty Trust, Inc. (NYSE:ABR) is a high-yield dividend stock. Arbor Realty Trust, Inc. (NYSE:ABR)’s dividend yield stands at over 10% as of February 12. For the third quarter, Arbor Realty Trust, Inc. (NYSE:ABR)’s adjusted EPS came in at $0.56, beating estimates by $0.12. Revenue in the quarter jumped 42% on a year-over-year basis to total $99.32 million, beating estimates by $12.07 million. Arbor Realty Trust, Inc. (NYSE:ABR) also upped its dividend by 33%, marking its 10th consecutive quarterly dividend increase.
As of the end of the third quarter of 2022, 13 hedge funds out of the 920 funds tracked by Insider Monkey had stakes in Arbor Realty Trust, Inc. (NYSE:ABR). The total value of their stakes was about $45 million. The biggest stakeholder of Arbor Realty Trust, Inc. (NYSE:ABR) during this period was Dmitry Balyasny’s Balyasny Asset Management which had a stake worth about $18 million in the company.
10. Starwood Property Trust, Inc. (NYSE:STWD)
Number of Hedge Fund Holders: 18
Starwood Property Trust, Inc. (NYSE:STWD) ranks 10th in our list of high growth real estate stocks that are profitable. For the third quarter of 2022, Starwood Property Trust, Inc. (NYSE:STWD) posted revenue of $390.5 million, up from $294 million posted in the previous quarter but missing estimates of $393.7 million. Starwood Property Trust, Inc. (NYSE:STWD) had a total investment activity of about $1.3 billion, which included $0.9 billion of commercial lending.
A total of 18 hedge funds tracked by Insider Monkey reported owning shares of Starwood Property Trust, Inc. (NYSE:STWD) at the end of the third quarter of 2022. The biggest hedge fund stakeholder of Starwood Property Trust, Inc. (NYSE:STWD) during this period was Amy Minella’s Cardinal Capital which owns a $93 million stake in the firm.
9. Independence Realty Trust, Inc. (NYSE:IRT)
Number of Hedge Fund Holders: 19
Pennsylvania-based Independence Realty Trust, Inc. (NYSE:IRT) ranks 9th in our list of the high growth real estate stocks that are profitable. For the third quarter, Independence Realty Trust, Inc. (NYSE:IRT) posted an EPS of $0.07, beating estimates by $0.04 Revenue in the quarter increased by a whopping 165% on a YoY basis to total $160.30 million. In December, Independence Realty Trust, Inc. (NYSE:IRT) declared a quarterly dividend of $0.14 per share. Forward dividend yield at the time came in at over 3%.
A total of 19 hedge funds out of the 920 funds had stakes in Independence Realty Trust, Inc. (NYSE:IRT) at the end of the third quarter of 2022. The total value of these stakes was about $25 million.
8. Sunstone Hotel Investors, Inc. (NYSE:SHO)
Number of Hedge Fund Holders: 21
Sunstone Hotel Investors, Inc. (NYSE:SHO) ranks 8th in our list of the 12 high growth real estate stocks that are profitable. Sunstone Hotel Investors, Inc. (NYSE:SHO)’s revenue in the third quarter jumped about 46% on a YoY basis to come in at $244.31 million. FFO in the period was $0.24, beating estimates by $0.01.
Sunstone Hotel Investors, Inc. (NYSE:SHO) has a dividend yield of about 1.9% as of February 12. In November, Sunstone Hotel Investors, Inc. (NYSE:SHO) declared a quarterly dividend of $0.05 per share.
A total of 21 hedge funds tracked by Insider Monkey reported owning stakes in Sunstone Hotel Investors, Inc. (NYSE:SHO) as of the end of the third quarter of 2022. The total value of these stakes was $1.1 billion.
7. Rexford Industrial Realty, Inc. (NYSE:REXR)
Number of Hedge Fund Holders: 23
Rexford Industrial Realty, Inc. (NYSE:REXR) ranks 7th in our list of the high growth real estate stocks that are profitable. Earlier in February Rexford Industrial Realty, Inc. (NYSE:REXR) posted its fourth quarter of 2022 results. GAAP EPS in the quarter came in at $0.22. Revenue in the period increased by about 35% on a year-over-year basis to total $178.59 million. For fiscal year 2023 Rexford Industrial Realty, Inc. (NYSE:REXR) expects GAAP EPS in the range of $0.94 to $0.98.
As of the end of the third quarter of 2022, 23 hedge funds had stakes in Rexford Industrial Realty, Inc. (NYSE:REXR), compared to 28 funds in the previous quarter.
Baron Funds made the following comment about Rexford Industrial Realty, Inc. (NYSE:REXR) in its Q3 2022 investor letter:
“We recently acquired additional shares in Rexford Industrial Realty, Inc. (NYSE:REXR), a high-growth real estate investment trust that owns a $13 billion portfolio of infill industrial properties concentrated in Southern California. We are optimistic about the long-term prospects of Rexford to grow cash flow at a rapid pace and generate attractive shareholder returns.
Southern California is among the most attractive markets for industrial real estate in the country, owing to the diverse set of industries that drive demand for warehouse space, and new infill development activity that is limited by a scarcity of developable land and “higher and better use” opportunities to develop land for purposes other than warehouse space.
Rexford is growing rapidly, both organically (record occupancy, rising market rents, contractual rent escalators in leases) and through acquisitions in a highly fragmented market. Rexford’s current portfolio rents are on average over 50% below market rents, which should drive outsized organic growth over the next several years as in-place leases expire and reset to market rates. In addition, we expect Rexford to continue to rapidly grow its market share (currently less than 2%) through acquisitions.
Following a more than 35% correction in its shares in the first nine months of 2022, we believe the company’s valuation is attractive relative to the high-quality nature of the platform and the significant growth we expect to see over the next several years.”
6. Agree Realty Corporation (NYSE:ADC)
Number of Hedge Fund Holders: 26
Agree Realty Corporation (NYSE:ADC) ranks 6th in our list of the 12 high growth real estate stocks that are profitable. For the third quarter of 2022, Agree Realty’s FFO was $0.96, which missed estimates by $0.01. Revenue in the quarter jumped about 25.7% on a year-over-year basis to total $110.07 million, missing estimates by $0.26 million. In early January Agree Realty Corporation (NYSE:ADC) jumped after the company posted record real estate activity for 2022. Agree Realty Corporation (NYSE:ADC) said its total real estate investment activity for the year touched a whopping $1.71 billion. During 2022, Agree Realty Corporation (NYSE:ADC) bought 434 retail net lease properties for total acquisition volume of ~$1.59 billion.
As of the end of the third quarter of 2022, 26 hedge funds tracked by Insider Monkey reported owning stakes in Agree Realty Corporation (NYSE:ADC). The net worth of their stakes was $313 million. The biggest stakeholder of Agree Realty Corporation (NYSE:ADC) among these hedge funds was Frank Fu’s CaaS Capital which owns a $44 million stake in the company.
Click to continue reading and see 5 High Growth Real Estate Stocks that are Profitable.
Suggested articles:
Disclosure: None. 12 High Growth Real Estate Stocks that are Profitable is originally published on Insider Monkey.
