5 Best Commercial Real Estate Stocks To Buy According To Hedge Funds

In this article, we discuss 5 best commercial real estate stocks to buy according to hedge funds. If you want to read our detailed discussion on the real estate market, check out 10 Best Commercial Real Estate Stocks To Buy According To Hedge Funds. 

5. Jones Lang LaSalle Incorporated (NYSE:JLL)

Number of Hedge Fund Holders: 28

Jones Lang LaSalle Incorporated (NYSE:JLL) a London-based company in the commercial real estate services sector, offering a range of services including investment management, asset management, real estate development, advisory, consulting, leasing, and property management. It is one of the best commercial real estate stocks to watch. 

On March 15, analyst Andrew Rosivach from Wolfe Research upgraded Jones Lang LaSalle Incorporated (NYSE:JLL) to Outperform from Peer Perform, with a price target of $218. According to the analyst’s research note, the company’s cost savings and plans to resume share repurchases were highlighted as positive factors in its earnings report. Despite JLL’s relative multiple experiencing a decline, the firm’s cost savings have helped maintain earnings estimates at a steady level. Currently, Jones Lang LaSalle Incorporated (NYSE:JLL) shares are trading at a multiple of 10.6 times the expected 2023 earnings, representing a 39% discount compared to Wolfe Research’s coverage average. This discount has increased from a historical average of approximately 18%, as mentioned by the firm.

According to Insider Monkey’s first quarter database, Jones Lang LaSalle Incorporated (NYSE:JLL) was part of 28 hedge fund portfolios, compared to 26 in the prior quarter. David Blood and Al Gore’s Generation Investment Management is the biggest stakeholder of the company, with 4.3 million shares worth $637.6 million. 

Ariel Appreciation Fund made the following comment about Jones Lang LaSalle Incorporated (NYSE:JLL) in its Q1 2023 investor letter:

“Also in the quarter, we initiated a position in long-time Ariel holding Jones Lang LaSalle Incorporated (NYSE:JLL), also known as JLL, which is a leading professional services firm that specializes in real estate and investment management. A slowdown in leasing, advisory and investment sales due to rapidly rising interest rates and inflationary pressures presented us an attractive entry point in the name. The company generates strong fee revenues on its annuity businesses, prudently manages expenditures, returns excess capital to shareholders through share repurchases and has provided a three-year strategic outlook with strong 2025 financial targets. Although the first half of 2023 will likely be choppy given macro-uncertainty, company leadership is highly confident about the medium- and longer-term revenue outlook for both transactional and recurring revenue streams, alongside its efforts to streamline operations and increase efficiencies to generate higher profit over time.”

4. Alexandria Real Estate Equities, Inc. (NYSE:ARE)

Number of Hedge Fund Holders: 33

Alexandria Real Estate Equities, Inc. (NYSE:ARE) owns and manages advanced life science, agtech, and technology campuses in highly sought-after innovation hubs such as Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and Research Triangle. It is one of the best commercial real estate stocks to invest in. On June 5, Alexandria Real Estate Equities, Inc. (NYSE:ARE) declared a $1.24 per share quarterly dividend, a 2.5% increase from its prior dividend of $1.21. The dividend is payable on July 14, to shareholders of record on June 30. 

On May 4, RBC Capital maintained an Outperform rating on Alexandria Real Estate Equities, Inc. (NYSE:ARE) but lowered the firm’s price target on the shares to $166 from $198. The firm acknowledged that while the long-term prospects for the life science sector remain strong, the near-term outlook appears less promising. Despite this, RBC believes that Alexandria Real Estate Equities, Inc. (NYSE:ARE) is well-equipped to handle the current situation and is ready to take advantage of opportunities when the market conditions stabilize.

According to Insider Monkey’s first quarter database, 33 hedge funds held stakes worth $284.5 million in Alexandria Real Estate Equities, Inc. (NYSE:ARE), compared to 29 funds in the prior quarter holding stakes valued at $296 million. Ian Simm’s Impax Asset Management is the largest position holder in the company. 

Baron Real Estate Income Fund made the following comment about Alexandria Real Estate Equities, Inc. (NYSE:ARE) in its Q4 2022 investor letter:

“Alexandria Real Estate Equities, Inc. (NYSE:ARE) is the leading landlord and developer for the life science industry. A best-in-class company with several competitive advantages including an irreplaceable life science office portfolio concentrated in the premier life science markets in the U.S. and deep customer relationships.

Alexandria’s shares declined 33% in 2022 and are now valued at a 5.8% implied capitalization rate versus recent life science real estate transactions that have been valued in the 4% to 5% capitalization range. Alexandria’s real estate is attractively valued at approximately $600 per square foot versus private market transactions for life science real estate in the $1,000 to $1,500 per square foot range.

We are bullish on the long-term prospects for Alexandria Real Estate Equities, Inc., the life science industry leader and sole publicly traded life science pure play REIT. The company has acquired and developed an irreplaceable life science portfolio and has significant tenant relationships. Chairman and co-founder Joel Marcus has assembled a deep and experienced management team. Alexandria has been benefiting from an increase in funding for health care drug development, which has been contributing to demand for life science buildings that continues to exceed supply, resulting in strong business fundamentals in key geographic markets.”

3. Simon Property Group, Inc. (NYSE:SPG)

Number of Hedge Fund Holders: 35

Simon Property Group, Inc. (NYSE:SPG) is a real estate investment trust that focuses on investing in shopping malls, outlet centers, and community/lifestyle centers. It is one of the best commercial real estate stocks to monitor. Simon Property Group, Inc. (NYSE:SPG) reported higher earnings and revenue in the first quarter of 2023 compared to the same period last year, which positively influenced its outlook for the upcoming year. Consequently, the company’s board of directors announced an increased quarterly dividend of $1.85 per share, up from the previous dividend of $1.80.

On May 26, Haendel St. Juste, an analyst at Mizuho, assigned a Neutral rating to Simon Property Group, Inc. (NYSE:SPG) stock but revised down the price target from $116 to $106. The analyst maintains an Equal-weight stance on shopping centers overall but anticipates the possibility of higher earnings if bad debt remains low and transaction activity improves in the latter half of 2023.

According to Insider Monkey’s first quarter database, 35 hedge funds were bullish on Simon Property Group, Inc. (NYSE:SPG), compared to 33 funds in the preceding quarter. Jeffrey Furber’s AEW Capital Management is a prominent stakeholder of the company, with 495,805 shares worth $55.5 million. 

Baron Real Estate Income Fund made the following comment about Simon Property Group, Inc. (NYSE:SPG) in its Q4 2022 investor letter:

“Simon Property Group, Inc. (NYSE:SPG) is the world’s largest mall operator. Led by CEO David Simon, the company has assembled a well-located portfolio of retail malls, outlets, and community centers. Management has a long track record of solid capital allocation decisions.

Simon’s dividend yield of 6% and valuation of only 10.6 times earnings (AFFO) versus a long-term average of 15 times earnings is, in our opinion, compelling.

Though we are mindful of the headwinds to certain retail real estate–excess supply of retail real estate, e-commerce headwinds, large capital requirements to repurpose retail real estate to higher and better alternative uses–we believe Simon Property is well positioned given the strong location and high quality of its real estate portfolio. We are managing the Fund’s investment in the company with possible retail headwinds in mind.”

2. VICI Properties Inc. (NYSE:VICI)

Number of Hedge Fund Holders: 39

VICI Properties Inc. (NYSE:VICI) is a real estate investment trust that holds an extensive portfolio of top-tier gaming, hospitality, and entertainment destinations, including renowned establishments like Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas. VICI Properties Inc. (NYSE:VICI) is one of the best commercial real estate stocks to invest in. On June 8, the company declared a $0.39 per share quarterly dividend, in line with previous. The dividend is payable on July 6, to shareholders of record on June 22. 

On April 5, Mizuho initiated coverage of VICI Properties Inc. (NYSE:VICI) with a Buy rating and a $35 price target. The firm noted that VICI Properties Inc. (NYSE:VICI) is one of only two gaming-focused real estate investment trusts and possesses an exceptionally high quality portfolio. Mizuho also observed that the gaming sector is experiencing increased gross gaming revenue and enjoys strong alignment with local governments. The firm expects VICI to outperform in the current macro environment due to its high-quality portfolio, which makes it an attractive option for investors seeking defensive investments.

According to Insider Monkey’s first quarter database, 39 hedge funds were long VICI Properties Inc. (NYSE:VICI), compared to 40 funds in the earlier quarter. Ken Griffin’s Citadel Investment Group is the biggest stakeholder of the company, with 9.80 million shares worth $319.7 million. 

Baron Real Estate Income Fund made the following comment about VICI Properties Inc. (NYSE:VICI) in its Q4 2022 investor letter:

“We remain optimistic about the Fund’s triple net gaming REIT investments in VICI Properties Inc. (NYSE:VICI) and Gaming and Leisure Properties, Inc. The companies primarily own quality casino and gaming real estate properties. They have attractive dividend yields in the 5% to 6% range that are well covered, accretive acquisition growth opportunities, and are, in our opinion, attractively valued.

We remain mindful of the rising interest rate environment and the possibility that higher debt costs and lower equity prices could negatively impact the ability for net lease REITs to invest in an accretive fashion.”

1. CBRE Group, Inc. (NYSE:CBRE)

Number of Hedge Fund Holders: 41

CBRE Group, Inc. (NYSE:CBRE) specializes in providing commercial real estate services and investments worldwide. Its operations are divided into three segments – Advisory Services, Global Workplace Solutions, and Real Estate Investments. On April 27, CBRE Group, Inc. (NYSE:CBRE) reported a Q1 non-GAAP EPS of $0.92 and a revenue of $7.41 billion, outperforming Wall Street estimates by $0.02 and $320 million, respectively. 

On April 10, Chandni Luthra, an analyst at Goldman Sachs, reaffirmed a Buy rating on CBRE Group, Inc. (NYSE:CBRE) but slashed the price target for its shares from $103 to $90. The analyst informed investors of the additional challenges in property transactions given the current macroeconomic environment, making a recovery in commercial real estate more difficult in the latter half of 2023. Goldman Sachs believes that the outlook for commercial real estate service providers has become more challenging compared to a month ago. Consequently, the firm expects a potential downside to the 2023 guidance provided in CBRE’s Q4 results, leading to a reduction in estimates and price targets across the sector.

According to Insider Monkey’s first quarter database, 41 hedge funds were bullish on CBRE Group, Inc. (NYSE:CBRE), compared to 38 funds in the prior quarter. Harris Associates is the biggest stakeholder of the company, with 13.4 million shares worth $978.7 million. 

Baron Funds made the following comment about CBRE Group, Inc. (NYSE:CBRE) in its Q4 2022 investor letter:

“CBRE Group, Inc. (NYSE:CBRE) is the largest commercial real estate services firm in the world. It maintains a #1 worldwide market share position in each of its key business lines and has a pristine balance sheet.

It is currently valued at only 13 times our estimate of 2023 earnings per share versus a long-term average valuation multiple of 15 to 16 times earnings per share.

Our “other real estate-related companies” category includes those companies that do not fit neatly in more traditional real estate categories of REITs, residential-related real estate, and travel-related real estate. Other real estate-related companies currently include:

Commercial real estate services companies Examples: CBRE Group, Inc. and Jones Lang LaSalle Incorporated…” (Click here to read the full text)

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also check out 30 High-Paying Remote Jobs Without a Degree or Experience and 10 Best Beef Stocks to Buy Now.