REITs: The A Team or the B Team?

Another B Player

Another company that focuses on secondary markets and secondary properties is Whitestone REIT (NYSE:WSR). It owns, operates, and re-develops shopping centers and office buildings, primarily in Arizona and Texas, though it has a small presence in Illinois.

Management focuses on what it calls Community Centered Properties, which it defines as “visibly located properties in established or developing culturally diverse neighborhoods.” Moreover, it tends to buy properties that need to be re-developed in some way to unlock value.

The company is small, owning around 50 properties, but that gives it the ability to pay extra attention to local communities in its purchase decisions and when it re-develops and leases a property. Like Stag Industrial Inc (NYSE:STAG), Whitestone is probably more exposed to the impacts of an economic downturn than rivals in better markets with higher quality properties, so there are risks to the company’s approach.

Investors willing to take on the inherent risks Whitestone posses, however, get treated to a 7.5% dividend yield, paid monthly. That’s notably higher than Kimco Realty Corp (NYSE:KIM), a larger player in roughly the same property type that yields around 3.5%. Almost 90% of its tenants are national players, so its properties are largely high quality. However, it offers less than half the yield. So it might be well worth a look at smaller and risker Whitestone REIT (NYSE:WSR) for more aggressive types.

The A or B Choice

Of course it isn’t as simple as A or B when picking a REIT. However, for those willing to do a little extra digging, smaller REITs that focus on less desirable areas and/or properties can be great investment options. There may be more risk, but the extra income may be more than adequate offset.

The article REITs: The A Team or the B Team? originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.