Real Estate Investment Trusts (REITs) are currently trading at some of their lowest valuations in years, with many individual REITs being offered at significant discounts to their net asset values. This presents an opportunity for investors to buy real estate at a fraction of its worth. Despite the market’s overreaction to rising interest rates, REIT balance sheets are stronger than ever, with low debt and long debt maturities. Furthermore, the increase in interest rates is largely due to high inflation, resulting in rising rents and dividends in most cases. The fact that many REIT insiders are purchasing shares of their own companies further validates the undervaluation of these assets.
Agree Realty: Insider Buying Amidst Historically Low Valuations
Agree Realty (ADC), one of the highest-quality net lease REITs in the world, has seen over $4 million worth of insider purchases recently. This significant purchase indicates that insiders believe the company is undervalued. ADC owns Class A properties occupied by reputable tenants like Walmart and Walgreens. Despite its strong cash flow and steady growth potential, the company’s share price has dropped to historically low levels. This presents an excellent buying opportunity for investors, as ADC offers about 25% upside potential to its 5-year average AFFO multiple. Additionally, insiders’ confidence in ADC can be seen as a positive sign for peers like Realty Income, National Retail Properties, and Essential Properties Realty Trust.
Safehold: CEO Confidence Shines Through Insider Purchases
Safehold, a company specializing in ground leases, has experienced a significant decline in its share price due to the surge in interest rates. However, the CEO’s recent $1.4 million purchase of shares indicates his confidence in the company. Ground leases, with their extreme durations, are highly sensitive to interest rates. Despite this, the cash flows derived from these leases are secure, as tenants would do anything to avoid defaulting and losing ownership of their buildings. Safehold’s long debt maturities and low LTV make it resistant to high interest rates. If investors believe interest rates will return to lower levels, buying shares of Safehold at its current price presents a great opportunity. Furthermore, with a near 4% dividend yield, investors can earn while they wait for the share price to increase.
Uniti Group: Insider Confidence in a Cheap REIT with Potential
Uniti Group (UNIT), one of the cheapest REITs in the market, has seen its CEO purchase nearly $1 million worth of shares. Despite trading at just 4x FFO and 1/3 of its estimated net asset value, the company has suffered from high debt and concerns surrounding a problem tenant. However, the recent refinancing of major debt maturities until 2026 and the long lease with the largest tenant expiring in 2030 provide stability for the company. If interest rates decrease in the coming years, Uniti Group’s valuation is likely to increase significantly. The management is actively seeking a strategy transaction to lower debt, which could unlock further value. With a dividend yield of around 10% and the potential for positive outcomes, Uniti Group is an attractive investment opportunity.
REIT Sector Insider Purchases: A Strong Signal for Investors
The flurry of insider purchases in the REIT sector indicates that many of these assets are undervalued. Despite the market’s overreaction to rising interest rates, REIT balance sheets remain strong, debts are low, and maturities are far into the future. Insider buying offers a strong validation of the fair value of these properties. Investors can consider following in the footsteps of these insiders and take advantage of the historically low valuations in the REIT sector. Agree Realty, Safehold, and Uniti Group are three specific REITs that have recently seen significant insider purchases, highlighting their potential for growth and providing confidence to other investors.
The current undervaluation of REITs presents a unique opportunity for investors. The insider purchases in Agree Realty, Safehold, and Uniti Group indicate that these companies are trading below their true worth. By taking advantage of these historic low valuations, investors can potentially enjoy significant returns in the long run. However, as with any investment, it is important for investors to conduct their own due diligence and consider their own investment strategies and risk tolerances before making any decisions. Overall, the recent insider purchases in the REIT sector signal a positive outlook for these assets and should not be ignored by savvy investors.
Analyst comment
Positive
Market Outlook: The undervalued state of REITs, highlighted by insider purchases, suggests that the market will experience a rebound as investors recognize the potential for significant returns. This presents a great buying opportunity, especially for Agree Realty, Safehold, and Uniti Group, which have seen substantial insider purchases. Other investors may follow suit, driving up valuations in the REIT sector. However, investors should conduct their own research and consider their risk tolerance before making any investment decisions.
