The consumer is the key to the economy improving. The consumer is also the key for revenue growth and success for the major U.S retail REITs. The International Council of Shopping Centers (ICSC) just wrapped up its annual conference in Las Vegas. The REIT research team from UBS A.G. (NYSE: UBS) was there, and they came away pleasantly surprised.
UBS is Overweight the mall REITs, with a preference toward outlets and class A malls, as property-level growth is being driven by real pricing power. Net asset value (NAV) and funds from operations (FFO) growth is further driven by growing ground-up and redevelopment opportunities. They also see more value in the mall REIT shares, trading more in line with private market values versus the strip malls, which trade at meaningful NAV premiums. Here are the top-rated retail REIT stocks to buy from UBS.
General Growth Properties Inc. (NYSE: GGP) was almost left for dead a short five years ago. In November of 2008, the stock traded at less than $1. The UBS price target for the stock is $23. The Thomson/First Call estimate is $22.38. Investors are paid a 2.10% dividend.
Simon Property Group Inc (NYSE: SPG) is the mega-cap name in the UBS stock to buy list. Insiders have been buyers of this industry leader in the past six months. The UBS price target is $179 and the consensus is $187. Investors receive a 2.60% dividend.
Tanger Factory Outlet Centers Inc. (NYSE: SKT) engages in acquiring, developing, owning, operating and managing factory outlet shopping centers. The UBS price objective is $41, while the consensus for the stock is $37.75. Investors are paid a 2.40% dividend.
While the UBS REIT team is biased to malls in their retail REIT report, they also are bullish on U.S. REITs as a whole. They especially favor the apartment REITs. Here are the additional stocks to buy. Boston Properties Inc. (NYSE: BXP), Colonial Properties Trust (NYSE: CLP), Camden Property Trust (NYSE: CPT), Equity Residential (NYSE: EQR), Kilroy Realty Corp. (NYSE: KRC), Avalonbay Communities Inc. (NYSE: AVB) and BRE Properties Inc. (NYSE: BRE).
All the additional stocks to buy have solid earnings and pay investors good dividends. It is important to remember that REIT dividends can contain return of principal. In addition, with so many of these quality stocks trading at or near 52-week highs, investors may want to consider scaling money into these names over some period. Another tactic would be to buy a half position now and wait for a market pullback to add the second half of the position.