Real Estate Investment Trusts, or REITs, have long been a popular vehicle for real estate investing among market participants. With consistent dividend payouts, low unit value, easy liquidity, and access to diversified portfolios of different types of real estate across geographies, the status of REITs as a “go-to” real estate asset among the investing public isn't expected to fade anytime soon.
Now, as the buzz over a long-awaited rate cut continues to grow stronger amid inflation's downward trajectory, REITs should be expected to thrive amid a more favorable macro backdrop heading into the back half of 2024 and into 2025.
Here, we'll highlight two REITs that have been fairly quiet in 2024 so far, but analysts seem to believe they are good turnaround stories, with ratings getting more bullish on both names lately. Are either of these names solid REIT stocks to buy right now? Let's have a closer look.
Lineage Inc
Founded in April 2012 by Kevin Marchetti and Adam Forste, Lineage (LINE) operates a vast network of temperature-controlled warehouses across North America, Europe, and Asia Pacific. The company's focus is on providing end-to-end logistics solutions, including warehousing, transportation, and value-added services, for temperature-sensitive products such as frozen foods, perishables, and pharmaceuticals. Its market cap is currently at $19.36 billion.
Lineage recently grabbed headlines with its IPO, where it sold 57 million shares and raised $4.44 billion, making it the biggest offering of 2024 to date. LINE, which is only the second REIT to go public since the Fed's rate hike campaign started in 2022, is up 8.5% from its IPO price of $78.
Notably, Lineage is the world's largest global temperature-controlled warehouse REIT. Its portfolio comprises 482 warehouses spanning approximately 84 million square feet. These warehouses support the operations of over 13,000 customers, with even the largest customer accounting for just over 3% of Lineage's sales.
Given that roughly 12% of global food is lost due to a lack of refrigeration, Lineage aims to play a crucial role in addressing this issue. The company stores a wide range of foods, including seafood, packaged goods, poultry, potatoes, beef, dairy, bakery goods, and pork.
Lineage's revenues have been consistently rising over the years, from $3.7 billion in 2021 to $5.3 billion in 2023. Net operating income (NOI), a key metric that assesses the operational strength of a REIT, has risen from $1.1 billion in 2021 to $1.7 billion in 2023. At the same time, core funds from operations (FFO) have increased from $335.4 million in 2021 to $433.4 million in 2023. Overall, the company's total assets stood at $18.9 billion and net long-term debt at $9 billion at the end of 2023.
On average, analysts have an overall rating of “Moderate Buy” for the stock, with a mean target price of $94.91 - which denotes an upside potential of about 12% from current levels. Out of 14 analysts covering LINE, 8 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 4 have a “Hold” rating.
Americold Realty Trust
Americold Realty Trust (COLD) was founded in 1980 as a subsidiary of ConAgra Foods (CAG). In 2010, Americold was spun off as a separate, publicly traded company. Americold is primarily engaged in the ownership, development, and operation of temperature-controlled warehouses. It provides storage and distribution services for frozen and refrigerated products, including food, pharmaceuticals, and other temperature-sensitive goods. The company's market cap currently stands at $8.1 billion.
COLD stock is down 4.7% on a YTD basis, and it offers a dividend yield of 3.06%.
In its latest results for the second quarter, COLD reported growth in both revenues and FFO. Revenues for the quarter came in at $660.96 million, up 1.8% from the previous year, while core FFO per share went up by an impressive 43.5% in the same period to $0.33. The company's NOI increased by 17.1% yearly to $215.5 million.
Overall, COLD closed the quarter with a cash balance of $44.2 million and a total warehouse count of 235, almost flat from the prior year.
Americold boasts an impressive customer list of 3,000, including well-known consumer names like Smithfield, Conagra, Kraft-Heinz (KHC), Unilever (UL), Safeway, Sprouts (SFM), Ahold, and others. The company has maintained long-standing relationships with its biggest 25 tenants, averaging over 35 years. Among these top customers, 15 have investment-grade balance sheets, and many generate additional revenue through transportation services.
Americold has announced plans to expand its operations by building distribution centers in Kansas City and Dubai. Ongoing expansions are also underway in Spearwood, Australia, and Allentown, Pennsylvania.
The company's partnership with Canadian Pacific Kansas City (CP), now the only Class I railroad connecting all three North American nations, will enable Americold to build and operate cold-storage facilities at strategic locations within this critical network. This will significantly reduce supply chain costs and open up new market opportunities.
Overall, analysts have a consensus rating of “Strong Buy” for COLD stock, with a mean target price of $30.36, which indicates an upside potential of about 5.3% from current levels. Out of 11 analysts covering the stock, 7 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 2 have a “Hold” rating.
LINE vs. COLD: What's the Verdict?
Both Lineage and Americold are leading players in a huge market that is valued at about $40 billion currently, and is projected to reach almost $100 billion by 2030. As key players in a growing market, both REITs are poised to benefit. While the recently listed Lineage offers a robust balance sheet, Americold's proactive strategic moves to grow its operations are a positive move in its favor.
That said, for investors seeking steady yields from an established player in the REIT space, Americold's longer track record as a public entity, with a dividend payment history stretching back to 2018, may tip the scales in its favor at the moment.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
