For real estate investors, 2021 is going to be a hard act to follow in 2022. Total returns across the industry we around 43% (market-cap-weighted) and 40% (equal-weighted). The S&P 500 returned 28.7% in 2021.

According to BTIG analyst James Sullivan and his team, share price appreciation in 2021 was the highest ever for equity real estate investment trusts (REITs), and this year is on track for the highest growth in fund flow from operations per share and dividend yields since 2011. Two weeks ago, we ran our own screen to find the five highest-yielding REITs going into 2022.
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BTIG’s coverage universe is more limited than ours, and the analysts were interested in finding their top picks in each of 10 industry sectors. We include their top picks (all are Buy rated) and BTIG’s price target at the end. Here are the five REITs expected to post share-price gains of more than 20% this year.

Macerich

Macerich Co. (NYSE: MAC) is one of North America’s largest regional mall operators. The company owns 51 million square feet of real estate in some 47 regional shopping centers. Macerich was hit hard by COVID-19 restrictions in each of the past two years. BTIG says it expects some “lumpiness” in the company’s recovery but, because the company’s portfolio of properties is focused on higher-income customers, the analysts “expect the wealth effect to boost spending.” Higher expected inflation could also yield higher rent payments.

At a recent share price of around $17.90, Macerich’s upside potential based on BTIG’s target price of $35 is 95.5%. The company’s dividend yield is 3.32%.

SL Green

SL Green Realty Corp. (NYSE: SLG) is the largest office landlord in Manhattan and remains focused on acquiring and managing commercial properties in the heart of the American financial industry. At the end of 2020, SL Green owned 28.6 million square feet of space in Manhattan and another 8.7 million square feet used to secure debt and preferred equity payments.

According to BTIG, the company outperformed the office sector by 760 basis points, returning 27.2% to investors last year. The analysts believe that “SL Green is uniquely positioned to benefit from an uptick in office utilization while the continued ‘flight to quality’ provides an upward bias to earnings (SLG’s YE 2021 goal was to lease 85% of its $3.3B [One Vanderbilt Avenue] development, and the project is now more than 94% leased).”

At a recent price of around $82.00, the upside potential based on BTIG’s price target of $105 is 28%. SL Green’s dividend yield is 4.59%.

San Diego-based Innovative Industrial Properties Inc. (NYSE: IIPR) is one of the country’s largest owners and managers of specialized properties for state-licensed operators of regulated medical-use cannabis growing facilities. In BTIG’s view, the company offers investors three key benefits. First, the U.S. cannabis market is still in its “infancy.” Second, the company has an “outsized growth profile” compared to other REITs. And third, cannabis demand is secular, not cyclical.

At a recent price of around $209.70, the potential upside based on BTIG’s price target of $290 is 38.1%. Innovative Industrial Properties pays a dividend yield of 2.78%.

Avalon Bay

Avalon Bay Communities Inc. (NYSE: AVB) owns more than 86,000 apartments in 11 states, primarily along the east and west coasts of the United States. It is also expanding into southeast Florida and the Denver metropolitan area. BTIG expects above-average same-store net operating income growth in these markets this year, with demand and rental rates continuing to improve as the U.S. economy recovers from the worst effects of the pandemic.

At a recent price of around $249.30, the upside potential based on BTIG’s price target of $307 is 23.1%. Avalon Bay pays a dividend yield of 2.53%.

Terreno Realty

Terreno Realty Corp. (NYSE: TRNO) owns and operates industrial real estate in six large U.S. coastal markets: Los Angeles, Northern New Jersey/New York City, San Francisco Bay Area, Seattle, Miami and Washington, D.C. The company owns 253 buildings, with 15.1 million square feet of space. At the end of December, Terreno claimed 554 tenants and a lease rate of 95.5%. BTIG noted that Terreno underperformed the industrial sector by 560 basis points last year, but things are improving:

As industrial demand accelerated during the pandemic and tenants continued to push closer to population centers, Terreno’s acquisitions and operating fundamentals have ramped to record levels. Indeed, the company closed on $657.7M of transactions (~125% higher than the prior record set in 2017), and through 3Q21 Terreno’s SSNOI and earnings growth have led the industrial sector.

At a recent price of $76.80, the upside potential to BTIG’s price target of $94 is 22.4%. Terreno pays a dividend yield of 1.77%.

And Others

Here are other BTIG Top Picks among REITs:

• Alpine Income Property Trust Inc. (NYSE: PINE): Recent price, $19.90; BTIG target $23
• Pebblebrook Hotel Trust (NYSE: PEB): Recent price $23.50; BTIG target $26
• Simon Property Group Inc. (NYSE: SPG): Recent price $158.60; BTIG target $177
• Invitation Homes Inc. (NYSE: INVH): Recent price $43.00; BTIG target $50
• Retail Opportunity Investments Corp. (NASDAQ: ROIC): Recent price $19.30; BTIG target $20

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