California REITs market, characterized by diversity and resilience, is a testament to strategic investment opportunities. In this article, we will explore some of the most valuable assets in the California REITs market and reveal how these trusts have become synonymous with both growth and stability.
Key Takeaways – Best California REITs Chart
| REIT | Market Cap | Dividend Yield (TTM) | Industry |
|---|---|---|---|
|
$122.95 Billion |
2.55% |
Industrial |
|
|
$74.98 Billion |
1.66% |
Specialty |
|
|
$52.21 Billion |
3.67% |
Industrial |
|
|
$42.92 Billion |
5.10% |
Retail |
|
|
$22.30 Billion |
3.78% |
Office |
|
|
$15.91 Billion |
3.68% |
Residential |
|
|
$11.88 Billion |
2.58% |
Industrial |
|
|
$3.17 Billion |
8.68% |
Healthcare Facilities |
Prologis, Inc. (PLD)
- Market Capitalization: $122.95 Billion
- Dividend Yield (TTM): 2.55%
- Industry: REIT – Industrial
- Headquarters: San Francisco, California
Prologis, Inc. (PLD) is one of the global leaders in the REITs market. The company specializes in leasing modern distribution facilities, catering to a wide range of clients, including business-to-business and retail/online fulfillment sectors. Its client roster includes notable names like DHL, Kuehne + Nagel, Home Depot Inc., Unilever, and FedEx.
It has a significant international presence, managing properties across North America, Europe, Asia, and South America.
As of mid-2023, the company’s portfolio included properties and development projects expected to total approximately 1.2 billion square feet. The company’s financial performance reflects its success, with its shares surging 18.2% in 2023, significantly outperforming the industry’s growth.
Over the past decade, Prologis has delivered impressive returns to its investors, outperforming both the S&P 500 and the MSCI US REIT Index with a total shareholder return of over 400%. The company’s assets are well-positioned to perform well in an inflationary environment, with several tailwinds expected to drive strong FFO growth in the future. Prologis has also demonstrated an ability to underwrite mark-to-market rent increases, providing significant opportunities for future earnings growth.
The company’s diverse customer base, with the top 10 customers accounting for less than 15% of its portfolio, highlights its robust and well-diversified business model, offering stability in various market conditions.
Equinix, Inc. (EQIX)
- Market Capitalization: $74.98 Billion
- Dividend Yield (TTM): 1.66%
- Industry: REIT – Specialty
- Headquarters: Redwood City, California
Equinix, Inc. (EQIX), a California-based REIT, specializes in digital infrastructure. Founded on August 11, 2000, Equinix has become a leader in providing data center and connectivity solutions.
Equinix operates a global network of data centers called International Business Exchanges (IBXs). This network allows organizations to access vital places, partners, and possibilities, enabling them to scale with agility, expedite the launch of digital services, deliver superior experiences, and enhance their value.
Equinix’s data center network spans several countries and continents, including the Americas, Asia-Pacific, Europe, and the Middle East. Notable expansions include the acquisition of Main One, a West African data center and connectivity solutions provider, for $320 million in December 2021; expansion into Chile and Peru with a $758 million acquisition of four data centers from Entel in March 2022; and the announcement of its market entry into Malaysia with plans to build a new IBX data center in Johor Bahru, scheduled to begin operations in Q1 2024.
By signing deals with wind farms in Texas and Oklahoma, Equinix aimed to offset the energy consumption of its North American data center portfolio. The U.S. Environmental Protection Agency recognized Equinix’s efforts by naming it one of the 17 Green Power Partners leading the transition to renewable energy in 2019.
Public Storage (PSA)
- Market Capitalization: $52.21 Billion
- Dividend Yield (TTM): 3.67%
- Industry: REIT – Industrial
- Headquarters: Glendale, California
Public Storage (PSA) is a REIT specializing in acquiring, developing, and operating self-storage facilities. As of September 30, 2023, Public Storage had interests in 3,028 self-storage facilities located across 40 states in the United States, encompassing approximately 217 million net rentable square feet. Additionally, the company holds a 35% common equity interest in Shurgard Self Storage Limited, which operates 267 self-storage facilities across seven Western European countries under the Shurgard brand, covering around 15 million net rentable square feet.
Public Storage is a member of both the S&P 500 and FT Global 500, reflecting its significant influence and scale in the real estate sector.
Founded in the late 1980s, Public Storage has a history of being a significant player in the self-storage industry. It underwent a notable restructuring in 1995, merging with its self-storage REIT, Storage Equities Inc., to form a single REIT, Public Storage Inc.
Besides the storage facilities, the company’s business model also includes a merchandising business, a third-party property management business, and an insurance business offering products to cover losses for goods in self-storage facilities.
Realty Income Corporation (O)
- Market Capitalization: $42.92 Billion
- Dividend Yield (TTM): 5.10%
- Industry: REIT – Retail
- Headquarters: San Diego, California
Realty Income Corporation, also known as “The Monthly Dividend Company,” is a notable REIT based in California. As an S&P 500 company and a member of the S&P 500 Dividend Aristocrats index, Realty Income has been delivering dependable monthly dividends that steadily increase.
Founded in 1969 by William E. Clark and Evelyn J. Clark, Realty Income has a long-standing history in the real estate industry. The company’s first acquisition was a Taco Bell restaurant in 1970. Over the years, it has grown significantly.
Realty Income invests primarily in free-standing, single-tenant commercial properties across the United States, Spain, and the United Kingdom, subject to triple-net (NNN) leases. As of March 31, 2022, the company owned 11,288 properties totaling approximately 213.9 million leasable square feet. Its largest tenants include prominent names like Walgreens, 7-Eleven, Dollar General, and FedEx, among others.
The company became public in 1994 and has since declared 640 consecutive monthly dividends. It has increased its dividend 122 times since its public listing.
Alexandria Real Estate Equities, Inc. (ARE)
- Market Capitalization: $22.30 Billion
- Dividend Yield (TTM): 3.78%
- Industry: REIT – Office
- Headquarters: Pasadena, California
Alexandria Real Estate Equities, Inc. (ARE) is a prominent S&P 500 company specializing as a life science REIT. Founded in 1994 and headquartered in California, Alexandria is known for being the pioneer and longest-tenured owner, operator, and developer of collaborative life science, agtech, and advanced technology mega campuses in AAA innovation cluster locations. These locations include Greater Boston, the San Francisco Bay Area, New York City, San Diego, Seattle, Maryland, and the Research Triangle.
The company focuses on creating highly dynamic and collaborative environments for its tenants, including over 800 life science, agrifoodtech, climate innovation, and technology companies. Its largest tenants include notable companies like Bristol-Myers Squibb, Moderna, Eli Lilly and Company, and Takeda Pharmaceutical Company, which contribute significantly to the company’s revenue.
In addition to its real estate operations, Alexandria also provides strategic capital to transformative companies through its venture capital platform. The company’s unique business model and rigorous underwriting process aim to ensure a high-quality and diverse tenant base, resulting in higher occupancy levels, longer lease terms, higher rental income, higher returns, and greater long-term asset value.
Essex Property Trust, Inc. (ESS)
- Market Capitalization: $15.91 Billion
- Dividend Yield (TTM): 3.68%
- Industry: REIT – Residential
- Headquarters: San Mateo, California
Essex Property Trust, Inc. (ESS) is a distinguished S&P 500 company and a fully integrated REIT specializing in acquiring, developing, redeveloping, and managing multifamily residential properties. Based in San Mateo, California, Essex Property Trust focuses primarily on selected West Coast markets.
Founded in 1971 by billionaire George M. Marcus, Essex Property Trust became a public company on June 13, 1994, through an initial public offering. In April 2014, Essex Property Trust significantly expanded its portfolio by acquiring BRE Properties for $4.3 billion, further solidifying its position in the REIT sector and leading to its inclusion in the S&P 500 index.
As of recent updates, Essex Property Trust has a significant presence with ownership interests in 252 apartment communities, encompassing approximately 62,000 apartment homes, along with an additional property under active development. It is recognized as the 10th largest owner of apartments and the 20th largest apartment property manager in the United States.
Essex Property Trust places a strong emphasis on tenant satisfaction. By maintaining high-quality properties and offering desirable amenities, they aim to attract and retain tenants, which is crucial for ensuring steady rental income and minimizing vacancy rates.
Rexford Industrial Realty, Inc. (REXR)
- Market Capitalization: $11.88 Billion
- Dividend Yield (TTM): 2.58%
- Industry: REIT – Industrial
- Headquarters: Los Angeles, California
Rexford Industrial Realty, Inc. (REXR) is a REIT focusing on acquiring, operating, and redeveloping industrial properties in Southern California. This region, characterized by its high-barrier submarkets, is one of the largest global industrial markets.
The company specializes in “infill” industrial real estate, which refers to properties within densely populated areas where industrial development is limited. These locations are typically surrounded by urban development, creating scarce available land for new construction.
Central to Rexford Industrial’s business model is a customer-centric approach. Managing tenants directly, the company aims to deliver functional space in their sub-markets, supported by effective property management and communication technologies.
Sabra Health Care REIT, Inc. (SBRA)
- Market Capitalization: $3.17 Billion
- Dividend Yield (TTM): 8.68%
- Industry: REIT – Healthcare Facilities
- Headquarters: Irvine, California
Sabra Health Care REIT focuses on the healthcare real estate sector. As of September 30, 2023, the company’s portfolio included a diverse array of 377 real estate properties held for investment. This company’s portfolio is spread across various healthcare industry segments, including 240 Skilled Nursing/Transitional Care facilities, 43 senior housing communities under lease, 61 senior housing communities managed by third-party property managers, 18 Behavioral Health facilities, and 15 Specialty Hospitals and Other facilities. Additionally, Sabra’s investments extend to loans receivable, preferred equity investments, and unconsolidated joint ventures.
The breadth of Sabra’s real estate properties, encompassing 37,606 beds/units, is distributed throughout the United States and Canada. Sabra’s operations include nursing facilities, assisted living centers, and mental health facilities, addressing various healthcare needs.
Despite Sabra’s diversified portfolio, the company faces particular challenges. For instance, their financial strength indicators reveal concerns about balance sheet health, including a low interest coverage ratio and a low Altman Z-Score, suggesting potential financial distress. Additionally, the company’s revenue has declined over the past three years, and there has been a decrease in earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past five years.
Investors looking at Sabra Health Care REIT, Inc. should thus consider these financial health and growth metrics alongside the company’s operational strengths in the healthcare real estate market.
