3 REITs To Avoid At All Costs Today

If you're looking to get a snapshot of what industries expect to thrive or collapse in the post-COVID-19 world, look no further than the real estate market.

Following the social distancing guidelines across the United States, numerous real estate investment trusts (REITs) have completely collapsed. REITs that specialize in hotels, retail, and office space have plunged in value.

During March, lodging REITs lost 36.5% as a subsector. Office REITs shed 20.3% in March as well. And regional malls lost a staggering 53.9%.

While some investors believe that we are looking at a potential rebound in the future, we urge caution.

Structural changes in the U.S. economy and longer waits until we reopen the economy could drive many of these REITs even lower in the months ahead.

Here are three REITs to absolutely avoid in April.

REITs to Avoid, No. 3: Apple Hospitality

First, we start in the hotel and hospitality sector. Apple Hospitality REIT Inc. (NYSE: APLE) is a REIT with extensive hotel holdings in urban, high-end suburban and developing markets. It owns 231 hotels in 34 states, with a total of 29,535 rooms. Brands include Hilton, Courtyard by Marriott, and Home2 Suites.

Now, it doesn't require an MBA or even a high school diploma to realize how ugly the market is right now for hospitality companies.

Naturally, it's tempting to look at Apple Hospitality's 14.6% dividend as appealing. Here's the problem. The COVID-19 crisis is likely to extend much longer than many people believe. And with millions of Americans out of work, there will be a prolonged impact on hospitality given that consumers won't be able to travel in abundance.

I don't expect that this 14.6% dividend will be sustainable. When the company reports earnings for Q1 or Q2, I fully anticipate that they will slash their dividend.

In addition, we will need to get a better understanding of how many of its tenants are struggling with cash flow.

REITs to Avoid, No. 2: Simon Property Group

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Disclosure: None.

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