Not All REITs Are Created Equal – Avoid These 3 At All Costs

My bet is the company is trying to generate higher fees in the near term. That strategy may be wise at the beginning of a cycle, but it could be disastrous at the end of the cycle.

I'm not sold.

The long term trend here is down. And this won't end well if the cycle does indeed come to an end soon. Avoid Senior Housing immediately.


REITs to Avoid Now, No. 2

The decline in the retail sector has been swift and painful. Perhaps Real Estate giant Simon Property Group knew something bad was coming when it spun off Washington Prime Group Inc. (NYSE: WPG) five years ago at almost $20 per share.

Today, you can buy Washington Prime Group for $3.83 per share.

I feel bad for those investors buying now, after seeing the insane 25% dividend yield being paid by the company today. It's not going to end well.

Washington Prime is bleeding money, with losses that are expected to last for the foreseeable future. The company is expected to lose $0.38 per share in 2020 after a loss of $0.25 per share in 2019.

A glance at the portfolio of properties owned by Washington Prime explains why. These are some of the junkiest malls in existence today.

To its credit, Washington Prime is attempting to transform those properties to viable hybrid malls with various mixed uses. But it's too little too late.

Huge financial losses will make it difficult to execute that strategy going forward.

This is one REIT I would avoid immediately.


REITs to Avoid Now, No. 1

On the surface, all appears well with Community Healthcare Trust Inc. (NYSE: CHCT).

The company is in the sweet spot of the REIT space, owning healthcare facilities across the country. With an aging demographic, the healthcare market promises riches to come for the next several years.

Unfortunately, the big gains have already been had at Community Health. The stock has climbed over 120% in the last five years, but it's not sustainable growth. The valuation is the problem for investors considering buying today.

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