Commercial Real Estate Finance

As is often the case, this is not my list. I found this ranking in an interesting article on Seeking Alpha, in which Avi Morris names his choices for this year’s Top 8 REITs for Yield Potential, emphasizing the appeal of their tax-advantaged dividends.

(These REITs are ranked in descending order according to their 2011 yields, which means they’re basically in no particular order when it comes to their potential for 2013.)

- Omega Healthcare Investors (NYSE: OHI)

- Senior Housing Properties (SNH)

- EPR, Inc. (NYSE: EPR)

- Sun Communities (NYSE: SUI)

- Campus Crest Communities (NYSE: CCG)

- Highwoods Properties (NYSE: HIW)

- Home Properties (HME)

- HCP (NYSE: HCP)

An interesting list, including several of the less-talked-about REITs. There’s a good mix by asset class, with both diversified and specific-asset REITs making up this ranking: If we break this list down by asset class, we have 3 healthcare/senior living REITs, one trailer park operator (my term, not theirs), one student housing REIT, a couple multifamily REITs, and two diversified REITs (including EPR, a/k/a Entertainment Properties Trust, whose holdings include everything from movie theaters to water parks to charter schools).

I suppose the lesson of this ranking (which, of course, remains to be proven) is that smaller, niche real estate trusts show greater potential for yield than their more diversified peers (though there are notable exceptions: notice self-storage is nowhere on this list). Ultimately, though–as with anything else–the higher potential return is usually attended by higher risk.  

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