As we approach the end of 2022, it may seem like it's getting tougher to find good values in the real estate sector. After all, real estate investment trusts (REITs) as a whole have increased by 31% and outperformed the S&P 500 index by eight percentage points so far in 2021.
Having said that, there are still some excellent options if you want a solid combination of income and growth potential in your stock portfolio. Here are two of my favorite REITs to buy as we head into the latter months of 2021.
One reopening stock with tons of potential
American Campus Communities (NYSE: ACC) is the only pure play on student housing in the real estate industry and could be an excellent stock for long-term investors to load up on.
For one thing, the student housing industry has grown tremendously but is still in the relatively early stages -- most of the on-campus housing inventory in the company's target university markets still consists of outdated and uncomfortable buildings.
American Campus Communities creates student-oriented apartment communities offering incredible amenities, more privacy, and modern technology infrastructure at roughly the same price as the average on-campus room.
Furthermore, recent data shows just how resilient the student housing industry is. The company's fall 2021 leasing numbers were well ahead of the high end of expectations, and RealPage recently reported that student housing occupancy is back to pre-pandemic levels nationwide. With the lowest level of new student housing inventory in 10 years coming onto the market in 2022, it's fair to say that the properties' strong performance could continue for years.
This company is about to own the Vegas strip (well, a lot of it)
MGM Growth Properties (NYSE: MGP) is a gaming REIT that owns a portfolio of casino properties in Las Vegas and elsewhere in the United States. Vegas' Mandalay Bay and The Mirage are in the MGM portfolio, as are the Borgata in Atlantic City, New Jersey, and MGM National Harbor in Washington, D.C., just to name a few. The company's sole tenant is MGM Resorts, as the company was spun out of the gaming giant a few years ago.
We recently learned that MGM Growth Properties has agreed to be acquired by VICI Properties (NYSE: VICI) in an all-stock deal. If you aren't familiar, VICI is to Caesars Entertainment what MGM Growth Properties is to MGM Resorts (although Caesars isn't VICI's only tenant).
VICI owns 28 gaming properties, including the iconic Caesars Palace in Las Vegas, and has a large amount of regional gaming real estate. In addition, VICI is in the process of acquiring the Venetian and Sands Expo Center on the Vegas Strip.
When the companies combine, it will create the largest experiential REIT in the world. And as an all-stock deal, MGM Growth Properties' shareholders will become VICI shareholders after the deal is finalized. To be sure, you could simply buy VICI stock now, but since MGM Growth Properties currently trades at a small discount to the value of VICI stock you'll get, it is the better way to go right now (assuming the deal goes through).
In the longer term, VICI plans to continue to grow, including into non-gaming experiential properties, and with a 4.8% dividend yield, it is an excellent choice for income investors.
Buy for the long term
One point to keep in mind is that both these REITs are designed to be long-term value creators for their investors. I have absolutely no idea what they'll do over the next month -- or even the next year -- and neither does anyone else. However, both have excellent management and big market opportunities, and I'm confident that investors who add them to their portfolios now will be glad they did years down the road.