Real estate investment trusts (REITs) have been excellent wealth creators over the years. However, some REITs stand out for their ability to enrich their investors. Five of the best over the last decade have been CoreSite Realty (NYSE: COR), Extra Space Storage (NYSE: EXR), Equinix (NASDAQ: EQIX), SBA Communications (NYSE: SBAC), and Sun Communities (NYSE: SUI). Each produced total returns in excess of 500%. Given those massive returns, I wish I'd owned them 10 years ago.
Here's a closer look at how they produced those exceptional returns, which provide a blueprint for potentially finding the best REITs to own for the next decade.
CoreSite Realty: 1,000%-plus total return in the last decade
A $10,000 investment in CoreSite Realty a decade ago has grown into more than $114,000 over the years. Powering that growth has been the data center REIT's steady expansion. Ten years ago, CoreSite operated 11 data centers that served the needs of more than 600 customers across seven U.S. markets. Today, the REIT operates 25 data centers leased to more than 1,375 customers.
CoreSite grew that portfolio by making some strategic acquisitions and investing in development and expansion projects. This growing data center portfolio has enabled the REIT to increase its FFO from $1.24 per share in 2011 up to $5.31 per share in 2020, a 328% improvement. That gave CoreSite the power to boost its dividend at least once each year during that time. Overall, it has grown the payout by a jaw-dropping 876.9% since the end of 2010.
Extra Space Storage would have also grown a $10,000 investment a decade ago into more than $100,000 today. Driving the self-storage REIT's massive wealth creation has been its ability to produce sector-leading core FFO per share growth of more than 500% over the last 10 years.
It delivered that value-enhancing growth by steadily expanding its branded store count through development projects and acquisitions while also significantly increasing the number of stores it manages for third-party owners. The REIT also routinely increased its dividend, including by 69.5% since 2016.
Equinix: 901% total return
While Equinix has only officially been a REIT since 2015, the data center operator has generated strong total returns over the last decade. The company has steadily grown its portfolio via acquisitions and development projects. That has enabled it to deliver a remarkable 73 consecutive quarters of revenue growth. It also has a solid dividend track record, growing its payout each year since its conversion to a REIT.
SBA Communications: 750% total return
SBA Communications is also a relatively new entrant to the REIT sector, as it didn't convert until 2017. However, the infrastructure REIT has created a lot of shareholder value over the last 10 years.
The company has taken a multifaceted approach to grow value for its investors. It has acquired and built new data infrastructure like cell towers, repurchased shares, increased its dividend, and paid off debt. Those factors have enabled it to steadily grow its portfolio and cash flow per share, enriching investors in the process.
Sun Communities: 580% total return
Sun Communities is a residential REIT focused on manufactured housing communities, RV parks, and marinas. The REIT has steadily grown its property portfolio over the years, purchasing more than $8.5 billion of communities since 2010, in the process increasing its community count by more than fourfold over the past decade.
Sun Communities has further increased its income by expanding existing communities, developing new ones, and through its home sale and rental programs. That focus on manufactured housing has enabled the company to grow its income faster than other REITs over the years.
Exploiting fast-growing niches
There's one commonality that helped these five REITs create so much shareholder value over the past decade. Each one focused on a property sector off the beaten path for most real estate investors. That enabled them to expand while facing less competition, allowing them to grow their portfolios, cash flows, and dividends at above-average rates. Thus, a key to finding REITs that could be standout performers over the next decade is to look for those dominating niche real estate segments, since they could produce the biggest gains in the future.