Real estate investment trusts (REITs) typically cater to income investors because they need to distribute 90% of their taxable income to remain in compliance with IRS regulations. However, REITs can still be growth stocks. Three fast-growing REITs are Americold Realty Trust (NYSE: COLD), Innovative Industrial Properties (NYSE: IIRP), and Rexford Industrial Realty (NYSE: REXR). Here's why growth-focused investors will love these REITs.
A blazing-hot REIT
Americold Realty is one of several REITs operating in the fast-growing industrial real estate sector. However, it has a niche focus, as it's the only REIT concentrating on owning and operating cold-storage facilities.
That strategy has allowed the company to grow at a brisk pace. Its revenue surged 35.7% year over year in the second quarter, while its net operating income (NOI) jumped 20.1%.
The main driver has been acquisitions. The industrial REIT grabbed a bigger slice of the global cold-storage pie last year when it acquired Agro Merchants Group for $1.74 billion, solidifying its position as the No. 2 player in the industry.
Meanwhile, it has continued its shopping spree this year, spending $488 million on several additional cold-storage acquisitions in the U.S. and Australia. Those deals should enable Americold to continue growing its revenue at a brisk pace despite some pandemic-related headwinds on the global food supply chain. That should allow it to keep producing superior total returns that have averaged more than 20% annually since its initial public offering in 2018.
A smoking-hot REIT
Innovative Industrial Properties is another industrial REIT. It also has a niche focus, this time on medical-use cannabis facilities.
Innovative Industrial Properties has been growing like a weed. Its revenue soared 101% year over year in the second quarter, while its AFFO rocketed 104%. That gave it the fuel to grow its dividend by 32% over the past year.
The company has steadily acquired new properties net leased to companies operating in the medical-use cannabis industry. From early April through early August, the company purchased eight properties that will require a total investment of $227.2 million, including spending on tenant improvements.
Meanwhile, it had plenty of financial flexibility to continue expanding. It ended the quarter with $805.7 million of cash and short-term investments and a low leverage ratio of 21% debt-to-total assets. That should enable Innovative Industrial to continue growing at a blistering pace, which has helped fuel total annualized returns of more than 70% since its IPO in late 2016.
Focused on the right location
Rexford Industrial Realty also focuses on the industrial sector. While it's one of several industrial REITs concentrating on owning logistics properties like distribution centers, it's laser-focused on the Southern California market.
The company's concentration is paying dividends as its core FFO (funds from operations) surged 35.9% in the second quarter. It benefited from strong organic growth as the cash NOI of its stabilized same-property portfolio jumped 22%, driven in part by a 33.9% jump in rental rates on new and renewal leases. Rexford is cashing in on strong market conditions and low vacancy rates.
Rexford is complementing its strong organic growth by acquiring additional properties. It purchased 10 in the second quarter for $256.9 million, bringing its year-to-date investment level to $470 million. Meanwhile, it has a strong balance sheet with a low leverage ratio of 12% net debt-to-enterprise value, giving it the financial flexibility to continue expanding.
It already had more than $650 million of additional acquisitions in the pipeline at the end of the second quarter. When combined with its organic growth prospects, those future deals should enable Rexford to continue generating outsized returns for investors. Since its IPO in 2013, Rexford has delivered a nearly 23% total annualized return.
Americold, Innovative Industrial, and Rexford Industrial are growing fast. One of the biggest factors driving their above-average growth rates is their laser focus on a particular property type or region. That's enabling these pure-play REITs to dominate their niche markets, driving superior growth and total shareholder returns.