![UBS sees 'compelling' opportunities in dividend-paying real estate stocks](https://news7g.com/wp-content/uploads/2024/07/108001404-1720016102726-gettyimages-1095609806-RinaldiAlexandria05-780x470.jpeg)
The collapse in real estate has created an opportunity for long-term investors, according to UBS. Real estate was the only one of the 11 major sectors of the S&P 500 to decline in 2024, down 4.7%. UBS analyst Jonathan Woloshin wrote in a note last week that there is still significant uncertainty in the commercial real estate, or CRE, market, including the path of interest rates and questions about refinancing $2 trillion in debt maturing between 2024 and 2026. However, he said, capital availability and a shrinking supply of new retail, multifamily and industrial properties point to a stronger operating base in 2025 to 2030, he added. There’s also money sitting outside the private equity market, he added, and about $33.5 billion in new CRE funds have been announced. .SPLRCR YTD Mountain S&P 500 Real Estate Sector Year-to-Date Real estate investment trusts, or REITs, also pay attractive dividends, with an average yield of 4.2%, according to UBS. “Investors need to remember that no one rang the bell at the bottom,” Woloshin wrote. “While headlines are likely to remain negative and more challenges lie ahead in CRE, we believe patient investors with liquidity and a multi-year time horizon have a wealth of attractive risk-adjusted reward opportunities in the CRE and REIT markets.” He specifically recommends focusing on quality—such as management, balance sheet, real estate, geography, and dividend coverage over free cash flow—rather than looking for yield. Here are two REITs on his list: Prologis stock has struggled this year, down about 15%. However, the REIT is the world’s largest owner of industrial real estate, such as warehouses — and the industrial sector remains strong, Woloshin said. “PLD has a four-pronged operating model that includes owned and operated real estate, development, Essential Business potential, and strategic capital management, providing multiple potential avenues for value creation,” he said. Prologis also pays a 3.4% dividend. Alexandria Real Estate Equities has a 4.4% dividend and is down more than 7% year-to-date. The company owns, operates, and develops large facilities for life sciences companies. Woloshin likes Alexandria Real Estate Equities’ strong balance sheet and limited short-term debt, as well as its well-covered dividend and broad access to capital. “ARE has a proven track record of developing strongly pre-leased assets and has a strong, well-diversified credit tenant base,” he said.