2 Hidden REIT Gems Poised to Outperform the Market

The real estate sector is off to a strong start in 2025, outperforming the S&P 500 (SNPINDEX: ^GSPC) By approximately 6 percentage points as of mid-March. Nevertheless, not everyone did so. real estate investment trusts (REITs) have shown superior performance, and there are some great chances for patient long-term investors to make purchases.

Below are two stocks that have dropped by 18% and 23% respectively from their 52-week high points, making them particularly appealing to investors assessing their gains over time. years , not weeks or months.

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Soft demand but a great long-term opportunity

Ryman Hospitality Properties (NYSE: RHP) is a hospitality REIT with two main components to its business. First, and the larger part of the business, is hotels. Ryman owns the five massive Gaylord hotels and one other group-focused hotel property. In short, these properties are designed to host large conventions, conferences, and attractions, which creates massive demand for its rooms, food, and beverage offerings.

On the flip side, Ryman’s entertainment division, formerly called the Opry Entertainment Group, encompasses various performance spaces including the renowned Ryman Auditorium and the historic Grand Ole Opry in Nashville. Additionally, this segment includes the Ole Red restaurants and entertainment outlets, along with Austin City Limits and others.

After releasing its latest earnings report, Ryman fell due to management expressing dissatisfaction with their performance during the holiday season. However, the fundamental outlook remains strong, making this an opportune moment to consider purchasing shares at a reduced price.

Despite the challenges posed by the COVID-19 pandemic, group-event demand has shown unexpected durability, prompting Ryman to invest significantly with plans for growth. The company’s strategy encompasses substantial enlargements at various Gaylord locations, significant acquisitions within the realm of entertainment resources, and further developments. Additionally, Ryman intends to ultimately separate its Opry Entertainment Group as a means to fully realize the potential worth of their enterprise.

The proof of this model is in the performance. Since becoming a REIT in 2012, Ryman has generated a 14.1% annualized total return, handily outpacing the S&P 500. Plus, this highly profitable company has a 4.7% dividend yield, making it an excellent choice for income investors.

Excellent assets on sale

Alexandria Real Estate Equities (NYSE: ARE) It has dropped by approximately 20% within the last year and stands around 55% lower than its peak value in 2022. To put it simply, besides facing challenges from rising interest rates which affected the entire Real Estate Investment Trust (REIT) sector throughout 2022 and 2023, Alexandria focuses specifically on office spaces leased to life sciences companies and has been hit hard due to a broader decline in the life sciences industry.

To put it simply, the demand for the large-scale life sciences properties that Alexandria focuses on has significantly decreased. Vacancy rates have risen, the uptake of new developments has been disappointing, and there remains an excess supply. lot of construction going on.

However, there's a lot to like about this business. Alexandria's properties still have an excellent 94.6% occupancy rate, and there are 7.5 years remaining on the average lease. The company has an excellent balance sheet, with an average of nearly 13 years remaining on its debt and few near-term maturities. Lease renewal activity has been rather strong, with positive rental-rate increases.

Currently, Alexandria Real Estate Equities is valued at slightly more than 10 times its projected funds from operations (FFO), which serves as the real estate industry’s version of earnings. Additionally, it boasts a dividend yield of 5.3%, comfortably supported by its income streams.

Management apparently agrees that the stock is a bit too cheap. It authorized a $500 million stock buyback authorization and has spent $200 million of that amount in just a few months. (Note: Buybacks are somewhat rare for real estate investment trusts.)

Excellent performances for both development and profit

These are both excellent long-term Investment prospects. Currently, investors are grappling with worries about recessions, economic instability, and trade tariffs, which might cause these REITs to experience significant fluctuations shortly. However, if you’re an individual focused on the long haul and seeking robust companies likely to outperform the broader markets in terms of overall returns, then these two REITs should definitely catch your attention and make their way onto your radar.

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Matt Frankel holds stakes in Ryman Hospitality Properties. The Motley Fool owns shares of and advocates for purchasing Alexandria Real Estate Equities. They also recommend investing in Ryman Hospitality Properties. The Motley Fool holds a position in this as well. disclosure policy .