The Federal Open Market Committee (FOMC) is planning for a series of rate cuts in 2024, and savvy investors are homing in on the real estate sector. Lower interest rates often spur real estate activity, as borrowing costs tumble, stimulating demand for properties. Consequently, companies involved in real estate development, property management, and real estate investment trusts (REITs) tend to benefit in a lower rate environment. With the prospect of interest rate drops on the horizon, let’s scrutinize three real estate stocks currently trading at attractive valuations.
Forestar Group Inc.
This real estate development company, a subsidiary of D.R. Horton Inc, excels at procuring land and converting it into single-family residential communities. With a keen eye for regions with growth potential, favorable economic conditions, and the creation of essential infrastructure, Forestar Group targets optimal sale prices of residential properties, delivering robust financial returns. Trading at a 9.45 P/E GAAP (FWD), FOR stock is currently at a remarkable 75% discount to the sector median.
City Office REIT Inc.
Specializing in acquiring and managing superior office properties, predominantly in Sun Belt markets, City Office REIT Inc. currently owns or holds a controlling stake in 5.7 million square feet of office properties. In a climate where valuations within the Office REIT sector have experienced a dip, the company stands out. At 9.33 P/AFFO (FWD), this REIT stock is trading at about a significant 40% discount to sector median. Additionally, CIO stock boasts an attractive AFFO Yield (FWD) of 9.59%.
EPR Properties
EPR Properties, a diversified REIT, specializes in enduring experiential properties, managing approximately $5.7 billion in assets across 44 states. Stringent standards govern the company’s underwriting and investments, focusing on industry, property, and tenant cash flow. Valued at 9.36 P/AFFO (FWD), EPR stock is extremely attractive relative to the sector median, at around 40%. Furthermore, EPR stock boasts a tantalizing AFFO Yield (FWD) of 10.16%.