These Two REITs Could Be Sleeping Giants

The first time I heard the expression “sleeping giant” was when I ran across the supposed quote from Japanese Admiral Isoroku Yamamoto, who wrote in his journal about the 1941 attack on Pearl Harbor: “I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.” That sleeping giant, of course, was the United States of America. After the attack, America woke up to its place in history and the world, and the Greatest Generation used its latent strength to defeat the forces of imperialism and fascism.

The term “sleeping giant” has also been used to describe other things, such as the volcanic formation under Yellowstone National Park. It may seem like nothing now with just its geysers and hot springs, but if this “sleeping giant” would ever really wake up, it could cause the largest volcanic eruption in history.

Sports teams have also been referred to as “sleeping giants”—a football team, for example, may have some of the best players in the National Football League, but their play is below average. The players haven’t been motivated enough. With the right coach and motivation, the “sleeping giant” could wake up and win the Super Bowl!

You can also say that there are Real Estate Investment Trusts (REITs) that could be considered “sleeping giants.” They have the latent strength to wake up and make investors a tremendous amount of money.

Two such REITs are Arbor Realty Trust (NYSE: ABR) and Apartment Income REIT Corporation (NYSE: AIRC), also known as AIR Communities.

Arbor Realty Trust 

Nareit describes Arbor Realty Trust as a mortgage REIT—

“Arbor Realty Trust, Inc. is a nationwide REIT and direct lender, providing loan origination and servicing for multifamily, single-family rental (SFR), seniors housing and other diverse commercial real estate assets. Headquartered in New York, Arbor manages a multibillion-dollar servicing portfolio, specializing in government-sponsored enterprise products. Arbor is a Fannie Mae DUS® lender, Freddie Mac Optigo Seller/Servicer, and an approved FHA Multifamily Accelerated Processing (MAP) lender. Arbor’s product platform also includes CMBS, bridge, mezzanine and preferred equity lending.”

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Arbor Realty closed on July 8, 2022, at 13.84 per share, with a fantastic dividend yield of 11.1%. This is on the low end of Arbor Realty’s 52-week trading range ($12.18 to $20.74).

Many REITs such as Arbor Realty are on the low end of their trading ranges due to rising interest rates. But you can’t beat the dividend and recent inflation trends will prove to have a positive impact on the price per share.

Nareit.com reports the following total returns for Arbor Realty—

1 year: – 20.33%
2 year: 31.35%

3 year: 12.82%

5 year: 20.32%

10 year: 19.40%

Apartment Income REIT Corporation (AIR Communities)

Apartment Income is described as a “self-administered and self-managed real estate investment trust (REIT). The Company is focused on investing in United States multi-family real estate.” Nareit describes it as a residential REIT.

Apartment Income closed on July 6, 2022, at 41.34 per share, with a decent dividend yield of 4.31%. Again, this is on the low end of Apartment Income’s 52-week trading range ($39.06 to $55.82). At the beginning of May, Apartment Income entered oversold territory at 46.05 per share.

Since this REIT only began trading on the New York Stock Exchange in December 2020, Nareit reports only one year of total return at – 9.98%.

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In times like we’re living in today, when online companies such as Amazon have sapped the strength out of many community retail marketplaces, and when white-collar employees have become used to working from home after the COVID pandemic, it doesn’t seem like the wisest move to invest in commercial real estate or office buildings.

But people always need a place to live. Even if the US economy would tailspin into a recession, families still need places to lay their heads at night. This is why I consider Arbor Realty and Apartment Income ideal investments right now. Currently, these REITs are relatively cheap, they offer attractive dividends and their portfolios will only go up in value with the current rate of inflation. They are indeed “sleeping giants.” This may be a once-in-a-lifetime opportunity for your investment portfolio.

Photo: Kaatsheuvel / The Netherlands – March 29 2018: Sleeping and snoring giant in Theme Park Efteling. Spring. Courtesy of Taras Kuziv on Shutterstock.

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