3 Small-Cap REITs With Big Potential Upside

Small-cap real estate investment trusts (REITs) with a market cap below $2 billion are gaining attention due to their growth potential and ability to uncover undervalued opportunities in niche markets. Their size allows for greater flexibility, enabling them to adapt quickly to market demands and emerging trends.

Therefore, investors looking for small-cap REITs with an upside potential of more than 10% might consider adding Ladder Capital Corp (LADR), Chimera Investment Corporation (CIM), and SITE Centers Corp. (SITC) to their portfolios.

A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-producing real estate. As per Nareit’s research, approximately 170 million Americans own REITs through their retirement savings and other investment funds.

The growth potential of small-cap REITs aligns well with economic recovery and urban development. As regions prioritize infrastructure expansion and property development, these REITs are poised to benefit from rising demand.

Furthermore, the global REIT market is anticipated to grow by $350.20 billion by 2028, exhibiting a CAGR of 2.9%, showing a real positive REIT growth in the economy.

Considering these conducive trends, let’s look at the fundamentals of the above-mentioned stocks in detail:

Ladder Capital Corp (LADR)

With a market cap of $1.5 billion, LADR operates as an internally managed real estate investment trust offering commercial mortgage loans, structured finance products, and investments in securities and real estate properties. It operates through three segments: Loans; Securities; and Real Estate. 

On October 15, the company paid a quarterly dividend of $0.23 per share. LADR pays an annual dividend of $0.92 per share, which translates to a yield of 7.72% on the prevailing share price. Also, its four-year average dividend yield is 7.86%. Moreover, the company’s dividend payouts have increased at an impressive CAGR of 4.8% over the past three years. 

For the nine-month period that ended September 30, 2024, LADR’s net interest income amounted to $95.99 million. Its total other income is valued at $106.81 million, up marginally year-over-year. The company’s attributable net income came in at $76.87 million, while its earnings per share stood at $0.61.

Analysts expect LADR’s revenue and EPS for the current year (ending December 2024) to be $273.38 million and $1.20, respectively. For the fiscal year 2025, its revenue is expected to grow 9.1% from the prior year to $298.35 million, and its EPS is projected to be $1.20.

Over the past nine months, the stock has surged 10.1%, closing the last trading session at $11.92.

The 12-month median price target of $13.25 indicates an 11.7% upside potential from the last closing price. The price targets range from a low of $13 to a high of $13.50.

LADR’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

LADR has an A grade for Sentiment and a B for Quality. It is ranked #2 out of 43 stocks in the REITs - Diversified industry. Click here to see the additional ratings for LADR (Growth, Value, Momentum, and Stability).

Chimera Investment Corporation (CIM)

CIM engages in the business of investing in a diversified portfolio of mortgage assets, including residential mortgage loans, agency residential mortgage-backed securities (RMBS), non-agency RMBS, agency commercial mortgage-backed securities (CMBS), and other real estate-related assets. It has a market cap of $1.19 billion.

On December 3, CIM announced the completion of its acquisition of Palisades Group, a U.S.-based alternative asset manager that specializes in residential real estate credit, for $30 million cash and an additional potential earnout of up to $20 million over five years contingent upon achieving certain financial targets.

On October 31, buoyed by strong financial performance, the company paid a quarterly dividend of $0.37 per share. CIM pays an annual dividend of $1.48, which translates to a yield of 10.01% at the current share price. Its four-year average dividend yield is 13.39%.

CIM’s net interest income for the fiscal third quarter that ended September 30, 2024, amounted to $66.45 million, with a 4.8% year-over-year increase. The company’s net income available to common shareholders stood at $113.67 million compared to the prior-year quarter’s loss of $16.27 million, while its net income per share came in at $1.39 versus a loss of $0.22 per share last year.

The consensus revenue estimate of $74.10 million for the fiscal fourth quarter (ending December 2024) represents a 14.6% increase year-over-year. The consensus EPS estimate of $0.40 for the current quarter indicates a 2.4% improvement year-over-year.

CIM’s stock has surged 24.3% over the past six months and 12.6% over the past nine months to close the last trading session at $14.79.

Based on Wall Street analysts offering 12-month price targets for CIM in the last three months, the average target price is $16.50, indicating an 11.6% change from the last price.

CIM’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has a B grade for Value. Within the REITs - Mortgage industry, it is ranked #4 out of 27 stocks. Click here to see CIM’s ratings for Growth, Momentum, Stability, Sentiment, and Quality.

SITE Centers Corp. (SITC)

SITC has a market cap of $825.36 million and engages in the business of owning, leasing, acquiring, redeveloping, developing, and managing shopping centers located in suburban, high-household-income communities. It is a self-administered and self-managed REIT.

In the fiscal third quarter that ended on September 30, 2024, SITC’s revenue amounted to $89.43 million. The company’s net income to common shareholders rose 598.2% from a year-ago period to $320.16 million. Its EPS stood at $6.07, up 597.7% year-over-year.

Street expects SITC’s FFO for the current year (ending December 2024) to be $2.62, while its revenue is estimated to be $367.10 million. Further, SITC topped the consensus FFO estimates in each of the trailing four quarters, which is promising.

The stock has gained 1.2% intraday to close the last trading session at $15.70.

Based on Wall Street analysts offering 12-month price targets for SITC in the last three months, the average target price is $44.40, indicating an 182.80% change from the last price, with a high forecast of $64 and a low forecast of $17.

SITC’s fundamentals are reflected in its POWR Ratings. The stock has an A grade for Value and a B for Quality. It is ranked #3 out of 29 stocks in the REITs - Retail industry.

Beyond what is stated above, we’ve also rated SITC for Growth, Momentum, Stability, and Sentiment. Get all SITC’s ratings here.

What To Do Next?

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LADR shares were trading at $11.81 per share on Tuesday afternoon, down $0.11 (-0.92%). Year-to-date, LADR has gained 9.08%, versus a 28.16% rise in the benchmark S&P 500 index during the same period.

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