The first company on the list operates in self-storage facilities across the U.S. In a real estate market that is attached to variability, the company has constantly leveraged its sharp occupancy management and strategic pricing strategies to derive top-line growth.
Meanwhile, the second one’s business model has maintained a high occupancy rate. The model ensured stable cash flows through long-term lease agreements. The company has a diversified tenant base spanning over 1,500 clients across various sectors and geographies. This reduces dependency on any single client or region.
Finally, the last company on the list is a leader in owning premier shopping, dining, entertainment and mixed-use destinations. The company realized high increases in funds from operations (FFO) and net operating income (NOI). In short, these fundamentals make these stocks attractive and will benefit from a market rally.
Extra Space Storage (EXR)
Extra Space Storage (NYSE:EXR) operates as a REIT specializing in self-storage facilities across the U.S. The company has seen constant improvement in occupancy, reaching 93.2% in Q1 2024, a 0.5% annual increase. This indicates effective management of property utilization and demand. Higher occupancy levels directly contribute to revenue growth. Even a 1% increase in occupancy can significantly impact revenue, as noted by the 1% lift in same-store revenue performance. Extra Space Storage’s revenue strategy improved occupancy and average move-in rates. Notably, the move-in rate grew sequentially by approximately 8% from a seasonal low in January.
Moreover, despite adversities in the market, the company managed to increase same-store revenue. This aligns with their internal projections and reflects Extra Space’s effective pricing strategies. Meanwhile, the expenses for the same-store properties increased by 5.5% annually, which was managed within expectations. The company has successfully achieved savings across various categories of general and administrative expenses (G&A), leveraging its scale to improve operational efficiency. Overall, Extra Space is included on the stocks for a market rally list based on its revenue growth through occupancy management and strategic pricing strategies.
Realty Income (O)
Realty Income (NYSE:O) is a REIT focusing on commercial real estate. The company maintained a high occupancy rate of 98.6% in Q1 2024, which was constant with previous quarters. Realty Income achieved a rent recapture rate of 104.3% on lease renewals, indicating its ability to capture higher rents upon lease expiration. Their tenant base spans over 1,500 clients across various sectors and geographies, reducing dependency on any single client or region. Only 5.2% of its portfolio’s annualized rent was on the credit watch list, aligning with historical averages.
After the Spirit merger, Realty Income has approximately $825 million in annualized free cash flow for investments. The company has maintained strong financial flexibility with approximately $4 billion in total liquidity. This ensures Realty Income can effectively manage upcoming debt maturities and new investment opportunities. The company achieved a nominal first-year investment spread of over 3.4%, significantly higher than its historical average of 1.5%. In short, Realty Income’s inclusion on the stocks for market rally list is based on its stable cash flows from a diversified tenant base and robust asset management of lease renewals.
Simon Property Group (SPG)
Simon Property Group (NYSE:SPG) is a leader in owning premier shopping, dining, entertainment and mixed-use destinations. In Q1 2024, the company marked a solid increase in FFO. Simon Property’s FFO grew to $1.334 billion, equating to $3.56 per diluted share. It is a solid increase from $1.026 billion or $2.74 per diluted share in Q1 2023. Indeed, this impressive growth of approximately 30.1% per share reflects Simon Property’s effective management of its real estate assets. This includes higher rental income and gains from strategic investment activities such as the Authentic Brands Group sale.
Further, Simon Property’s NOI also had solid expansion in Q1. Domestic property NOI increased by 3.7% annually, while portfolio NOI grew by 3.9%. This reflects operational resilience and efficiency in optimizing property performance. Improved occupancy rates support the growth in NOI. These are reaching 95.5% overall, with malls achieving 97.7% and a 3% increase in the base minimum rent per square foot. To conclude, high occupancy rates, strategic asset management and significant growth in FFO solidify Simon Property’s presence on the stock for market rally list.
As of this writing, Yiannis Zourmpanos held a long position in O. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in O.
Yiannis Zourmpanos is the founder of Yiazou Capital Research, a stock-market research platform designed to elevate the due diligence process through in-depth business analysis.