It has been a tough year for ASX real estate investment trust (REIT) shares, with investors fleeing this side of the market as interest rates rise.
While this is disappointing, the team at Bell Potter believes it could have created a buying opportunity for investors.
As a result, it has initiated coverage on a host of REITs and named five as buys today.
Which ASX REITs are buys?
Bell Potter has a preference for ASX REITs with a low interest expense impact, positive outlooks, and in certain sectors. It explains:
We prefer REITs where there is a combination of: (1) Low future interest expense impact via higher hedging, already higher WACD, low gearing or actively selling assets in a more-liquid sub-sector; (2) Have underlying earnings growth look forward / solid LFL rental growth; and (3) Prefer healthcare, petrol stations and industrial subsectors over retail and office.
Five ASX REITs that tick these boxes are:
Centuria Capital Group (ASX: CNI)
The broker has a buy rating and a $1.55 price target on its shares.
Dexus Convenience Retail REIT (ASX: DXC)
Bell Potter has put a buy rating and $2.85 price target on Dexus Convenience Retail's shares.
GDI Property Group Ltd (ASX: GDI)
Its analysts have a buy rating and 75 cents price target on this REIT.
Healthco Healthcare and Wellness REIT (ASX: HCW)
This health and wellness focused REIT gets a buy rating and a $1.75 price target.
HMC Capital Ltd (ASX: HMC)
Bell Potter has a buy rating and a $5.55 price target on HMC Capital's shares.
One REIT to sell
Bell Potter may be a fan of the Dexus Convenience Retail REIT, but the same cannot be said for the Dexus Industria REIT (ASX: DXI). It has initiated coverage on this industrial property company with a sell rating and a $2.65 price target. It explains:
[W]e see an earnings cliff ahead in FY26 when the impact of higher locked in hedging rolls on at which point we forecast peak WACD (5.8% vs. 3.5% actual as at FY23). With a flat 3yr EPS CAGR (1.9% vs. 6.0% across our coverage), a mooted change in Fund Manager leadership and trading at a PE and NTA premium to peers we see better value across our coverage universe.
