In this piece, we will take a look at the 12 most profitable real estate stocks now. For more real estate stocks, head on over to 5 Most Profitable Real Estate Stocks Now.
The real estate sector is one of the most lucrative industries in the world. Its importance is underscored by the fact that some of the largest economies in the world are inextricably linked to real estate development. The biggest example of the sector's importance is the 2008 financial crisis. This crisis, the after effects of which we are dealing with even today, shook the real estate industry badly . Spurred by a policy of low interest rates, homeowners borrowed extravagantly to own their properties, and banks then used these loans as an asset to sell their interest payments to investors. However, once the interest rates went up, the mortgage owners started to default - kicking a vicious cycle that forced the Federal Reserve to pump billions of dollars into the economy to prevent an all out collapse. How much did the Fed spend to prevent disaster? Well, its latest balance shows that while before the crisis its balance sheet had roughly $0.9 trillion of assets, these swelled to $2.2 trillion by the end of 2008. Effectively, the central bank had to more than double its assets to bail out big banks and the economy, and it is still struggling to contain it, as the coronavirus pandemic further exacerbated the problem and led to the balance sheet swelling to $8.96 trillion.
Another more recent example of the perhaps outsized role that real estate plays come from the world's second largest economy, China. Spurred by the financial difficulties of China Evergrande Group (OTCMKTS:EGRNF), the crisis continues to threaten not only the Chinese market but also the global economy due to the interlinking of large asset managers such as BlackRock with the Chinese stock market. In order to stimulate real estate, and by extension the broader economy, the Chinese government allowed low interest rates and increased bank lending to real estate companies to build properties and increase home ownership in the country. These stimuli led to the home prices in Shanghai rising by a whopping 150% between 2003 and 2010 and paved the way for excessive borrowing for big construction companies who then used these loans to pay other debts and take out more loans. The spiral led to the government making new laws, called the Three Red Arrows, which limited real estate developers' ability to raise new funds. Steeped in debt, Evergrande found it difficult to raise working capital and missed bond payments.
In terms of market value, the real estate sector is one of the most valuable in the world. According to research from Allied Market, the global real estate market was worth a whopping $28 trillion in 2021. From then until 2031, the firm believes that it will grow at a compounded annual growth rate (CAGR) of 5.3% to sit at an estimated $48 trillion by the end of the forecast period. Cementing the importance of China in the industry, Allied Market Research points out that Asia Pacific is the world's largest real estate sector, and that it accounts for more than two fifths of the global market. However, in terms of growth, the research firm believes that Latin America, the Middle East, and Africa (LAMEA) market will be the strongest growing region, as it outpaces the broader industry by posting a CAGR of 6.4%.
Today we'll look at some of the biggest money makers in the real estate world, with the top performers being Longfor Group Holdings Limited (HKG:0960.HK), China Overseas Land & Investment Limited (HKG:0688.HK), and Prologis, Inc. (NYSE:PLD).
We sifted out the biggest real estate companies in the world in terms of their market capitalization and revenue. Then, their net income for the past twelve months was determined, and the top twelve performers are listed.
CBRE Group, Inc. (NYSE:CBRE) is a real estate services company that provides services such as building engineering, construction management, investment services to commercial real estate investors, and property sales and mortgage services.
CBRE Group, Inc. (NYSE:CBRE) received a Buy share price rating and a $100 price target from Citi in January 2023 as the bank outlined that the firm is slated to benefit from real estate outsourcing. By the end of September 2022, 47 of the 920 hedge funds polled by Insider Monkey had invested in the firm.
CBRE Group, Inc. (NYSE:CBRE)'s largest investor is Natixis Global Asset Management's Harris Associates which owns 13.6 million shares that are worth $1 billion.
Along with Prologis, Inc. (NYSE:PLD), Longfor Group Holdings Limited (HKG:0960.HK), and China Overseas Land & Investment Limited (HKG:0688.HK), CBRE Group, Inc. (NYSE:CBRE) is a profitable real estate stock.
Public Storage (NYSE:PSA) is an American company that is headquartered in Glendale, California. The firm is a real estate investment trust (REIT) that buys, builds, and operates storage units. It has thousands of facilities all over the U.S., alongside interests in a European storage company that also provides it with a global footprint.
Public Storage (NYSE:PSA) faced a setback in February 2023 when another storage company rejected the firm's massive $11 billion buyout offer, sharing that it believes the offer is paying too little. 34 of the 920 hedge funds polled by Insider Monkey in Q3 2022 had held a stake in the company. The trailing twelve month net income removes the effect of a security sale on the firm's profit.
Public Storage (NYSE:PSA)'s largest investor in our database is Jeffrey Furber's AEW Capital Management which owns 457,800 shares that are worth $128 million.
Simon Property Group, Inc. (NYSE:SPG) focuses on developing and operating hospitality properties such as restaurants and entertainment centers alongside also focusing on high end shopping malls. The firm is headquartered in Indianapolis, Indiana.
Simon Property Group, Inc. (NYSE:SPG) is the largest shopping mall operator in the United States, but despite this, the firm missed a rather large $295 million loan maturity in February 2023. By the end of last year's third quarter, 35 of the 920 hedge funds surveyed by Insider Monkey had bought the firm's shares.
Out of these, Israel Englander's Millennium Management is Simon Property Group, Inc. (NYSE:SPG)'s largest investor. It owns 569,619 shares that are worth $66 million.
10. China Evergrande Group (OTCMKTS:EGRNF)
Trailing Twelve Month Net Income: $2.32 billion (1HKD = 0.13USD)
Number of Hedge Fund Holders in Q3 2022: N/A
China Evergrande Group (OTCMKTS:EGRNF) is a diversified Chinese property company that operates in the development, investment, management, and consumer sales segments. The firm also has finance, healthcare, and internet divisions.
China Evergrande Group (OTCMKTS:EGRNF) is busy investigating matters of financial impropriety, with an investigation revealing in February 2023 that its directors had acted improperly in redirecting loans from its property services division to the group as a whole.
9. Goodman Group (ASX:GMG.AX)
Trailing Twelve Month Net Income: $2.34 billion (1AUD = 0.69USD)
Number of Hedge Fund Holders in Q3 2022: N/A
Goodman Group (ASX:GMG.AX) is an Australian company headquartered in Rosebery, New South Wales. The firm has a global operational footprint, with a presence in lucrative markets such as the United Kingdom, Brazil, North America, Asia, and Europe.
Goodman Group (ASX:GMG.AX)'s first fiscal half of 2022 financial results shared in February 2023 revealed that the firm had raked in AUD1 billion in revenue, which marked a 1.5% drop. At the same time, its operating profit of AUD877 million marked an 11.5% annual increase.
American Tower Corporation (NYSE:AMT) is a specialty real estate company that focuses on operating telecommunications towers. The firm has hundreds of thousands of communications sites all over the world.
American Tower Corporation (NYSE:AMT) is busy expanding its global footprint, as a report in February 2023 speculated that the firm is interested in buying out a Spanish mobile tower operator. Insider Monkey dug through 920 hedge fund portfolios for last year's third quarter to determine that 42 had held a stake in American Tower Corporation (NYSE:AMT).
American Tower Corporation (NYSE:AMT)'s largest investor is Charles Akre's Akre Capital Management which owns 6.9 million shares that are worth $1.4 billion.
7. Vonovia SE (ETR:VNA.DE)
Trailing Twelve Month Net Income: $3 billion (1EUR = 1.07USD)
Number of Hedge Fund Holders in Q3 2022: N/A
Vonovia SE (ETR:VNA.DE) is a German real estate company that focuses its attention on the residential sector. The firm has more than half a million residential units in its portfolio that are spread across several European countries such as Germany and Sweden.
Vonovia SE (ETR:VNA.DE) is interested in the sustainable real estate development industry, as it is leading a 100 million funding round for an Austrian sustainable homes developer.
Vonovia SE (ETR:VNA.DE) joins our list of profitable real estate stocks, alongside others such as Longfor Group Holdings Limited (HKG:0960.HK), China Overseas Land & Investment Limited (HKG:0688.HK), and Prologis, Inc. (NYSE:PLD).
