How REITs Could Stage a Huge Comeback in 2026

Summary of the Stansbury Investor Hour with Brad Thomas (Recorded 2026)

Key Concepts:

• REITs (Real Estate Investment Trusts): Companies that own or finance income-producing real estate across various sectors.
• AFFO (Adjusted Funds From Operations): A key metric for evaluating REIT performance, representing free cash flow.
• Net Debt to EBITDA: A leverage ratio used to assess a REIT’s debt levels relative to earnings.
• Silver Tsunami: The demographic trend of a large aging population (Baby Boomers) driving demand for specific sectors like healthcare and affordable housing.
• Hyperscalers: Companies building and operating large-scale data centers to support cloud computing and AI.
• Net Lease REITs: REITs that lease properties to single tenants under long-term contracts.
• PLR (Private Letter Ruling): An official interpretation by the IRS regarding tax law, crucial for the development of certain REIT sectors.

1. REIT Performance in 2025 & Historical Context

The discussion began with an analysis of REIT performance in 2025, which was notably weak, returning only 3.3% including dividends, significantly underperforming other asset classes like large caps (17%). Brad Thomas highlighted a historical pattern: REITs thrive in low-interest-rate environments and struggle when rates rise. He presented a chart illustrating this, showing REITs as the top-performing asset class in 2010 (28% return) following the 2008-2009 financial crisis, due to the Federal Reserve’s rapid interest rate cuts. Periods of low rates from 2010-2012 saw average REIT returns of 18%, with similar performance in 2014-2015. Conversely, rate hikes in 2015, 2017, and 2019 correlated with underperformance. However, 2020 saw a crash followed by a 40% bounce in 2021 when rates fell again. Brad believes the current environment, with potential rate cuts, presents a compelling opportunity for REITs, noting a peak-to-trough decline of 33%.

2. Concerns About Interest Rate Dynamics & REIT Fundamentals

Dan Ferris expressed concern about the divergence between the Fed’s control over short-term rates and the influence on long-term rates, which are more relevant to REITs (due to their long-term mortgage-based financing). Brad countered that strong REIT fundamentals, including improved balance sheets and a focus on specific property sectors, are more critical. He emphasized that many REITs learned from the 2008-2009 crisis, reducing debt and focusing on core competencies. He stressed that earnings drive dividends and dividends drive returns, and that sentiment is currently low despite strong fundamentals.

3. The Impact of the Trump Administration & Genesis Mission

Dan highlighted the potential impact of the Trump administration’s policies, particularly the “Genesis mission” (focused on biotech, defense, minerals, manufacturing, and semiconductors), on real estate. Brad agreed, emphasizing the importance of supply and demand. He believes the administration’s initiatives could create significant opportunities in specific real estate sectors.

4. Demographic Trends: The "Silver Tsunami" & Healthcare REITs

Brad identified the “silver tsunami” – the rapidly aging Baby Boomer population – as a key demographic driver. He cited AARP research indicating nearly 10,000 Boomers reach 65 daily, increasing healthcare spending. This trend is expected to benefit healthcare REITs. He specifically highlighted Welltower (WELL), which saw a 50% return in the previous year, and recommended Healthpeak Properties (DOC) as a potentially undervalued opportunity. Healthpeak’s focus on medical office buildings, life science properties, and senior housing, combined with a strong balance sheet and conservative payout ratio (72%), makes it attractive. He noted Healthpeak is spinning off its senior housing business in a $3 billion transaction, potentially unlocking value.

5. Equity Lifestyle Properties (ELS) & Affordable Housing

Brad also discussed Equity Lifestyle Properties (ELS), focusing on manufactured housing and RV resorts. He highlighted the affordability of these options (20-25% less per square foot than traditional rentals) and the fact that 70% of their manufactured housing properties are age-qualified (55+), aligning with the silver tsunami trend. He noted that many of these parks operate on ground leases, considered a safe asset class.

6. Data Center REITs & Technological Infrastructure

The conversation shifted to data center REITs, driven by the growth of AI and cloud computing. Brad acknowledged the increased competition and the need for careful analysis. He mentioned early investments in data center REITs like Digital Realty and Equinix, and highlighted the importance of understanding the legal framework (specifically, the IRS’s private letter ruling allowing racking systems to be classified as real estate). He also mentioned Fermy, cautioning against investing in companies with only a blueprint and no existing properties. He also highlighted Iron Mountain as a company adapting to the digitization trend. He emphasized the need to consider the energy infrastructure supporting data centers.

7. Net Lease REITs & VICI Properties (VICI)

Brad discussed the net lease sector, characterized by long-term leases to single tenants. He recommended VICI Properties (VICI), a net lease REIT focused on casinos, benefiting from the resurgence of Las Vegas and a strong dividend yield.

8. Key Financial Metrics & Valuation

Brad emphasized the importance of AFFO (Adjusted Funds From Operations) as a key metric for evaluating REITs, representing free cash flow. He also discussed Net Debt to EBITDA as a measure of leverage, noting that a ratio of 5x is acceptable for REITs with strong credit ratings (e.g., triple B+). He highlighted the importance of analyzing payout ratios to assess dividend sustainability. He pointed out that Healthpeak trades at 9.7x its normal multiple, compared to Welltower’s 44x, indicating potential undervaluation.

9. Brad Thomas’s Core Investment Philosophy

Brad emphasized the importance of learning from past market cycles, maintaining humility, and focusing on strong fundamentals. He stressed the value of meeting with management teams and understanding their strategies. He highlighted the importance of understanding the interplay between demographic trends, technological advancements, and government policies.

Conclusion:

Brad Thomas presented a cautiously optimistic outlook for REITs in 2026, emphasizing the potential for recovery as interest rates potentially decline. He identified specific sectors – healthcare, affordable housing, and data centers – as offering compelling opportunities, driven by demographic trends and technological advancements. He stressed the importance of focusing on REITs with strong balance sheets, conservative payout ratios, and experienced management teams. His core message was to learn from past cycles, prioritize fundamentals, and capitalize on emerging opportunities.