Baron Real Estate Income Strategy

Welltower Inc. (WELL) is a $45 billion diversified health care owner and manager of senior housing, including assisted and independent living. Core to its strategy is to partner with top-tier operators and health systems while providing operators access to its proprietary data analytics platform.
We are optimistic about the prospects for Welltower given the substantial opportunity for cyclical recovery and continued secular growth in its senior housing business through occupancy and rent growth. The company also benefits from its proven ability to recycle capital at attractive rates of returns, premier health care platform, partnerships with top-tier operators, and well-respected management team focused solely on creating value on a per-share basis.

American Tower Corporation (AMT) is the largest independent wireless tower operator worldwide, with more than 240,000 towers in 20 countries on five continents.
Increasing demand for wireless data coverage is driving leasing activity by wireless carriers, with mobile data growing more than 25% per year. Since zoning for new towers in the U.S. is difficult to obtain, leasing on an existing tower (tenant colocation) or modifying existing equipment (amendment) is typically the best option. American Tower has been expanding internationally as well. We expect new tenants and higher colocation activity to drive strong organic cash flow growth. We believe American Tower will continue to acquire tower portfolios opportunistically.

Prologis, Inc. (PLD) is the world's largest industrial REIT, with a $100 billion global portfolio. 
In our view, industrial real estate has attractive fundamentals over the next several years, with organic growth among the highest across all real estate asset types. Stabilizing demand, driven by the growth of e-commerce, inventory building, and the need for infill locations to service "last mile" delivery, should be able to absorb a sharp decline in supply deliveries over the next several years. Given Prologis's assets, markets, management, and balance sheet, we believe the company is well positioned to benefit from this favorable fundamental backdrop.

Ventas, Inc. (VTR) is a REIT with a $30 billion portfolio of 1,300 properties across senior housing, medical office, hospitals, and life sciences properties.
We believe Ventas' well-located portfolio is poised to benefit from strong organic growth. In particular, Ventas' senior housing properties are cyclically depressed due to idiosyncratic reasons stemming from the pandemic, in our view. We see evidence that occupancy has bottomed and is primed to rebound substantially, as senior housing is a needs-based product with strong demographic forces around the forthcoming "silver wave" demand. Construction activity in the sector remains subdued and should position the company for favorable growth.

Independence Realty Trust, Inc. (IRT) owns 33,000 apartment units that cater to an affordable-income demographic across the Sun Belt and Midwest regions in the U.S.
We believe Independence Realty Trust offers attractive return prospects, supported by its discounted public market valuation compared to recent private market transactions and publicly traded peers. Its value-add program provides superior growth potential, while declining new supply deliveries in its markets should enhance pricing power. We also believe the broader market is undervaluing the company’s future cash flow growth from the lease-up of two recently completed development projects, which is not reflected in current earnings.

EastGroup Properties, Inc. (EGP) is an industrial REIT that owns a business distribution building portfolio valued at approximately $8 billion and located primarily in Texas, Florida, and California.
In our view, industrial real estate has an attractive fundamental backdrop over the next several years, with organic growth that is at the high end of real estate broadly. An eventual reacceleration in demand, driven by improving business confidence, the growth of e-commerce, inventory building, and the need for infill locations to service "last mile" delivery, is poised to occur at a time when new supply has fallen sharply. Given EastGroup's assets, markets, management, and balance sheet, we believe the company is well positioned to benefit from this expected growth.

Equity Residential (EQR) is the largest U.S. apartment REIT, with over 75,000 units and a portfolio valued at over $35 billion, focused largely on coastal markets such as New York City, Washington, D.C., Los Angeles, Boston, and San Francisco.
Equity Residential is a blue-chip apartment REIT, with high-quality assets in markets with high barriers to entry, a proven management team, a state-of-the-art operating platform, and a strong balance sheet. Tenant demand for apartments remains strong, driven by low housing inventories and changing demographics. Following a period of decelerating rent growth driven by elevated new construction levels, we think Equity Residential should begin to see stabilizing rent growth.

American Homes 4 Rent (AMH) is one of two publicly traded single-family home rental operators. The company owns over 58,000 rental homes across 22 states, with an average monthly rent of approximately $2,000 and average size of 2,000 square feet.
We believe American Homes 4 Rent is well positioned for growth through M&A and "build to rent" development in a fragmented industry, given its superior balance sheet and operating platform. Partnerships with homebuilders to acquire new homes and additional rental units against a backdrop of housing undersupply could also drive growth. The company is working on expense optimization by reducing turnover and leasing time and costs.

Weyerhaeuser Company (WY) is a timber REIT. It is one of the world's largest owners of timberlands with 10.5M acres in the U.S. and 14M acres that are licensed in Canada. It also operates 19 lumber mills and 6 OSB mills, where it manufactures wood products such as lumber, plywood and other building materials.
Weyerhaeuser is trading at a significant discount to its NAV, which is the result of recent headwinds in new housing construction and R&R activity related to elevated interest rates. Historically, WY has performed well off of cyclically low valuations near today's levels. Additionally, ~10% of lumber industry capacity was recently curtailed, which has already started to spur a rally in lumber prices that should continue as demand recovers as well. The timber REITs will be key beneficiaries of higher lumber prices and tend to perform well in a rising lumber price environment.

Simon Property Group, Inc. (SPG) is the largest U.S. mall and outlet REIT, with a $90 billion portfolio consisting of malls (50%), outlets (40%), and international operations (10%).
Simon's size and balance sheet strength should ensure it will stay a dominant force in the U.S. mall business, where scale matters, and in the outlet business (50% market share). Simon has unparalleled access to a variety of capital sources and a distinct cost-of-capital advantage in raising debt and equity. In our opinion, the executive team, led by David Simon, is deep and talented. Simon continues to invest domestically and abroad. We believe the stock price is attractive, trading at a discounted valuation multiple.