Next week, the Federal Open Market Committee will gather to discuss monetary policy for the year ahead.
After three straight interest rate cuts, investors anticipate that the Fed will pause on the benchmark rate. However, Fed Chair Jerome Powell has already signaled that the central bank will keep interest rates lower for longer to support the markets, U.S. employment, and inflation.
Lower for longer means that investors must seek alternative investment vehicles to offset falling bond yields and weak income payment.
If you’re living on a fixed income, a 10-year bond rate under 2% isn’t going to do much for your money, given the rate of inflation sits at 1.8% in the United States.
Instead, you should look at Real Estate Investment Trusts (REITs).
These alternative vehicles produce gobs of cash thanks to their rental activities, higher appreciation upside due to increasing real estate demand, and favorable tax benefits to their unitholders.
And the one I’m showing you today is expanding at an impressive rate.
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In fact, this company is one of the largest publicly traded REITs in the United States. The company primarily operates in three high-growth markets – Austin, Texas; Philadelphia, Pa.; and Washington, D.C.
Plus, this REIT pays a 5% dividend yield and could quickly surge 60% in value by this time next year.
Here’s the Top REIT to Buy Now
The best pick right now is Brandywine Realty Trust (NYSE: BDN).
Now, you know how I feel about D.C. after I recommended Washington REIT last month.
The nation’s capital continues to experience tremendous growth thanks to the uptick in government spending and demand for housing in the region. But Austin and Philadelphia are similarly popular markets that have experienced steady growth over the last decade.
In fact, Austin received the top ranking for places to live from U.S. News and World Report. The city will see another 50,000 people join the its population for the ninth straight year.
Meanwhile, Philadelphia has experienced the largest growth rate for highly educated residents of any of the top 25 metro areas since 2008. Venture capital activity exceeded $1.8 billion last year as more graduates and millennials flocked to the city.
Philadelphia represents 74% of Brandywine’s net operating income.
The Pennsylvania-based real estate giant specializes in property management, construction and development, investment services, and land acquisition. The firm’s core portfolio of Philadelphia property activity creates a significant opportunity for the coming year.
Brandywine is the master developer of Schuylkill Yards – a massive Philadelphia real estate project that will change the face of the city.
It consists of 14 acres (5.1 million square feet) of office, residential, life science, academic, retail, and hospitality space.
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The location will run adjacent to the third busiest rail station in the United States. Investors anticipate that this project will generate incredible demand from companies looking to capitalize on this rail station and the fact that the project falls into an opportunity zone.
This means that the project will receive federal incentives and attract long-term investors who will be able to avoid capital gains taxes by tapping into the program.
In October, the company released an earnings report that revealed a very successful and growing company. Occupancy and lease rates remain very robust.
Roughly 93.2% of its core portfolio is occupied, while 95.5% of the property has full leases. While its retention rate of 72% is strong, it can certainly show improvement to bolster cash flow and thus its stock price.
Brandywine Is Ready to Break Out
There are hundreds of REITs trading on the public market today.
So, why am I identifying Brandywine as a breakout stock?
The answer is simple: I used the Money Morning Stock VQScore™.
This proprietary rating system tracks thousands of profitable companies. Through a mixture of a stock’s price/earnings to growth ratio and several other key fundamentals and technical elements, VQScore assigns every company a rating from 0 to 4.9.
The higher the VQScore, the higher the likelihood that a company will break out in the coming months.
Brandywine’s 4.6 rating puts it in the high end of our “Strong Buy Zone.”
Brandywine pays a near 5% dividend and trades at roughly $15.30 per unit.
Given the expected trajectory of the markets in 2020, I think that Brandywine could easily trade at $23 per share by this time next year.
That figure represents a potential upside of 50% from today’s levels.
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