“Who’s Buying These ‘Fortress’ A-Rated REITs?” was one of my final 2023 articles. In it, I described blue-chip real estate investment trusts, or REITs, as the crème de la crème, the very best-quality companies that you can own. They’re great stocks to own in almost any market cycle because they most always have access to equity and debt.

“And they typically generate stable earnings and dividends. The most common attributes for a blue-chip are its balance sheet and conservative dividend policy.

“Specifically, blue-chip companies [almost] always have modest debt ratios with low-risk credit ratings.”

That’s why I also call them sleep well at night stocks or SWANs. And why they’re able to demonstrate “consistent growth in adjusted funds from operations [AFFO] and dividends, making them attractive investments.”

It’s always great to own such top-notch investments. But they do have two distinct downsides.

One is that their dependability tends to translate to higher stock prices. This can mean their fair valuations are simply higher, meaning you need more dollars to buy a single share. And it very, very often means they trade at those fair valuations or higher – instead of the discounts we like to look for.

There’s also the issue that they don’t often provide immediate boosts of profit. They do provide profits. Safe, significant ones too.

But they take more time to accrue. So if you’re looking for a faster turnaround, you usually need to increase your risk and look lower on the alphabet.

The Appeal of BBB+ Rated REITs

Now, as my regular readers know, I don’t advise adding too much risk to your investing inventory – neither in overall theory nor stock-to-stock practice. But there’s no way to avoid risk all around.

There’s simply no investment that can provide 100% rewards 100% of the time. So there is a proper balance to strike, and that exact balance is going to look different for every individual investor. However, BBB+ rated REITs are rarely a bad place to turn.

To understand how, let’s first look at the S&P rating structure, where AAA is the absolute best designation. The worst of the worst, meanwhile, is D.

If a company is slapped with that latter assessment, it means it’s about two steps away from crashing and burning.

That’s too much risk, for the record. Though I’m sure you already recognize that. It’s obvious.

S&P Global Rating’s whole structure is very easy to use, in fact, sliding down like this:

• AAA
• AA
• A
• BBB
• BB
• B
• CCC
• CC
• C
• D.

The first four ratings are labeled as “investment grade” while the latter six are “speculative grade.” Which means that BBB is the lowest you can go in the investment grade category.

This means you’ve still got substantial reward in terms of safety. These companies are far from falling apart.

Yet they tend to trade at lower entry prices, leaving more room to run on the upside.

A Bit More Risk With a Lot More Than a Bit of Reward

Now, admittedly, there are plenty of excellent prices to capitalize on across the real estate investment trust realm. So the price appreciation aspect isn’t as strong a reason to act on as it otherwise could be.

At the same time, the stocks I’m about to delve into represent quality companies. Sure, they each have room for improvement according to S&P.

(And S&P is very good at what it does, analyzing each investment intensely to reach its conclusions.)

So you’re not going to find something quite as impressive as, say, AvalonBay Communities (AVB). That REIT made my A-rated REIT list a week or two ago, warranting this glowing review:

Or like Realty Income (O), Equity Residential (EQR), Simon Property Group (SPG), Mid-America Apartment Communities (MAA), Camden Property (CPT) – all of which are A- rated – or Prologis (PLD) or Public Storage (PSA), which are even higher on the scale at unadulterated A’s,

With that said, I still think you might like what you see.

Healthpeak Properties, Inc. (PEAK)

This BBB+ rated REIT has a market cap of almost $11.0 billion and a portfolio of healthcare real estate with a focus on lab campuses, outpatient medical centers, and continuing care retirement communities (“CCRC”).

In late October, PEAK announced that it had agreed to an all-stock merger with Physicians Realty Trust (DOC), which is expected to close in the first half of 2024.

The combined company’s portfolio will cover approximately 52 million SF across high-growth markets including Houston,