To:
Warren E. Buffett
Chief Executive Officer and Chairman
Berkshire Hathaway
3555 Farnam Street, Omaha, Nebraska
Mr. Buffett,
My name is Brad Thomas. I’m a former real estate developer, author of several books on real estate investing, and the founder and chief investment analyst of Wide Moat Research.
I last reached out to you in 2021, when I sent you a copy of my book The Intelligent REIT Investor Guide. Much has changed since then – including your announcement of a successor, Greg Abel. Allow me to offer my congratulations on such a storied career.
I was interested to hear that Berkshire Hathaway recently took a position in Lamar Advertising (LAMR), a premier billboard real estate investment trust (“REIT”). As I explained to my readers recently, Lamar outpaces its competitors in terms of quality, revenue diversification, and earnings growth. Judging by your $142 million position, it would seem you agree.
You’ve invested in a few REITs over the years. There was the 5.3% stake you took in Tanger Factory Outlet Centers – now owned by Simon Property Group (SPG) – in 1999…
The 2 million shares of Seritage Growth Properties (SRG) you purchased in 2015…
And the 10% position you took in 2017 in the now privately owned STORE Capital.
But then years went by before you bought another one. Seven years, to be precise.
You have your reasons, I’m sure. But I would mention that the REIT sector offers reliable growth and has traded at attractive levels in recent years – qualities you look for in your holdings.
As I told my readers yesterday, I hope your position in Lamar is “the start of a beautiful new beginning” for Berkshire Hathaway when it comes to REITs. And if you and your team are scouring the REIT sector, I might offer a few suggestions on where you could look.
Realty Income
I wrote about Realty Income (O) for my readers just last week. I’m sure you’ve heard of it as well.
Self-named “the monthly dividend company,” it’s the gold standard of net-lease REITs and one of the few REITs listed in the S&P 500. Realty Income owns over 15,600 properties in all 50 states, the U.K., and seven other European countries. And its geographic, sector, and operator diversification is impressive.
This has allowed it to navigate challenging market conditions – from sharp recessions to the global pandemic – with impressive ease.
Many of Realty’s clients are industry leaders, spanning categories such as grocery, drug, and convenience stores. But it also has made strategic purchases into data centers and casinos in the last few years.
This REIT has rock-solid fundamentals and a balance sheet rated A3 by Moody’s and A- by Standard and Poor’s. Its leverage levels are also noteworthy, with 99.9% unsecured debt and 35% net debt to total enterprise value.
Since listing in 1994, it has achieved positive total operation returns every single year. And it has raised its dividend every single year for three decades.
Best yet, it’s trading with a 13.9 times price-to-adjusted-funds-from-operations (p/AFFO) multiple. That’s well below its normal (historical) valuation at 17.2 times. All told, Wide Moat Research expects Realty Income shares to return 25% annually.
Equinix
In years past, you admitted to a hesitancy to invest in technology. However, you credit your investing in Apple (AAPL) to understanding the company as one that provides essential consumer items with a devoted customer base.
I would offer a similar reframe for Equinix (EQIX). It is an essential infrastructure company servicing a sector with enviable, long-term growth prospects.
It operates 260 data centers and serves over 10,000 customers across more than 486,000 interconnections in 35 countries.
This mission-critical nature allows Equinix to embed annual price increases of 2% to 5% into its contracts. Moreover, these contracts tend to last quite a while, with average leases of 18 years.
This past quarter, the REIT reported solid adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and AFFO alike. And CEO Adaire Fox-Martin said she sees “a path to drive the business to double-digit revenue growth” going forward.
Equinix has an investment-grade rated balance sheet with over $8.5 billion of liquidity. Plus, it has grown its dividend by an average 10% per year since it converted to a REIT in 2015.
At last check, Equinix was trading at $773.46 with a well-covered dividend that’s yielding 2.4%. The REIT comes complete with a current p/AFFO multiple of 20.9 times – which is notably below its normal 24.8 times.We’re targeting 30% annual returns for these shares.
Equity Lifestyle
I would also offer Equity LifeStyle Properties (ELS) for consideration.
The REIT owns and operates 455 properties in 35 states and one Canadian province. These are for both manufactured housing and RV communities.
This is a market that you are undoubtedly familiar with. After all, Clayton Homes – the largest builder of manufactured homes in the United States – is a wholly owned subsidiary of Berkshire Hathaway. If you are interested in expanding your presence in this market, ELS may be worthy of consideration.
The sites are generally leased on an annual basis to residents who own or lease factory-built homes, including mobile homes. These aren’t the rundown, crime-ridden lots most people imagine. Equity Lifestyle runs a tight, appealing ship.
Since 1999, it has generated predictable growth with a 4.4% average net operating income (“NOI”). That’s 110 basis points above its REIT peers and 1.2% higher than the REIT average. Its funds from operations per share have risen annually by an average 8% since 2006, and its dividend by an average of 20%.
Equity’s balance sheet is one of the best in the entire REIT sector, with a weighted average interest rate of 4.1%. As of the second quarter of 2025, it had 4.5 times debt-to-EBITDAR (with the R standing for restructuring or rent costs). Its interest coverage was 5.6 times, and it had access to over $1 billion of capital from its line of credit and ATM programs.
This manufactured housing REIT is trading at $60.73 with a p/AFFO multiple of 23.5 times. Once again, that presents an attractive discount against its normal valuation of 29.9 times.
EastGroup
Fourth on my list today is EastGroup Properties (EGP), an industrial REIT with a portfolio of 63.9 million square feet. These properties are located in high-growth markets across Texas, Florida, California, Arizona, and North Carolina – mostly markets where the local economies are growing faster than the national rate.
It also targets functional, flexible, quality business distribution space for location-sensitive customers (primarily in the 20,000 to 100,000 square foot range). Accordingly, EastGroup has a diversified customer base that serves it and its investors well.
The company is hardly the biggest of its kind. There are plenty of industrial REITs that look much more impressive size-wise. However, EastGroup does have one of the best balance sheets with very solid financial metrics, such as:
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A 16% debt ratio
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A 3% unadjusted debt-to-EBITDA ratio
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A 16 times interest and fixed charge coverage
In short, there’s a lot to like here.
I also like its valuation. EastGroup is trading at $166.72 with a p/AFFO multiple of 24.5 times compared with its average of 31.3 times. Plus, its dividend comes with a current 3.4% yield and is well-covered with an 80% payout ratio.
For all these reasons (and then some), Wide Moat is targeting shares to return 30% or higher over the next 12 months.
Public Storage
Last but not least, for this list anyway, is Public Storage (PSA). The world’s largest self-storage landlord, it holds more than 3,300 facilities across the U.S. and serves around 2 million customers.
It also owns approximately 35% of Shurgard, the largest owner and operator of self-storage properties in Europe. So, it has got international revenue coming in as well.
Last year, that combined revenue increased by $230 million to a record $5.1 billion. And its NOI hit a record $3.7 billion.
That was impressive, though not completely unexpected. After all, Public Storage consistently has the highest same-store revenue and NOI per square foot among its self-storage REIT peers.
Yet it maintains very low leverage of 4.1 times net debt and preferred to EBITDA, with approximately $600 million in retained cash flow this year. This has helped it achieve an A2 credit rating from Moody’s and an A from Standard and Poor’s.
It’s the only U.S. REIT to achieve that accomplishment across all sectors.
Public Storage is currently trading at $287.35 with a p/AFFO multiple of 18.7 times – well below its normal 22.8 times. Its dividend is well-covered based on a payout ratio of 76% and yields 4.2% today.
Wide Moat believes it’s very capable of returning 20% annually. Or more.
These five REITs could boost Berkshire Hathaway’s performance considerably over the coming years and even decades. And your attention to the larger sector could help the average investor understand its value all the more.
In my mind, it’s an all-around win-win – and one I hope you, your team, and your successors will take further advantage of from here.
Yours very respectfully,
Brad Thomas
Editor, Wide Moat Daily
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