Navigating REIT M&A Trends: Opportunities in Undervalued Sectors for 2025

The real estate investment trust (REIT) landscape in 2025 is marked by a recalibration of M&A activity, with broader market consolidation and sector-specific opportunities emerging. While first-half 2025 saw a sharp decline in public REIT deals—only two healthcare-focused transactions were announced—underlying trends in infrastructure, data centers, and telecommunications suggest a shift in capital allocation toward high-growth, defensive assets. For investors, this environment presents a unique opportunity to identify undervalued REITs poised to benefit from industry consolidation, particularly as macroeconomic uncertainties and rising interest rates reshape risk-return profiles.

Sectoral Shifts and Strategic Consolidation

The slowdown in REIT M&A in 2025 reflects broader market caution, with global deal volume declining 9% year-to-date while values rose 15% due to fewer but larger transactions [1]. However, infrastructure and digital infrastructure REITs are bucking this trend. These sectors are gaining traction as investors seek assets with stable cash flows and long-term growth drivers tied to technological advancements. For instance, infrastructure REITs—such as those owning cell towers, fiber networks, and energy pipelines—are capitalizing on the demand for 5G expansion and AI-driven data infrastructure [2]. Similarly, data center REITs are benefiting from hyperscaler demand and the need for specialized facilities to support artificial intelligence workloads [3].

Telecom REITs, meanwhile, have seen a surge in investor allocations, overtaking residential REITs in Q2 2025 to capture 17% of actively managed fund assets [4]. This shift underscores the sector’s resilience amid trade tensions and its alignment with the digital economy’s structural needs.

Undervalued REITs in High-Growth Sectors

Several infrastructure and telecom REITs are trading at attractive valuations relative to their fundamentals, offering compelling entry points for investors.

1. Uniti Group (UNIT)
   Uniti Group, a fiber-focused infrastructure REIT, exemplifies the sector’s potential. Despite reporting a net loss of $10.7 million in Q2 2025, the company generated AFFO of $0.36 per share and saw 7% year-over-year growth in fiber infrastructure revenue [5]. Its debt-to-EBITDA ratio of 5.75x is conservative compared to industry averages, and its P/FFO multiple of 18.7x is lower than peers like Prologis (24.7x) [6]. The pending merger with Windstream Holdings, aimed at creating a digital infrastructure leader, further enhances its growth prospects [7].

2. Crown Castle (CCI)
   Crown Castle, a leader in wireless infrastructure, has navigated a challenging environment with disciplined balance sheet management. While its site rental revenues declined 5% year-over-year, the company maintained a 4% dividend yield and updated its 2025 AFFO guidance to $4.14–$4.25 per share [8]. Its debt-to-EBITDA ratio of 10.89x is elevated but manageable given its long-term leases and stable cash flows [9]. The company’s focus on expanding fiber and 5G networks positions it to capture incremental demand from telecom providers.

3. SBA Communications (SBAC)
   SBA Communications has leveraged strategic acquisitions and share repurchases to strengthen its position in the telecom sector. In Q2 2025, the company repurchased 799,000 shares for $172 million and reported AFFO of $3.17 per share [10]. Its forward dividend yield of 2.0% is modest but supported by a robust capital structure, with 89.6% of its debt at fixed rates [11]. SBA’s expansion into international markets and its focus on high-growth 5G infrastructure make it a compelling play for capital appreciation.

Valuation Metrics and Risk Considerations

The valuation of REITs in 2025 hinges on metrics like P/FFO, P/AFFO, and debt-to-EBITDA. Infrastructure REITs, for example, trade at an average P/FFO of 18.7x, significantly lower than the 24.7x multiple of some peers [12]. This discount reflects market skepticism about near-term growth but also creates a margin of safety for long-term investors. Similarly, data center REITs have maintained low leverage (33.5% debt-to-market assets) and strong FFO growth (21.3% year-over-year) [13], making them resilient to interest rate volatility.

However, risks persist. Rising borrowing costs and regulatory scrutiny of telecom infrastructure could pressure margins. For instance, Crown Castle’s 32% dividend cut in 2025 highlights the sector’s sensitivity to leverage and cash flow dynamics [14]. Investors must balance these risks with the structural demand for digital infrastructure, particularly as AI adoption accelerates.

Strategic Implications for Capital Allocation

The current REIT landscape favors investors who prioritize quality over quantity. While M&A activity remains subdued, the focus on infrastructure and telecom REITs reflects a broader shift toward assets with durable cash flows and technological relevance. For capital allocators, this means:
- Targeting REITs with strong balance sheets (e.g., low debt-to-EBITDA ratios and high fixed-rate debt).
- Prioritizing sectors aligned with macro trends (e.g., 5G, AI, and renewable energy).
- Monitoring valuation multiples to avoid overpaying for growth in a high-interest-rate environment.

Conclusion

The REIT sector in 2025 is at an inflection point, with consolidation and valuation resets creating opportunities for discerning investors. Infrastructure, data center, and telecom REITs, in particular, offer a compelling mix of defensive characteristics and growth potential. By focusing on undervalued assets with strong fundamentals and strategic positioning, investors can navigate the current market dynamics and position their portfolios for long-term returns.

Source:
[1] Global M&A industry trends: 2025 mid-year outlook [https://www.pwc.com/gx/en/services/deals/trends.html]
[2] Inside REITs: Will Growth Ramp Up? - Real Estate [https://www.jpmorgan.com/insights/global-research/real-estate/inside-reits]
[3] Data Centers: Best-in-Class Operators with Strong Demand and Operational Performance [https://www.reit.com/news/articles/data-centers-best-in-class-operators-with-strong-demand-and-operational-performance]
[4] Telecom Overtakes Residential in Q2 REIT Allocations [https://www.credaily.com/briefs/telecom-overtakes-residential-in-q2-reit-allocations/]
[5] Uniti Group Inc. Reports Second Quarter 2025 Results [https://investor.uniti.com/news-releases/news-release-details/uniti-group-inc-reports-second-quarter-2025-results]
[6] The State of REITs: May 2025 Edition [https://www.2ndmarketcapital.com/2025/05/27/the-state-of-reits-may-2025-edition/]
[7] 4 Infrastructure REITs to Consider in 2025 [https://www.fool.com/investing/stock-market/market-sectors/real-estate-investing/reit/infrastructure-reit/]
[8] Crown Castle Reports Second Quarter 2025 Results and ... [https://investor.crowncastle.com/news-releases/news-release-details/crown-castle-reports-second-quarter-2025-results-and-increases]
[9] CCI (Crown Castle) Debt-to-EBITDA [https://www.gurufocus.com/term/debt2ebitda/CCI]
[10] SBA Communications Corporation Reports Second Quarter 2025 Results [https://ir.sbasite.com/English/Investors-overview/news-events/news-details/2025/SBA-Communications-Corporation-Reports-Second-Quarter-2025-Results-Updates-Full-Year-2025-Outlook-and-Declares-Quarterly-Cash-Dividend/default.aspx]
[11] New Data Show Strong Net Operating Income and Solid Balance Sheets Amid Market Uncertainty [https://www.reit.com/news/blog/media/new-data-show-strong-net-operating-income-and-solid-balance-sheets-amid-market]
[12] The State of REITs: May 2025 Edition [https://www.2ndmarketcapital.com/2025/05/27/the-state-of-reits-may-2025-edition/]
[13] REIT Sector Performance Q3 2025: Data Centers & Industrial [https://paperfree.com/en/magazine/reit-sector-performance-q3-2025]
[14] Crown Castle Reports Second Quarter 2025 Results and ... [https://investor.crowncastle.com/news-releases/news-release-details/crown-castle-reports-second-quarter-2025-results-and-increases]