👋 Happy Friday, Everyone. Another big earnings week for REITs and several of them surpassed Wall Street’s estimates on funds from operations (FFO) and/or revenue. The earnings didn’t always translate into large moves, especially after most REITs came off bottoms last week with strong gains, but it looks like barring any further negative inflationary news, the path of least resistance could be higher.

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REIT ROUND-UP

Four Corners Property Trust Inc (NYSE: FCPT) Two company insiders bought shares of company stock this week. On November 6, President/CEO/Director William H. Lenehan, purchased 9,000 shares of company stock for a total of $198,450, now giving him a total of 568,443 shares. Also, on November 7, Director Douglas B. Hansen bought 4950 shares of company stock at at price of $21.74. Mr. Hansen now owns 59,061 shares of Four Corners Property stock.

On November 8, Four Corners Property Trust also announced it has acquired an Oklahoma Taco Bell property for $2.2 million. The restaurant has a triple-net lease to K-MAC Enterprises, LLC, with a remaining 5-year lease term at a 7.3% cap rate as of the closing date, minus transaction costs.

Gladstone Commercial Corporation (Nasdaq: GOOD) November 6, announced an acquisition of a 67,709 square foot industrial facility in Indianapolis, IN, with a weighted GAAP cap rate of 10.1%, in a long-term sale leaseback with a 20-year triple-net lease.

Welltower Inc (NYSE: WELL) November 6, announced it has granted underwriters an option to purchase up to 2.625 million additional shares of common stock, as part of its shelf registration from August 1.

Dividend News:

Farmland Partners Inc (NYSE: FPI) November 8, announced an update to its special dividend, created from significant appreciation of assets sold in 2023. Farmland expects to pay out between $0.20 and $0.38 per share of common stock in addition to its regular quarterly dividend of $0.06 per share, will be paid in January 2024 to shareholders of record on date later in December to be announced.

Third Quarter Earnings:  

📈 Biggest Winners This Week: Mortgage and Industrial REITs

• Net Lease Office Properties (NYSE: NLOP) Up 26.07%

• Hudson Pacific Properties Inc (NYSE: HPP) Up 14.05%

• Seritage Growth Properties Class A (NYSE: SRG) Up 14.03%

• Extra Space Storage Inc (NYSE: EXR) Up 12.91%

• Angel Oak Mortgage Inc (NYSE: AOMR) Up 12.26%

• Outfront Media Inc (NYSE: OUT) Up 7.80%

• Centerspace (NYSE: CSR) Up 6.94%

• Hannon Armstrong Sustnble Infrstr Cap Inc (NYSE: HASI) Up 6.76%

• CubeSmart (NYSE: CUBE) Up 6.67%

• Apartment Investment and Management Co (NYSE: AIV) Up 6.49%

📉 Biggest Losers This Week: Hotel and Medical REITs

• Braemar Hotels & Resorts (NYSE BHR) Down 15.57%

• Ashford Hospitality Trust, Inc. (NYSE: AHT) Down 11.44%

• Americold Realty Trust Inc (NYSE: COLD) Down 8.54%

• Medical Properties Trust Inc (NYSE: MPW) Down 8.06%

• Omega Healthcare Investors Inc (NYSE: OHI) Down 7.44%

• Service Properties Trust (Nasdaq: SVC) Down 6.23%

• Paramount Group Inc (NYSE: PGRE) Down 5.15%

• Apple Hospitality REIT Inc (NYSE: APLE) Down 5.10%

Prices as of November 9, 12:00 PM

UPGRADES:

Centerspace (NYSE: CSR) November 6, Compass Point analyst Merrill Ross upgraded Centerspace from Neutral to Buy and announced a $65 price target.

Park Hotels & Resorts Inc (NYSE: PK) November 6, Barclays analyst Anthony Powell upgraded Park Hotels & Resorts from Equal-Weight to Overweight and raised the price target from $16 to $19.

Ventas, Inc. (NYSE: VTR) November 7, Wedbush analyst Richard Anderson upgraded Ventas from Neutral to Outperform.

Spirit Realty Capital Inc (NYSE: SRC) November 7, Exane BNP Paribas upgraded Spirit Realty Capital from Underperform to Neutral.

Rexford Industrial Realty Inc (NYSE: RXR) November 8, Scotiabank analyst Greg McGinniss upgraded Rexford Industrial Realty from Sector Perform to Outperform and announced a $55 price target.

Essex Property Trust Inc (NYSE: ESS) November 9, BMO Capital analyst John Kim upgraded Essex Property Trust from Underperform to Market Perform and announced a $225 price target.

Welltower Inc (NYSE: WELL) November 9, Raymond James analyst Jonathan Hughes upgraded Welltower from Outperform to Strong Buy and raised the price target from $95 to $101.

…AND DOWNGRADES:

Stag Industrial Inc (NYSE: STAG) November 3, RBC Capital analyst Michael Carroll downgraded Stag Industrial from Outperform to Sector Perform and reduced the price target from $42 to $39.

Omega Healthcare Investors Inc (NYSE: OHI) November 6, Exane BNP Paribas analyst Nate Crossett downgraded Omega Healthcare from Neutral to Underperform.

UDR Inc (NYSE: UDR) November 7, Wells Fargo analyst James Feldman downgraded UDR from Overweight to Equal-Weight and sliced his price target from $42.50 to $34.

Uniti Group Inc (Nasdaq: UNIT) November 8, Bank of America Securities analyst David Barden downgraded Uniti Group from Neutral to Underperform and lowered the price target from $5 to $3.50.

Tanger Outlet Centers Inc (NYSE: SKT) November 8, Compass Point analyst Floris Van Dijkum downgraded Tanger Factory Outlet from Buy to Neutral and announced a $26 price target.

ONE BIG THING

REITs Crushing Q3 Estimates

Briefly: Despite Wall Street’s fears of inflation, higher interest rates, declines in occupancy, possible recession, and who knows what else, a number of REITs have just been crushing third quarter estimates and beating their own year-over-year FFO and revenue results.

Who: A large number of REITs, including Realty Income Corp (NYSE: O), One Liberty Properties, Inc. (NYSE: OLP), Tanger Factory Outlet Centers Inc (NYSE: SKT), Service Properties Trust (Nasdaq: SVC), Kite Realty Group Trust (NYSE: KRG), Brightspire Capital Inc (NYSE: BRSP), Park Hotels & Resorts Inc (NYSE: PK) and several others have reported third quarter operating results this past week that took Wall Street by surprise.

As we reported here last week, Brightspire’s EPS was 33% above analyst estimates. Tanger not only beat the FFO estimates $0.50 to $0.47, but boosted its 2023 full-year guidance from $1.85-$1.92 to $1.90-$1.94. Realty Income, whose share price was decimated after announcing its acquisition of Spirit Realty Capital (NYSE: SRC), has already bounced back nicely and is moving up again following its stellar third quarter report.

So it would seem that many of the critics were either early or wrong with their concerns about REITs. Strength in REITs is occurring across several sub-sectors of the REIT universe. For example:

Many of the triple-net lease REITs are still reporting occupancy rates and rent collections between 98% and 99.9%. Hotel Revenue per Available Room (RevPAR) is up from 2022. Healthcare REITs with Senior Skilled Nursing facilities are approaching pre-COVID 19 occupancy numbers.

Mortgage REIT’s such as Hannon Armstrong Sustainable Infrastructure Capital Inc (NYSE: HASI) and Franklin BSP Realty Trust Inc (NYSE: FBRT) have had strong rallies on a possible longer FED pause or dare to say it, a rate cut or two in 2024? Even the much beleaguered office REITs such as Office Properties Income Trust (Nasdaq: OPI), SL Green Realty Corp (NYSE: SLG) and Boston Properties, Inc. (NYSE: BXP) have been rallying this week after the FED paused its rate hikes for the second consecutive meeting.

Yes, REITs are back, at least for the time being. Investors are snapping up beaten down shares of quality companies with dividend rates of 6% to 8% in many cases, with expectations that share price bottoms have now been reached.

REIT investors, after two years of misery, let’s enjoy this moment while it lasts!

HOUSING NEWS BRIEF

What: A quick update on the article from October 20 regarding the case of Burnett et. al vs the National Association of Realtors (NAR), in which plaintiffs sued NAR for unfair and anticompetitive business practices (i.e. higher set commissions than necessary between listing and selling Brokers).

On October 31, an 8-person federal Missouri jury found the defendants, NAR, and several large real estate companies liable and awarded the Plaintiffs $1.78 billion in damages. The jury ruled they conspired to artificially inflate brokerage commissions. Plaintiff lead attorney, Michael Ketchmark said he expects the jury award to be tripled under U.S. antitrust law to over $5 billion.

Fall Out: This verdict is potentially devastating to the real estate industry, which is already suffering from the highest interest rates in over 22 years, tight inventories and unaffordable prices for younger buyers. It could lead to changes in or even the end of the Multiple Listing Service (MLS), whose origins date back to the late 1800’s, in which Brokerages representing buyers normally split the sale commission with the seller’s Brokerage. The elimination of buyer broker commissions would save sellers thousands of dollars, but would likely result in homes taking far longer to sell and very possibly for less money. So what’s the point?

What Now: NAR announced it will appeal the ruling, so this case is far from being over. But the shock waves are already being felt all over the real estate industry and led to a quick resignation of Bob Goldberg, the former CEO of NAR.

ONE FOR THE ROAD

Park Hotels & Resorts: Let’s Party Like It’s 2019!

What Happened: On November 1, after the closing bell, Tyson's, VA based Park Hotels & Resorts (NYSE: PK) reported its third quarter operating results. FFO of $0.51 per share crushed the estimates for $0.43 per share and the FFO of $0.42 in Q3 2022. Revenue of $679 million was also ahead of estimates of $668.13 million and $662.00 million in Q3 2022. Increases in occupancy throughout 2023 and Revenue per available room (RevPAR) were the catalysts for the improvements in FFO and revenue.

Park Hotels also announced an increase in its full year 2023 AFFO from $1.76-$2.02 to $1.92-$2.03.

But wait, there’s more: Park Hotels, owner of 43 hotels and resorts, then announced its Board of Directors has approved a special cash dividend of $0.77 per share due to the effective exit of Park from its two Hilton San Francisco Hotels. The special dividend will be paid on January 16, 2024 to shareholders of record as of December 29, 2023.

FFO of $0.60 and $0.51 from Park’s last two quarters, are numbers not seen by Park Hotels since pre-COVID 2019 when it averaged FFO of $0.72 for that year’s four quarters. But between 2020 into 2021, when COVID-19 absolutely ravaged travel plans, Park had several consecutive quarters of negative FFO, while its share price sank from $23 to $6, rebounded again to $23, and then slowly drifted back to $11 by the end of October 2023.

Fall Out: But the Q3 numbers and the special dividend announcement have propelled Park’s shares higher. On November 6, shares were trading up near $14, an increase of 27% in less than a week. In typical fashion, after a big run-up, traders took profits. As of November 9, shares were trading near $13, so investors still have a good opportunity to add shares without chasing price.

Also on November 6, Barclays analyst Anthony Powell upgraded Park Hotels & Resorts from Equal-Weight to Overweight and raised the price target from $16 to $19. On November 7, Morgan Stanley analyst Stephen Grambling maintained Park Hotels at Equal-Weight and raised the price target from $12 to $13.

Park shareholders must be partying like it’s 2019 all over again. Well, why not, maybe it is!

PRESENTED BY NADA

Own a Piece of Your Favorite City

Ever considered diversifying your investments with shares of an entire city? With Cityfunds by Nada, you can tap into real estate portfolios from cities like Austin, Dallas, Miami, and Tampa. Starting at just $10.88 per share, opportunities abound for both new and established investors.

What sets Cityfunds apart? Location. Access prime real estate in sought-after areas without the typical costs. Own fractional shares in homes and build passive income through rental dividends and home sales, all with the added advantage of a 10-15% acquisition discount.

With expert management at the helm, Cityfunds ensures a seamless venture. And soon, you'll be able to freely trade your shares on their upcoming Secondary Trading Platform in 2024.

Boasting 10,000 investors and a gross asset value over $35 million, Cityfunds is your gateway to the expansive $20T home equity market. Dive into the future of real estate investment today! 🏙️💼📈

Click here to explore the offerings and make your mark in top cities.