You're receiving this email because you’re subscribed to Real Estate from Benzinga. To manage your subscription, click the link at the bottom of this email.

ONE BIG THING

Hurricane Milton Socks Florida. Which REITs Will Feel The Most Impact in Q4?

What: On October 9, Hurricane Milton became the second major hurricane to slam into Florida within two weeks, coming ashore near Sarasota, as a category 3 hurricane. Milton left a path of destruction across the belly of Florida, with at least 27 tornadoes reported. About 85% of Florida had either full or partial impact of strong winds and rain, leaving three million homes without electrical power.

Who: There are over a dozen REITs with headquarters in Florida. Many REITs own substantial properties in Florida and while Q3 ended September 30, could sustain damages that could hurt their fourth-quarter earnings. Here are some of the REITs that could be hurt the most:

Invitation Homes (NYSE: INVH) is a residential REIT based in Jacksonville, Florida that owns approximately 24,000 homes in Florida. Many of those homes may sustain damage to roofs, screen porches, sheds and other structures. Homes that flood, sustain internal damage or develop mold will force tenants to seek other shelter. While insurance will cover some of these costs, there could be a substantial drop in occupancy from the storm.

Invitation Homes has already had a tough month with the Federal Trade Commission taking action against them for alleged unlawful actions with tenants. Shares are down almost 11% since the beginning of September.

American Homes 4 Rent Class A (NYSE: AMH) Like Invitation Homes, Las Vegas-based American Homes 4 Rent owns about 8200 homes in Florida and will face the same problems with damages and possible loss of tenancy. Several analysts raised price targets on American Homes 4 Rent in August and September, but the stock could come under some pressure until they sort out the extent of any damage to their rentals.

Sun Communities Inc (NYSE: SUI) Although Southfield, MI-based Sun Communities rents and sells manufactured homes in 23 different states, they service homes in 75 Florida communities, including some in the areas of Southwest Florida near where the hurricane made landfall. After Hurricane Helene struck North Central Florida, Sun Communities released a statement saying they had not suffered significant damage. But they may not be as lucky this time as many of their Florida properties are right in the hurricane’s path. Investors have already acted, as the short percent of float has risen 56.23% on Sun Communities since September.

NNN Inc (NYSE: NNN) Orlando, FL-based NNN is a triple-net retail REIT that has over 3500 properties across 49 states, but 229 are in Florida and contribute almost 9% of NNN’s annual base rent (ABR). If stores are damaged by a hurricane and forced to close for a considerable length of time it could impact NNN’s rent collections. Flooding can also present major problems for businesses, as Hurricane Helene has proven.

In August 2004, Hurricane Charley landed in Punta Gorda, FL, causing widespread destruction of many of the town’s businesses and buildings. This author was in Punta Gorda less than two weeks later and personally witnessed the destruction of both businesses and residences, as in the photo above.

Takeaway: It will likely take months before all the damage is assessed. For now, investors should avoid these and other REITs with substantial properties in Florida.

PRESENTED BY ARRIVED HOMES

Our Favorite Real Estate Investing Secret

We know that real estate is the best long-run investment in modern history. But getting started is hard. Even when you do have a bunch of properties under your belt, then managing workload or scaling and diversifying is difficult.

What if there was a platform that - in less than 5 minutes - let you browse pre-vetted (<0.2%) properties, told you what the estimated appreciation and rental cash-flow of each one is, let you invest $100 to $50,000+ per property, and then literally took care of everything for you?

You just sit back, relax, and collect regular dividends while participating in the long-term appreciation of your properties.

Well there is. It’s called Arrived.com and it’s backed by world class investors like Jeff Bezos and Marc Benioff. Over 650,000 investors have already signed up and invested $193M USD.

WHAT WALL ST. SAID ABOUT REITS THIS WEEK

Camden Property Trust (NYSE: CPT) On October 8, announced a partnership with 3V Infrastructure, an electric vehicle charging owner and operator to deploy EV charging stations across portions of Camden Property Trust’s multi-family properties. This is important because multi-family buildings make up almost a third of U.S. housing, yet fewer than 5% of multi-family communities offer on-site chargers.

AFC Gamma Inc (Nasdaq: AFCG) On October 7, AFCG announced it has committed and funded $41 million to Story of Maryland, LLC., a cannabis operator in Maryland through a senior secured credit facility. AFC Gamma said it has now exceeded its 2024 goal of lending $100 million in new originations.

Upgrades:

Digital Realty Trust Inc (NYSE: DLR) On October 4, HSBC analyst Phani Kanumuri upgraded Digital Realty Trust from Reduce to Hold and raised the price target from $124 to $160. The same day, analyst Kanumuri upgraded Equinix Inc (NYSE: EQIX) from Hold to Buy and raised the price target from $865 to $1000. Kanumuri noted,

“Data center demand has far outstripped supply YTD in 2024, due to strong AI-driven demand and constrained supply in major markets. Yet EQIX and DLR shares have underperformed the broad index on company-specific concerns. Going forward, operational headwinds are likely to fade, driving strong 2025 momentum.”

Downgrades:

SITE Centers Corp (NYSE: SITC) On October 7, Keybanc analyst Todd Thomas downgraded SITE Centers from Overweight to Sector Weight. Analyst Thomas alson initiated coverage on SITE Centers’ spin-off, Curbline Properties Inc (NYSE: CURB) at Sector Weight. Thomas wrote, “We expect SITC to continue selling assets in the quarters/years ahead, as the company looks to continue capitalizing on the arbitrage between public and private asset valuations.” Thomas now favors Curbline Properties over SITE Centers, saying that Curbline should have elevated growth vs. its peers but much of that is already priced into the stock.

FIVE ZINGERS:

Crushing the Competition: Simon Property Group Inc (NYSE: SPG) is up 17.4% year-to-date while the rest of the retail REITs are only up 7.8%. Here’s why the trend may continue for a bit longer.

Consistency Pays Off: Analysts at Stifel Nicolaus just placed a $70.25 price target on Realty Income Corp (NYSE: O) recently, calling for up to 12.6% upside from where it trades today.

Property Insurance Up 52% Since 2020: Single-family homeowners’ insurance costs have risen 52% since 2020, but hurricanes Helene and Milton are expected to increase homeowners insurance costs again.

Mortgage Rates Rise Again: The average 30-year mortgage rate rose again this week to 6.62%. Here’s why hopes that the Fed rate cut would slash mortgage rates were misplaced.

Hurricane Inflation?: Raphael Bostic, President of the Federal Reserve Bank of Atlanta, says that Hurricane Milton could have a big impact on the overall U.S. economy over the next three to six months, including spiking housing, insurance, and food prices.