DA Davidson Identifies Banks, REITS That Could Benefit From Amazon's HQ2

Online retail giant Amazon.com, Inc. AMZN is searching for a second headquarters. With the company expected to pick a location from a list of 20 finalists, D.A. Davidson analyst Kevin Reevey looked at likely winners and some potential beneficiaries from what's known as "HQ2." 

The Thesis

The potential winner could be Washington D.C., given its large number of highly skilled IT workers servicing the U.S. government and the possibility of a bicoastal presence for Amazon, Reevey said in a Thursday note, quoting D.A. Davidson's Amazon analyst Tom Forte. (See Reevey's track record here.) 

Other strong contenders include Dallas, Indianapolis and Denver, the analyst said. These regions' already positive economic and demographic prospects, favorable business climate and educated workforces were cited by Reevey as the reasons behind the speculation.

D.A. Davidson projects an "economic windfall" for the prospective Amazon HQ2 city due to increased demand for office and apartment properties. Amazon could create 50,000 new jobs in the chosen city, with every dollar invested adding $1.40 to the local economy, the analyst said.

Companies servicing Amazon could drive increased office space demand, Reevey said. 

The financial prospects for banks in the selected city should be positive, as the demand for commercial and residential real estate on bank balance sheets should drive stronger CRE, C&I and residential mortgage loan growth, according to D.A. Davidson. These institutions could also see an influx of deposits from commercial and retail customers, the firm said.

Reevey projects a rise in loan fees, service charges and ancillary fees from treasury and wealth management products and services.

See also: How to Start Investing In Real Estate

Likely Bank Beneficiaries 

  • United Bankshares, Inc. UBSI
  • Texas Capital Bancshares Inc TCBI
  • First Merchants Corporation FRME
  • National Bank Holdings Corp NBHC

These banks benefit from Amazon's HQ2 due to their leading respective market positions, scale and broad array of products and services to capitalize on such opportunities, Reevey said. 

Likely REIT Benficiaries 

Office REITs

  • Boston Properties, Inc. BXP
  • Brandywine Realty Trust BDN
  • City Office REIT Inc CIO
  • Piedmont Office Realty Trust, Inc. PDM

Apartment REITs

  • Mid-America Apartment Communities Inc MAA
  • Camden Property Trust CPT

The Price Action

Amazon shares are up about 59 percent over the past year.

SELECT SECTOR S/RL EST SELECT SECTO XLRE is down about 1 percent.

SPDR KBW Regional Banking (ETF) KRE is up about 14 percent.

Related Link:

Wells Fargo Upgrades First Horizon, With Capital Bank Integration Underway And More Interest Rate Hikes Expected

The Washington, D.C. Metro. Photo from Pixabay. 

Posted In: DA DavidsonKevin ReeveyTom ForteAnalyst ColorAnalyst RatingsTrading Ideas