A Slew Of REIT Downgrades Start The Week On A Sour Note

A couple of analysts put a damper on what had been an excellent five-week run for real estate investment trusts (REITs). Nothing goes up or down forever on Wall Street, and analysts can sometimes push the brakes on a runaway stock by downgrading it a notch or two. Often the downgrade is accompanied by a cut in the stock's price target as well.

One analyst is downgrading REITs this week while raising the price targets as if trying to play catch-up to where these stocks have now advanced. Several of these REITs have been on fire since Nov. 1, so perhaps the analyst felt the massive gains were unsustainable.

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Take a look at a half dozen REITs that went under the analysts' knives to start the week:

Vornado Realty Trust VNO is a New York-based diversified REIT that owns and operates approximately 26 million square feet of commercial office buildings and some street retail and mixed-use establishments in New York, Chicago and San Francisco. About 88% of its portfolio net operating income (NOI) is derived from 2,000 rental units in New York City. Vornado has been trading on the New York Stock Exchange for over 60 years.

Vornado Realty also owns and operates advertising signage in the Penn District and Times Square areas of New York City, including a six-story-high, 330-foot wide 4K LED sign on Broadway, the largest 4K LED sign in the world.

Vornado Realty also has a 32.4% interest in Alexander's Inc. ALX, a REIT that owns six properties in the New York City metropolitan area.

On Dec. 11, Evercore ISI Group analyst Steve Sakwa downgraded Vornado Realty from In-Line to Underperform and raised the price target from $23 to $28.

Can the analyst's downgrade slow this express train down? Since Nov. 1, Vornado has been the third-best-performing REIT with a total return of 45.68%.

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National Storage Affiliates Trust NSA is a Greenwood Village, Colorado-based self-storage REIT that owns and operates 1,119 self-storage properties in the largest metropolitan areas throughout 42 states and Puerto Rico. Its third-quarter occupancy rate was 87.9%.

On Dec. 11, Sakwa downgraded National Storage Affiliates from In-Line to Underperform and raised the price target from $32 to $35. National Storage Affiliates is another stock that has recently been on a roll, with a total return of 29.21% since Nov. 1.

CubeSmart CUBE is a Malvern, Pennsylvania-based, internally managed self-storage REIT with over 600 storage facilities across the U.S. It had its initial public offering (IPO) in 2004 under the name, U-Store-It. In 2011, it was rebranded as CubeSmart. Between 2012 and 2022, CubeSmart grew its funds from operations (FFO) per share by 242%. Its same-store occupancy rate was recently 92.1%.

On Dec. 7, CubeSmart announced a 4.1% increase in its quarterly dividend from $0.49 to $0.51 per share. The dividend is payable on Jan. 16 to shareholders of record on Jan. 2. The new annual dividend of $2.04 per share yields 4.65%.

On Dec. 11, Sakwa downgraded CubeSmart from Outperform to In-Line and raised the price target from $42 to $43.

CubeSmart's total return since Nov. 1 is 23.73%.

Equity Residential EQR is a Chicago-based REIT that owns or invests in 301 apartment buildings with 80,683 units in large urban areas, such as Boston, New York, Washington D.C, Seattle, San Francisco and Denver. Its third-quarter occupancy rate was 96%. Equity Residential is a member of the S&P 500.

On Dec. 11, Mizuho analyst Haendel St. Juste downgraded Equity Residential from Buy to Neutral and lowered the price target from $62 to $58.

Equity Residential's total gain since Nov. 1 is 9.51%.

Gaming and Leisure Properties Inc. GLPI is a specialized REIT that owns and triple-net leases 61 gaming properties across 18 states. Its tenants include Penn Entertainment Inc., Caesars Entertainment Inc., Boyd Gaming Corp. and others. It owns and operates over 14,800 hotel rooms and leases 28.7 million square feet of property. Gaming and Leisure Properties was formed in 2013 as the nation's first gaming REIT.

On Dec. 11, St. Juste downgraded Gaming and Leisure Properties from Buy to Neutral and lowered the price target from $50 to $47.

Unlike the previous REITs, Gaming and Leisure Properties’ gain since Nov. 1 is a more modest 2.42%.

Agree Realty Corp. ADC is a Bloomfield Hills, Michigan-based net-lease REIT that focuses on retail properties. Its portfolio includes 2,084 owned and operated properties totaling 43 million square feet across 49 states. Of its tenants, 69% are investment grade.

Agree Realty was founded as Agree Development Co. in 1971. It went public as a REIT on the New York Stock Exchange in 1994 as Agree Realty Corp. Some of its largest tenants include well-known names like Walmart Inc. WMT, Best Buy Co. Inc. BBY Dollar General Corp. DG and Kroger Co. KR.

On Dec. 11, St. Juste downgraded Agree Realty from Buy to Neutral and lowered the price target from $67 to $61.

Agree Realty's total gain since Nov. 1 is 3.53%.

These six REITs were not the only recent downgrades. On Dec. 8, Wells Fargo analyst Dori Kesten downgraded three hotel REITs — Apple Hospitality REIT Inc. APLE from Overweight to Equal-Weight with a $17 price target, Diamondrock Hospitality Co. DRH from Overweight to Equal-Weight with a $9 price target and Sunstone Hotel Investors Inc. SHO from Equal-Weight to Underweight with a $9.50 price target.

A change in momentum could be on the way for many REITs this week.

Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it's too late. Benzinga's in-house real estate research team has been working hard to identify the greatest opportunities in today's market, which you can gain access to for free by signing up for the Weekly REIT Report.

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