REITs Continue To Meet Or Beat Analyst Estimates

After a slow start to earnings season that saw several real estate investment trusts (REITs) struggle to beat earnings estimates, REIT earnings and, in particular, revenue seem to be overcoming estimates over the past few days.

Perhaps analysts were playing it too cautiously with REITs, but there's been a huge dichotomy between actual revenue reports coming in versus the estimates. The higher interest rates have not been as bad for the top line as Wall Street was expecting.

Take a look at four REITs that have come in with fourth-quarter funds from operations (FFO) that have met or beat expectations and revenue that was well above the estimates. 

Safehold Inc. SAFE is a New York-based, externally managed specialized REIT that acquires, manages and ultimately produces income from a $6.4 billion portfolio of 135 ground net leases in the top 40 U.S. markets. Its portfolio includes multifamily, office, hotel, life science and mixed-use property leases.

On Feb. 12, Safehold reported its fourth-quarter operating results. FFO or $0.36 per share beat the estimates of $0.35 per share but was down from $0.40 in the fourth quarter of 2022. However, revenue of $103 million beat the street estimate of $85.95 million by 19.84% and was a 40.38% improvement over revenue of $73.37 million in the fourth quarter of 2022.

On Jan. 23, JMP Securities analyst Mitch Germain initiated coverage on Safehold and announced a price target of $35. From its recent closing at $20.83, that's a 68% potential increase.

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Equity Commonwealth EQC is a Chicago-based, self-managed office REIT with a small portfolio of four properties totaling $1.5 million in three areas: Denver, Austin, Texas, and Washington, D.C. Its most recent lease percentage for the quarter ending Dec. 31 was 81.2%. This was a decline year over year from 82.8%.

There is a huge difference in the leased percentage by area. The Denver office is 92.7% leased, while the Washington, D.C. office is only 61.7% leased. Both of the Austin buildings are leased at 73% and 77%. Its largest tenants are Equinor Energy Services Inc., Salesforce Inc. Crowdstrike Holdings Inc. and KPMG International Ltd.

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On Feb. 12, Equity Commonwealth delivered its fourth-quarter operating results. FFO of $0.26 was in line with estimates but a 23.8% increase from the fourth quarter of 2022. Revenue of $15.15 million beat the consensus estimate by 78.63%, a large disparity, especially considering that revenue decreased by 4.06% from $15.79 million in the fourth quarter of 2022.

Caretrust REIT Inc. CTRE is a San Clemente, California-based healthcare REIT, founded in 2013, that owns and leases senior housing, skilled nursing facilities (SNF) and assisted living facilities (ALF). As of Dec. 31, its long-term net-lease portfolio consisted of 207 properties across 25 states, with 23 property operators. Skilled nursing facilities account for 71.5% of its portfolio, 8.8% is senior housing and the remaining 19.7%% is multiservice campus.

On Feb. 8, Caretrust reported fourth-quarter operating results. FFO of $0.36 was in-line with estimates but a decrease from FFO of $0.38 in the same quarter a year ago. But revenue of $59.73 million was 11.61% above analyst estimates of $53.52 million and a 15.29% increase over revenue of $51.81 million in the fourth quarter of 2022.

RBC Capital analyst Michael Carroll has an Outperform rating on Caretrust and recently lowered the price target from $25 to $24.

NNN REIT Inc. NNN, formerly known as National Retail Properties, is an Orlando, Florida-based triple net-lease REIT that owns a diversified group of stand-alone retail outlets across the U.S. It has 3,511 properties totaling approximately 35.8 million square feet over 49 states. NNN REIT has a stable base of approximately 400 tenants, including 7-Eleven, Sunoco, Best Buy, Wendy's, Camping World, BJ's Wholesale Club, Taco Bell and Chuck E. Cheese.

NNN is an income REIT stalwart that has increased its annual dividend for 34 consecutive years, making it a Dividend Aristocrat and has never cut nor suspended its dividend.  

NNN REIT finished 2023 with an impressive 99.5% occupancy level and presently has a weighted average remaining lease term (WALT) of over 10 years.

On Feb. 8, NNN reported its fourth-quarter operating results. FFO of $0.85 beat the estimates of $0.81 and was well above FFO of $0.80 per share in fourth quarter of 2022. Revenue of $216.23 million easily beat the estimate of $206.86 million and was an increase over revenue of $198.52 million in fourth quarter of 2022.

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