The Federal Reserve's reassertion this week that despite recent gains in the consumer price index (CPI) and producer price index (PPI), it still envisions three rate cuts coming in 2024, sparking a rally in real estate investment trusts (REITs). On March 22, three analysts from Citigroup kept that enthusiasm going by upgrading a half dozen REITs and raising price targets on all six.
Take a look at the REITs receiving upgrades this week, along with some positives that each REIT has going for it.
Macerich Co. MAC is a Santa Monica, California-based retail REIT that specializes in the acquisition, leasing and management of 44 regional town center malls across the U.S. Macerich was founded in 1972 and had its initial public offering (IPO) in 1994.
Macerich has recently developed new leadership. On March 1, Jackson Hsieh was appointed president and CEO of the company. On March 12, Hsieh and other Macerich senior executives celebrated 30 years of being in business as a public company by ringing the opening bell at the New York Stock Exchange.
On March 22, Citigroup analyst Nicholas Joseph upgraded Macerich from Sell to Neutral and raised the price target from $8 to $17.
Omega Healthcare Investors Inc. OHI is a Hunt Valley, Maryland-based triple-net equity healthcare REIT that provides financing, capital and leasing to 69 operators among 862 senior housing, skilled nursing and assisted living facilities across 42 states throughout the U.S. and the United Kingdom. Omega Healthcare Investors has no part in the day-to-day management of these facilities, which are run by the operators.
On March 22, Citigroup analyst Nicholas Joseph upgraded Omega Healthcare from Neutral to Buy and raised the price target from $32 to $35.
On Feb. 26, Wells Fargo analyst Connor Siversky also upgraded Omega Healthcare Investors, from Equal-Weight to Overweight and raised the price target from $31 to $35.
Park Hotels & Resorts Inc. PK is a Tysons, Virginia-based hotel REIT with 43 hotels and resorts with over 26,000 rooms, located in prime U.S. markets from Hawaii to Massachusetts that have high barriers to entry. Park Hotels is a small-cap stock with a market cap of $3.737 billion. Its occupancy rate in the fourth quarter of 2023 was 71%, up from 69.5% in Q4 2022.
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Park was established as an independent company in January 2017 following its spinoff from Hilton. In September 2019, Park acquired Chesapeake Lodging Trust to add premium-brand hotels and resorts in prime markets such as Miami, Boston, Los Angeles and San Francisco.
On March 22, Citigroup analyst Smedes Rose upgraded Park Hotels & Resorts from Neutral to Buy and raised the price target from $14 to $20.
Several other analysts have recently come out with positive ratings on Park Hotels. Truist Securities has a Buy and $21 price target and Deutsche Bank has a Buy rating and a $24 price target on Park.
Tanger Inc. SKT, formerly called Tanger Factory Outlet Centers Inc., is a Greensboro, North Carolina-based retail REIT that owns 40 indoor shopping centers and outdoor factory outlet malls with 15.6 million square feet and over 3,000 stores across 20 states and in Canada. Tanger Factory Outlet Centers was founded in 1981 and had its IPO in May 1993. Tanger's occupancy rate at the end of 2023 was 97.3%.
Tanger was the second-leading REIT overall in 2023, with a total return of 63.58%, overcoming the popular idea that in-store retail shopping is in decline because of the popularity of Amazon.com Inc. AMZN and other online retailers. Its total return so far in 2024 is 5.09%.
On Feb. 15, Tanger reported excellent fourth-quarter operating results. Funds from operations (FFO) of $0.52 beat the estimate of $0.50. Revenue of $127.48 million beat the estimate of $119.04 million and was 9.46% above revenue from the fourth quarter of 2022 of $116.46 million. Additionally, full-year core FFO was announced in a range from $2.01-$2.09 per share, with a midpoint above the analyst consensus estimate of $2.03 per share.
On March 22, Citigroup analyst Michael Bilerman upgraded Tanger from Neutral to Buy and raised the price target from $30 to $33. Tanger continues to perform well and the Citigroup upgrade should help the share price as well.
Essential Properties Realty Trust Inc. EPRT is a Princeton, New Jersey-based diversified REIT that owns and manages single-tenant properties with net leases for service-oriented and experience-based businesses. Essential Properties was founded in 2016 and has a market cap of $4.4 billion. It has a portfolio of 1,873 properties across 48 states. Its properties, which have a 99.8% occupancy rate, have a weighted average lease term (WALT) of 14 years.
On March 22, Citigroup analyst Nicholas Joseph upgraded Essential Properties from Neutral to Buy and raised the price target from $25 to $28.50. On March 13, B. Riley Securities also reiterated a Buy on Essential Properties and raised its price target from $27.50 to $29 per
Total occupancy and rent collection are extremely important aspects of a REIT, and from that standpoint, it's easy to see why analysts have upgraded Essential Properties' ratings and price targets this month.
American Homes 4 Rent AMH is a Calabasas, California-based residential REIT that purchases, develops, renovates and leases existing and new single-family homes as rental properties. American Homes 4 Rent was created in 2012 and in less than 12 years has built a portfolio of 58,470 single-family units across 21 states. Its largest concentration of homes is in the Southeastern U.S., where population growth has been explosive. Its IPO was in July 2013.
As of the fourth quarter of last year, American Homes 4 Rent had a same-home average occupied days of 96.2%.
On March 22, Citigroup analyst Nicholas Joseph upgraded American Homes 4 Rent from Neutral to Buy and raised the price target from $37 to $41.
Other analysts have also supported American Homes recently. On March 20, Mizuho analyst Haendel St. Juste maintained a Buy on American Homes and raised the price target from $37 to $39. On March 12, JMP Securities analyst Aaron Hecht maintained American Homes with an Outperform and raised the price target from $38 to $41.
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