The start of the second quarter of 2024 has been challenging for real estate investment trusts (REITs). On Good Friday, when Federal Reserve Chairman Jerome Powell noted that higher-than-expected strength in job gains and inflation may delay or reduce interest rate cuts in 2024, markets again sold off interest rate-sensitive stocks such as REITs.
Despite the latest disappointment, there was some good news last week, as analysts upgraded several REITs and raised price targets on many others while still maintaining previous ratings.
Take a look at four REITs that analysts at Bank of America Securities recently upgraded.
Tanger Inc. SKT, formerly 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 Canada. Tanger Factory Outlet Centers was founded in 1981 and had its initial public offering (IPO) in May 1993. Tanger's occupancy rate at the end of 2023 was 97.3%.
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.
Tanger was the second-leading REIT overall in 2023, with a total return of 63.58%, negating the popular notion that in-store retail shopping has lost out to Amazon.com Inc. AMZN and other online websites.
On April 5, Bank of America Securities analyst Jeffrey Spector upgraded Tanger from Underperform to Neutral and raised the price target 29.1% from $24 to $31. On March 22, Citigroup analyst Michael Bilerman also upgraded Tanger from Neutral to Buy and raised the price target from $30 to $33.
Acadia Realty Trust AKR is a Rye, New York-based retail REIT with 189 properties (as of the fourth quarter of 2023) across centralized urban areas in 22 states and Washington, D.C. The overall lease rate is approximately 95% with annual rent increases of 3%.
On April 5, Bank of America Securities analyst Craig Schmidt upgraded Acadia Realty Trust from Neutral to Buy and raised the price target by 11.1% from $18 to $20. This upgrade could not have come at a better time, as many retail REITs, including Acadia Realty, were getting hit hard last week following Powell's remarks.
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Acadia will announce its first-quarter 2024 earnings on April 29.
Essex Property Trust Inc. ESS is a residential REIT that owns and operates 252 apartment communities with 62,000 units in the West Coast states of California and Washington. Essex Property Trust is a member of the S&P 500 and a Dividend Aristocrat.
On March 25, Essex Property Trust acquired JV Partner's 49.9% interest in four apartment communities, with 1,480 units for a total purchase price of $505 million.
On April 1, Bank of America Securities analyst Joshua Dennerlein upgraded Essex Property Trust from Neutral to Buy and raised the price target by 10% from $250 to $275.
Analyst price targets vary widely. Within the past two weeks, Truist Securities has maintained a Hold on Essex with a $259 price target, and Piper Sandler has maintained an Overweight position and a $291 price target.
Healthpeak Properties Inc. DOC is an El Segundo, California-based diversified healthcare REIT that owns and operates private-pay facilities such as life science centers, medical offices and continuing care retirement communities. Although it has properties across the country, most are in the San Francisco, San Diego and Boston areas.
Healthpeak's IPO was created in 1985, and it was added to the S&P 500 in 2008. It owns 477 properties totaling over 50 million square feet with over 2,500 tenants, worth over $20 billion.
On March 1, Healthpeak officially merged with Physicians Realty Trust in an all-stock-for-stock transaction.
On April 1, Bank of America Securities analyst Dennerlein upgraded Healthpeak Properties from Underperform to Buy, while raising the price target 38.8% from $18 to $25.
Healthpeak will announce its first-quarter 2024 earnings on April 26.
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