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The past few weeks have been quite productive for real estate investment trusts (REITs) with most of the sector showing profits during July. However, about 15% of the total REITs were in the red for the month, and analysts have been downgrading some of them within the past few trading days.
Investors are advised to use caution after analyst downgrades as stocks can drop several percentage points over the following week.
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Take a look at five REITs that received downgrades this week, some also receiving price cuts:
Digital Realty Trust
Digital Realty Trust (NYSE:DLR) is an Austin, TX-based Data Center REIT with over 221,000 cross-connects in 300 facilities across 25 countries. It has over 5,000 customers, including stalwart tech companies such as Nvidia Corp (NASDAQ:NVDA), Oracle Corp (NASDAQ:ORCL) and IBM Common Stock (NYSE:IBM).
On July 25, Digital Realty Trust reported its second-quarter operating results. AFFO of $0.20 missed the $0.24 estimate while revenue of $1.40 billion was ahead of the estimate of $1.38 billion.
On Aug. 1, Argus Research analyst Marie Ferguson downgraded Digital Realty Trust from Buy to Hold. The analyst believes there will be "slower growth projections due to slower data center demand and stabilization expectations."
TD Cowen analyst Michael Elias also has a Hold rating on Digital Realty Trust with a $120 price target. But analyst Eric Luebchow of Wells Fargo recently maintained Digital Realty at Overweight with a price target of $170.
In recent news, on July 10, Digital Realty Trust announced it acquired the Slough Data Center Campus in West London for $200 million.
Host Hotels & Resorts
Host Hotels & Resorts Inc (NASDAQ:HST) is a Bethesda, MD-based hotel REIT with 81 hotels containing 43,400 rooms in 21 large markets across the U.S. Host Hotels is the only lodging REIT in the S&P 500 and has been in the index since 2007. Its hotel brands include Marriott, Hyatt, Four Seasons and Hilton.
On July 31, Host Hotels reported its Q2 2024 operating results. FFO of $0.57 per share beat the estimate by a penny and its Q2 2023 FFO of $0.53. Revenue of $1.47 billion met the consensus estimate and topped Q2 2023 revenue of $1.39 billion. However, Host Hotels reduced its full-year 2024 diluted earnings outlook from $1.00-$1.08 to $0.95-$1.03 per share.
The same day, Host Hotels announced it had acquired one Hotel Central Park in New York City for $265 million in cash.
On Aug. 1, Compass Point analyst Floris Van Dijkum downgraded Host Hotels & Resorts from Buy to Neutral and lowered the price target by 28% from $25 to $18. However, on the same day, Stifel analyst Simon Yarmak maintained Host Hotels & Resorts with a Buy and adjusted the price target from $22 to $21.
Public Storage
Public Storage (NYSE:PSA) is a Glendale, CA-based, self-managed self-storage REIT that is one of the largest brands of self-storage services in the United States. Its portfolio includes 3,369 self-storage facilities with 243 million rentable square feet across 40 states. Its Market Cap of $52.88 billion is the largest among all self-storage facilities.
Public Storage also sells packing and moving supplies and provides insurance services as well. Public Storage was founded in 1972 and became a publicly traded REIT in 1995 when it merged with Storage Equities. It was added to the S&P 500 in 2005.
On July 30, Public Storage released its Q2 2024 operating results. FFO of $4.23 per share beat the estimate of $4.21. Revenue of $1.17 billion was in line with estimates and improved 4.5% year over year. Public Storage also said it's reducing its full-year FFO forecast from $16.60-$17.20 to $16.50-$16.85.
On Aug. 1, Truist Securities analyst Ki Bin Kim downgraded Public Storage from Buy to Hold and maintained the price target at $306. The analyst noted that Public Storage's advantage over its peers in rent trends is diminishing.
On Aug. 2, Public Storage declared a quarterly dividend of $3.00 per share, matching its previous seven quarters. The dividend is payable on Sept. 30 for shareholders of record on Sept. 13, also the ex-dividend date. The forward yield is 4.0%.
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Community Healthcare Trust
Community Healthcare Trust Inc (NYSE:CHCT) is a Franklin, TN-based self-managed health care REIT that owns 198 properties with 318 tenants across 35 states. Its diverse portfolio includes medical office buildings, specialty centers, behavioral facilities and inpatient rehabilitation centers.
On July 26, Community Healthcare Trust increased its second-quarter dividend from $0.46 to $0.4625 per share.
On July 30, Community Healthcare announced its Q2 operating results. FFO of $0.53 missed the estimate of $0.55, and revenue of $27.516 million missed the forecast of $30.665 million. It's somewhat unusual for a REIT to miss on earnings right after increasing its dividend.
On July 31, Evercore ISI Group analyst Steve Sakwa downgraded Community Healthcare from In-Line to Underperform and lowered the price target from $27 to $25. The same day, Baird analyst Amanda Sweitzer maintained Community Healthcare at Neutral and lowered the price target from $29 to $25.
Healthcare Realty Trust
Healthcare Realty Trust Inc. (NYSE:HR) is a Nashville, TN-based health care REIT with 673 properties covering 39.7 million square feet across 35 states. It was established in 1992 with only 21 facilities and has evolved into a delivery model in which 72% of its properties are multi-tenant medical outpatient service buildings on the campus of hospitals or other types of health care facilities.
In 2022, Healthcare Realty merged with Healthcare Trust of America in an $18 billion deal and became Healthcare Realty Trust. The top locations of its properties include Dallas, Seattle and Houston.
On July 30, Wells Fargo analyst Joseph Feldman downgraded Healthcare Realty Trust from Equal-Weight to Underweight and lowered the price target from $17 to $16. The analyst noted that Healthcare Realty's stock buybacks at current levels won't offset the diminishing benefits of its asset dispositions.
Perhaps analyst Feldman had an inkling of what was to come because, on Aug. 2, Healthcare Realty Trust reported somewhat disappointing Q2 earnings. FFO of $0.38 was in-line but down from $0.39 year-over-year. Revenue of $316.32 million was shy of the estimate of $322.00 million and below Q2 2023 revenue of $338.14 million.
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