Canaccord analyst Ryan Meliker recently had a chance to sit down and talk with REIT management teams at the annual NAREIT Convention. Here’s a look at what he learned at the conference and which REITs are Canaccord’s top picks.
Lodging
According to Meliker’s report, market sentiment toward lodging REITs is “the lowest we’ve seen in years.” Investors remain concerned about slowing RevPAR growth and disappointing M&A valuations.
Meliker believes the Marriott International Inc MAR/Starwood Hotels & Resorts Worldwide Inc HOT deal was a positive for the space, and Canaccord predicts that RevPAR growth will pick up in 2016.
Top picks include:
- Ashford Hospitality Prime Inc AHP
- Ashford Hospitality Trust, Inc. AHT
- DiamondRock Hospitality Company DRH
- Hersha Hospitality Trust HT
- Summit Hotel Properties Inc INN
- RLJ Lodging Trust RLJ
Multifamily
Meliker acknowledged concerns over a tech slowdown in California, but noted that West Coast fundamentals remain strong. Student housing REITs have witnessed a pickup in interest from universities regarding on-campus developments.
Top picks include:
- Preferred Apartment Communities Inc. APTS
- Education Realty Trust, Inc. EDR
Prisons
Meliker warned that political rhetoric about reducing or eliminating the private prison system could be a headwind for prison REITs, as the U.S. election season plays out. However, he believes that “ending private prisons is an unrealistic outcome” and “private players aren’t going away.”
In addition, Canaccord’s top pick in the space, The Geo Group Inc GEO, has identified several potential new contracts in the pipeline for 2016.
Disclosure: The author holds no position in the stocks mentioned.
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