REIT Earnings Off To A Blazing Start Beating Analyst Estimates

The second quarter earnings season has just begun, and thus far, a half-dozen REITs are off to a blazing start. 10 REITs reported earnings between July 17 and July 22. Six of them beat the analyst estimates for earnings and revenue, and two topped the estimates on earnings but missed the mark on revenue. One REIT missed estimates for both top and bottom lines, and another missed earnings but did not report revenue.

Another positive note is that the strong quarters are across several subsectors of the REIT universe.

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Take a look at some of the early winners:

KKR Real Estate Finance 

KKR Real Estate Finance Trust Inc. KREF is a New York City-based mortgage REIT (mREIT) that provides customized and structured collateralized loans to commercial real estate projects. Its current portfolio of approximately 66 loans across the U.S. is worth $6.9 billion. About 60% of its loan portfolio is in multifamily and industrial properties.   

On July 22, KKR Real Estate Finance reported its second-quarter operating results. Earnings per share (EPS) of $(1.57) beat the consensus estimate of $(1.67), but earnings were far below $0.48 per share in the second quarter of 2023. Revenue of $40.433 million was 9.81% better than estimates of $36.820 million but below revenue of $43.952 million in Q2 2023. 

Analysts have recently weighed in on KKR Real Estate. On July 19, BTIG analyst Thomas Catherwood assumed KKR Real Estate at Buy and announced a price target of $11.50. On July 16, JP Morgan analyst Richard Shane maintained KKR Real Estate at Overweight and lowered the price target from $10 to $9.50. 

Equity Lifestyle Properties 

Equity Lifestyle Properties Inc. ELS is a Chicago, IL-based residential REIT focused on manufactured home communities, RV resorts, marinas, and campgrounds in North America. Equity Lifestyle owns 450 total properties across 35 states and British Columbia. It was founded in 1992 and had its IPO in 1993.

On July 22, Equity Lifestyle Properties reported its second-quarter operating results. FFO of $0.66 per share beat the estimate of $0.65. Revenue of $380.019 million beat the consensus estimate of $375.128 million and topped the Q2 2023 revenue of $370.014 million.

Equity Lifestyle Properties also announced guidance for the full year 2024 Normalized FFO at $2.86-$2.96 per share versus the estimate of $2.90. Its third-quarter projection for Normalized FFO is $0.69-$0.75 per share, easily topping the analyst consensus estimate of $0.65.

Another plus is that Equity Lifestyle Properties has raised its annual dividend for 20 consecutive years.

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Alexandria Real Estate 

Alexandria Real Estate Equities Inc. ARE is a Pasadena, CA-based specialty Office REIT with a portfolio of 800 tenants in 408 properties exclusively devoted to life science, Agtech, and advanced technology companies in what its website calls "top innovation clusters." These areas include Boston, NYC, Seattle, and San Francisco. Mega campuses make up 74% of its annual rental revenue. Alexandria is a member of the S&P 500.

94% of Alexandria's leases are triple-net and 96% contain annual rent escalations. The weighted average remaining term (WALT) of its top 20 tenants is 9.4 years and for all tenants, the WALT is 7.4 years. The tenant quality is higher-grade, with many of its tenants publicly traded on Wall Street. Moderna Inc. MRNA and Eli Lilly and Co. LLY are its two largest tenants. The total occupancy rate as of Q2 2024 was 94.6%. Earnings have grown appreciably since 2023.

On July 22, Alexandria Real Estate Equities reported its second-quarter operating results. FFO of $2.36 per share beat the analyst consensus estimate of $2.34 and topped its Q2 2023 FFO of $2.24. Revenue of $766.73 million just missed the consensus estimate of $793.07 million but increased over $713.90 million in Q2 2023.

Alexandria Real Estate also raised its full-year 2024 FFO outlook from $2.98-$3.10 to $3.60-$3.72. The street estimate was $3.38.

On July 16, Evercore ISI Group analyst Steve Sakwa maintained Alexandria Real Estate at Outperform and raised the price target from $132 to $133. 

Other REITs performing well recently include Alpine Income Property Trust Inc. PINE, SL Green Realty Corp. SLG, and Rexford Industrial Realty Inc. REXR, which also beat the consensus estimates on earnings and revenue last week. The early results should give REIT investors confidence for the remainder of the sector.

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