Hurricane Milton Socks Florida. Which REITs Will Feel The Most Impact in Q4?

On October 9, Hurricane Milton became the second major hurricane to slam into Florida within two weeks, coming ashore near Sarasota, as a category 3 hurricane. Milton left a path of destruction across the belly of Florida, with at least 27 tornadoes reported. About 85% of Florida had either full or partial impact of strong winds and rain, leaving three million homes without electrical power.

There are over a dozen REITs with headquarters in Florida. Many REITs own substantial properties in Florida and while Q3 ended September 30, could sustain damages that could hurt their fourth-quarter earnings. Here are some of the REITs that could be hurt the most:

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Invitation Homes INVH

Invitation Homes is a residential REIT based in Jacksonville, Florida that owns approximately 24,000 homes in Florida. Many of those homes may sustain damage to roofs, screen porches, sheds and other structures. Homes that flood, sustain internal damage or develop mold will force tenants to seek other shelter. While insurance will cover some of these costs, there could be a substantial drop in occupancy from the storm.

Invitation Homes has already had a tough month with the Federal Trade Commission taking action against them for alleged unlawful actions with tenants. Shares are down almost 11% since the beginning of September.

American Homes 4 Rent Class A AMH

Like Invitation Homes, Las Vegas-based American Homes 4 Rent owns about 8200 homes in Florida and will face the same problems with damages and possible loss of tenancy. Several analysts raised price targets on American Homes 4 Rent in August and September, but the stock could come under some pressure until they sort out the extent of any damage to their rentals.

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Sun Communities Inc SUI 

Although Southfield, MI-based Sun Communities rents and sells manufactured homes in 23 different states, they service homes in 75 Florida communities, including some in the areas of Southwest Florida near where the hurricane made landfall. After Hurricane Helene struck North Central Florida, Sun Communities released a statement saying they had not suffered significant damage. But they may not be as lucky this time as many of their Florida properties are right in the hurricane's path. Investors have already acted, as the short percent of float has risen 56.23% on Sun Communities since September.

NNN Inc NNN 

Orlando, FL-based NNN is a triple-net retail REIT that has over 3500 properties across 49 states, but 229 are in Florida and contribute almost 9% of NNN's annual base rent (ABR). If stores are damaged by a hurricane and forced to close for a considerable length of time it could impact NNN's rent collections. Flooding can also present major problems for businesses, as Hurricane Helene has proven.

In August 2004, Hurricane Charley landed in Punta Gorda, FL, causing widespread destruction of many of the town's businesses and buildings. This author was in Punta Gorda less than two weeks later and personally witnessed the destruction of both businesses and residences, as in the photo above.

It will likely take months before all the damage is assessed. For now, investors should avoid these and other REITs with substantial properties in Florida.

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