While January has seen a number of improving analyst calls on real estate investment trusts (REITs), there have also been some downgrades. Take a look at three REITs that have recently received multiple analyst downgrades but still managed to show positive results this month:
Crown Castle Inc. CCI is a Houston-based specialized REIT that focuses on owning, operating and leasing cell towers. Crown Castle was founded in 1994 with a portfolio of 133 cell towers. Today, the REIT has over 40,000 towers and 85,000 miles of fiber in its portfolio.
One negative for Crown Castle is its forward annual dividend of $6.26 per share against funds from operations (FFO) of $7.76, producing a payout ratio of 80%.
On Jan. 23, KeyBanc Capital Markets analyst Brandon Nispel downgraded Crown Castle from Overweight to Sector Weight. No price target was given.
A few weeks ago, Barclays analyst Brendan Lynch also downgraded Crown Castle, from Overweight to Equal Weight, while lowering his price target from $153 to $152. From the recent closing price of $146.07, that still represents a potential increase of 4%.
But the analyst news wasn’t all bad this month for Crown Castle, as three other analysts have maintained Outperform or Buy ratings within the past two weeks. Three analysts have price targets between $152 and $154, and one has a price target of $175.
Despite the downgrades, Crown Castle has risen 5.61% since the beginning of the year.
Extra Space Storage Inc. EXR is a Salt Lake City-based self-storage REIT with over 2,000 locations in large metropolitan areas across 41 states and Washington, D.C. Extra Space Storage was founded in 1977 and is the second-largest operator of self-storage facilities in the U.S. Over the past five years, it has acquired $4.6 billion worth of new properties.
Extra Space Storage’s performance history is excellent. Since August 2004, Extra Space Storage’s average annual total return is 16.09%. Over the last five years, Extra Space Storage has also grown its quarterly dividend from $0.78 to $1.50 per share, an increase of 92%. The annual yield of $6 per share on its recent closing price of $157.59 was 3.8%.
Despite this, on Jan. 18, Wolfe Research analyst Andrew Rosivach downgraded Extra Space Storage from Outperform to Peer Perform. No price target was given. The downgrade was a valuation call.
One day earlier, Truist Securities analyst Ki Bin Kim downgraded Extra Space Storage from Buy to Hold, while lowering the price target from $175 to $160. With a recent closing price of $157.59, that represents only a 1.53% potential increase from the present level.
Earlier this month, Raymond James analyst Jonathan Hughes expressed a different view, upgrading Extra Space Storage from Market Perform to Outperform while announcing a $170 price target.
Investors have shrugged off the downgrades, and Extra Space Storage has risen 9.22% this month.
Kimco Realty Corp. KIM is a Jericho, New York-based retail REIT that owns and operates 526 open-air, grocery store-anchored properties with 91 million square feet of leasable space. Kimco Realty is a member of the S&P 500 and has been publicly traded on the New York Stock Exchange since 1991.
Kimco Realty received three downgrades this month. On Jan. 17, Truist Securities analyst Kim downgraded Kimco Realty from Buy to Hold and reduced the price target from $25 to $24.
On Jan. 10, Mizuho Securities analyst Haendel St. Juste downgraded Kimco Realty from Buy to Neutral and dropped the price target from $22 to $21. St. Juste’s reasons were that Kimco Realty is at full valuation with minimal earnings growth.
This downgrade came a day after Credit Suisse analyst Omotayo Okusanya downgraded Kimco Realty from Outperform to Neutral and announced a price target of $22. At a recent closing price of $22.65, these three price targets represent a potential range from negative 7.28% to positive 5.96%.
But are these downgrades deserved? Kimco Realty’s third-quarter operating results beat the street on FFO and revenue. The quarterly dividend of $0.22 per share was raised to $0.23 per share in December, the sixth increase since the 2020 COVID-related dividend cut. The forward FFO payout is still reasonable at 58%.
Kimco Realty shares have risen 6.64% in January.
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