REITs Crushing Estimates After Third-Quarter Sell-Off

After a difficult third quarter that saw real estate investment trusts (REITs) hammered down in share price, REITs are making a strong comeback. Talk of high interest rates, increasing vacancies and possible recession are still all around, but take a look at several REITs that just trounced the analyst estimates for the third quarter.

One Liberty Properties Inc. OLP is a Great Neck, New York-based diversified REIT that owns and manages retail, office and industrial properties under long-term triple net leases. One Liberty Properties owns 120 properties with more than 11.3 million square feet in 31 states. Most of its properties are in the East and Midwest portions of the U.S.

On Nov. 6, One Liberty Properties reported its third-quarter operating results. Adjusted funds from operations (AFFO) of $0.49 beat the estimate of $0.16 and third-quarter 2022 AFFO of $0.48. Revenue of $22.55 million beat the estimate of $22.5 million and also bested third-quarter 2022 revenue of $21.47 million.

That wasn't the only positive recent news for One Liberty Properties. On Oct. 6, it also announced the board of directors approved a share repurchase plan for up to $10 million of common stock.

One Liberty Properties touched a low of $17.55 on Oct. 4, not seen since March 2021, but bounced back to $19.05 just before the earnings release. Better times could be ahead for this Long Island REIT.

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Realty Income Corp. O is a San Diego-based, triple-net lease REIT, with over 13,100 properties around the world. The Monthly Dividend Company, as it's widely known, is a member of the S&P 500 and an S&P 500 Dividend Aristocrat, with 639 consecutive monthly dividends paid and 122 increases since 1994. The occupancy rate for its portfolio is 99%.

On Oct. 30, Realty Income made big news when it announced it was acquiring fellow triple-net REIT Spirit Realty Capital in an all-stock transaction with an enterprise value of $9.3 billion.

Wall Street was not happy about the deal, and shares of Realty Income sold off, falling as low as $44.79 per share on Oct. 30. By contrast, Realty Income was trading near $63 at the end of July.

On Oct. 31, Mizuho analyst Haendel St. Juste maintained a Neutral rating on Realty Income, while lowering the price target from $61 to $48.

But on Nov. 6, Realty Income reported its third-quarter operating results. FFO of $1.02 per share beat the analysts' consensus estimate of $1 per share and was up smartly from FFO of $0.97 in the third quarter of 2022.  Revenue of $1.04 billion was ahead of estimates of $955.78 million and was 24.2% above revenue of $825.95 million in the third quarter of 2022.

Tanger Factory Outlet Centers Inc. SKT is a Greensboro, North Carolina-based retail REIT that owns 37 indoor shopping centers and outdoor factory outlet malls with 14 million square feet and over 2,700 stores across 20 states and in Canada. Tanger Factory Outlet Centers was founded in 1981 and had its initial public offering (IPO) in May 1993.

Tanger has produced some positive news recently. On Oct. 13, Tanger announced an increase in its quarterly dividend from $0.245 to $0.26 per share, payable Nov. 15 to stockholders of record on Oct. 31. This represents a 6.1% increase in its annualized dividend from $0.98 to $1.04 per share.

As so often happens, a dividend increase shortly before earnings are reported portends a good quarter for the company. On Nov. 6, Tanger reported its third-quarter operating results. FFO of $0.50 beat the estimates of $0.47 and FFO of $0.47 in the third quarter of 2022. Revenue of $117.35 million beat the estimates of $110.02 million and revenue of $111.45 million in the third quarter of 2022.

With the solid quarter in hand, Tanger also boosted its 2023 full-year guidance of FFO from $1.85-$1.92 to $1.90-$1.94.

Tanger also announced that as of Nov. 16, it will officially change its name to Tanger Inc.

On Oct. 12, JP Morgan analyst, Michael Mueller upgraded Tanger Outlet Centers from Underweight to Neutral and raised the price target from $24 to $25. Given the results of the third quarter, it would not be surprising to see another upgrade and/or price target hike this week.

Service Properties Trust SVC is a Newton, Massachusetts-based diversified REIT with a portfolio of 221 hotels and 761 service-focused net lease retail outlets that cover 46 states, Puerto Rico and Canada. Service Properties owns many of the travel centers along major U.S. highways.

On Nov. 6, Service Properties Trust announced its third-quarter operating results.  FFO of $0.56 per share beat the estimates of $0.54, as well as its FFO of $0.54 in the third quarter of 2022. Revenue of $496.82 million beat the estimate of $489.19 million but was a slight decrease from third-quarter 2022 revenue of $498.25 million.

Service Properties traded near $10.75 in March, but a tough third quarter brought it down to $7.69 just before the earnings release. It could perform very well going forward.

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