Analysts Upgrading REITs From Different Subsectors

As an investor, you always appreciate when an analyst upgrades a stock you own. Not only does it support your bullish view, but it usually has a positive effect on the stock price.

When upgrades are made across different sectors of the market, that's a sign of overall market health. This is especially true with real estate investment trusts (REITs), which have more than a dozen subsectors within the group. Over the past week, several of the subsectors have taken off in parabolic fashion as analysts have upgraded some beaten-down issues.

Take a look at REITs from six subsectors that analysts have upgraded within the past week, one with a potential upside of over 17% from its present level.

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First Industrial Realty Trust Inc. FR is a Chicago-based industrial REIT that specializes in owning and operating bulk and regional distribution centers and other logistics properties. First Industrial owns 441 properties, covering 69.4 million square feet of industrial space in 15 major markets. It was founded in 1994.

On Nov. 1, First Industrial Realty announced a quarterly dividend of $0.32 per share, payable on Jan. 16 to shareholders of record on Dec. 29. The ex-dividend date is Dec. 28. The $1.28 annual dividend yields 2.58%.

On Dec. 5, Mizuho analyst Haendel St. Juste upgraded First Industrial Realty from Neutral to Buy and announced a $55 price target. From its most recent closing price of $49.52, that's a potential 11% gain.

Hudson Pacific Properties Inc. HPP is a Los Angeles-based office REIT with 48 office properties and five studio properties with an emphasis on centers of innovation for media and tech companies in California, Washington and Vancouver, British Columbia. Hudson Pacific Properties was founded in 2006 and soon after began purchasing motion picture studios and office buildings on the West Coast. Hudson Pacific Properties went public in 2010.  

On Nov. 30, Goldman Sachs analyst Caitlin Burrows upgraded Hudson Pacific Properties from Sell to Neutral and announced a $6.25 price target. Hudson has already surpassed that, with a recent close at $7.19. The analyst noted that several key negative catalysts are now behind Hudson Pacific, including the Hollywood strikes, and the risk/reward now appears to be leaning toward the reward side.

On Dec. 4, Hudson Pacific Properties sold a Silicon Valley land parcel and a partial tranche of a loan secured by its Hollywood media portfolio for gross proceeds of $189.3 million. Hudson will use the net proceeds to repay debt on its unsecured revolving credit facility. 

Regency Centers Corp. REG is a Jacksonville, Florida-based retail REIT that owns and operates 481 properties, totaling over 60 million square feet in higher-income areas, mostly on the East Coast. Its portfolio includes 80% grocery-anchored properties, along with restaurants, service providers, medical spaces and higher-class retailers. It has a 95.4% lease rate.

On Nov. 3, Regency Centers increased its quarterly dividend from $0.65 to $0.67, payable Jan. 3 to shareholders as of Dec. 14, with an ex-dividend date on Dec. 13. The annual $2.68 per share dividend presently yields 4.11%.

On Nov. 30, Compass Point Research & Trading analyst Floris Van Dijkum upgraded Regency Centers from Neutral to Buy and raised the price target from $65 to $72. From its recent closing price of $65.13, that represents a potential gain of 10.5%.

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AvalonBay Communities Inc. AVB is a residential REIT that acquires, develops and manages multifamily communities. As of Sept. 30, 2023, AvalonBay Communities owned approximately 89,240 apartments directly or indirectly in 296 communities across 12 states and Washington, D.C.  

On Nov. 29, JPMorgan analyst Anthony Paolone upgraded AvalonBay from Underweight to Neutral and lowered the price target from $201 to $194. From its recent closing price of $177.74, that represents a potential gain of 9.1%. The analyst said he believes AvalonBay will be stronger than its peers in the multifamily sector.

On Dec. 4, AvalonBay announced a public offering of $400 million senior unsecured notes at a 5.3% rate due Dec. 7, 2033.

RLJ Lodging Trust RLJ is a Bethesda, Maryland-based hotel REIT that owns 96 premium-branded hotels with 21,200 rooms in 23 states and Washington, D.C. Its brands include Marriott, Hilton Garden Inn, Embassy Suites and Hyatt.

On Nov. 1, RLJ Lodging reported its third-quarter operating results. Funds from operations (FFO) of $0.06 per share beat the estimate of $0.05, while revenue of $334.41 million was also better than expectations for $327.77 million.

Another positive for RLJ Lodging is that it raised its quarterly dividend twice in 2023, from $0.05 to $0.08 in March to $0.10 in September for a total increase of 100%. The present annual yield is 3.63%.

On Nov. 28, Oppenheimer & Co. Inc. analyst Tyler Batory upgraded RLJ Lodging from Perform to Outperform and announced a $13 price target. The analyst said he expects improved business travel and elevated levels of group demand. From its recent closing price of $11.02, the price target represents a potential gain of 17.9%.

Crown Castle Inc. CCI is a Houston-based specialized REIT that owns, operates and leases cell towers long term. Crown Castle has more than 40,000 cell towers, 85,000 route miles of fiber and 120,000 small cells in its portfolio. It works with businesses and governments to design and build solutions that meet connectivity needs like wireless coverage and custom fiber optic networks.

Crown Castle was in the news last week when Elliott Investment Management released a letter to Crown Castle's board, detailing its views on the company's underperformance and calling for significant changes to the board and CEO. The letter sparked a surge in Crown Castle's share price, which has climbed from $103 to a recent close of $118.43.

On Dec. 5, Wells Fargo Securities analyst Eric Luebchow upgraded Crown Castle from Underweight to Equal-Weight and raised the price target from $90 to $115.  

Analysts are only correct about 50% of the time, and investors should always perform their own due diligence and not simply rely on an analyst's viewpoint before making purchase or sale decisions.

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