After a lackluster January, real estate investment trusts (REITs) provided a much-needed improvement in February. Almost all REITs reported fourth-quarter earnings this month, and although forward guidance came in soft for many of them, the majority of REITs still managed to meet or beat estimates on funds from operations (FFO) and revenue. The Vanguard Real Estate Index Fund ETF VNQ was up 1.98% for the month, and about 60% of all REITs had positive returns as well.
The top REIT performers this month were from a diverse mix of subsectors. One REIT that has underperformed for many months, came back to life in February and was the leading REIT in total return. Take a look at the top four performers for February (prices as of the close on February 29).
Medical Properties Trust Inc MPW is a Birmingham, Alabama-based healthcare REIT that owns and operates 439 general acute care and other properties across the U.S. and nine other countries, with locations in Europe and even Australia. It has a total portfolio of $18.3 billion, of which about 64% are general acute care hospitals. About two-thirds of its properties are in the United States.
After one of the worst total returns of any REIT in January, Medical Properties reversed course in February, coming in with a total return of 35.81%. Here are the highlights of the month:
On Feb. 20, RBC Capital Markets analyst Michael Carroll maintained an Outperform rating on Medical Properties Trust while lowering the price target from $8 to $5.
On Feb. 21, Medical Properties Trust reported its fourth-quarter operating results. Normalized FFO of $0.36 per share beat the estimates of $0.29 per share but fell from $0.43 per share in the fourth quarter of 2022. Revenue of negative $122.83 million was well below revenue of $380.49 million in the fourth quarter of 2022 and reflected a $166.8 million charge in straight-line rent and another negative $53.4 million reduction of interest and other income.
Medical Properties declined to comment on the full-year 2024 forward guidance of FFO because of the uncertainty of its large portfolio of Steward Health Care System hospitals.
While it wasn't a great earnings report, it still triggered a rally in share price over the last week of the month, perhaps because of relief that it wasn't worse than it was.
TPG RE Finance Trust Inc. (NYSE TRTX), a subsidiary of TPG Real Estate, is a mortgage REIT with a $4.2 billion portfolio of first mortgage loans with an average loan size of $71.6 million in geographically diverse primary and select secondary markets across the U.S.
On Feb. 20, TPG RE Finance Trust reported its fourth-quarter operating results. Adjusted earnings per share (EPS) of negative $2.05 missed the estimate of negative $0.17. Revenue of $31.49 million was ahead of estimates of $24.73 million but below revenue from the fourth quarter of 2022 of $35.99 million.
In contrast to the negative earnings report, the earnings call was quite upbeat, and perhaps investors were reacting to that as shares blasted higher over the final week of the month. TPG RE Finance had a total return in February of 22.82%
Iron Mountain Inc. IRM is a Portsmouth, New Hampshire-based specialty REIT with a focus on information management and storage, data center infrastructure and asset lifecycle management. Iron Mountain was founded in 1951 and has more than 225,000 customers in more than 60 countries. In recent years, it has shifted its focus from paper storage to data storage.
On Feb. 22, Iron Mountain reported its fourth-quarter operating results. AFFO of $0.52 per share beat the consensus estimate of $0.45. Revenue of $1.42 billion missed the estimate of $1.45 billion but was an 11.02% increase over revenue of $1.28 billion in Q4 2022.
Iron Mountain's fourth quarter was impressive, and the REIT had the third-best total return in February with 16.47%
Xenia Hotels & Resorts Inc. XHR is an Orlando, Florida-based hotel REIT that owns and operates 32 luxury and upscale hotels and resorts with 9,514 rooms in 25 markets across 14 states. Marriott, Hyatt and Hilton are some of the brands within its portfolio.
On Feb. 27, Xenia Hotels reported its fourth-quarter operating results. Adjusted funds from operations (AFFO) of $0.41 beat the analyst estimates of $0.37 and was in line with AFFO from the fourth quarter of 2022. Revenue of $253.38 million missed the consensus estimate of $253.79 million and was also below revenue of $263.14 million from the fourth quarter of 2022.
Nonetheless, one analyst was impressed. On Feb. 29, Jefferies analyst David Katz upgraded Xenia Hotels from Hold to Buy and raised the price target from $14 to $18.
As a result, Xenia Hotels blasted higher over the last three trading days of the month and had a total return in February of 15.08%.
A few other REITs that performed admirably in February were Diversified Healthcare Trust DHC, with a total return of 14.29%, Ranyonier Inc. RYN, with 13.63% and Park Hotels & Resorts Inc. PK, with 10.08%.
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