After a difficult year, December was an incredible month for investors of real estate investment trusts (REITs). Sparked by the Federal Reserve's third consecutive pause on interest rate hikes and a prediction that they'll deliver three rate cuts in 2024, REITs blasted higher from undervalued positions.
Office REITs were the best-performing subsector, with a dozen REITs surging over 20% higher. Seven mortgage REITs (mREITs) also enjoyed a month of 20% or more gains.
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Take a look at the five best-performing REITs above $5 for December, based on closing prices on Dec. 27.
Hudson Pacific Properties Inc. HPP is a Los Angeles-based office REIT with 48 office properties and five motion picture studio properties emphasizing centers of innovation for media and tech companies in California, Washington and Vancouver, British Columbia. Its present office occupancy rate is 87%.
Hudson Pacific Properties was founded in 2006 and 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 far surpassed that, with a recent close at $9.02. The analyst noted that several key negative catalysts are now behind Hudson Pacific, including the Hollywood strikes, and that the risk/reward now appears to be more on the reward side.
On Dec. 4, Hudson Pacific 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 said it will use the net proceeds to repay debt on its unsecured revolving credit facility.
Hudson Pacific had a total return of 53.66% in December to lead all REITs. While that's remarkable, even more outstanding is that Hudson was also one of the leading REITs in November with a gain of 31%.
Macerich Co. MAC is a Santa Monica, California-based retail REIT that specializes in the acquisition, leasing and management of 48 million square feet in 44 regional town center malls all across the U.S.
On Dec. 20, Piper Sandler analyst Alexander Goldfarb maintained a Neutral position on Macerich but raised the price target 41.66% from $12 to $17.
Macerich was the second-best-performing REIT in December, with a total return of 36.88%. However, it's been one of the worst-performing REITs since the start of 2020 and had a total return of negative 44.00% before December. Whether December was the start of a turnaround that will continue into 2024 or just a bounce from a deeply oversold position remains to be seen.
Peakstone Realty Trust PKST is an El Segundo, California-based diversified REIT that owns and operates single-tenant office and industrial properties. Peakstone Realty's portfolio has 19 million square feet of space across 24 states in high-growth markets. Its occupancy rate is 95%. Peakstone's initial public offering (IPO) was on April 13. Shares have been volatile since then, falling from a high of $45.88 in April to $12.29 by the end of October and back up to a recent close of $21.11.
On Dec. 25, Zacks Investment Research Inc. upgraded Peakstone Realty from Neutral to Outperform.
Despite not much other news, Peakstone benefited from a good month for office and industrial REITs, securing a total return of 32.27% in December, third best among all REITs.
Acres Commercial Realty Corp. ACR is a Uniondale, New York-based mREIT specializing in originating, holding and managing mortgage loans and other debt instruments for commercial real estate.
One event that propelled Acres Commercial Realty higher in December was its announcement on Nov. 30 that its board has reauthorized an additional $10 million share repurchase program as well as continuing with the preexisting program of $4.1 million of common stock.
Acres Commercial saw some insider purchases In October, when Eagle Point Credit Management, a 10% owner at Acres Commercial purchased another 7,985 shares of Acres common stock for $169,321.
Acres had a total return of 30.09% in December.
Office Properties Income Trust OPI is a Newton, Massachusetts-based office REIT with 154 properties covering 20.7 million square feet. As of the third quarter, its occupancy rate was 89.9%. Office Properties is externally managed by the RMR Group Inc. RMR.
In September, after opposition from shareholders, Office Properties Income Trust agreed to terminate its proposed merger with Diversified Healthcare Trust DHC, another RMR Group-managed REIT, and that announcement has helped propel Office Properties higher ever since.
On Nov. 17, Office Properties announced that President and CEO Christopher Bilotto will take over as president and CEO of Diversified Healthcare Trust on Jan. 1. Yael Duffy will become president and chief operating officer of Office Properties on Jan. 1.
Office Properties had a total return of 29.75% in December, following another gain of 24.28% in November.
Weekly REIT Report: REITs are one of the most misunderstood investment options, making it difficult for investors to spot incredible opportunities until it's too late. Benzinga's in-house real estate research team has been working hard to identify the greatest opportunities in today's market, which you can gain access to for free by signing up for the Weekly REIT Report.
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