REITs Q1 Earnings Begin On Solid Note

Given the recent talk about higher interest rates being a headwind for real estate investment trusts (REITs), investors might anticipate that first-quarter operating results could be lackluster or subpar.

However, many initial REIT earnings reports are much better than expected, with several REITs beating the analyst estimates on funds from operations (FFO) or adjusted funds from operations (AFFO). Occupancy levels are still high and full-year 2024 FFO guidance looks sound. 

Take a look at three REITs that just declared earnings and are showing up the analyst consensus estimates. 

Alexandria Real Estate Equities Inc. ARE is a Pasadena, California-based REIT with a portfolio of 800 tenants devoted to life science, agtech and advanced technology companies in what its website calls "top innovation clusters." These areas include cities like Boston, New York City, Seattle and San Francisco. Mega campuses make up 75% of its annual rental revenue. Alexandria is a member of the S&P 500.

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Of Alexandria's leases, 94% are triple-net and 96% contain annual rent escalations. The weighted average remaining term (WALT) of its top 20 tenants is 9.7 years and for all tenants, the WALT is 7.5 years  The tenant quality is strictly higher-grade with many of its tenants publicly traded on Wall Street. Moderna Inc. MRNA and Eli Lilly and Co. LLY are two of its largest tenants. The total occupancy rate as of the first quarter of 2024 was 94.6%.

Alexandria has reported positive news this month.  On April 1, it announced an early renewal with insitro on a six-year lease extension through Aug. 31, 2034, in the San Francisco area. Insitro is a machine learning-powered drug discovery and development company.

On April 2, Alexandria announced it's been named one of Newsweek magazine's most trustworthy companies in America for the second consecutive year. Alexandria is first among the three S&P 500 REITs recognized in the real estate and housing category.

On April 22, Alexandria declared its first-quarter operating results. AFFO of $2.35 per share beat the consensus estimate of $2.33 per share and was better than AFFO of $2.19 per share in the first quarter of 2023. Revenue of $769.1 million bested the Street estimate of $762.903 million and was substantially improved from first-quarter 2023 revenue of $700.795 million.

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Alexandria gave investors a hint that its first-quarter earnings would be strong when it increased the dividend by 5% in early March to $1.27 per share or $5.02 per share annually. The dividend yield is presently 4.39%.

Equity LifeStyle Properties Inc. ELS is a Chicago-based residential REIT that owns and operates manufactured home communities, RV resorts, marinas and campgrounds in North America. Equity LifeStyles owns 450 communities across 35 states and British Columbia. It was founded in 1992 and had its initial public offering (IPO) in 1993.

On April 22, Equity LifeStyle reported its first-quarter operating results. FFO of $0.78 per share was above estimates for $0.77 and topped first-quarter 2023 FFO of $0.74 per share. Revenue of $386.6 million missed the consensus estimate of $389.49 million but solidly trounced the $370 million revenue it reported in the first quarter of 2023.

The forward guidance announced simultaneously with the operating results was even more positive. Equity LifeStyle sees full-year FFO between $1.83-$1.93 per share, well above the consensus estimate of $1.74 per share.

With single-family homes so expensive, manufactured homes remain an alternative for people who would love to buy a home but have a limited budget or down payment funds.

Alpine Income Property Trust Inc. PINE is a Daytona Beach, Florida-based retail REIT that owns and operates 138 high-quality net-leased properties of 3.8 million square feet across 35 states. Sixty-five percent of its tenants are investment-grade companies such as Lowe's Cos. Inc., Dollar Tree Inc., Walgreens, Walmart Inc., Advanced Auto Parts and Dick's Sporting Goods. As of March 30, Alpine Income Property Trust had an occupancy rate of 99%.

On April 18, Alpine Income reported its first-quarter 2024 operating results. FFO of $0.41 per share topped the Street's view of $0.38 per share and its first-quarter 2023 FFO of $0.36 per share. Revenue of $12.47 million was ahead of analysts' estimates of $11.66 million and was 116% above revenue of $11.17 million in the first quarter of 2023. Alpine Income Property Trust maintained its full-year 2024 AFFO guidance from $1.53-$1.58 per share, slightly above the consensus estimate of $1.54 per share. 

On April 19, Jones Trading analyst Jason Weaver maintained Alpine Income Property Trust with a Buy but lowered the price target from $19 to $18. On the same day, Stifel analyst Nathan Jones maintained a Buy on Alpine Income Property Trust but lowered the price target from $19 to $18.75.

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