Stocks in National Storage Affiliates Trust (NYSE:NSA), a real estate investment trust (REIT) with more than 1,100 facilities, and Vornado Realty Trust (NYSE:VNO), a New York City-focused REIT with a diverse portfolio of offices and retail space, have surged in the past few weeks.
Between November 1 and now, Vornado’s share price has increased by 45.68 percent, while National Storage Affiliates’ share price has increased by 29.21 percent.
A downgrade from “In-Line” to “Underperform” was issued for both REITs by Evercore ISI analyst Steve Sakwa on December 11th as a result of this significant swing. On the other hand, he seemed to be playing catch-up when he increased the price targets of Vornado ($23) and National Storage Affiliates ($32–$35).
The real estate investment trusts’ (REITs) current trading prices are lower than Sakwa’s new price objectives, which remain unchanged despite the downgrades. The implication of his rating is that the stock market might have overestimated its potential and that further gains would be in short supply.
Self-Storage, Apartment REITs Also Take A Hit
Analysts are cutting their predictions for apartment and self-storage REITs in addition to commercial office and retail REITs.
In particular, Sakwa lowered CubeSmart’s (NYSE:CUBE) “Outperform” rating to “In-Line.” Shares of CubeSmart have increased in value by 23.73% within the previous 30 days. Haendel St.
Juste, an analyst at Mizuho, downgraded the apartment REIT Equity Residential (NYSE:EQR) from “Buy” to “Neutral.” Although its 9.51% rise over the past month is encouraging, it is lower than the performance of other real estate investment trusts.
Analysts increased their price expectations for CubeSmart and Equity Residential, following in the footsteps of Vornado and National Storage. The message is clear: they anticipate more positive developments, but maybe not as quickly as what has been seen recently.
Specialty REITs Not Immune
Speculative real estate investment trusts (REITs) that focus on certain types of real estate have also been reevaluated by experts. gambling and Leisure Properties (NASDAQ:GLPI) was downgraded from “Buy” to “Neutral” by St. Juste. The company owns and rents 61 properties centered on gambling throughout 18 states.
Compared to other hot real estate investment trusts (REITs), Gaming and Leisure Properties’ November gain of 2.42 percent is somewhat slow. Price targets were also reduced by St. Juste, who went from $50 to $47.
St. Juste also lowered their rating on retail net lease asset specialist Agree Realty Corp. (NYSE:ADC) from “Buy” to “Neutral.” A month-over-month increase of 3.53% for Agree Realty is commendable but not remarkable.
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So Why Did Analysts Get Cold Feet?
The spike in real estate investment trust (REIT) valuations has obviously petered out, according to analysts. The new price targets are often higher than the old ones, but they imply significantly slower growth than investors have witnessed recently.
The likelihood of a reversal increases as upward momentum becomes extremely inflated. Even while market watchers aren’t predicting massive drops in value just yet, 2023 seems to be the year that things could cool down a bit.
Also, high-yielding real estate investment trusts (REITs) may lose some of their appeal if interest rates keep going up. But there are many who think that next year’s weakening might offer better entry possibilities.