US REITs underperform broader market in Q1 2024 – S&P Global

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Share prices for US real estate investment trust stocks fell during the first quarter of the year, underperforming the strong returns of the broader market.

The Dow Jones Equity All REIT index logged a negative 1.3% total return for the recent quarter, compared to a solid 10.6% return for the S&P 500.

Buy/sell, rent/lease residential &
commercials real estate properties.

On a yearly basis, the Dow Jones Equity All REIT index ended March with a 7.9% total return, while the S&P 500 fared much better with a return of 29.9%.

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Sector returns

Among the property sector indexes, the Dow Jones US Real Estate Regional Malls index generated the highest return for the second consecutive quarter, at 11.1%, and was the sole REIT sector index to outperform the S&P 500 for the quarter.

Simon Property Group Inc., the largest mall REIT by market capitalization, ended the first quarter with a strong 11.1% return, the 10th largest return of any REIT stock above $200 million market capitalization. Macerich Co. fared slightly better, recording a 12.8% return for the quarter, the ninth-largest largest return of all REIT stocks in the analysis. That being said, CBL & Associates Properties Inc., which operates mainly B-class malls, ended the first quarter with a negative 4.5% return.

The Dow Jones US Real Estate Apartments index ended the first quarter with a slightly positive return, at 0.4%. Independence Realty Trust Inc. logged the largest return of the apartment REIT group, also referred to as multifamily REITs, at 6.5%. Aimco and Equity Residential followed next with returns of 4.6% and 4.3% for the first quarter, respectively.

Conversely, the Dow Jones US Real Estate Diversified index closed the first quarter with the lowest return, at negative 7.4%. The Manufactured Homes and Strip Centers indexes followed next with returns of negative 4.9% and negative 3.3%, respectively.

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Top-performing REITs

Two office REITs — Net Lease Office Properties and SL Green Realty Corp. — held the highest returns for the first quarter among all US REITs above $200 million market capitalization, at 28.8% and 23.9%, respectively.

Net Lease Office Properties booked a significant increase in its share price on Jan. 11 and Jan. 12, after announcing the sale of four office properties in December 2023 for an aggregate $43.1 million in gross proceeds. Utilizing annual base rent totals as of Sept. 30, 2023, and property sale prices reported in the company’s press release, capitalization rates for the sales ranged from 7.1% to 12%.

As opposed to one event spiking SL Green’s share price, the office REIT instead recorded a steady increase in its share price throughout the second half of the quarter, rising to $55.13 per share at quarter-end from $43.24 per share at the close of Feb. 14.

Advertising REIT OUTFRONT Media Inc. placed third, with a total return of 22.8% for the first quarter. Outfront Media’s share price jumped 18.5% on Feb. 22 following its fourth-quarter 2023 earnings release, in which the REIT reported fourth-quarter revenue of $501.2 million. The revenue figure came in at the higher-end of the REIT’s guidance range and marked a 1.3% increase year over year. Outfront Media’s share price continued to rise throughout the rest of the first quarter, closing at $16.79 on March 28.

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Bottom-performing REITs

Healthcare REIT Diversified Healthcare Trust ended the quarter as the worst-performing REIT stock above $200 million market capitalization, closing the quarter with a return of negative 34%. Despite the REIT’s significant share-price drop during the recent quarter, its return for the past year sits at 86.5%.

Office REIT Hudson Pacific Properties Inc. ranked second, with a return of negative 30.2% for the first quarter. Hudson Pacific’s per-share stock price steadily dropped throughout the quarter, moving to $6.45 on March 28 from $9.31 at the end of 2023.

Rounding out the bottom three was Belpointe PREP LLC, which booked a negative 21.2% return for the recent quarter.

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