The Best-Performing REITs In July
Whoever coined the phrase, "Sell in May and go away" surely wasn't referring to the 2023 stock market. Both June and July were excellent months for the major indices, and while real estate investment trusts (REITs) underperformed the general indices, most still managed to finish on the positive side in July.
July was an outstanding month for office REITs as three of the top four performers emerged from that sector. Short sellers who were predicting office stocks' demise were forced to run for cover as some of the office REITs were pounding out monthly gains of over 20%.
Take a look at the three best-performing REITs for July (as of opening prices on 7/31) as well as six more that showed exemplary results.
Hudson Pacific Properties Inc. (NYSE:HPP) is a Los Angeles-based office REIT with 49 office properties and four studio properties with an emphasis on innovation centers for media and tech companies in California, Washington and Vancouver, British Columbia.
Hudson Pacific Properties was founded in 2006 by Chairman and CEO Victor Coleman. Soon after its creation, Hudson Pacific began purchasing motion picture studios and office buildings on the West Coast. Hudson Pacific Properties went public in 2010. It has a market cap of $690.43 million. The 52-week range is $4.08 to $16.31.
Hudson Pacific Properties led all REITs in performance for July with a gain of 38.11%.
Sotherly Hotels Inc. (NASDAQ:SOHO) is a Williamsburg, Virginia-based hotel REIT that owns and manages 3,011 rooms in 12 hotels across the southern United States. Sotherly initial public offering (IPO) was in 2004, and it has a market cap of $93.028 million.
Sotherly Hotels had an occupancy rate of 70.6% in June, which was 4.1% better than June 2022. Average daily rates (ADR) of $178.46 was 3.3% better year over year and revenue per available room (RevPar) of $124.79 was 7.7% better year over year.
Things have recently been improving for Sotherly Hotels, which had performed poorly from the onset of COVID-19 in 2020. Sotherly Hotels was the second-best REIT performer in July with a gain of 28.93%.
SL Green Realty Corp. (NYSE:SLG) is a New York City-based office REIT and the largest office building landlord in New York. As of June 30, SL Green Realty held interests in 60 buildings totaling 33.1 million square feet. Many income-oriented investors like owning SL Green Realty for its monthly paying dividend.
On July 19, after the closing bell, SL Green Realty reported its second-quarter operating results. Funds from operations (FFO) of $1.43 was down 23.53% from FFO of $1.87 in the second quarter of 2022 but beat the estimates by $0.09. Rental revenue of $165.65 million was better than rental revenue of $136.5 million in the second quarter of 2022. Total revenue of $221.07 million was above estimates of $205.97 million.
Analysts are unusually divided with ratings and price targets for SL Green Realty. On July 26, Goldman Sachs maintained its Sell rating on SL Green Realty but raised the price target from $19 to $25. Yet, the day before, Truist Securities maintained a Buy rating while lowering the target price from $50 to $47. A few days before that, Morgan Stanley reiterated an Equal-Weight rating and maintained a $21 price target on SL Green. Also in July, Piper Sandler Cos. upgraded SL Green from Neutral to Overweight and raised its price target from $27 to $41.
Despite Goldman Sachs' negative call, SL Green was the third best-performing REIT in July with a gain of 24.13%.
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Other solidly performing REITs in July were:
STOCK | SYMBOL | JULY GAIN |
Vornado Realty Trust | (NYSE:VNO) | 22.21% |
Kilroy Realty Corp. | (NYSE:KRC) | 18.63% |
Empire State Realty Trust Inc. | (NYSE:ESRT) | 18.87% |
Uniti Inc. | (NASDAQ:UNIT) | 17.80% |
Paramount Group Inc. | (NYSE:PGRE) | 17.59% |
Boston Properties Inc. | (NYSE.BXP) | 14.77% |
Given the unusually large gains over one month's time, investors who are interested in purchasing these REITs may want to wait for pullbacks in price before entering new positions.
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