After a difficult October that saw many real estate investment trusts (REITs) dropping to 52-week lows, November was a positive turning point for REITs, helped largely by the Federal Reserve's second consecutive pause on interest rate hikes and a burgeoning optimism that 2024 might include a rate decrease or two.
The Vanguard Real Estate Index Fund ETF (NYSE:VNQ) had a November return of 12.08%, but dozens of individual REITs beat that mark, with several having returns over 20%.
The 60/40 strategy isn't going to cut it any longer, which is why major firms like Blackrock are adding these assets to their portfolios to boost returns.
Passive income investments are one of the most trusted methods for riding out a recession, so it's no surprise that people are turning to high-yield real estate notes that pay a fixed 7.5% to 9%.
Take a look at the best-performing REITs (over $3 per share) in November:
Hannon Armstrong Sustnbl Infrastructure Capital Inc. (NYSE:HASI) is an Annapolis, Maryland-based mortgage REIT (mREIT) that provides mortgage loans for renewable energy projects and owns stakes in a portfolio of solar and wind projects as well as other energy-efficient endeavors. Its business model and $4.9 billion portfolio are designed to invest in energy transitions that will improve the climate future. Hannon Armstrong joined the S&P Small Cap 600 in mid-September. Its market cap is $2.69 billion.
Two things in Hannon Armstrong's favor are the Biden administration's funding of energy-efficient projects and the Federal Reserve pausing its interest rate hikes for two consecutive months.
Hannon Armstrong's return in November was 41.25%, making it the No. 1-performing REIT.
Hudson Pacific Properties Inc. (NYSE:HPP) is a Los Angeles-based office REIT with 48 office properties and five studio properties focused on innovation centers for media and tech companies in California, Washington and Vancouver, British Columbia. Its office occupancy rate is 81.3%.
Hudson Pacific Properties was founded in 2006 by Chairman and CEO Victor Coleman. Soon after its creation, it began purchasing motion picture studios and office buildings on the West Coast. Hudson Pacific Properties went public in 2010.
On Nov. 9, Hudson Pacific announced the successful refinancing of a loan securitized by one of its properties in Vancouver, British Columbia, at a 4.36% interest rate. Hudson has no more debt maturities until December 2024.
On Nov. 30, Goldman Sachs analyst Caitlin Burrows upgraded Hudson Pacific from Sell to Neutral and announced a $6.25 price target.
While it's true that Hudson shares were down in the low single digits, making it easier to achieve a higher percentage gain, its second-best return of 31.61% for November was still notable. The end of the Hollywood actors and screenwriters' strikes certainly Hudson Pacific have a much-improved performance in November. And office REITs were absolutely on fire over the past two weeks.
Park Hotels & Resorts Inc. (NYSE:PK) is a Tysons, Virginia-based hotel REIT with 43 hotels — plus two in receivership — and resorts with over 26,000 rooms in prime U.S. markets that have high barriers to entry. Of its properties, 36% are located in Hawaii.
Park was established as an independent company in January 2017, following its spinoff from Hilton. In September 2019, Park acquired Chesapeake Lodging Trust to add premium-brand hotels and resorts in prime markets such as Miami, Boston, Los Angeles and San Francisco.
On Nov. 6, Barclays analyst Anthony Powell upgraded Park Hotels from Equal Weight to Overweight and raised the price target from $16 to $19.
On Nov. 30, Park Hotels announced it would pay a special dividend of $0.78 per share, along with its regular quarterly dividend of $0.15 per share on Jan. 16 to shareholders of record on Dec. 29. The ex-dividend date is Dec. 28.
Several hotel REITs performed well in November, but Park was the best of them, notching a third-best 28.62% total return for the month.
Crown Castle Inc. (NYSE:CCI) is a Houston-based specialized REIT that focuses on owning, operating and long-term leasing of cell towers. Crown Castle has more than 40,000 cell towers, 85,000 route miles of fiber and 120,000 small cells in its portfolio.
Crown Castle works with businesses and governments to design and build solutions that meet connectivity needs like wireless coverage and custom fiber optic networks. It has a market cap of $50.84 billion, making it one of the largest REITs in the U.S.
On Nov. 14, James Cramer of CNBC's "Mad Money" recommended buying Crown Castle, saying he liked the 6% yield.
Crown Castle's return for November was 26.13%, with over half of that gain coming in the final week of the month after Elliott Investment Management called out Crown Castle for underachieving versus its peers and promised to run its own candidates for the board of directors at the next meeting. Elliot owns $2 billion in Crown Castle stock.
Extra Space Storage Inc. (NYSE:EXR) is a Salt Lake City-based self-storage REIT with over 3,500 self-storage properties, comprising 2.5 million units across 43 states and Washington, D.C.
In July, Extra Space Storage closed its transaction to acquire Life Storage Inc. in an all-stock transaction of approximately $145.82 per share. The merger added about 1,200 new properties for Extra Space Storage and boosted its portfolio by over 50%.
On Nov. 7, Extra Space Storage reported its third-quarter operating results. Funds from operations (FFO) of $2.02 missed FFO estimates by a penny but revenue of $650.89 million easily beat the estimate of $612.85.
On Nov. 8, Stifel analyst Steve Manaker maintained his Buy position on Extra Space Storage while lowering the price target from $185 to $165. That was a courageous call because at the time Extra Space was trading near $118. But the analyst's Buy rating was correct — on the last day of November, it closed at $130.17.
Extra Space Storage was the best of the self-storage REITs this month with a 25.66% total return.
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