Weyerhaeuser (WY +0.7%) is upgraded to Strong Buy with $36 price target, suggesting 16% upside from last week's close. Kite Realty Group (KRG +0.3%) is also raised to Strong Buy, with $29 price target suggesting 20% upside.
Lifted to Outperform are Kimco (KIM -0.3%), LaSalle Hotel (LHO -0.3%), Brandywine Realty (BRG +2.2%), Rayonier (RYN +1.1%), and Washington REIT (WRE +0.5%).
Downgraded to Market Perform are Cedar Realty (CDR -4.1%), EastGroup (EGP -1.1%), Easterly Government Properties (DEA -0.7%), Corporate Office Properties (OFC -0.4%), and Regency Centers (REG -0.7%).
REITs were already down on the week prior to the rate hike announcement on Wednesday afternoon, but the Fed's more-hawkish guidance for next year put a further hurt on the sector.
Buyers are emerging this morning, with VNQ +1.2% and IYR +1% vs. the S&P 500's 0.2% advance.
There are a number of sell-side upgrades hitting today, but also some downgrades. Dividend hikes help too, and leading gainers this morning is Urstadt Biddle Properties (UBA +8.5%) after last night's results and dividend hike. CubeSmart (CUBE +1.8%) jacked its payout by 28.6%.
Healthcare Realty Trust (HR +1.5%) and Healthcare Trust of America (HTA +1.8%) were initiated with Buy ratings at Jefferies.
Gramercy Property Trust (GPT +2.9%) announced a big portfolio acquisition.
Other movers: Realty Income (O +1.8%), National Retail (NNN +2.1%), Omega Healthcare (OHI +1.8%), Essex Property (ESS +2%), Weingarten Realty (WRI +1.7%), Life Storage (LSI +1.5%), Government Properties (GOV +3.3%), LaSalle Hotel (LHO +1.5%), Stag Industrial (STAG +1.1%), Eastgroup (EGP +1.9%)
The bond market was closed on Friday, keeping rates in check and allowing REITs a respite from the week's bout of selling. The respite was short-lived though, with the selloff resuming this morning as the 10-year Treasury yield jumps 10 basis points to 2.255%.
Realty Income (O -1.5%), Public Storage (PSA -1.3%), Welltower (HCN -0.6%), Equity Residential (AVB -1.6%), AvalonBay (AVB -1.6%), Simon Property (SPG -1.5%), Kimco (KIM -0.5%), Eastgroup (EGP -0.5%), American Campus (ACC -1.7%).
Fading the action are some office REITs as players eye a big boost in government spending: Government Properties (GOV +1.6%), Boston Properties (BXP +1%), First Potomac (FPO +1.2%).
Also fading the negativity despite the stronger dollar are the previously very roughed-up lodging REITs as perhaps they discount a stronger economy: Ashford Hospitality (AHT +3.7%), Sunstone Hotel (SHO +3.2%), LaSalle Hotel (LHO +2.2%), Pebblebrook Realty (PEB +3.7%), Summit Hotel (INN +1.6%), Hospitality Properties (HPT +1.2%), RLJ Lodging (RLJ +2.8%)
Still cautious on EastGroup (NYSE:EGP) thanks to its Houston exposure, analyst Gaurav Mehta can't fight the trend any longer, and upgrades to Hold while raising the price target to $71 from $63 (yesterday's close was $69.73).
Looking at Florida exposure among the 53 REITs in his coverage universe, BTIG's James Sullivan says the broad picture is nothing to get worried about - only 9 of the 53 have greater than 20% portfolio exposure, 5 have 10-15% exposure, 23 have less than 10% exposure, and 16% have zero exposure.
Standout risks appear to be Equity One (NYSE:EQY), with nearly 41% of rent coming from Florida, EastGroup (NYSE:EGP) with almost 29%, and Kite Realty Group (NYSE:KRG) with 25%. He notes that "exposure" does necessarily mean the companies' REIT properties are concentrated in potentially affected areas.
Launching coverage of three industrial REITs today, Mizuho names EastGroup Properties (EGP -0.1%) as its top pick.
Analyst Richard Anderson likes the sector as a whole for the same reason many others do - the proliferation of e-commerce and the commensurate demand for warehouse/distribution space.
Despite its relatively lower growth profile, EastGroup is Anderson's favorite thanks to valuation. He rates it a Buy with $83 price target (13% upside). DCT Industrial (DCT -0.1%) gets a Neutral and $51 PT; Duke Realty (DRE -0.1%) a Neutral and $29 PT.
The P-E giant has agreed to buy a portfolio of mostly West Coast logistics centers from LBA Realty for $1.5B, reports the WSJ.
In the age of Amazon.com logistics is the hottest part of the commercial property sector, with prices for distribution centers and such still on the rise even as those for things like office buildings and malls show signs of cooling.
"Distribution used to be just another part of the supply chain. Now logistics has moved up in its importance in corporate strategy," says Charles Sullivan of Global Logistics Properties.
Rental rates for prime warehouse space in the U.S. jumped 9.9% last year, according to CBRE, outpacing by a mile global industrial leasing rate growth of 2.8%.
Six U.S. markets were in the top nine worldwide, led by facilities near import gateways and population centers - Oakland, north Jersey, and California's Inland Empire, to name three.
CBRE's David Egan says construction of new sites is lagging behind demand, and his firm expects rates in top markets to add another 6% this year. It's all about e-commerce," says Egan. “To get the goods to consumers fast, you have to get close to them."