The company last night topped Q1 estimates, but cut its expectation for annual growth in same-store NOI from 1-2% to negative 1.5%-to-flat. Noted is the impact of increased vacancies from recent tenant bankruptcies.
The expected end-of-year leased rate is lowered to 93-93.5%.
FFO and Operating FFO guidance is pulled thanks to the unpredictable timing and magnitude of potential buys/sells during the year. DDR -8.8%
Other players: Retail Properties of America (RPAI -2.9%), Retail Opportunity (ROIC -1.6%), Kimco (KIM -2.4%), Federal Realty (FRT -1%), Tanger Factory (SKT -3.3%)
The major averages are modestly lower, but the equity REIT sector as represented by IYR +0.6% and VNQ +0.8% is seeing a bid as the 10-year Treasury yield slips a full six basis points to 2.30%.
Roughed-up shopping center names are among the strongest gainers: Retail Opportunity (ROIC +2%), Kimco (KIM +1.7%), Whitestone (WSR +1.6%), CBL (CBL +2.6%), Kite Realty (KRG +1.7%).
Also in the green are the mortgage REITs (REM +0.7%), though Wells Fargo today downgraded a trio of big names, noting considerably less favorable risk/reward as the stocks now trade pretty close to book value. Those three - AGNC Investment (AGNC), Two Harbors (TWO +0.9%), and CYS Investments (CYS +0.4%). Other players: Annaly (NLY +0.6%), Armour (ARR +0.6%), New York Mortgage (NYMT +1.9%), AG Mortgage (MITT +2.1%), Ellington (EARN +1.2%).
KeyBanc throws in the towel on the mall/shopping center sector, downgrading to Sector Weight. Hardest hit is CBL & Associates (CBL -5.3%) which is downgraded to Sector Weight from Overweight as the team there sees the most risk to mid-quality malls.
The iShares U.S. Real Estate ETF (NYSEARCA:IYR) and Vanguard REIT Index Fund (NYSEARCA:VNQ) are each down about 5% just this month - stung by surging interest rates. Deeper within the REIT sector, the mall and shopping center names also need to contend with the supposed death of traditional retail.
That's created opportunity, says Evercore ISI's Steve Sakwa, noting many in the group sport dividend yields north of 4%, with malls now trading at just 16.8x forward AFFO - a 4-turn discount to the broader REIT sector vs. the typical 1-turn discount.