NAV Monitor: US REITs close November at lower median discount to net asset value

This Data Dispatch is updated monthly and was last published Nov. 5. The analysis includes US equity real estate investment trusts that trade on the Nasdaq, NYSE or NYSE American with market capitalizations of at least $200 million and can offer insight into how the Street is valuing different property sectors. While valuations within the portfolio of publicly traded REITs might not match all privately owned properties, the public markets can often be a leading indicator for potential future property pricing. That insight is particularly helpful when there is little price discovery in the market due to a lack of transactions.

The price-to-net asset value valuations for publicly listed US equity real estate investment trusts rose in November, after two consecutive months of decline.

US equity REITs closed November at a median 18.2% discount to their consensus net asset value (NAV) per share estimates, 3.1 percentage points down from the median 21.3% discount at the end of October, according to S&P Global Market Intelligence data.

The timber REIT sector recorded the largest median discount to NAV at 36.4%, compared to a 35.7% discount the previous month. The hotel sector followed, ending November at a median discount to NAV of 34.8%, compared to a 38.9% discount the month prior.

Healthcare REITs, on the other hand, posted the highest median premium to NAV. The sector closed November at a median 31.1% premium to NAV, compared to a 21.6% premium as of Oct. 31.

Largest discounts

Hotel-focused Service Properties Trust recorded the largest discount to NAV among public REITs with at least $200 million in market capitalization. The REIT closed November at $1.74 per share, 63.4% below the consensus NAV estimate of $4.75 per share.

Office REIT Brandywine Realty Trust and industrial REIT Industrial Logistics Properties Trust followed, trading at discounts of 57.5% and 51.7%, respectively.

Among the 10 public REITs trading at the highest discounts, four belonged to the office sector, three were from the hotel sector, and the remaining three consisted of industrial and diversified REITs. In addition to Brandywine Realty Trust, the office REITs on the top 10 list were Alexandria Real Estate Equities Inc., Hudson Pacific Properties Inc. and City Office REIT Inc.

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Largest premiums

Nine of the 10 public REITs trading at the highest premiums to NAV were from the healthcare sector.

Welltower Inc. posted the largest premium to NAV among public REITs with a market capitalization of at least $200 million. The healthcare REIT closed Nov. 28 at $208.22 per share, 126.3% above the consensus NAV estimate of $92.0 per share.

American Healthcare REIT Inc. ranked second, trading at a premium of 87.6%. Medical Properties Trust Inc. followed, trading at a premium of 77.3%.

The other healthcare REITs on the top 10 list were CareTrust REIT Inc., National Health Investors Inc., Omega Healthcare Investors Inc., Ventas Inc., Sabra Health Care REIT Inc. and Diversified Healthcare Trust.

Communications REIT Crown Castle Inc. took the fourth spot on the list, closing November at $91.28 per share, 57.9% above the consensus NAV estimate of $57.80.