NAV Monitor: US equity REITs trade at lower discount to NAV in May

This Data Dispatch is updated monthly and was last published May 6. 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.

Publicly-listed US equity real estate investment trusts ended May at a median 18.8% discount to their consensus net asset value (NAV) per share estimates, 3.0 percentage points down from a median discount of 21.8% as of April 30, according to S&P Global Market Intelligence data.

The hotel sector traded at the largest discount to NAV at 35.7%, 2.7 percentage points down from 38.4% in the previous month. The office sector followed with median discount to NAV of 33.3% as of May 30, 2.5 percentage points down from 35.8% in the month prior.

Industrial REITs recorded the largest month-over-month decline in median discount to NAV, 7.1 percentage points down to 22.1% as of May 30.

Healthcare REITs continued to trade at the highest premium at 20.6%, 4.5 percentage points down from 25.1% median premium to NAV in April.

Casino REITs, only two in the analysis, which traded at a 0.5% premium last month, closed May 30 at a 1.9% median discount to NAV.

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Largest discounts

Office REIT Hudson Pacific Properties Inc. traded at the largest discount to NAV among all US REITs with at least $200 million in market capitalization. The REIT closed May 30 at $1.86 per share, 76.7% below the consensus NAV estimate of $7.98 per share.

Industrial REIT Industrial Logistics Properties Trust traded at $3.29 per share on May 30, 70% below the consensus NAV estimate of $10.97 per share.

Hotel sector-focused Summit Hotel Properties Inc. traded at the third largest discount to NAV, closing May 30 at $4.38 per share, which was 56.2% below the consensus NAV estimate of $10.01. Among the 10 public REITs analyzed that traded at the largest discounts, four were from the hotel sector, while three were from the office sector.

The other three hotel REITs on the list included RLJ Lodging Trust, Pebblebrook Hotel Trust and Park Hotels & Resorts Inc., which traded at median discounts to NAV of 54.6%, 54.3% and 51.0%, respectively.

Other office REITs on the list were Brandywine Realty Trust and Empire State Realty Trust Inc., which traded at discounts to NAV of 49.0% and 42.9%, respectively.

Largest premiums

Of the 10 public REITs that traded at the largest premium to NAV among all US REITs with at least $200 million in market capitalization, seven belonged to the healthcare sector.

The four REITs trading at the largest premiums all came from the healthcare sector. Welltower Inc. traded at the highest premium to NAV. The REIT closed May 30 at $154.28 per share, which was 93.3% above the consensus NAV estimate of $79.81 per share.

American Healthcare REIT Inc. was at the second position, trading at 48.1% median premium to NAV on May 30. The other five healthcare REITs on the list included CareTrust REIT Inc., National Health Investors Inc., Omega Healthcare Investors Inc., Ventas Inc. and Sabra Health Care REIT Inc.

CareTrust and National Health were at the third and fourth positions, trading at 38.7% and 35.8% premiums to NAV, respectively.

Retail REIT Alexander's Inc. traded at $225.19 per share on May 30, 30.0% above the consensus NAV estimate of $173.20 per share.