NAV Monitor: US equity REITs trade at higher discount to NAV in June

This Data Dispatch is updated monthly and was last published June 4. 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 June at a median 19.1% discount to their consensus net asset value (NAV) per share estimates, 28 basis points up from a median discount of 18.8% as of May 30, according to S&P Global Market Intelligence data.

The hotel sector traded at the largest median discount to NAV at 35.5%, down from a 35.7% median discount to NAV as of May 30. The timber sector traded at a median discount of 33.5%, roughly 2.8 percentage points up from 30.8% in the previous month.

Healthcare REITs continued to trade at the highest median premium, 19.3%, which is about 1.4 percentage points down from the 20.6% median premium to NAV as of May 30.

The communications sector, with three REITs in the analysis, posted the largest monthly increase in valuation. As of June 30, the sector traded at a 0.4% median premium to NAV, up from a 17.2% discount to NAV as of May 30.

Largest discounts

Industrial REIT Industrial Logistics Properties Trust traded at the largest discount to NAV, closing June 30 at $4.55 per share, 58.5% below the consensus NAV estimate of $10.97 per share.

Among the 10 public REITs with at least $200 million in market capitalization trading at the steepest discounts, four belonged to the hotel sector and three were from the office sector.

Hotel REIT RLJ Lodging Trust, which ranked second, traded at $7.28 per share June 30, 54.8% below the consensus NAV estimate. Other hotel REITs on the list included Park Hotels & Resorts Inc., Pebblebrook Hotel Trust and Summit Hotel Properties Inc., which traded at discounts of 51.9%, 48.5% and 47.7%, respectively.

Office REITs on the top discount list included City Office REIT Inc., Brandywine Realty Trust and Hudson Pacific Properties Inc., which closed June 30 at discounts of 54.5%, 49.0% and 41.0%, respectively.

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Largest premiums

Healthcare REITs dominated the list of 10 public REITs with at least $200 million in market capitalization that traded at the largest premiums at the end of June.

Healthcare REIT Welltower Inc. traded at the largest premium, closing June 30 at $153.73 per share, 92.4% above the consensus NAV estimate of $79.89 per share.

Telecom tower REIT Crown Castle Inc. landed the No. 2 spot, trading at $102.73 per share, 72.7% above the consensus NAV estimate of $59.50 per share.

The other healthcare REITs on the list were American Healthcare REIT Inc., CareTrust REIT Inc. and Sabra Health Care REIT Inc., ranking third, fourth and fifth, respectively. On June 30, American Healthcare traded at a 52.1% premium, CareTrust traded at a 49.6% premium and Sabra Health traded at a 30.5% premium to NAV.

National Health Investors Inc., Omega Healthcare Investors Inc. and Medical Properties Trust Inc. were the three other healthcare REITs in the eighth through 10th spots.