NAV Monitor: US REITs close July at median 20.3% discount to net asset value

This Data Dispatch is updated monthly and was last published July 3. 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 closed July at a median 20.3% discount to their consensus net asset value (NAV) per share estimates, 1.2 percentage points higher than the median 19.1% discount as of June 30, according to S&P Global Market Intelligence data.

The hotel REIT sector once again traded at the steepest median discount to NAV, at 35.6%. The timber sector followed, closing the month at a median discount to NAV of 31.9%. The median discount for farmland REITs expanded 6.3 percentage points in July to 30.1% as of month-end, taking the third spot.

Two REIT property sectors closed July at a median premium to their consensus NAV estimates. At 20.0%, the healthcare REIT sector traded at the largest premium to NAV at July-end, while the two datacenter REITs closed the recent month at a median 6.2% premium to NAV.

The communications REIT sector recorded the largest month-over-month change in its price-to-NAV valuation, down 14.3 percentage points on a median basis to a discount of 13.9% as of July 31.

Largest discounts

Four of the ten US REITs trading at the largest discount to NAV were in the hotel sector. RLJ Lodging Trust traded at the largest discount to its consensus NAV estimate among all US REITs as of July 31. Its common stock closed the month at $7.40 per share, 53.6% below its consensus NAV estimate of $15.94 per share. Park Hotels & Resorts Inc. was in the fourth spot at a discount of 49.5%, Summit Hotel Properties Inc. ranked sixth at a discount of 45.7%, and Pebblebrook Hotel Trust closed the month 44.8% below its consensus NAV estimate, ranking it tenth.

Industrial REIT Industrial Logistics Properties Trust closed July at $5.32 per share, 51.5% below its consensus NAV estimate of $10.97 per share, the second-largest discount among all US REITs with market capitalizations of at least $200 million. Office REIT Brandywine Realty Trust traded at the third-largest discount to NAV as of July-end, at 49.6%.

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Largest premiums

Healthcare had the most REITs trading at the largest premium to NAV as of July 31.

Welltower Inc. again traded at the largest premium to NAV of all US REITs with at least $200 million in market capitalization. The REIT closed July at $165.07 per share, more than double its consensus NAV estimate of $78.89 per share. American Healthcare REIT Inc. took the third spot at 59.3%, while CareTrust REIT Inc. followed at a premium of 47.7%.

Omega Healthcare Investors Inc., Ventas Inc., National Health Investors Inc. and Sabra Health Care REIT Inc.. were also among the ten REITs trading at the largest premium to NAV.

Communications REIT Crown Castle Inc. closed July at the second-largest premium to NAV among all US REITs, at 76.6%. The other REITs in the top ten were Alexander's Inc., trading at a premium of 45.0% to NAV, and information storage-focused Iron Mountain Inc., trading at a premium of 22.8%.