NAV Monitor: US equity REITs end July at 8.4% discount to NAV

This Data Dispatch is updated monthly and was last published July 2. 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 31 at an 8.4% median discount to their consensus net asset value per share estimates, down from a median discount of 15.5% as of June 28, according to S&P Global Market Intelligence data.

Hotels trade at biggest NAV discount

The hotel sector traded at the steepest median discount to net asset value (NAV), at 30.0%. Hotel REIT RLJ Lodging Trust closed July 31 at $9.44, 47.5% lower than its consensus NAV estimate of $17.98 and the third-largest discount to NAV among all US equity REITs above $200 million in market capitalization.

Summit Hotel Properties Inc. followed, trading at a discount of 35.9% and was seventh in the overall top REIT discount rankings. Two other hotel REITs — Pebblebrook Hotel Trust and Host Hotels & Resorts Inc. — placed eighth and 10th, respectively, on the overall biggest discount list, at 35.3% and 32.5%.

The farmland segment also traded at a large median discount next to the hotel sector, at 21.9%. Landowner Farmland Partners Inc. closed July 31 at $10.62, 32.0% below its consensus NAV estimate of $15.61. Another farmland REIT, Gladstone Land Corp., traded at a discount of 11.9% as of July 31.

Industrial Logistics Properties Trust posted the largest discount to NAV among all US REITs with at least $200 million in market capitalization. The industrial REIT closed July 31 at $5.14, 57.8% below its consensus NAV estimate of $12.18.

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Datacenters log highest NAV premium

The datacenter sector remains atop the premium-to-NAV list, trading at a median of 10.0%. Datacenter-focused Digital Realty Trust Inc. closed July 31 at $149.49, 14.5% above the consensus NAV estimate of $130.59, the 10th-largest premium among all US equity REITs above $200 million in market capitalization. In the same sector, Equinix Inc. traded at a premium of 5.6%, closing July 31 at $790.24.

The "other retail" segment, which includes single-tenant and outlet center REITs, followed with a median premium of 6.4%. In this space, single tenant REIT Essential Properties Realty Trust Inc. traded at a premium of 27.6%, nabbing sixth place on the list.

Healthcare-focused Welltower Inc. ranked first on the overall list of REITs with the highest premiums, closing July 31 at $111.25, 72.4% above the consensus NAV estimate of $64.51.

Iron Mountain Inc., a REIT focused on information management services, ranked second on the largest premium list, trading at a premium of 64.0% as of the end of July.