Real estate investment trusts and the broader markets lost ground Tuesday, Feb. 27, after Federal Reserve Chairman Jerome Powell indicated in his first congressional testimony that the Fed would pursue gradual interest-rate hikes to keep the U.S. economy from overheating and allow inflation to return to its 2% goal.
American Tower Corp. posted an 8.0% year-over-year gain in fourth-quarter 2017 consolidated adjusted funds from operations to $1.64 per share. The wireless telecom REIT expects consolidated AFFO per share for 2018 to hit $7.30 at the midpoint.
American Tower shares declined 1.43% to close at $140.70.
Office REIT Vornado Realty Trust is in talks to sell its 49.5% stake in the 666 Fifth Ave. office tower in Manhattan, N.Y., to Kushner Cos. A deal between the joint venture partners could be reached in a few months, The Wall Street Journal reported, citing an unnamed source.
Vornado shares tumbled 2.50% to close at $66.40.
Global Net Lease agreed to acquire $274 million worth of net-lease distribution and industrial assets in North America and expects to close the transactions in phases through October. The diversified REIT also purchased a distribution property for $18.6 million in the first quarter.
Global Net Lease shares dipped 4.51%, closing at $15.67.
Lodging REIT Xenia Hotels & Resorts Inc. is selling the leasehold interest in the Aston Waikiki Beach Resort in Honolulu in a $200 million transaction slated to close during the first quarter.
Shares of Xenia Hotels slipped 3.58% to close at $19.10.
BMO Capital Markets analyst John Kim downgraded Franklin Street Properties Corp. to "underperform," with a lower per-share price target on the stock of $8.00, after the office REIT offered 2018 FFO-per-share guidance that was below the analyst's expectations.
Kim said Franklin Street will likely need to lower its dividend by 40% or more to align its payout ratio with its peers. "While FSP has positively been reducing its reliance on short-term debt, this results in higher interest costs, and we do not see a clear path to near-term earnings recovery," the analyst said in a Feb. 27 note.
Franklin Street shares slid 3.53% to close at $8.21.
A pair of Evercore ISI analysts upgraded W. P. Carey Inc. to "in line" from "underperform," with a price target on the company's stock of $66 per share, after the net-lease REIT's recent year-to-date underperformance relative to the overall REIT sector.
The analysts said they believe W. P. Carey is well-positioned for what seems to be a bumpy year for REITs in 2018, given its conservative balance sheet, ample disposition pipeline and expertise in sale-leaseback transactions. "The tax reforms have placed more limitations on the deductibility of interest compared to the full deductibility of rental expense, which would make sale leasebacks a more competitive alternative than previously," the analysts said in a Feb. 27 note.
W. P. Carey shares dropped 1.56%, ending the day at $60.08.
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