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Deutsche Financial institution analyst Derek Johnston is taking a cautious strategy to deciding on REITs in 2023, because the robust leasing momentum and stable lease spreads seen prior to now two years deteriorate given the upper for longer rates of interest outlook in addition to elevated financial uncertainty.
That stated, Johnston downgraded a raft of REITs to Maintain from Purchase, together with: AvalonBay Communities (NYSE:AVB), +1.6%, Boston Properties (NYSE:BXP), +1.5%, Invitation Houses (NYSE:INVH), +2%, Independence Realty Belief (NYSE:IRT), +2.3%, RPT Realty (NYSE:RPT), +0.6%, and SL Inexperienced Realty (NYSE:SLG), +2.4%. The downbeat protection would not appear to hassle the group with shares of every REIT rising in morning buying and selling.
“Elevated price of capital for the REITs paired with a possible – however not nicely forecasted recession depth – work to stall enterprise resolution making and weigh on demand and earnings progress,” the analyst wrote in a be aware to purchasers.
Given the poor macroeconomic backdrop, Johnston stated his “Purchase checklist is traditionally tight,” specializing in names which have the “greatest positioned property sorts, outsized earnings progress, sound steadiness sheets and low a number of / out of favor (however not damaged) sub-sectors.”
Earlier, Mizuho upgraded Vornado Realty Belief (VNO) to Impartial, however demoted Cousins Properties (CUZ) to Underperform.
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