US Listed REITs Trading at 4.6% Median Discount to NAVs as of October 31

November 7, 2017

US Listed REITs Trading at 4.6% Median Discount to NAVs as of October 31

November 7, 2017 | James Sprow | Blue Vault

NAV - Net Asset Value. US Dollar texture.

SNL analyzes publicly traded U.S. equity real estate investment trusts with market caps greater than $200 million and compares their stock prices to the analysts’ consensus estimates of net asset value per share (NAV). Within each property sector, the stock prices are compared to NAVs and the median percentage premium (stock price is higher than consensus NAV) or discount (stock price is lower than consensus NAV) is reported.

As of October 31, 2017, the sector with the highest median premium to NAV was Self Storage with a premium of 7.3%, followed by Industrial at 6.1% and Healthcare at 6.1%. These valuation estimates can be indicative of the values of nontraded REITs in those sectors and the potential for capital gains should nontraded REITs focused on a particular sector experience a full-cycle event such as a listing on a national exchange. 

The median discount for all listed US REITs was 4.6% at October 31, compared to 4.2% in September, indicating the REIT sector as a whole was trading below the estimated NAVs.  The steepest discounts were in the Regional Mall sector where the median discount to NAV was a huge 41.6%, compared to 38.7% in September.  Shopping Center REITs were trading at a median discount of 18.8% and Office REITs at 13.2%. All of these sectors had deeper discounts in October than in September.  Of the 10 traded REITs trading at the greatest discounts to NAV, the four greatest discounts belonged to four regional mall REITs, possibly reflecting the continuing impact on anchor retailers and the spill-over effects within malls of the Amazon effect on retailing generally, and anchor retailers such as Sears and J.C. Penney specifically.

For example, Simon Property Group, a listed REIT with 399 properties at June 30, lists 69 Sears, Roebuck and Co. tenants and 69 J.C. Penney tenants, with over 11 million total square feet occupied by each brand. With the downturn in the prospects of these anchor retailers, regional malls anchored by them have suffered a drop in values, as have the companies that own them. Simon Property Group (SPG) is down over 14% in the last 12 months compared to an 8.3% average gain for U.S. Equity REITs.

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Matthew C. Strife
Blue Vault Services
April 11, 2016

Blue Vault's services are without question great resources for the review of the nontraded products offered.