NAV Monitor: US equity REITs trade at a lower discount to NAV in August

This Data Dispatch is updated monthly and was last published Aug. 7. 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 Aug. 30 at a median 4.2% discount to their consensus net asset value (NAV) per share estimates, 4.2 percentage points down from a median discount of 8.4% as of July 31, according to S&P Global Market Intelligence data.

Largest discounts: Hotel REITs top the chart

The hotel sector continued to trade at the largest median discount to NAV among all REIT sectors for the fourth consecutive month, at 26.5%, closely followed by the farmland sector, which traded at a 26.0% median discount to NAV. The timber segment traded at a median discount of 23.7%.

Among the top 10 public REITs on the largest discount list with market capitalizations of at least $200 million, three belonged to the hotel sector. RLJ Lodging Trust closed Aug. 30 at $9.50 per share, 42.9% below its consensus NAV estimate of $16.65 per share and fourth in the overall top 10 discount rankings.

The other hotel-focused REITs on the top 10 discount list included Pebblebrook Hotel Trust and Park Hotels & Resorts Inc., which traded at 35.4% and 34.6% discounts to the NAV estimates as of Aug. 30, placing at seventh and eighth positions, respectively.

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 Aug. 30 at $4.95 per share, 59.4% below the consensus NAV estimate of $12.18 per share.

Office REITs Hudson Pacific Properties Inc. and City Office REIT Inc. occupied the second and third positions on the list, respectively. Overall, the office sector traded at a 17.8% median discount to NAV estimate.

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Largest premiums: Healthcare dominates the top 10 list

The healthcare sector traded at the biggest median premium to NAV as of Aug. 30, at 18.1%. The sector was trading at a 2.3% median discount to NAV at July 31.

Of the 10 public REITs on the largest premium list, seven were healthcare-focused.

Healthcare REIT Welltower Inc. finished atop the list, closing Aug. 30 at $120.68 per share, 80.1% above the consensus NAV estimate of $66.99 per share. From the same sector, CareTrust REIT Inc. followed at the second position, with a 64.2% premium-to-NAV as of Aug. 30.

The other healthcare-focused REITS on the list include National Health Investors Inc., Omega Healthcare Investors Inc., Ventas Inc., Sabra Health Care REIT Inc. and American Healthcare REIT Inc.

The datacenter sector, self-storage, casinos and "other retail" sectors also traded at premiums to NAV.

Two REITs from the "other retail" segment, which includes single-tenant and outlet center REITs, were on the top 10 premiums list. Single tenant REIT Essential Properties Realty Trust Inc. landed the sixth position, trading at a premium of 32.4% at the end of August, while another single-tenant REIT, Agree Realty Corp., occupied the 10th position, trading at an 18.2% premium.