SAFE - REITs gain on strong H1 performance by major indices analysts turning positive on sector

2023-07-01 12:00:07 ET

REITs gained this week on the back of major indices ending H1 on a strong note and analysts turning positive on the sector.

Wall Street's major averages closed H1 on a positive note. Notably, technology stocks achieved historic market capitalizations and inflation gauge moderated.

Nasdaq notched its best H1 performance since 1983.

Analysts are especially beginning to upgrade more REITs than they were a few months ago, considering the improvements in earnings and performance and the likelihood of an end to the current interest rate hike environment, according to a recent report by Benzinga.

Some major ratings actions of the week include RBC Capital Markets initiating coverage of the ground-lease REIT Safehold ( SAFE ) with an Outperform rating, Piper Sandler upgrading retail REIT Federal Realty Investment Trust ( FRT ) to Overweight from Neutral, Janney raising the recommendation on NNN REIT ( NNN ) to Buy from Neutral, Morgan Stanley upgrading Sunstone Hotel Investors ( SHO ) to Equal-weight from Underweight, among others.

Billionaire Seth Klarman recently told CNBC News that the real estate sector could be the next big investment opportunity.

Interestingly, equity REITs reported a surge in their May capital offerings activity, having raised more than double the capital from April.

For the week ended June 30, equity REITs gained by 5.03% from last week. Comparatively, the broader S&P 500 index increased by merely 2.35%.

The real estate index rose by 5.10%, while mortgage REITs saw an increase of 3.75% on a weekly basis.

Timber was the best performing subsector for the week, having gained ~10% in value. Another surprise winner was the office subsector, having risen by ~9%.

Diversified rose the least in percentage terms.

Here is a look at the subsector performance:

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