BRX - Site Centers upgraded at Mizuho RPT Realty cut as recession risks rise

With the risk of recession rising, Mizuho Securities analyst Haendel St. Juste expects shopping center REITs with a defensive-oriented tenancy, strong tenant credit and focus on internal growth to outperform. Based on that premise, he upgrades Site Centers ( NYSE: SITC ) to Buy from Neutral and downgrades RPT Realty ( NYSE: RPT ) to Neutral from Buy.

He also points to recently upgraded Brixmor Realty ( BRX ) as checking boxes for an outperforming retail REIT.

Site Centers' ( SITC )  core growth; signed, not occupied pipeline, lower leverage, more opportunistically oriented balance sheet, and favorable growth at a reasonable price work in the REIT's favor, St. Justin wrote in a note to clients.

By contrast, the analyst points to RPT Realty's ( RPT ) higher discretionary tenant base, higher leverage relative to peers, and its externally driven headwinds as reasons for the downgrade.

For the sector overall: "We remain constructive on shopping center REITs (given fairer valuations and defensiveness), but emphasize the need for selectivity given investor concerns about the subsector's leasing momentum and near-term organic/earnings growth prospects, given tougher 2H22 comps, a slowing economy, higher interest rates, stubbornly high inflation, and an increasingly stretched consumer," the analyst said.

SA's Quant system, which historically outperforms the market, also rates Site Centers ( SITC ) a Buy and RPT Realty ( RPT ) a Hold . The average Wall Street rating, though, rates both SITC and RPT a Buy

See why SA contributor Daniel Jones thinks RPT Realty ( RPT ) shares have finally gotten cheap enough

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