2023-09-12 10:26:44 ET
Office Real Estate Investment Trust ( REIT ) companies are facing numerous challenges this year. Interest rates have jumped to a 22-year high, lowering their appeal among income investors. Higher rates have also led to lower values for office buildings, making it hard for them to refinance.
Further, REITs are also seeing lower occupancy rates as many companies lay off thousands of workers and embrace hybrid working. Most importantly, there are concerns about an upcoming wall of maturities among most developers.
This article looks at some of the top REIT stocks to consider investing in this year. The assumption is that the maturity risks have been overblown and that many companies will ask their staff back to the office.
Watch here: https://www.youtube.com/embed/vkVTGs9JypM?feature=oembedVornado Realty Trust
Vornado Realty Stock ( NYSE: VNO ) is a highly shorted REIT company that focuses on New York. The company owns more than 20 million square feet of office spaces, primarily in New York City. It also owns buildings in Chicago and San Francisco.
Vornado Realty Trust stock price has staged a strong recovery as investors reassess the risks to the company. It has jumped by more than 103% from the lowest level this year and is now trading at the highest level since February 3rd.
VNO faces numerous risks ahead, especially its concentration in high-risk markets. Nonetheless, it is a good REIT stock to invest in because of its high occupancy rate. Its tenants are also big companies in industries like finance and law that tend to be relatively stable.
Most importantly, the company does not have any meaningful maturity until mid-2024. Therefore, I believe that its 8.7% yield is worth the risk now as it has formed a golden cross.
Boston Properties
Boston Properties ( NYSE: BXP ) is a giant office REIT that has a presence in Washington, San Francisco, Los Angeles, Boston, and New York. It owns some of the biggest landmark buildings in the US like 2200 Pennsylvania Avenue, 2440 West El Camino, and 399 Park Avenue.
Like other office REITs, Boston Properties stock price plunged sharply this year as fear about the industry spread. It dropped to a low of $44 in March and has now recovered smoothly to $66.20. Technically, like SL Green, which I wrote on here , its stock has formed a golden cross pointing to more gains.
Boston Properties revenue in Q2 came in at $817 million, up by 5.5% from the previous year. It has a single $500 maturity this year that the company expects to pay with cash. Its next maturity will come in February next year.
Boston Properties is a diversified company with strong earnings that will cushion it in this tough environment.
Kilroy Realty Corporation
Kilroy Realty Corporation ( NYSE: KRC ) is another office REIT whose stock has formed a golden cross pattern. It is an office REIT that operates in Greater Los Angeles, Austin, San Francisco, and San Diego. It owns about 50 buildings.
Kilroy Realty, like other office REITs is going through a difficult time as interest rates remain at an elevated level. Still, the company’s business is doing well, as it revenue jumped to $284 million in the second quarter. It also has a high occupancy rate of 87% occupied and 89% leased.
Kilroy Realty has a young portfolio and is still seeing stable business operations. Therefore, there is a likelihood that the shares will continue rising in the near term. Its next maturity will be in December 2024.
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