REIT Earnings Season Part III: The Losers

Loser #1: Commercial mREITs

Commercial mREITs: (Final Grade: C)

• Negatives: Significant deterioration in multifamily bridge loan performance resulting in dividend reductions from Arbor and Ready Capital, Poor outcomes in several office resolutions (write-offs in excess of CECL), Ares Commercial's life science downgrade (and dividend reduction), Granite Point's student housing downgrade, Claros Mortgage becomes meme stock.
• Positives: Blackstone Mortgage's "positive inflection" commentary, delinquency data showing a "bottoming" in late 2024, steady trends in retail and hotel loan performance, and higher-tier multifamily.

• Change in EPS: -4.9% | Change in Book Value: -2.3%
• Top Performer: Blackstone Mortgage (BXMT)
• Worst Performer: Ready Capital (RC)

Loser #2: Hotel REITs

Hotel: (Final Grade: C+)

• Negatives: Margin headwinds in 2025 resulting from higher labor costs, zero average FFO growth in 2024 and 2025 despite record-setting travel demand, recent TSA data showing weaker trends in February and March, Average Daliy Rates have flatlined after substantial pandemic-era inflation, occupancy rates still marginally below 2019-levels.
• Positives: Reacceleration in Q4 travel demand after mid-year lull, ongoing recovery in group and business, Dividend hikes from Chatham & Xenia.

• FFO Guidance: 8 Beat, 3 Miss | 2025 Growth: +0.1%

• RevPAR Guidance: 6 Beat, 1 Meet, 3 Miss | 2025 Growth: +2.6%

• Top Performer: Apple Hospitality (APLE)

• Worst Performer: Sunstone Hotel (SHO)

Loser #3: Office REITs

Office: (Final Grade: B-)

• Negatives: Disappointing 2025 FFO outlook calls for a third-straight year of double-digit average FFO declines, higher interest rate expense (BDN in particular) continues to offset improved property-level fundamentals, DOGE concerns hit government office REITs, concerns of softer leasing in early 2025 amid recent dip in business confidence, ONL's dividend cut.

• Positives: Leasing activity recovers to pre-pandemic average, Sequential uptick in occupancy for first time since 2022, Sunbelt & NYC strength, Cousins remains "unicorn" among office REITs, CDP dividend hike.

• FFO Guidance: 7 Beat, 6 Meet, 1 Miss (+40 bps Average)

• Top Performer: Hudson Pacific (HPP)

• Worst Performer: Orion Office (ONL)

Loser #4: Storage REITs

Self-Storage: (Final Grade: B-)

• Negatives: New lease rates ("Street Rates") remain in free-fall, No bottom yet for occupancy rates, EXR's expense jump in Q4 resulting from "outsized" increases in property taxes and marketing costs, Sunbelt remains soft after early-pandemic boom.

• Positives: Positive renewal rent growth despite sharply negative new lease rates, Upbeat commentary on supply growth, Relatively steady FFO and NOI in 2024 and 2025 given recent headwinds and early-pandemic boom, Notable round in Google search trend activity for self-storage.

• FFO Guidance: 2 Beat, 2 Meet | 2025 Growth: -1.7%

• Top Performer: National Storage (NSA)

• Worst Performer: CubeSmart (CUBE)

Loser #5: Data Center REITs

Data Center: (Final Grade: B)

• Negatives: Not immune from broader tech sell-off, softer bookings for DLR, moderating (but still solid) pricing power after record-setting 2024, IRM's disappointing 2025 bookings outlook and DOGE impacts.

• Positives: EQIX's record bookings in Q4, DLR's long-awaited return to FFO growth, upbeat DeepSeek and AI commentary, strong pricing power on smaller leases.

• FFO Guidance: 3 Beat | 2025 Growth: +5.8%

• Top Performer: Iron Mountain (IRM)

• Worst Performer: Equinix (EQIX)

Loser #6: Billboard REITs

Billboard: (Final Grade: B)

• Negatives: Notable cooldown in the local segment in late 2024, moderation in same-store growth in static billboard segment, concerns that downbeat business sentiment could dampen spending in early 2025.

• Positives: Robust political spending drives recovery in the national segment, NYC drives impressive recovery in the transit segment, Digital conversions continue to catalyze growth, 10% dividend hike from Lamar.

Loser #7: Manufactured Housing REITs

Manufactured Housing: (Final Grade: B)

• Negative: Transient and Season RV segments still a significant drag, Sun's UK division remains a major question mark, Marinas were consistently the best of the non-MH segments in same-store NOI growth.

• Positive: Core Manufactured Housing ("MH") segment remains very strong, Recreational Vehicle segment stabilizes, Sun sells Safe Harbors' marina division at healthy premium to focus on core business.

• FFO Guidance: 1 Beat, 1 Miss | 2025 Growth: +4.9%

• Top Performer: Sun Communities (SUI)

• Worst Performer: UMH Properties (UMH)

Loser #8: Single-Family Rental REITs

Single-Family Rental: (Final Grade: B)

• Negatives: New lease rates turned negative in the fourth quarter, muted external growth in 2024, tariff concerns for AMH's homebuilding program, Softer trends noted in Central Florida, Texas, and Phoenix.

• Positives: Healthy FFO growth in 2024 & 2025 given recent housing market headwinds, Rent growth appears to be re-accelerating in early 2025 after a three-year deceleration, American Homes' 15% dividend hike.

• FFO Guidance: 1 Beat, 1 Meet | 2025 Growth: +2.0%

• Top Performer: Invitation Homes (INVH)

• Worst Performer: American Homes (AMH)

Loser #9: Cell Tower REITs

Cell Tower: (Final Grade: Incomplete)

• Negatives: Delay in CCI's earnings report as it negotiates fiber sale, Zero average FFO growth in 2024 & 2025 after leading REIT sector 2015-2022.

• Positives: Better commentary on carrier investment activity, Recent bad press for Starlink - which has emerged as a legitimate disrupter to the traditional macro cell tower model, AMT and SBAC's dividend hike.

• FFO Guidance: 3 Beat | 2025 Growth: +0.0%

• Top Performer: American Tower (AMT)

• Worst Performer: Uniti Group (UNIT)

REIT Earnings Recap: Recession to Recovery

Real estate earnings results were consistent with our Recession to Recovery forecast last December in which we emphasized that valuations - not fundamentals - were responsible for the vast majority of REIT underperformance since early 2022, setting the stage for significant REIT outperformance in the quarters and years ahead as benchmark interest rates eventually normalize. While interest rates have been the "spark" to the REIT rebound over the past two months, a very solid slate of earnings results provided the fuel. One of the strongest overall REIT earnings season in the past half-decade, two-thirds of REITs reported full-year FFO that exceeded guidance estimates. Of note, REITs have delivered cumulative FFO growth of roughly 18% since the start of 2022 - not far behind that of the broader S&P 500 - during which time REIT stock price performance is effectively flat versus the 50%+ gains on the S&P 500, underscoring the historically compelling current valuations of REITs compared to the broader equity market.

About the Author

David Auerbach boasts over two decades of experience in the securities industry, specializing as an institutional trader with a focus on Real Estate Investment Trusts (REITs), Equity and Preferred stocks, MLPs, ETFs, and Closed End Funds.

Based in Dallas, TX throughout his entire career, David currently serves as the Chief Investment Officer for Hoya Capital, managing the Hoya Housing 100 ETF (Ticker: HOMZ) and The High Yield Dividend ETF (Ticker: RIET). Previously, David held the position of Managing Director at Armada ETF Advisors, the sub-advisor for the Residential REIT ETF (Ticker: HAUS) and The Private Real Estate Strategy via Liquid REITs ETF (Ticker: PRVT).

Additionally, he acts as a consultant with IRRealized, LLC, focusing on corporate access in the REIT industry. David's industry journey includes roles at World Equity Group, Esposito Securities, and Green Street Advisors where he got his start in the REIT industry.

At Esposito Securities, he played a crucial role in building the REIT/Real Estate platform and worked extensively with institutional investors, Equity REITs, and ETF issuers.

Throughout his career, David has been quoted by reputable publications such as Bloomberg, WSJ, Financial Times, REIT.com, and GlobeSt.com. He has also made notable appearances as a featured guest on networks like Yahoo Finance, TD Ameritrade, and Bloomberg.

David holds a BBA in Finance from the University of Texas at Austin (May 1999) and an MBA in Finance from Southern Methodist University (May 2005). He maintains FINRA Series 7, 24, 55, and 63 registrations.

In his leisure time, David is an avid traveler, often found crisscrossing the country in pursuit of attending as many Phish concerts as possible.

Disclaimer

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.