Raymond James sees threat to REITs from rising interest rates, job losses

Centerspace

23/11/2022 13:51

** Brokerage Raymond James says it is concerned that Real
Estate Investment Trusts (REIT) valuations are not pricing in an
adequate safety margin relative to the current interest rate
environment, a potential recession and job losses 
    ** Says significantly higher-than-expected increases in
property tax assessments could catch up with the sector in 2023
    ** Says pandemic-related rental assistance payments are
winding down quickly, as courts remain bogged down and
disincentivized to process eviction cases, it could lead to
re-accelerating bad debt accruals
    ** "All of these factors give us some added concern that
prevailing consensus estimates forecasting double-digit FY23
earnings growth for many multifamily REITs are possibly too
optimistic on net operating income margins next year," Raymond
James
    ** Brokerage downgrades Centerspace  CSR.N  to
"underperform" from "market perform"; stock down 1.4% premarket 
   
    ** Downgrades Essex Property Trust  ESS.N  to "market
perform" from "outperform", citing accelerating pace of rent
growth deterioration and mounting tech-sector related job losses
across ESS's primary West Coast markets 
 (Reporting by Shashwat Chauhan in Bengaluru)
 ((Shashwat.Chauhan@thomsonreuters.com))