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Wells Fargo analyst Dori Kesten initiated coverage of shopping center REITs InvenTrust Properties (NYSE:IVT) and Retail Opportunity Investments (NASDAQ:ROIC) with Overweight ratings, according to a recent note written to clients. In addition, he issued Underweight ratings on Kimco Realty (NYSE:KIM) and Kite Realty Group Trust (NYSE:KRG), as well as Equal Weight ratings on Brixmor Property Group (NYSE:BRX), Federal Realty Investment Trust (NYSE:FRT), Phillips Edison & Company (NASDAQ:PECO) and SITE Centers (NYSE:SITC).
The REITs were ranked based on Wells Fargo’s proprietary heatmap, which takes into account a slew of factors like recession resilience, tenant credit quality and liquidity. As such, InvenTrust (IVT) became Kesten’s top pick among shopping center REITs in his coverage.
IVT scored above-average rankings across the heatmap, owing to its “slightly outsized exposure to grocers, a more recession-resilient category, in our view, the 2nd highest ranking in our Wells Fargo Retailer Attraction Score, and above-average tenant credit quality, which translates into a stronger-than-peer average 2yr AFFO/sh CAGR,” the note said.
Overall, Kesten expects a potential recession to weigh on retail sales, “but believe the Shopping Center REITs’ exposures to grocers and the tailwind of work from home provide some recession resilience for the group.” Also, “the Shopping Center REITs are a well-capitalized group positioned to pay their current common dividends, fund development pipelines, and pay down debt at maturity should capital markets freeze through year-end 2024.”
SA’s Quant system laid out the highest ranked retail REITs in this stock screener.
