U.S. Fed has signalled multiple times in recent weeks that it’s not done raising rates just yet. Still, Brian Jones of Neuberger Berman says it’s time to consider investing in REITs again.
Rates-related pain is already priced in
It’s an interesting call since the real estate investment trusts tend to be very sensitive to the rate hikes.
But Jones is convinced that much of the rates-related pain is already reflected in these stocks. On CNBC’s “The Exchange”, he said:
We see REITs as trading at about 25% below our view of net asset value, which is intrinsic value of the real estate a REIT owns. So, even if you get some further decline in commercial real estate prices, a lot of that pain is already reflected in valuations.
For the year, the Neuberger Berman Real Estate Fund is currently down more than 30%.
Jones reveals his favourite REIT
A name he particularly likes in this space is American Tower Corp (NYSE: AMT) that’s set to report its Q3 results tomorrow.
Analysts expect to see annualised growth in its revenue this quarter but a hit to funds from operations (FFO) per share. Still, Jones said:
Demand for American Tower is driven by rollout of 5G technologies. We don’t think those trends will change even if there’s a recession. Cellular service providers have bid billions for spectrum to rollout 5G. Those CAPEX dollars will benefit AMT.
Consensus is for this Boston-headquartered company to report $2.67 billion in revenue (8.6% YoY increase) on $2.42 of FFO per share (2.8% YoY decline). Wall Street has a consensus “overweight” rating on this stock.
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