The volatility seen on Wall Street in 2022 has continued into 2023.
The first 10 weeks of 2023 produced a strong January rally, followed by a collapse of prices in February and somewhat into March.
Among real estate investment trusts (REITs), about two-thirds of all REITs have produced negative returns year to date, and only about 10% of those that are in positive territory have double-digit returns.
A handful of stalwart REITs have produced spectacular returns so far in 2023. Take a look at three whose performance has been outstanding.
Angel Oak Mortgage REIT Inc. (NYSE: AOMR) is an Atlanta, Georgia-based mortgage REIT (mREIT) that provides programs specifically for consumers whose circumstances may not meet standard agency financing guidelines. Angel Oak is the largest non-bank originator of nonqualified mortgages.
Angel Oak Mortgage began the year by announcing its participation in AOMT 2023-1, a $580.5 million scheduled principal balance securitization backed by a pool of residential mortgage loans. Through the process, Angel Oak Mortgage was able to reduce its whole loan warehouse debt by 51% and mark-to-market percentage of total warehouse debt by 62% from the end of the third quarter of 2022.
Angel Oak Mortgage shares rose strongly throughout the first two months, but on March 9, it released somewhat negative fourth-quarter operating results. Distributable earnings loss of $2.50 per share missed the consensus estimate of $0.31 by 906.45% and was 380.9% below earnings of $0.89 per share from the fourth quarter of 2021. Revenue of $7.41 million was 45.03% below consensus estimates of $13.73 million and a 55.34% decrease from sales of $16.59 million in the fourth quarter of 2021.
After a small decline following the announcement, the stock has traded sideways. Year to date, Angel Oak Mortgage is up 52.64%.
Service Properties Trust (NASDAQ: SVC) is a Newton, Massachusetts-based diversified REIT with a portfolio of 1,003 properties, including 238 hotels and 765 service-focused net-lease retail outlets in 46 states, Puerto Rico and Canada.
Service Properties Trust gained about 52% between January and February. The gain was largely due to BP’s acquisition of TravelCenters of America for $86 per share in cash, or about $1.3 billion. Service Properties Trust owns 7.8% of outstanding shares of TravelCenters of America.
On Feb. 28, Service Properties Trust reported fourth-quarter operating results. Funds from operations (FFO) of $0.44 beat the analysts’ view by $0.08 and was up 158% from FFO of $0.17 in the fourth quarter of 2021. Revenue of $455.22 million beat the Street view by $10.35 and was 8% ahead of revenue of $421.38 million in the fourth quarter of 2021.
Although it declined about 17% in March, Service Properties Trust is still up by 40.05% year to date.
Life Storage Inc. (NYSE: LSI) is a Buffalo, New York-based self-storage REIT with 1,200 facilities encompassing 68 million square feet across 37 states and Washington, D.C. Life Storage was founded in 1982 as Sovran Self Storage Inc. and operated under the brand name Uncle Bob’s Self-Storage until 2017 when the name was changed to Life Storage.
Life Storage jumped from $110.58 to $121.82 on Feb. 6, following a report that Public Storage (NYSE: PSA) had offered to acquire it for $11 billion. Shortly after, Truist analyst Ki Bin Kim noted that there was a strong probability that Public Storage might slightly increase that offer.
Ten days later, Life Storage turned down Public Storage’s offer, which was followed by another analyst, Smedes Rose of Citi, commenting that Public Storage has room to raise its offer.
On Feb. 23, Life Storage released its fourth-quarter operating results. FFO of $1.69 beat the estimates of $1.07 and was 19.86% above FFO of $1.41 in the fourth quarter of 2021. Revenue of $274.68 million beat the estimates of $269.37 million and was a 24.2% increase over revenue of $221.16 million in the fourth quarter of 2021.
Between the acquisition offer and good fourth-quarter report, Life Storage has risen 20.2% in 2023.
Over the past five years, private market real estate investments have outperformed the publicly traded REIT market by about 50%.