Office REITs Earn Mixed Report Card

Boston Properties; 599 Lexington Ave. in Midtown Manhattan. the REIT ranked first in Q2 job growth weighted by market exposure. (Photo: Boston Properties)

VIENNA, VA—Office REITs in Capital One Securities’ coverage universe begin reporting their second-quarter results after the markets close on Tuesday, and analysts with the firm give the sector mixed grades. On the one hand, they’re predicting funds from operations either above or in line with consensus estimates for six of the seven REITs; on the other hand, they note that office REIT shares are trading at a deeper discount lately.

Over the past three years, write analysts Thomas J. Lesnick, Ryan Wineman and Chris Lucas, office REITs have traded at an average 1.5% discount to the median present net asset value of all other REITs. Today, they write, “office REITs trade at a 7.7% discount, suggesting low expectations going into earnings.” Additionally, the SNL US Office REIT Index has underperformed the MSCI US REIT Index over the past three months, with its 11.04% total return lagging the RMS by 213 basis points.