REIT Rebound Is Short-Lived
Only 3 of 19 sectors were in the black in April, including casino REITs expected to bid on NYC gaming licenses.
It looks like the REIT rebound in March, when 18 of the 19 REIT property types yielded positive returns and outperformed broader markets, was a mirage.
REITs still outperformed broader markets in April—but only because their losses weren’t as steep as the Dow (-4.82%), S&P 500 (-8.80%) or the NASDAQ (-13.26%): REITs averaged -5.85% returns last month, with only three of 19 sectors in positive territory, according to data compiled by S&P Global.
Overall, most REITs have now been in the red for three of the first four months of 2022.
Student Housing topped the leaderboard in April, with average returns of 15.54%, results that were turbocharged by Blackstone’s announcement in April that it will purchase American Campus Communities, the only publicly traded student housing REIT.
Also posting positive yields in April were timber REITs, which averaged 4.75% returns, and casino REITs, which had returns averaging 2.30%.
The casino REIT results were juiced by the New York State Legislature’s approval in April of the issuance of three new Class III casino licenses for the New York City area, focusing on Manhattan.
According to a recent report from S&P Global, at least two US casino REITs are considering partnering with a casino operator to bid for one of the new casino licenses in NYC.
Two existing gambling venues in the NYC area—Malaysia-based Genting Group’s Resorts World New York City at Aqueduct Racetrack in Queens and MGM Resorts International’s Empire City Casino at Yonkers Raceway—are widely expected to be frontrunners to expand their lower-level gaming operations at the race tracks into full-scale casinos with table games and slots.
Vornado Realty Trust CEO Steven Roth said on a May 3 earnings call that Vornado would be bidding for a Manhattan casino licenses. SL Green Realty Corp. CEO Marc Holliday also declared during an earnings call last month that SL Green is interested in developing a casino in Times Square.
“Within Manhattan, I feel the absolute best, most obvious, least impactful and most globally accepted area (for a casino) will be Times Square. So, we’re on that opportunity,” Holliday said on the April 21 earnings call.
Office and health care REITs were among the largest sectors that fared poorly in April, posting average negative returns of -10.57% and -11.53%, respectively. The malls sector continued to get clobbered, posting negative average returns of -13.96% in April.