Written by The White Law Group• January 3, 2024• 9:36 pm• Investment Loss Recovery, Securities Fraud Articles

Biggest REIT Losers in 2023

Worst Performing Real Estate Investment Trusts (REITS) in 2023

According to an article in Yahoo Finance this week, the real estate sector in the U.S. is undergoing significant challenges due to rising interest rates, impacting property firms differently than banks. Builders face limitations in accessing capital for new projects, and management firms struggle with meeting debt obligations amidst the rate hikes.

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The banking sector is revisiting strategies from 2008, offering borrowers the opportunity to modify repayment terms. However, rapid interest rate increases limit liquidity in the sector, leading to defaults in the office real estate and lodging industries. The shift to remote work during the pandemic has disrupted office real estate significantly, affecting various REITs responsible for managing these properties.

Real Estate Investment Trusts (REITs), unlike conventional corporations, fund projects using investors’ funds and distribute profits as dividends, often resulting in tax-exempt operations. The performance of these REITs in 2023 contrasts with the stock market’s success.

Here are some of the worst-performing REIT stocks in 2023:

Hersha Hospitality Trust (NYSE:HT) YTD Share Price Losses: 21.91% A hospitality real estate trust, Hersha Hospitality Trust (NYSE:HT) manages 25 hotels. Despite regularly surpassing analyst EPS estimates, it’s liquidating some properties. Among its investors, Israel Englander’s Millennium Management holds the largest stake.

Bluerock Homes Trust, Inc. (NYSE:BHM) YTD Share Price Losses: 23.64% Focused on residential real estate, Bluerock Homes Trust, Inc. (NYSE:BHM) faced capital inflows but reported a loss per share.

Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) YTD Share Price Losses: 23.66% Focused on energy-efficient buildings, Hannon Armstrong Sustainable Infrastructure Capital, Inc. (NYSE:HASI) aims to stop being a REIT in 2024.

Ashford Hospitality Trust, Inc. (NYSE:AHT) YTD Share Price Losses: 24.01% Another hotel REIT, Ashford Hospitality Trust, Inc. (NYSE:AHT) surpassed analyst EPS estimates but reported a loss due to high interest expenses.

Orion Office REIT Inc. (NYSE:ONL) YTD Share Price Losses: 24.79% This office real estate firm experienced share price dips since February.

OUTFRONT Media Inc. (NYSE:OUT) YTD Share Price Losses: 25.90% Operating billboards and similar mediums, OUTFRONT Media Inc. (NYSE:OUT) missed analyst EPS estimates but remains rated as a Strong Buy.

Gladstone Commercial Corporation (NASDAQ:GOOD) YTD Share Price Losses: 28.52% Focused on industrial and office space management, Gladstone Commercial Corporation (NASDAQ:GOOD) is diversifying its properties amidst office real estate troubles.

Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) YTD Share Price Losses: 29.66% Investing in mortgage-backed securities, Cherry Hill Mortgage Investment Corporation (NYSE:CHMI) faced losses in Q4 earnings, causing a significant drop in share prices.

Hudson Pacific Properties, Inc. (NYSE:HPP) YTD Share Price Losses: 30.76% Specializing in office real estate for media and technology industries, Hudson Pacific Properties, Inc. (NYSE:HPP) faced revenue losses due to ongoing strikes in Hollywood.

Franklin Street Properties Corp. (NYSE:FSP) YTD Share Price Losses: 34.66% Primarily focusing on office real estate in Southern U.S. states, Franklin Street Properties Corp. (NYSE:FSP) reported losses in Q2 earnings.

These REITs have struggled with various challenges within the real estate sector in 2023, experiencing substantial losses in their share prices.

The Risks of Investing in Real Estate Investment Trusts (REITs)

Investing in Real Estate Investment Trusts (REITs) can offer benefits like diversification, steady income, and exposure to the real estate market. However, there are several risks to consider when investing in REIT stocks:

Interest Rate Risks: REITs are sensitive to interest rate changes. When interest rates rise, the cost of borrowing for REITs goes up, impacting their profitability and potentially decreasing property values.

Market Risk: REIT stocks can be subject to market volatility, mirroring movements in the broader stock market. Economic downturns or market downturns can negatively affect property values and rental incomes.

Property-Specific Risks: The performance of REITs is tied to the properties they own. Factors like vacancies, property damage, changes in property values, or local economic conditions can affect their revenue and profitability.

Liquidity Risk: Compared to traditional stocks, some REITs may have lower liquidity. Selling REIT shares quickly at market price might be challenging, especially for smaller or less-known REITs.

Sector-Specific Risks: Different types of REITs (e.g., retail, office, residential, healthcare) face unique risks. For instance, retail REITs might be affected by the rise of online shopping, while healthcare REITs could face regulatory changes in the healthcare sector.

Inflation Risk: Inflation can impact the costs of maintaining properties, potentially reducing the real returns of REIT investments.

Dividend Risk: REITs are known for their dividends, but economic downturns or financial struggles might lead to dividend cuts or suspensions.

Before investing in REITs, it’s crucial to conduct thorough research, understand the specific risks associated with the REIT’s portfolio, management, and market conditions, and consider consulting a financial advisor to evaluate how REITs align with your investment goals and risk tolerance.

Securities Fraud Attorneys

Brokerage firms are required to perform adequate due diligence on the investments they recommend to ensure a reasonable likelihood of success, and to evaluate whether the investments are suitable considering the client’s age, net worth, investment experience, and investment objectives.

Firms that fail to perform adequate due diligence, or that make unsuitable recommendations, can be held responsible for losses in a FINRA arbitration claim.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 700 FINRA arbitration cases.

Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others. With over 30 years of securities law experience, The White Law Group has the expertise to help investors defrauded in securities and investment fraud attempt to recover their investment losses. For more information, please visit our website, www.whitesecuritieslaw.com.