REITs set for 2025 rebound amid widest discount since GFC: Jefferies

Real estate investment trusts could be primed for a strong comeback in 2025, with Jefferies highlighting the sector's steepest valuation discount since the global financial crisis

Trailing the broader market over the last three year, "the performance of the REIT sector will be rate-driven, but the direction is difficult to predict — we lean toward expecting falling interest rates," analyst Jonathan Petersen wrote in a note to clients on Wednesday.

As such, the analyst reshuffled a slew of REITs within his coverage, with a preference for durable rent growth themes.

The following stocks were upgraded to Buy from Hold: CBRE Group (NYSE:CBRE), Cousins Properties (NYSE:CUZ), EastGroup Properties (NYSE:EGP), Equity LifeStyle Properties (NYSE:ELS), InvenTrust Properties (NYSE:IVT), Macerich (NYSE:MAC), Simon Property Group (NYSE:SPG) and Welltower (NYSE:WELL). 

Still, Petersen downgraded these to Hold: Crown Castle (NYSE:CCI), CubeSmart (NYSE:CUBE), Cushman & Wakefield (NYSE:CWK), Healthcare Realty Trust (NYSE:HR), Invitation Homes (NYSE:INVH), Kimco Realty (NYSE:KIM), Kilroy Realty (NYSE:KRC), Kite Realty Group (NYSE:KRG), NNN REIT (NYSE:NNN) and UDR (NYSE:UDR).

His top picks include: Agree Realty (NYSE:ADC), Acadia Realty Trust (NYSE:AKR), Cousins Properties (NYSE:CUZ), Digital Realty Trust (NYSE:DLR), Extra Space Storage (NYSE:EXR), Jones Lang LaSalle (NYSE:JLL), Ryman Hospitality Properties (NYSE:RHP), Simon Property (NYSE:SPG), Stag Industrial (NYSE:STAG) and Ventas (NYSE:VTR).

"While REIT sector returns often feel inextricably tied to interest rates, we believe that there are opportunities for material outperformance by stickingwith REITs that have durable earnings growth momentum — falling rates would pull the rest of the sector up too," the note said.

Meanwhile, Seeking Alpha's Quant system gives the highest rating among REITs to Getty Realty Corp (GTY), followed by Sila Realty Trust (SILA) and CareTrust REIT (CTRE).