Real estate stocks’ comeback year — with exceptions

It was a profitable year to invest in real estate stocks, unless you were betting on some newer public names at the intersection of property and technology.

Stock traders who bet on veteran landlords at the nadir of the pandemic saw substantial returns in 2021, even in the hardest-hit segments of office, lodging and retail.

While lower quality retail stocks continued to struggle, class A mall and shopping center landlords staged a comeback after a devastating year during which many of their properties shuttered. Macerich’s stock price rose more than 60 percent in 2021, while Simon Property Group’s almost doubled, reclaiming its pre-pandemic level.

“We’ve overcome the arbitrary shutdown of our business due to the pandemic and our cash flow has bounced back dramatically, which many have doubted,” Simon Property Group chairman and CEO David Simon said on a November earnings call.

Office and hotel companies’ stock performances were more muted, though still strong. The office landlords Boston Properties and SL Green, for example, both saw gains of more than 20 percent this year, while leading lodging names like Marriott International and Host Hotels saw gains of 32 percent and 24 percent, respectively. At year-end, the near-term outlook for both segments is muddled, with the Omicron variant delaying indefinitely any expected “return to normal.”

Industrial and multifamily landlords — two real estate sectors that have benefited from changes in consumer behavior over the last two years — continued to shine. Prologis climbed almost 75 percent, while Duke Realty logged a nearly 70 percent gain. Both saw new all-time highs.

Multifamily and single-family rental landlords profited from the supply and demand imbalance in the nation’s housing market. Essex Property Trust and AvalonBay Communities on the apartment side, and Invitation Homes and American Homes 4 Rent on the single-family side, all saw gains of around 50 percent or more this year.

The world’s two largest real estate investment managers — Blackstone and Brookfield Asset Management — significantly outperformed the market in 2021. Blackstone’s stock more than doubled in price over the course of the year, while Brookfield’s gained 54 percent and closed near an all-time high.

Not all stocks associated with the hot housing and recovering commercial markets thrived, however. Compass’ IPO in the spring priced 30 percent below where it initially targeted, and the brokerage’s stock had lost about half of its value by the end of the year. The company reported a net loss of $100 million in the third quarter, as expenses ballooned and it settled a long-standing dispute with tech entrepreneur Avi Dorfman over his role in the brokerage’s founding.

Each of the iBuyers — companies like Zillow and Opendoor that make algorithm-based instant offers for single-family homes that they then renovate and flip for a profit — were duds in the stock market this year, with declines of around 40 percent or more. Zillow shuttered its iBuying business in November, citing the unreliability of its home price forecasting model that caused it to overpay for thousands of the homes, sending its stock into a tailspin.

Offerpad, another iBuyer that went public via a SPAC merger in September at a $2.7 billion valuation, spiked in its first days on the market before coming back to earth. The stock is down about 35 percent since it began trading.

New public market entrants in proptech were a mixed-bag. Both SmartRent, the smart home automation company that went public via a $2.2 billion SPAC merger in August, and Procore, the construction management platform that raised $635 million in an IPO this spring, ended the year down after a choppy first few months of trading.

Douglas Elliman, the brokerage that began trading Dec. 30 after spinning off from Vector Group, put a cherry on top of a turnaround year. Elliman’s separation from Vector’s tobacco business should coax ESG-conscious real estate investors who have wanted to commit, analysts said. The stock rose more than 21 percent in its first trading day.

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