3 Low-Cost REITs That Are Making Big Moves

Several low-priced real estate investment trusts (REITs) made huge moves higher this week, and many are in the office or healthcare sub-sectors.

Investors know that low-priced stocks can be volatile and it’s as easy to lose as it is to gain a lot in the short term. These stocks are not for conservative investors or people on fixed incomes who cannot afford to take big risks with their capital.

But sharp new moves in a low-priced stock often portend even more future gains to come. If an investor is patient and perhaps waits for a price pullback after a spike, it is possible to do quite well on these trades.

Take a look at three low-priced REITs that exploded higher on rising volume this week.

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Diversified Healthcare Trust (NASDAQ: DHC) is a Newton, Massachusetts-based healthcare REIT that owns 376 healthcare-related properties worth approximately $7.1 billion in 36 states and Washington, D.C. In addition to more of 100 medical and life science practices, Diversified Healthcare Trust also has 27,389 community life unit executives in its portfolio.

In April, Office Property Income Trust (NASDAQ: OPI) announced the acquisition of Diversified Healthcare Trust in an all-stock transaction. It appeared to be a done deal as in May Office Properties Income Trust began putting in place the necessary financing to complete the transaction.

On June 2, Diversified Healthcare Director Adam D. Portnoy purchased a total of 5,566,644 shares at an average price of $1.77 per share, for a total of $9.81 million.

However, on June 5, investment advisory firm Flat Footed LLC, a major shareholder holding about 8% of Diversified Healthcare Trust, reiterated its intention to vote against the proposed merger. Flat Footed has sent a letter to the board of Diversified Healthcare asking for clarification on the details of the merger – specifically why the board is willing to let Diversified Healthcare go for $1.13 per share after rejecting a cash offer of $4 per share in 2022. The letter also asked why Portnoy was buying Diversified Healthcare shares at $1.77, well above the merger price.

Shares of Diversified Healthcare rose rapidly after this announcement and rose 37.28% in the past three days. Its most recent closing price was $2.32.

Uniti Group Inc. (NASDAQ: UNIT) is a Little Rock, Arkansas-based specialty REIT that acquires and builds critical communications infrastructure in the form of high-speed fiber optic, copper and coaxial networks.

Uniti Group owns and operates 137,000 miles of fiber route spanning 275,000 commercial buildings, with most of its network in the Eastern and Midwestern parts of the United States. It is one of the top 10 fiber providers in the United States today, and its fiber optic leasing generates approximately 70% of its total revenue.

Analysts have been lukewarm on Uniti Group recently. Morgan Stanley analyst Simon Flannery maintained an underweight rating on Uniti Group on June 1, while lowering the price target from $7 to $6. On May 30, RBC Capital Markets analyst Bora Lee maintained a Sector Perform rating on Uniti Group, but lowered the price target from $7 to $5.

But over three days this week, and without any news, Uniti Group was up 11.86%. On Tuesday, it was up 6.3% premarket and ended up 4.4% for the day. Its most recent closing price was $4.34.

Unity Group Chairman and CEO Kenny Gunderman bought 225,000 Uniti Group shares at an average price of $4.37 in the first week of March for $983,250.

Investors may be feeling more confident that the quarterly dividend of $0.15 per share, or $0.60 annually per share which yields 13.82%, will remain intact. The next ex-dividend date is June 15.

City office FPI inc. (NYSE: CIO) is a Dallas-based office REIT that owns 58 properties totaling 6 million square feet. The REIT is focused on the Sun Belt region, the West Coast and parts of Florida.

On May 30, RBC Capital analyst Michael Carroll maintained a Sector Perform rating on City Office REIT, but went more negative lowering the price target from $10 to $7.

Nonetheless, City Office REIT is one of several office REITs that have seen huge price increases this week in a sub-sector that has long had little love from Wall Street. City Office REIT is up 9.7% this week.

Other low-cost office REITs seeing big gains this week are Brandywine Estate Trust (NYSE: BDN), up 10.71%, and Hudson Pacific Properties Inc. (NYSE: HPP), up 9.66% in three days. Office stocks were crushed between February and late May but have shown recent resilience.

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This article 3 Low-Cost REITs That Are Making Big Moves originally appeared on Benzinga.com


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