Starwood, Newmark, KKR Real Estate upgraded on better commercial real estate view

By Steve Gelsi

KBW lifts ratings on the three real estate investment trusts to outperform from market perform

KBW analyst Jade Rahmani on Thursday upgraded three big real estate investment trusts to outperform from market perform due to a more favorable environment for commercial real estate.

"With the commercial real estate market nearing a bottom on key indicators (prices, volumes, loss reserves) and the Fed signaling rate cuts, we believe the commercial real estate (CRE) backdrop will improve in 4Q and flow into 2025," Raymani said.

KBW upgraded Starwood Property Trust Inc. (STWD), KKR Real Estate Finance Trust Inc. (KREF) and Newmark Group Inc. (NMRK).

Analysts lifted Starwood's price target to $22.50 a share from $20.50 a share and bumped up Newmark's price target to $16.50 a share from $13.50 a share.

KKR Real Estate's price target was raised to $13 a share from $11.50 a share.

"All in, we expect improving deal activity and sentiment to drive stocks through year-end and into 2025," said Raymani.

KBW has been tracking a rise in transaction volume and that the "best way" to react to this positive move is by wading into stocks that have been beaten up.

Starwood's stock is down about 27% from its peak, while KKR Real Estate is off by about 50%. Newmark is trading at a discount to its peers, Raymani added.

On Thursday, Starwood's stock rose 0.6%, KKR Real Estate Finance Trust moved up by 6% and Newmark Group advanced by 2.2%.

-Steve Gelsi

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09-06-24 1158ET

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