As Vaccine Hopes Rise, So Do Certain Real Estate Stocks
Real Estate Shares Jump on Vaccine News
Investors are looking ahead and hoping that a vaccine will eventually help the economy and industries that have been battered by the pandemic return to normal. Wall Street is betting that hotel, retail, and office space real estate, which has been hit hard during the pandemic, could rebound. It will likely take significant time before shopping, travel, and business looks anything like it did before the pandemic. But since Pfizer (PFE) and BioNTech (BNTX) announced the encouraging results of their vaccine trials in early November, shares for hotel, retail, and office real estate companies have popped by more than a third.
Shares of Park Hotels and Resorts (PK) and Xenia Hotels & Resorts (XHR) have soared 62%. Wall Street expects these resort chains to profit from pent-up demand as more people get vaccinated and start to travel again. The FTSE Nareit Equity Lodging/Resorts Index is also up 49%.
Regional malls and shopping centers REIT indexes have also seen a 40% spike since the vaccine announcement. Compared to the S&P 500, which was up 4.6% during that period, retail and lodging have been two of the top performers.
Executives Exercise Caution
Despite the renewed interest from investors, some executives say their businesses may take a long time to recover from the challenges of the pandemic. Leaders in the hotel industry for example have said it could take until 2023 for business to recover.
That could hold true even if the vaccine relaxes restrictions and encourages travel. Echoing that caution, business leaders like Bill Gates have said they doubt business travel will ever return to pre-pandemic levels. If recovery takes as long as these executives suspect, real estate and property companies could be of particular interest to long-term investors.
A-Rod Hopes for Home Run with Hotel Investments
Former New York Yankee Alex Rodriguez is among investors willing to take their chances on real estate. Rodriguez is partnering with CGI Merchant Group in launching a hotel investment fund. The baseball legend will invest some of his own money in the fund, which is seeking to raise $650 million in partnership with Hilton Worldwide Holdings (HLT). A-Rod will also help with sourcing deals.
The CGI Merchant Fund said it will invest in hotels and resorts around North America and the Caribbean. It is focused on tourism that it expects will bounce back fastest after the pandemic, which means staying away from hotels with open floor plans and large group gathering spaces. Rodriguez and CGI Merchant said they are willing to wait for the travel sector to deliver returns, and they see the fund as part of a long-term investing strategy.
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