Back in June, Miller Tabak + Co., LLC predicted that REITs would see valuation multiple contraction as the market anticipated the first Federal Reserve rate hike. Now, three months later, analyst Thomas Mitchell believes that the multiple contraction is now complete and that REITs are once again fairly valued.

The Move

On June 8, Miller Tabak downgraded the REIT sector to Sell, based on the belief that fears over the FOMC’s September decision would drive down the Price/FFO valuation ratio for many REITs. The firm set a Price/FFO target of 16.0x estimated 2016 FFOs.

It took almost exactly three months for the REITs to hit the firm’s target ratio, and now Mitchell has upgraded the sector to Hold.

Outlook

According to Mitchell, the anticipated long-term FOMC tightening cycle will likely be…

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