What happened

Real estate investment trust (REIT) Ryman Hospitality (NYSE:RHP) fell a nasty 22% in 2020 according to data from S&P Global Market Intelligence. That, however, was better than the roughly 28% decline that Kimco Realty (NYSE:KIM) suffered, which was better than the 33% drop that Empire State Realty Trust (NYSE:ESRT) experienced.  

To be fair, it was a bad year for REITs in general, with the Vanguard Real Estate ETF, a proxy for the sector, down about 8.5% for the year. However, the fact that each of the above names fell more than twice as much as the average REIT speaks to just how bad a year it was for the trio.

A man looking at a stock arrow crashing through the floor beneath him.

Image source: Getty Images.

So what

When Wall Street reexamines 2020 there's going to be one main story: the global coronavirus pandemic. While that's clearly the right story to look at, the company-by-company impact of the global economic shutdowns and social distancing used to slow the virus are the real key. 

For example, Ryman Hospitality falls into the hotel niche of the real estate investment trust sector. Moreover, its core properties are convention centers, with a side business in the amusement arena via the Grand Ole Opry and related assets. So the core of its business is bringing people together in group settings for fun and business. It's amazing that the stock didn't fall more given that third-quarter 2020 revenue was lower by more than 80% year over year.  

At the depths of the 2020 bear market, the stock was off by more than 80%. Investors were very downbeat at one point, so why did they shift gears and start to buy back shares? The answer is largely related to coronavirus vaccine success toward the end of the year, which resulted in a material rally. Effectively, investors seem to think that business and leisure travel will come back from the deep decline that's currently showing up in Ryman's numbers. That's probably true, but the pace of the recovery may be slower than investors think given the deep hole Ryman is in right now. Caution is in order here given the material stock price recovery that's taken shape already.

Kimco, meanwhile, owns over 400 shopping centers. That was a pretty rough sector to be in, with non-essential businesses getting shut down and worried consumers increasingly buying online instead of making in-person shopping trips. Interestingly, despite the laggard price performance, Kimco's business held up better than Ryman's. For example, Kimco collected 90% of its October rent roll and revenue was down a comparatively mild 8% in the third quarter of 2020. And while Kimco cut its dividend 34% in the third quarter of 2020, Ryman completely suspended its payment when it announced first-quarter 2020 results. Kimco actually increased its dividend in the fourth quarter, hinting that things weren't as bad as management at first feared. That said, Kimco faces a long recovery process, too. Indeed, the retail sector continues to work through notable headwinds, including the sped up "retail apocalypse" that has been a thorn in the side of retail REITs for several years. Caution is probably appropriate with Kimco, too.    

VNQ Chart

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Which brings the story to Empire State Realty Trust, an office landlord focused on New York City and its surrounding suburbs. The stock was down by a third in 2020 for a couple of reasons. The most obvious is that working from home became an increasingly normal thing last year. That will probably reverse at some point in the future, at least to some degree, but it's hardly shocking that investors would sell an office REIT in the face of the pandemic. That said, there's another wrinkle to consider. Empire State is not only heavily focused on one region, it also has a very small portfolio with just six properties accounting for over 70% of its rent roll in 2019. One property, the namesake Empire State Building, was a huge 33% of the total. The REIT stopped paying dividends in the third quarter of 2020. And while it benefited from the vaccine-related rally, the highly focused nature of its business is probably not appropriate for most investors.    

Now what

Ryman Hospitality, Kimco, and Empire State Realty all ended 2020 with a rally, thanks to positive vaccine news. While that was nice to see, and meant the year wasn't as bad as it could have been price-wise, none of these REITs is fully out of the woods just yet. Long-term investors should probably take a wait-and-see approach with this trio as 2021 gets under way. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.