Real estate valuations have declined abruptly in the face of the COVID-19 crisis but plugging the discount via M&A is difficult if not impossible in the current environment.

According to Activist Insight Vulnerability, Macerich, VEREIT, Regency Hotel Trust, and Pebblebrook Hotel Trust, are among the most vulnerable real estate companies to activism, although the sector at large appears attractive. Macerich trades at just 37% of its book value, Pebblebrook at 41%, and VEREIT at 80%, while their peer medians trade at a price-to-book value of between 3 and 5, according to Activist Insight Vulnerability.

“It’s a positive sign for activism when REITs trade at a discount. The problem right now is that it’s difficult to sell assets,” Jeff Pierce, the head of real estate activist investment firm Snow Park Capital, told Activist Insight Vulnerability in an interview.

Many REITs in the retail and office space trade at low valuations because equity holders may be wiped out in an eventual debt restructuring, keeping activists on the sidelines. Tom Barrack’s Colony Capital, which has been in the crosshairs of activist Blackwells Capital, said its portfolio companies owning hotels and healthcare properties had defaulted on $3.2 billion of debt. He previously said the company’s equity holders will survive.

Some activists are finding more opportunities in short selling than long activism. Jonathan Litt’s Land & Buildings last week predicted the demise of New York-based retailer Empire Realty Trust and shorted its stock.

Nonetheless, activism may pick up before too long. “High-quality companies will recover quickly. On the back-end of this there will be a lot of opportunities,” Pierce said, adding he is looking to invest in “high quality companies with great balance sheets, great management teams and long duration leases.”

One such company could be Kilroy Realty. The real estate firm, founded and led by John Kilroy, has seen its shares lose around one-third of their value since the start of the year, and underperformed its median peer over the past five years on a total shareholder return basis, according to Activist Insight Vulnerability. However, Kilroy has a strong portfolio of office and residential assets on the West Coast and counts Apple, Sony, and Netflix as its tenants. Meanwhile, its average financial leverage ratio is 1.90 versus 2.17 for the median peer and 2.80 for the S&P 500 Index, according to Activist Insight Vulnerability.

At the last annual meeting in May 2019, three of the six directors up for re-election received more than 30% of votes against their re-election, with many institutions citing a disconnect between executive pay and performance. In 2019, Kilroy’s total pay decreased from $43.7 million to $12 million, which is still extremely rich compared to similarly-sized peers, such as VEREIT and Kimco Realty. The 2020 annual meeting is just days away and signs of discontent could be a harbinger for an activist campaign in the future.

Another compelling activist target is Kilroy’s West Coast competitor, Hudson Pacific Properties, which saw the highest increase in its vulnerability score during the pandemic – from 43.5 to 60.7, according to Activist Insight Vulnerability. One of Hudson Pacific ’s key vulnerabilities is its poor operating and stock performance, and it already has Land & Buildings on its share register with a toehold stake. Litt said in a recent tweet that Hudson Pacific reported strong quarterly results but noted its 40% discount to net asset value. An activist could point out that Hudson Pacific’s net operating income margin is around 700 basis points below Kilroy’s.

While CEO compensation for 2019 is lower than Kilroy’s, it rose from $6.3 million to $9.3 million. In addition, three directors received around a third of votes against their re-election last year. Hudson Pacific’s annual meeting takes place on May 20.