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Stifel Nicolaus & Co. lowers Corporate Office Properties to 'sell'

StifelNicolaus & Co. Inc. analyst John Guinee III downgraded his investmentopinion of Corporate OfficeProperties Trust to "sell" from "hold," anddecreased his price target to $29 from $33.

The analyst wrote in a research report: "We aredowngrading Corporate Office Property Trust to Sell from Hold because: 1) persistentlyweak leasing economics which generates value erosion at the lease level; Lease EconomicsAnalysis below and in the attached excel model, 2) between now and YE 2019 (tenquarters), roughly 39% of space expires at an average in-place rent of$32.40/SF while leases signed in 1H17 averaged $28.00/SF, 3) we think that anyDefense/IT leasing done in new development or re-leasing is subject to a verybottom line oriented RFP process, 4) real estate valuation metrics are veryaggressive; particularly Replacement Cost, 5) stock valuation metrics areattractive relative to Gateway City office REITs, but high relative to other lowbarrier office REITs, 6) the two inventory buildings totaling roughly 340k SFof vacancy are not likely to generate cash NOI until 2019."