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Essential IR Insights Newsletter - February 2023

Tuesday, North American real estate edition


Jefferies analysts Jonathan Petersen and Omotayo Okusanya downgradedGovernment Properties Income Trustto "underperform" from "hold" with a price target on the company'sstock of $17.

The stock has outperformed office REITs and the RMZ, rising 92%from its mid-January lows, which Petersen and Okusanya said in a note may be duein part to the perceived safety of investing in a portfolio supported by governmentleases and the company's high dividend yield of 7.1% amid a low-rate environment.The analysts, however, posited that the company might face increased risk of move-outsdue to the age of its portfolio and that the dividend might not be sustainable.

In a separate note, the pair also downgraded to "hold"from "buy" and maintained their price target on the company's stock at$11.

While Lexington's portfolio appears to be more robust now thanit has in many years, and management's execution of the company's capital recyclingplans seem to be on track, the pair said they are "taking profits and movingto the sidelines" after a 65% run-up in the company's stock that now tradesin line with NAV.

Further, the analysts lowered their investment opinion of to "hold"from "buy" but raised their price target on the company's stock to $115from $108.

Thanks to management's progress in cutting development risk andexpanding into colocation with recent portfolio acquisitions, Digital Realty recovered its "blue-chip"premium AFFO multiple that surpasses the peer average. "We believe the currentmultiple premium is deserved, given DLR's strong market position and stable earningsgrowth," the analysts said.

The duo, however, argued that Digital Realty might not expandat the same pace as its smaller data center peers and recommended that investorshold off buying into the stock until there is a better entry point.


A team of Janney analysts launched coverage of at"buy" and a fair value estimate on the stock of $15.

In a note, Robert Stevenson, Venkat Kommineni and Hersh Shintresaid the company's stock price could see potential upside, thanks to its discountedvaluation, roster of mostly investment-grade tenants with long-term net leases andits ability to expand through ties with merchant developers. The analysts also viewthe company's NAV, multiple valuations and 4.8% dividend yield as attractive. However,they cited the company's above-average leverage, real estate securities portfolioand exposure to FedEx as potential risks.

Evercore ISI analysts Sheila McGrath and Nathan Crossett initiatedcoverage of FIBRA Prologiswith a "buy" rating, citing its attractive discount to NAV, quality portfolioand "favorable" risk profile compared to other Mexican REITs.

"We view FIBRA Prologis' affiliation with its sponsor Prologisfavorably given its status as a global leader in logistics real estate that hasoperated through different cycles," the duo said in a July 18 note.