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Monday, North American real estate edition


Mizuho Securities USA LLC's Haendel St. Juste on Aug. 13 upgraded Brixmor Property Group Inc. to "buy" from "neutral" and updated his per-share price target on the company's stock to $22 from $19.53.

St. Juste attributed the upgrade to Brixmor's discounted valuation, year-to-date underperformance and more favorable growth projections for the second half of 2017 through 2018, relative to its strip real estate investment trust peers.

St. Juste said he is still cautious on the retail REIT sector, but expects strip REITs to have better structural support and more robust same-store net operating income and earnings growth than mall REITs, and that strip REITs will likely fuel sector outperformance in the second half of 2017.

In the wake of the second-quarter earnings season and after some sizable REIT price movements over the past two weeks, Evercore ISI analysts on Aug. 14 elevated Kilroy Realty Corp. and STAG Industrial Inc. to "outperform" from "in line," and W. P. Carey Inc. to "in line" from "underperform." Their respective per-share stock price targets on Kilroy, STAG Industrial and W. P. Carey are $78, $30 and $67.

The analysts argued that the market "has more than overreacted" to news of a delivery delay and lack of leasing at Kilroy's The Exchange development project in the Mission Bay submarket of San Francisco. They added that other fundamental value drivers appear to be continuously steady and largely intact.


The same team of Evercore analysts lowered their ratings on Tanger Factory Outlet Centers Inc., Camden Property Trust and Kimco Realty Corp. to "in line" from "outperform," with per-share price targets of $28.50, $92 and $21, respectively. Urban Edge Properties and Federal Realty Investment Trust, meanwhile, were downgraded to "underperform" from "in line," with respective per-share stock price targets of $25 and $128.

The analysts posited that retail challenges have contributed to a 30% year-to-date decline in Tanger's stock, but noted that they positively view the company's lack of ample debt maturities through 2020 and its recent financing activities that have continued to bolster its balance sheet.

For Kimco, the analysts said they are moving to the sidelines after the stock's recent outperformance and management's optimism about the company's operations.

The analysts, meanwhile, think Urban Edge's stock is likely to see limited upside after its recent $155 million equity offering, as it indicates that the company believes its shares are more-or-less "fairly valued," rather than substantially undervalued.

For Camden, the team said the downgrade was more than anything a matter of "taking chips off the table," given the stock's less attractive valuation.

Notwithstanding Federal Realty's portfolio quality and potential for better-than-average growth over an extended period, the analysts said their expected total return in the next 12 months is only 2% for the stock, compared with 9% for their overall coverage universe.