Upgrades
A team of Evercore ISI analysts made six ratings changes in light of generally positive undertones at the 2018 Nareit investor conference in New York City.
The analysts said there was an "improving sentiment" over the retail sector, which recorded fewer bankruptcies in the first half of 2018 than in the same period in 2017, while experiencing robust demand for well-situated assets that spurred an upward bias in net operating income growth for 2018 amid lower projections.
The team also raised its estimates for lodging companies based on firm second-quarter revenue per available room data for the sector, which the analysts said was more likely to achieve higher revenue per available room growth for 2018 and 2019. The analysts added that the industrial sector outlook was largely positive, given healthy automotive, e-commerce and housing demand.
In a June 11 note, the team upgraded shopping center real estate investment trust Brixmor Property Group Inc. and primarily office REIT Vornado Realty Trust to "outperform" from "in line," with increased per-share price targets of $19 and $78, respectively.
Initiations
Jefferies LLC analyst Omotayo Okusanya initiated coverage of three multifamily REITs: NexPoint Residential Trust Inc. with a "buy" rating and a $32 per-share price target, and UDR Inc. and Apartment Investment and Management Co. with "hold" ratings and respective per-share price targets of $38 and $40.
Okusanya said he remains neutral on the apartment sector, noting that fundamentals continue to indicate limited same-store NOI and funds-from-operations-per-share growth through at least 2019 despite solid leasing in the spring. However, the analyst argued that positive rent growth on new leases has been seen at B assets, thanks to improving employment and limited supply.
Downgrades
In the same June 11 note, the Evercore team downgraded shopping center REIT DDR Corp. to "underperform" from "in line," and Empire State Realty Trust Inc. and Brandywine Realty Trust to "in line" from "outperform," given the lack of visible near-term catalysts.
The analysts noted that DDR's stock was up approximately 12% in the week ending June 8 and seems to be fairly valued leading up to the Retail Value Inc. spinoff.
The analysts also downgraded hotel REIT Host Hotels & Resorts Inc. to "in line" from "outperform," citing the stock's recent outperformance and limited upside despite the team's increased RevPAR and EBITDA projections in light of robust quarter-to-date operating trends.
