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Wednesday, North American real estate edition

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Wednesday, North American real estate edition

Initiation

Jefferies analysts George Hoglund and Omotayo Okusanya launchedcoverage of Agree Realty Corp.with a "buy" rating, citing its "robust" growth amid a "slowgrowth" sector. They set their price target on the company's stock at $45,which is dividend discount model-derived.

Hoglund and Okusanya said in an April 21 note that Agree Realtyhas seen rapid growth via acquisitionsin the past years, resulting in a "solidly" increasing dividendand greater portfolio diversification. "We think continued portfolio growthwhile maintaining low leverage and improving access to capital will drive multipleexpansion[s] and narrow the valuation gap to peers," the analysts said.

Citing the company's "attractive" valuation relativeto its peers, generally healthy roster of investment-grade tenants, "solid"balance sheet, an 11.4-year average remaining lease term coupled with a well-staggeredlease maturity schedule, "robust" investment opportunities, and declininggeneral and administrative expenses as a percentage of revenues, the pair addedthat they consider the company an attractive option for investors in the retailnet-lease segment.

Downgrade

Citing near-term concerns about the company's class A portfolioconcentration and the risk of new supply, a pair of Evercore ISI analysts downgradedEquity Residential to "hold"from "buy" and lowered their price target on the company's stock to $76from $80.

Steve Sakwa and Rich Hightower said in a note that while EquityResidential's first-quarter resultsare "generally in line," they are now "more acutely concerned"about supply risk in the company's key markets after a further top-line slowdownin the company's same-store portfolio in New York City and San Francisco.

The duo added that they are "concerned that the portfoliolacks any meaningful 'cushion' in the form of lower-price-point and/or suburbanexposure — at least in the near- to medium-term," given the company's urban,class A portfolio concentration after its recent property salesto Starwood Capital Group.

Upgrade

A group of Stifel analysts upgraded Liberty Property Trust to "hold" from "sell,"saying in a note that the company's "attractive" net industrial valuationoffsets their concerns about execution risk.

In addition to Liberty's attractive real-estate valuation metrics,the analysts said the upgrade is also based on the company's "solid" balancesheet and development-oriented platform, as well as their expectations for the REITto see attractive FFO/FAD per share multiples in 2017 and for industrial fundamentalsacross the U.S. to remain strong.

The analysts cited "modest" execution risk, Liberty'slong history of earnings and value erosion at a fixed cap and $341 million landbank, which they said accounts for a very high 3.8% of total enterprise value, asnegatives.