Goldman Sachs Resumes Coverage on Retail REIT Sector
Analysts at Goldman Sachs (NYSE: GS) resumed coverage on the retail REIT sector with an attractive view on Monday morning. The analysts wrote that "Our positive stance on this sub-sector of the broader REIT universe is driven by (1) a low rate environment (2) low supply growth in retail square footage, (3) a lack of government and financial service tenants, and (4) a strong earnings growth profile." They added that "Valuation is also compelling with each retail subsector trading in line with or at a discount to the overall REIT sector."
The Goldman analysts said that their best ideas are Simon Property Group (NYSE: SPG), and CBL & Associates (NYSE: CBL). The analysts resumed coverage on Simon Property Group with a Buy rating and $187.00 price target. This compares to the REIT's current price of just above $159.00. They wrote, "We think Simon is a GARP story, with a clear growth profile and a modest valuation premium." They cited the company's third quarter conference call where Simon will likely provide strong 2013 guidance as a potential catalyst.
Goldman also resumed coverage on CBL & Associates with a Buy rating and a $23.00 price target. This compares to the REIT's current price of $19.57. The analysts called CBL a "deep value" play and wrote that "We believe the market is pricing in financial and operating downside that we do not think is imminent, creating a buying opportunity in the stock." They added that, "We believe CBL's share price should react positively as refinancing opportunities are announced with stronger proceeds and pricing than anticipated."
The following names were given Neutral ratings: Glimcher Realty Trust (NYSE: GRT), Taubman Centers (NYSE: TCO), Macerich Co. (NYSE: MAC), General Growth Properties (NYSE: GGP), and Tanger Factory Outlet Centers (NYSE: SKT).
Two of the twelve retail REITs that the firm resumed coverage on were given Sell ratings, Regency Centers (NYSE: REG) and Realty Income (NYSE: O). Goldman sees 11 percent and 20 percent downside in the these names, respectively.
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