UPDATE: Bank of America Upgrades Starwood Property Trust to Buy Following Recent Stock Offering

In a report published Wednesday, Bank of America analyst Kenneth Bruce upgraded the rating on Starwood Property Trust STWD from Neutral to Buy, and raised the price target from $28.50 to $30.50. In the report, Bruce noted, “With the equity issuance behind it, we think STWD shares could witness further upside as the market reflects the value potential of the LNR acquisition. We think the combination of STWD's high-quality investment portfolio and the LNR platform will generate a decent 6.5% dividend yield with upside potential, as STWD extracts value from legacy assets and grows adjacent businesses through a newly acquired operating company. BV should grow, both due to the accretion from the equity raise and from retained earnings at the operating subsidiary, supporting valuation and a higher share price in our view. We think STWD can achieve an 18-19% total potential return, positioning it well into the top-half of our mortgage REIT coverage universe on an expected return basis.” Starwood Property Trust closed on Tuesday at $27.15.