UPDATE: Stifel Downgrades Pennsylvania REIT as Acquisition Complicates Improving Value Story

In a report published Wednesday, Stifel analyst Nathan Isbee downgraded the rating on

from Buy to Hold, but reiterated the $21.00 price target. In the report, Stifel noted, “We are downgrading PEI to Hold from Buy. While PEI is cheap and trades at a 27% discount to our $25 NAV estimate (7.25% cap rate), and portfolio fundamentals are improving, the shares will likely trade in-line, in our view, as the REIT raises additional equity to fund the pending $465 million Springfield Town Center acquisition and other redevelopment projects over the next few years. In addition, PEI is paying ‘full price' for an asset that will initially yield 4.1% and slowly ramp up to 5.5% at stabilization in 2018, in our view. "PEI needs to raise $190 - $200 million of additional equity to fund the acquisition on a leverage neutral basis. PEI will look to fund all of the additional equity through asset sales given the significant NAV discount.” Pennsylvania REIT closed on Tuesday at $18.27.