Fund Flows Are Signaling Upside In These Three REIT Stocks

In a report published Wednesday, Stifel analyst John Guinee offered three stocks that could benefit from a bottoming of negative fund flows, a bottoming of generalist investor interest and/or a potential rally in "risk-off" equities – which historically benefit REITs.

Boston Properties: Best-In-Class REIT

According to Guinee, Boston Properties, Inc. BXP is a "best-in-class" office REIT, with an "impressive" long-term track record of creating value for investors.

Guinee further offered nine reasons to be bullish on the name:

• 1) Attractive real estate valuation metrics
• 2) $700 to $900 million of asset sells annually
• 3) A $2.1 billion, 61 percent pre-leased development pipeline
• 4) A theoretical 50 percent profit margin on the development pipeline
• 5) A best-in-class portfolio of assets within the REIT space
• 6) A balance sheet that may even be "too solid"
• 7) A "conservatively run core" portfolio
• 8) very few "functionally challenged" assets
• 9) A "deep" and "talented" management team

Shares were upgraded to Buy from Hold with a new $120 price target.

Related Link: 4 REITs Miller Tabak Is No Longer Selling

Prologis: ‘Dominant' Industrial REIT

According to Guinee, Prologis Inc PLD is a "dominant" industrial REIT whose valuation is driven by the following five forces:

• 1) Constantly changing global economic drivers
• 2) A "relative" valuation versus blue chip peers
• 3) A "relative" valuation versus the smaller cap domestic industrial REITs
• 4) A pipeline of projected industrial development starts
• 5) A "perception of strategic decisions" on any given day

Shares were upgraded to Buy from Hold with a new $41 price target.

SL Green Realty: ‘Opportunity Fund' In REIT

Guinee offered six reasons to be bullish on the name:

• 1) The downside in SL Green's stock is "well protected" by its Manhattan office portfolio total enterprise value (TEV) of $736 per square foot versus a gross/adjusted replacement cost of $1,365/$841
• 2) The $50 to $70 per square foot office leasing price point remains "attractive" in Manhattan
• 3) Management is "conservative" with its core office portfolio
• 4) A rapid lease-up of acquired vacancy
• 5) Investments in multiple product types
• 6) An active structured finance portfolio

Shares were upgraded to Buy from Hold with a new $112 price target. Image Credit: Public Domain