How The West Was Won: Analyst Says Hudson Pacific Properties Benefits From Strength In LA, SF, Seattle

Exposure to the Los Angeles, San Francisco and Seattle rental markets combined with an expected continued rise in rent spread growth drive a compelling upside to shares of Hudson Pacific Properties Inc HPP, according to analysts at Wells Fargo.

The Analyst

Blaine Heck of Wells Fargo upgraded HPP from Market Perform to Outperform and raised the stock’s target price from $37 to $40.

The Thesis

Underappreciated rent growth in profitable cities in recent years could drive high rent spreads through 2019, Heck said in a Friday note. (See the analyst's track record here.)

“We believe HPP will continue to show peer-leading rent spreads in 2018 and 2019 given continued market strength in SF, Seattle and LA," the analyst said.

Hudson Pacific has six recently completed or under construction projects which are expected to contribute to the company’s funds from operations, Heck said. The REIT is now exploring further investment opportunities in the Los Angeles and Seattle markets, he said.

Additional drivers that were not factored into Wells Fargo’s analysis include expanded leasing operations in Silicon Valley and potential M&A activity, the research firm said.