UPDATE: BMO Capital Markets Upgrades Corporate Office Properties Trust to Outperform, Raises PT

In a report published Monday, BMO Capital Markets upgraded its rating on Corporate Office Properties Trust

from Market Perform to Outperform, and raised its price target from $22.00 to $29.00. BMO Capital noted, “While OFC has recouped some lost ground in 2012 after underperforming the previous three years, we think more pronounced outperformance could commence as the company nears an end to its Strategic Reallocation Plan (SRP). We expect remaining asset sales to occur at a more measured (less dilutive) pace. OFC stock performance has been tethered to the ups and downs of defense spending, which remains a headwind. However, assuming less partisan politics after the November election produces more business clarity for defense contractors, we believe OFC would stand to benefit. That is, pent-up demand for specialized office space from OFC's defense/IT tenant niche should ultimately create the potential for outsized earnings growth (off a smaller base). Recent lease transactions in Columbia, MD, and Huntsville, AL, may foretell better times to come. We provide several observations that lend support to our upgrade, including an improved balance sheet, dividend growth potential, and a deep valuation discount – for a company with a precedence of trading at a significant premium.” Corporate Office Properties Trust closed on Friday at $24.65.