Market Overview

JMP Securities: Updates Ratings On 5 REITs After Earnings

JMP Securities: Updates Ratings On 5 REITs After Earnings

On February 20, JMP Securities issued a note updating ratings and price targets on the commercial real estate sector, including:

  • Blackstone Mortgage Trust Inc (NYSE: BXMT),
  • Chesapeake Lodging Trust (NYSE: CHSP),
  • Equity Commonwealth (NYSE: EQC),
  • Host Hotels & Resorts Inc (NYSE: HST) and
  • Sabra Health Care REIT Inc (NASDAQ: SBRA)

Tale Of The Tape - Past Year


Blackstone Mortgage Trust - Market Outperform

JMP increased its price target to $32 from $31 following the company's 4Q earnings release and conference call.

  • BXMT reported "4Q core EPS of $0.52, which beat consensus by a penny and matched the new $0.52 dividend that was set in December 2014; marking the second consecutive quarter where core earnings fully covered the dividend."
  • Blackstone management believes it can "continue to deliver on the targeted ROI range of LIBOR +12-13%," (despite increased competition from larger banks).
  • JMP trimmed its 2015 core EPS estimate to $2.20 from $2.25, primarily due to a slightly lower net interest spread assumption;
  • JMP introduced an initial 2016 core estimate of $2.40; and 1Q16 dividend projection of $0.56.

Host Hotels & Resorts - Market Outperform

JMP maintained its rating but reduced its price target to $25 from $27; based on 14.0x (unchanged) and downward-revised 2016 EBITDA estimate of $1.62 billion (down from $1.70 billion).

  • Host reported disappointing 4Q14 results and provided renovation-impaired guidance that was well below what the Street was expecting.
  • "Group business weakened in 4Q, and renovations at several key properties impacted performance."
  • "4Q RevPAR grew 3.2% on a 60 bps decline in occupancy and a 3.6% gain in rate."
  • "Portfolio occupancies are at or near historic peaks, making each incremental point of occupancy that much harder to come by."

Chesapeake Lodging Trust - Market Outperform

JMP did not provide a PT update, but felt the stock was "fully valued" at a price of $36.42, based upon the shares trading at 15.9x and 13.9x JMP revised 2015 and 2016 EBITDA estimates, respectively.

  • "CHSP reported a slightly disappointing quarter, with adjusted EBITDA of $33.7M falling short of guidance of $33.8-35.3M on soft RevPAR growth and weaker than expected margin expansion."
  • "In 4Q, the 20-hotel portfolio posted pro forma RevPAR growth of +4.9%, just short of guidance of +5-7%, and adjusted hotel EBITDA margin expansion of +20 bps to 30.5%, which also fell short of margin expansion guidance of 30.8-31.5%."
  • "CHSP has been active in the acquisition market, acquiring the 337-room JW Marriott SF Union Square for $147.2M in 4Q, and announcing on Thursday an agreement to acquire its first hotel in Miami's South Beach market, the James Royal Palm for $278M, or 13.9x forward EBITDA."

Sabra Health Care REIT - Market Underperform

JMP maintains its $25.50 PT which is based on a ~5% premium to its FTM NAV estimate, which represents 22% downside potential from current levels, or ~17% after the 5% dividend yield.

  • "SBRA reported 4Q AFFO of $32M, in line with the JMP estimate of $31.9M, and reiterated previous 2015 guidance of $2.05- $2.10 without acquisitions."
  • JMP maintained its "2015-2016 AFFO estimates of $2.22 and $2.25, respectively, as capital structure adjustment benefits are expected to be offset by G&A increases."
  • "SBRA currently trades at a 35% premium to [JMP's] FTM NAV estimate, compared to the overall HC REIT industry at 20%, despite showing higher than average leverage levels…"

Equity Commonwealth - Market Perform

JMP stated that Equity Commonwealth's fourth quarter earnings result is somewhat immaterial.

  • EQC has begun a transition phase, "whereby management is in the midst of instituting a multi-year plan focused on culling an extensive portion of the assets, and significantly de-levering the balance sheet."
  • "Management has been reluctant to shed too much insight into the strategy until recently, as $2-$3B of sales are planned, with proceeds allocated to debt reduction, share buybacks, and special dividends necessary to maintain REIT status."
  • JMP is "incrementally positive" on this strategy; noting "the potential for a turnover of the shareholder base, and reluctance for investors to get involved in a story with an unstable near-term outlook as the portfolio takes shape, may curb share performance in the near term."

Latest Ratings for BXMT

Feb 2019Deutsche BankDowngradesHoldBuy
Dec 2018Deutsche BankDowngradesBuyHold
Oct 2018BTIG ResearchInitiates Coverage OnNeutral

View More Analyst Ratings for BXMT
View the Latest Analyst Ratings

Posted-In: JMP SecuritiesAnalyst Color REIT Upgrades Analyst Ratings General Real Estate Best of Benzinga


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