Morgan Stanley Puts The Spotlight On Shopping Centers
On Monday, Morgan Stanley released a report previewing what investors should expect from upcoming Q1 2015 earnings reports from the shopping center REIT sector and including specifics on:
- American Assets Trust, Inc (NYSE: AAT): $1.8 billion cap, 2.25 percent yield
- DDR Corp (NYSE: DDR): $6.4 billion cap, 3.9 percent yield
- Regency Centers Corp (NYSE: REG): $6.1 billion cap, 1.95 percent yield
Tale Of The Tape – Past Year
MS – Shopping Centers: Big Picture
- Fundamentals Solid: MS reports anecdotal evidence that tenant demand still remains strong, despite a retail sales environment they described as still being "cautious."
- Limited Supply: The lack of new shopping center development no doubt contributes to landlord pricing power and low reported vacancy rates.
- Northeast Weather: MS expects to hear that snow removal and other weather related factors may have negatively impacted some shopping center Q1 SSNOI performance.
- Quality Matters: MS is looking for 3 to 4 percent SSNOI increases in higher quality centers vs. only 2 to 3 percent for "lower productivity" REITs.
MS – Shopping Center Growth Trends
Regarding redevelopment, MS expects investors will be focused on redevelopment growth trends for each REIT since they have been accretive due to a wide spread – due to (higher) attained yields vs. (lower) cap rates.
MS noted that although new development is still lagging, two large grocery anchored REITs, Regency Centers and Kimco, both have new projects in the early stages of development.
Regarding M&A activity, MS mentioned the recent acquisition of Excel Trust for a 15 percent premium by Blackstone as potentially being the beginning of a trend. MS noted that six of the shopping centers in their coverage universe have market caps of $2 billion or less – potentially fuel for future M&A activity.
MS Expectations For AAT
MS expects "$0.42 FFO, +8 percent Y/Y, vs. Consensus $0.42" for American Assets Trust.
MS Call Questions:
- 1. How aggressive are new store opening plans?
- 2. Small shop leasing updates/progress?
- 3. Any new development updates?
- 4. Any color/guidance on 2015 SSNOI growth?
American Assets Trust is scheduled to report Q1 results AMC on April 28.
MS Expectations For DDR Corp
MS expects "$0.30 FFO, +7 percent Y/Y, vs. Consensus $0.30" for DDR Corp.
MS Call Questions:
- 1. Any additional color on power center cap rates vs. grocery anchored centers?
- 2. Any additional color on acquisitions and dispositions?
- 3. Any updates regarding "struggling retailers" Best Buy, Barnes & Noble, etc.?
- 4. What was the impact of lower gas prices on sales?
DDR is scheduled to report Q1 results AMC April 28.
MS Expectations For Regency Centers
MS expects "$0.72 FFO, +4 percent Y/Y, vs. Consensus $0.73" for Regency Centers Corp.
MS Call Questions:
- 1. How aggressive are new store opening plans?
- 2. Small shop leasing updates/progress?
- 3. What is the outlook for new developments and/or acquisitions?
- 4. Are grocers seeing any benefits from lower gas prices?
Regency is scheduled to report Q1 results AMC on May 6.
Image Credit: Public Domain
Latest Ratings for AAT
Date | Firm | Action | From | To |
---|---|---|---|---|
Jun 2020 | Wells Fargo | Maintains | Overweight | |
May 2020 | Wells Fargo | Maintains | Overweight | |
May 2020 | Morgan Stanley | Downgrades | Overweight | Equal-Weight |
View More Analyst Ratings for AAT
View the Latest Analyst Ratings
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Posted-In: blackstoneAnalyst Color REIT Previews Analyst Ratings Trading Ideas General Real Estate Best of Benzinga