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VEREIT: A REIT With Two Ways To Win

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  • Vereit Inc (NYSE: VER) shares have lost 11 percent year-to-date, having declined steadily since April.
  • Goldman Sachs analyst Andrew Rosivach initiated coverage of the company with a Buy rating and a price target of $9.50.
  • Rosivach believes that Vereit’s valuation could be boosted by the recently announced plan to sell $2 billion of real estate through 2016 and the company becoming a possible M&A candidate.

Vereit is a net lease REIT and owns Cole Capital, which is a non-traded REIT sponsor. Analyst Andrew Rosivach mentioned that elevated leverage seemed to be restricting the company from making acquisitions. This, in turn, erases the possibility of the company generating earnings growth, resulting in its stock trading at a discount.

Vereit has recently announced a plan to sell $2 billion of real estate through next year, at cap rates of 6.5-7.5 percent. Rosivach added that this would result in “stronger internal growth, tenant diversity, balance sheet metrics, external growth, and as a result, valuation.”

“We also calculate VER’s earnings could be 14% higher in the hands of an acquirer, making the company a possible M&A candidate,” the analyst wrote.

Vereit’s stock trades at a discount of 18 percent to triple net peers and at a discount of 45 percent to Goldman Sachs’ REIT coverage. The report pointed out that this discount is a result of “the market’s focus on the current versus future company.”

Rosivach enumerated the likely catalysts for the company’s stock as:

  1. Litigation settlement related to the 2014 accounting misstatement
  2. Asset sales: “We believe VER’s volume and pricing goals will be met based on other REITs’ actions and commentary on the 1031 market.”
  3. Re-establishing Cole’s key broker-dealer partners.
  4. Non-traded REIT regulatory changes: DOL restrictions could reduce non-traded activity.

Latest Ratings for VER

DateFirmActionFromTo
Jun 2019UpgradesUnderperformBuy
Feb 2019DowngradesOutperformNeutral
Oct 2018Initiates Coverage OnOutperform

View More Analyst Ratings for VER
View the Latest Analyst Ratings

Posted-In: Andrew Rosivach Goldman SachsAnalyst Color Initiation Analyst Ratings

 

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