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Fund Flows Are Signaling Upside In These Three REIT Stocks

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Fund Flows Are Signaling Upside In These Three REIT Stocks

In a report published Wednesday, Stifel analyst John Guinee offered three stocks that could benefit from a bottoming of negative fund flows, a bottoming of generalist investor interest and/or a potential rally in "risk-off" equities – which historically benefit REITs.

Boston Properties: Best-In-Class REIT

According to Guinee, Boston Properties, Inc. (NYSE: BXP) is a "best-in-class" office REIT, with an "impressive" long-term track record of creating value for investors.

Guinee further offered nine reasons to be bullish on the name:

  • 1) Attractive real estate valuation metrics
  • 2) $700 to $900 million of asset sells annually
  • 3) A $2.1 billion, 61 percent pre-leased development pipeline
  • 4) A theoretical 50 percent profit margin on the development pipeline
  • 5) A best-in-class portfolio of assets within the REIT space
  • 6) A balance sheet that may even be "too solid"
  • 7) A "conservatively run core" portfolio
  • 8) very few "functionally challenged" assets
  • 9) A "deep" and "talented" management team

Shares were upgraded to Buy from Hold with a new $120 price target.

Related Link: 4 REITs Miller Tabak Is No Longer Selling

Prologis: ‘Dominant' Industrial REIT

According to Guinee, Prologis Inc (NYSE: PLD) is a "dominant" industrial REIT whose valuation is driven by the following five forces:

  • 1) Constantly changing global economic drivers
  • 2) A "relative" valuation versus blue chip peers
  • 3) A "relative" valuation versus the smaller cap domestic industrial REITs
  • 4) A pipeline of projected industrial development starts
  • 5) A "perception of strategic decisions" on any given day

Shares were upgraded to Buy from Hold with a new $41 price target.

SL Green Realty: ‘Opportunity Fund' In REIT

Finally, Guinee stated that SL Green Realty Corp (NYSE: SLG) is an "opportunity fund" in REIT clothing, as the value of the stock is based on investor perception of the Midtown Manhattan office market.

Guinee offered six reasons to be bullish on the name:

  • 1) The downside in SL Green's stock is "well protected" by its Manhattan office portfolio total enterprise value (TEV) of $736 per square foot versus a gross/adjusted replacement cost of $1,365/$841
  • 2) The $50 to $70 per square foot office leasing price point remains "attractive" in Manhattan
  • 3) Management is "conservative" with its core office portfolio
  • 4) A rapid lease-up of acquired vacancy
  • 5) Investments in multiple product types
  • 6) An active structured finance portfolio

Shares were upgraded to Buy from Hold with a new $112 price target.
Image Credit: Public Domain

Latest Ratings for BXP

DateFirmActionFromTo
Apr 2019Deutsche BankMaintainsHoldHold
Mar 2019Evercore ISI GroupUpgradesIn-LineOutperform
Mar 2019Morgan StanleyDowngradesEqual-WeightUnderweight

View More Analyst Ratings for BXP
View the Latest Analyst Ratings

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