With Overhang Gone, Citi Upgrades Brixmor Property Group To Buy

With Blackstone Group LP BX having completed the sale of its remaining 14 percent stake in Brixmor Property Group Inc BRX, Citi’s Michael Bilerman noted that an overhang on the latter’s stock had been eliminated.

Bilerman upgraded the rating on Brixmore Property from Neutral to Buy, while raising the price target from $28 to $31.

Benefits

“We see several benefits: 1) the most obvious being less supply of shares = greater impact on price with incremental demand; 2) it removes the psychological barrier preventing investors from buying in the open market vs. waiting for the next deal; 3) it provides management with a greater ability to raise equity capital for investment and de-levering; and 4) it eliminates the element of control of a large active shareholder,” the analyst mentioned.

Full Circle

Bilerman believes Brixmore Properties has “come full circle” from the accounting scandal earlier in 2016, given the hiring of a new and respected management team, consistent quarterly results and a successful debt offering.

“We favor a more aggressive leasing approach, and see the company becoming more active portfolio managers with necessary pruning of non-core assets and reinvestment into acquisitions and re/development,” Bilerman stated.

The analyst believes the company’s willingness to look at robust assets in secondary markets could prove to be an advantage, since these assets trade at higher yields than their counterparts in primary markets.

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