Market Overview

Recent Underperformance Leaves Education Realty Trust Stock At An Attractive Price


Citi upgraded Education Realty Trust, Inc. (NYSE: EDR) to Buy from Neutral as the underperformance has left shares trading at an attractive relative valuation versus American Campus Communities, Inc. (NYSE: ACC) and the multifamily sector.

"We view the risks as tilted to the upside and see the potential for a 15%+ total return. EDR benefits from positive student housing trends, including the maturation and institutionalization of the sector, positive fundamentals, an attractive development pipeline, and a strong balance sheet," analyst Michael Bilerman wrote in a note.

Bilerman potential catalysts for EDR include:

  • "the delivery of accretive development and a pipeline for growth going forward,"
  • "a more favorable preleasing comp for academic year ‘17/'18 vs. lower occupancy in Fall 2016," and
  • "growing institutional interest in the student housing sector."

On the flip side, risks include 2017 guidance versus the Street and higher market supply in 2017 versus 2016 and 2015.

For fall 2018, the analyst expects development pipeline could reach about $400 million versus current pipeline of about $230 million in the pipeline. The yields are expected about 6.5-7 percent, ahead of transaction cap rates for high-quality well-located assets of about 5 percent.

"EDR is also well positioned to win on-campus public-private partnerships (P3s) with universities. There are an increasing number of universities considering P3s given their desire to replace outdated existing housing stock and a decline in state support," Bilerman added.

Latest Ratings for EDR

Sep 2020CIBCUpgradesUnderperformerNeutral
Feb 2020BMO CapitalMaintainsMarket Perform
Nov 2019BMO CapitalMaintainsMarket Perform

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Posted-In: Citi Michael BilermanAnalyst Color REIT Upgrades Price Target Analyst Ratings Real Estate

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