Washington REIT Starts 2018 With Stifel Downgrade

Washington Real Estate Investment Trust WRE reported third-quarter earnings Oct. 26. The company's EPS of 4 cents was below expectations of 9 cents, while sales of $82.8 million also fell short of a $83.1-million expectation. 

The Analyst

Stifel Nicolaus' John Guinee downgraded Washington Real Estate Investment Trust from Hold to Sell and decreased the price target from $33 to $28.

The Thesis

The REIT's 390,000 square feet of known office move-outs in mid-2019 are projected to reduce full year free funds from operations by approximately $13.2 million, or $0.17 per share, Guinee said in a Tuesday note. (See the analyst's track record here.) 

The move-outs comprise around 10 percent of the company's 4-million-square-foot office portfolio, and they include the 310,00-square-foot Advisory Board in the second quarter of 2017, as well as a secondary location, and Blank Rome, an 80,000-square-foot tenant, in the third quarter, said Guinee.

One of Washington Real Estate Investment Trust's largest assets, the 292,000-square-foot 2445 M Street, which was purchased for $181.4 million or $621 per square foot in 2008, could soon be sold for $117 million or $400-per-square foot, the analyst said. Stifel projects a $67-million decrease in net asset value estimates at the REIT, equivalent to 85 cents per share.  

Due to the sale of the Braddock Metro Center and the Walker House Apartments, Guinee expects a rough first quarter for the REIT — unless a "large acquisition" is made in early 2018. 

The Price Action

Washington Real Estate Investment Trust dropped almost 4 percent Tuesday.

Related Links:

Wells Fargo: 27 Stocks To Play Real Estate In 2018 

KeyBanc's Guide To REITs In 2018: Expect 5-10% Returns 

Posted In: John GuineeStifel NicolausAnalyst ColorREITDowngradesPrice TargetAnalyst RatingsReal Estate