4 Reasons Goldman Sachs Is Bullish On Brixmor Property

Shopping center REIT Brixmor Property Group Inc (NYSE: BRX), which owns open-air properties, has earned bullish review from Goldman Sachs despite shares underperforming year-to-date.

The Analyst

Analyst Caitlin Burrows initiated coverage of Brixmor Property with a Buy rating and a 12-month price target of $17.50.

The Thesis

Burrows outlined in a Friday note four factors that could prove constructive for Brixmor, even as serving as an issue for other companies.

The company's leading spreads have increased from 12.6 percent to 12.9 percent, while the spreads for Goldman's retail REIT coverage have decelerated by an average of 490 basis points year-over-year, Burrows noted. The analyst sees the company's ability to raise rents by at least 10 percent as supporting positive same center growth.

Given that the company's adjusted funds from operations payout ratio is below some peers and the retail average, and in line with the REIT sector average, the analyst said its dividend is well covered. The retained cash, according to the analyst, can be used for accretive projects.

Burrows sees the redevelopment the company is able to achieve with its low payout ration as a positive. The company is using the retained cash for repositioning anchor boxes, developing outparcels and redeveloping existing centers, the analyst said.

Goldman said the company's dispositions, with a 200 basis-point spread between Q1 disposition cap rate and its implied cap rate, allow it to implement its buyback program, while also paying down debt.

The Price Action

Brixmor Property shares have lost about 23 percent in the year-to-date period. The stock traded around $14.37 at time of publication.

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