Potential Earnings Dilution In Peakstone Realty's Long-Term Transition, Analyst Forecasts

Truist Securities analyst Anthony Hau initiated coverage on Peakstone Realty Trust PKST at Hold with a price target of $24.
Given the company has relatively new and unpopular single-tenant suburban office assets, the analyst is bullish on PKST's attractive valuation of 8.2x 2024E FFO versus 14x 2023E FFO in triple-net and 17x for all REITs.
Hau is upbeat about the portfolio's newer vintage age, high investment-grade tenancy (62%), and long weighted average lease term (6.9 years).
However, the analyst thinks management's target to transition into an industrial REIT may take several years and can lead to earnings dilution. Also, coupled with lower leverage and a high general & administrative expense load, Hau expects near-term cash flow growth to be challenging.
The analyst projects an adjusted FFO of $2.72 in 2023 and $2.82 in 2024.
Last month, the company reported Q1 2023 revenues of around $67.0 million and an adjusted FFO per share of $0.68.
Price Action: PKST shares are trading higher by 2.08% at $25.05 on the last check Friday.

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