Benchmark Starts Equity Residential (EQR) at Sell
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Benchmark Company initiates coverage on Equity Residential (NYSE: EQR) with a Sell rating and $38 price target.
The firm said key investment negatives are:
1) the property portfolio is facing headwinds, which could make operating metrics that already trail top-tier supply-constrained apartment REITs (despite aggressive portfolio repositioning and diverse markets) more likely to run into jobloss/ supply-related headwinds in 2H08 and 1H09, potentially driving same-store YoY revenue growth to less than 2% in 4Q08, a level not seen since '04.
2) slower market for transactions to upgrade the portfolio, due to the capital crunch and wider bid/ask spreads. EQR has already cut expectations to $250mn but does not see a need to pay a special dividend to remain in tax compliance.
Some investment positives are:
relatively small development effort, dramatic improvements in portfolio quality and better financing flexibility than peers.
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