Barclays on U.S. REITs: L.A. Stories: Takeaways from DEI and HPP Investor Days
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Price: $11.79 -0.59%
Rating Summary:
6 Buy, 19 Hold, 4 Sell
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Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
6 Buy, 19 Hold, 4 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Barclays on U.S. REITs: L.A. Stories: Takeaways from DEI and HPP Investor Days
Barclays analyst, Ross L. Smotrich, said, "Last Wednesday, we attended investor days in Los Angeles for DEI (in the morning) and HPP (in the afternoon). Each company provided a presentation by management, followed by a tour of local assets. Our main takeaway was that L.A. may not be fully appreciated relative to the other gateway office markets of NY, Boston, Washington DC and San Francisco. While we expect a more gradual recovery in the near term, L.A. also tends to display less volatility because of its wide variety of demand drivers."
"Douglas Emmett (NYSE: DEI): L.A. Concentration a Positive and Negative. DEI stock is down 25% from its first day of trading on 10/24/06 (versus -35% for the RMZ over the same period), as lower occupancy and higher expenses have offset the benefits of a larger portfolio. Going forward, L.A. fundamentals are beginning to recover and DEI is looking to more effectively grow by acquiring assets with lease-up risk and unlock value by applying its local market knowledge and operating platform...A relatively slow near-term earnings growth outlook and higher leverage inform our Equal Weight rating and $20 12-month price target, which implies 16% potential upside versus 25% for our coverage universe overall."
"Hudson Pacific Properties (NYSE: HPP); Strong Execution and Future Potential. HPP has executed the growth plan it presented at the time of last year's IPO, despite a challenging market environment. Thus far, the stock has not rewarded this performance; we believe the weak stock price has resulted from the company's small market cap and concerns around the acquisition environment and the availability/pricing of capital. We think the current discount should narrow as fundamentals recover and HPP benefits from its increased presence in San Francisco. The equity market may be cost-prohibitive for some time and therefore HPP may need to explore other financing strategies (management mentioned more preferred shares and joint venture structures as possibilities). We believe the potential upside outweighs the risks and rate the stock Overweight with a $17 12-month price target, implying 43% potential upside."
"We are not changing our earnings estimates or price target for DEI or HPP. We think each stock looks compelling on an absolute basis, but rate only HPP Overweight because we believe it has better growth potential and more upside. DEI is scheduled to report 3Q11 results after the market close on Tuesday, November 1; we project 3Q11 FFO of $0.34ps versus the consensus of $0.32ps. HPP is scheduled to report its quarterly results after the market close on Monday, November 7; we project 3Q11 FFO of $0.23ps versus the consensus of $0.24ps."
Barclays analyst, Ross L. Smotrich, said, "Last Wednesday, we attended investor days in Los Angeles for DEI (in the morning) and HPP (in the afternoon). Each company provided a presentation by management, followed by a tour of local assets. Our main takeaway was that L.A. may not be fully appreciated relative to the other gateway office markets of NY, Boston, Washington DC and San Francisco. While we expect a more gradual recovery in the near term, L.A. also tends to display less volatility because of its wide variety of demand drivers."
"Douglas Emmett (NYSE: DEI): L.A. Concentration a Positive and Negative. DEI stock is down 25% from its first day of trading on 10/24/06 (versus -35% for the RMZ over the same period), as lower occupancy and higher expenses have offset the benefits of a larger portfolio. Going forward, L.A. fundamentals are beginning to recover and DEI is looking to more effectively grow by acquiring assets with lease-up risk and unlock value by applying its local market knowledge and operating platform...A relatively slow near-term earnings growth outlook and higher leverage inform our Equal Weight rating and $20 12-month price target, which implies 16% potential upside versus 25% for our coverage universe overall."
"Hudson Pacific Properties (NYSE: HPP); Strong Execution and Future Potential. HPP has executed the growth plan it presented at the time of last year's IPO, despite a challenging market environment. Thus far, the stock has not rewarded this performance; we believe the weak stock price has resulted from the company's small market cap and concerns around the acquisition environment and the availability/pricing of capital. We think the current discount should narrow as fundamentals recover and HPP benefits from its increased presence in San Francisco. The equity market may be cost-prohibitive for some time and therefore HPP may need to explore other financing strategies (management mentioned more preferred shares and joint venture structures as possibilities). We believe the potential upside outweighs the risks and rate the stock Overweight with a $17 12-month price target, implying 43% potential upside."
"We are not changing our earnings estimates or price target for DEI or HPP. We think each stock looks compelling on an absolute basis, but rate only HPP Overweight because we believe it has better growth potential and more upside. DEI is scheduled to report 3Q11 results after the market close on Tuesday, November 1; we project 3Q11 FFO of $0.34ps versus the consensus of $0.32ps. HPP is scheduled to report its quarterly results after the market close on Monday, November 7; we project 3Q11 FFO of $0.23ps versus the consensus of $0.24ps."
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