KeyBanc's Take on Triple Net REITs: Marketweight
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Price: $40.41 -0.02%
Rating Summary:
4 Buy, 8 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
Rating Summary:
4 Buy, 8 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
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KeyBanc's Take on Triple Net REITs: Marketweight
KeyBanc analyst said, "The triple net group underperformed the broader REIT sector in 2011, and we suspect that the group could be a laggard again in 2012. The cap rate compression in 2010 and 2011, coupled with historically low interest rates, has effectively put a ceiling on near-term spread investing, even for the low cost of capital players. Given a relatively higher cost of capital, it may remain difficult for Entertainment Property Trust (NYSE: EPR) and CapLease (NYSE: LSE) to easily source attractive opportunities, which will likely limit cash flow and dividend growth."
"Within our coverage universe, we remain neutral on both EPR and LSE. Both companies have a higher cost of capital than Realty Income (NYSE: O)(uncovered) and National Realty (NYSE: NNN)(uncovered), which makes it more difficult to compete on acquisitions. While EPR’s cost of capital has been improving as the Company continues to seek an investment grade rating from S&P, competition for theatre and charter school investments has increased and the build-to-suit activity has been slower than expected."
"Separately, LSE continues to suffer from limited liquidity, although recent acquisitions and capital raises have provided some positive momentum. Overall though, portfolio growth will likely be measured given capital constraints."
KeyBanc analyst said, "The triple net group underperformed the broader REIT sector in 2011, and we suspect that the group could be a laggard again in 2012. The cap rate compression in 2010 and 2011, coupled with historically low interest rates, has effectively put a ceiling on near-term spread investing, even for the low cost of capital players. Given a relatively higher cost of capital, it may remain difficult for Entertainment Property Trust (NYSE: EPR) and CapLease (NYSE: LSE) to easily source attractive opportunities, which will likely limit cash flow and dividend growth."
"Within our coverage universe, we remain neutral on both EPR and LSE. Both companies have a higher cost of capital than Realty Income (NYSE: O)(uncovered) and National Realty (NYSE: NNN)(uncovered), which makes it more difficult to compete on acquisitions. While EPR’s cost of capital has been improving as the Company continues to seek an investment grade rating from S&P, competition for theatre and charter school investments has increased and the build-to-suit activity has been slower than expected."
"Separately, LSE continues to suffer from limited liquidity, although recent acquisitions and capital raises have provided some positive momentum. Overall though, portfolio growth will likely be measured given capital constraints."
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