Though Zacks senior real estate investment trust (REIT) industry analyst Greg Sukenik sees some good news among his coverage, Post Properties (PPS) is not among those companies. Here's where his latest Sell report gives the basis for this opinion:
'Post continues to report good quarterly results; rent growth and occupancy have held up in the company's core markets. Although, there are signs that rental rate growth will slow in the coming quarters and could turn negative in 2008 as the U.S. economy heads toward a recession.
'Despite a sector-wide sell-off over the past six months, Post still trades at an inflated valuation due to persistent buyout rumors. Investors are convinced that Post, with its relatively clean balance sheet and institutional quality assets is next.
'Although we do not expect any significant M&A activity in the REIT sector in the near term as it is very difficult to finance deals in the current credit environment. At 18.6x our run-rate 2007 FFO estimate, Post trades at a 25% premium to the Zacks apartment REIT sector average.
'Shares have tumbled about 31% over the past six months. Similarity situated competitors, such as UDR, Inc. (UDR) (11.6x 2007 FFO estimates) and Mid-America Apartment (MAA) (13.5x estimates), have much lower comparative valuations. We would put a higher value on Post as it generally has newer assets than these peers, although the spread should narrow in a volatile REIT market. We are leaving our price target at 15x 2007 FFO estimates or $30.00 per share.'
Read the full analyst report on PPS.
Read the full analyst report on UDR.
Read the full analyst report on MAA.
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