DDR Corp. (DDR) and Post Properties (PPS) have turned around their businesses and emerged with stronger balance sheets and geographical distribution of their real estate, says Alexander D. Goldfarb, Managing Director and Senior REIT Analyst at Sandler O’Neill + Partners, L.P. These REITs appear to be undervalued, he says, and they are his top picks for the industry.
“[DDR‘s] management has been on a roll over the past year, since there was a restructuring at the management level back in 2009, and since then they have shed a lot of legacy investments and delevered the balance sheet. In fact, they just regained their investment credit rating with S&P. And despite all that, the company still trades at a discount to NAV,” Goldfarb said.
Golfarb says Post Properties has been able to deliver very strong results without the usual competitive supply. He says PPS focusing on upscale, Class A apartments in the Sunbelt has driven NOI, which has led to beating consensus estimates continuously.
“[PPS] just had a credit upgrade from S&P to BBB, and management continues to deliver with a very simple story,” Goldfarb said. “There is a lot to like about the story, but on top of it, you get a company that’s trading at close to a 20% discount to NAV. To us, that’s pretty attractive.”
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