KeyBanc Downgrades Retail Properties of America (RPAI) to Hold

KeyBanc downgraded Retail Properties of America (NYSE: RPAI) from Buy to Hold and removed its price target (prior $17.00).

Analyst Todd M. Thomas said, "We view shares to be fairly valued on a risk-adjusted basis given our forecast for slower relative earnings growth in 2015 (-1% AFFO growth vs. 8% for the sector) vs. the Company’s peers, which is predicated on an acceleration in near-term, earnings dilutive capital recycling activity as the Company prunes its portfolio and focuses primarily on 10- 15 target markets. In addition, at 93.3% occupancy, we see less occupancy upside within the Company’s retail portfolio compared to 88% when the Company listed its shares on the New York Stock Exchange; with relatively lower combined leasing spreads vs. the Company’s shopping center peers (5.6% on a trailing four quarter basis), RPAI’s same center net operating income growth could begin to decelerate."

"Finally, we suspect that management will issue conservative 2015 initial FFO guidance, which could also pressure shares in the near term; this may present a more attractive entry point for tactical investors. Shares trade at a 6.7% implied cap rate, which compares to the sector’s average implied cap rate of 5.7%, and the stock trades at a 16% 2015 AFFO multiple discount," he added.

For an analyst ratings summary and ratings history on Retail Properties of America click here. For more ratings news on Retail Properties of America click here.

Shares of Retail Properties of America closed at $16.57 yesterday.

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