Potential Earnings Dilution In Peakstone Realty's Long-Term Transition, Analyst Forecasts

Author: Lekha Gupta | June 02, 2023 02:22pm

• Truist Securities analyst Anthony Hau initiated coverage on Peakstone Realty Trust (NYSE:PKST) at Hold with a price target of $24.
• Given the company has relatively new and unpopular single-tenant suburban office assets, the analyst is bullish on PKST's attractive valuation of 8.2x 2024E FFO versus 14x 2023E FFO in triple-net and 17x for all REITs.
• Hau is upbeat about the portfolio's newer vintage age, high investment-grade tenancy (62%), and long weighted average lease term (6.9 years). 
• However, the analyst thinks management's target to transition into an industrial REIT may take several years and can lead to earnings dilution. Also, coupled with lower leverage and a high general & administrative expense load, Hau expects near-term cash flow growth to be challenging.
• The analyst projects an adjusted FFO of $2.72 in 2023 and $2.82 in 2024.
• Last month, the company reported Q1 2023 revenues of around $67.0 million and an adjusted FFO per share of $0.68. 
• Price Action: PKST shares are trading higher by 2.08% at $25.05 on the last check Friday.

Posted In: PKST