Wunderlich - Cedar Realty Trust, Inc. (CDR: $7.66)
Equity REITs
Expanding NAV, Multiples Lead Us to Raise Target to $8.50
Raising Price Target
Rating: Buy
Price Target: Old - $8.00; New - $8.50
Market Cap: $653.7
We are raising our target on Buy-rated Cedar Realty Trust, Inc. (CDR) from $8 to $8.50 given a rising NAV estimate and expanding shopping center multiples, and we believe CDR's fundamentals will improve over the next 12 months, leading to a normalized level of 3%+ SS NOI, which the market is overly discounting as CDR trades at a 15% discount to its peer group of shopping center REITs. While acquisition volume may pick up, we see 2016 as a continuation of deleveraging and we expect leverage ratios to continue to decline to a ~38%/6.7x EBITDA. Our NAV of $8.44 values the portfolio at a 7% cap rate on a normalized occupancy (2Q17E) basis and our target represents 101 % of NAV vs. peers trading at 106%; this represents an in-line 2016E FFO multiple (15.1x) with similarly sized peers.