Seeing it “firing on all cylinders,” BMO Nesbitt Burns analyst Jenny Ma upgraded Plaza Retail Real Estate Investment Trust (PLZ.UN-T) to “outperform” from “market perform.”
“We believe Plaza is currently positioned at an upward inflection point.,” she said. “The grocery/essential-anchored retail sub-asset class has proven itself resilient, and investor demand for this asset class is high, fueling cap rate compression. It is clear that this view has become more agnostic to primary vs. secondary/tertiary markets in Canada, provided there are attractive tenants, covenants, and lease terms in place, as is the case generally for Plaza.”
After “solid” fourth-quarter results and seeing it moving “back to growth mode, Ms. Ma raised her target to $5.65 from $5. The average is $5.13.
“Two years after COVID, we believe Plaza has not only moved past pandemic-related operational challenges, but the stability of its essential-retailer heavy portfolio and proven redevelopment model position it to resume its steady pace of growth,” she said. “Moreover, we believe Plaza is poised to surpass its historical high of $5.28 reached in October 2016, when its forward AFFO [adjusted funds from operations] multiple was 17 times, compared with 14.5 times currently and 17.5 times implied by our new target price.”
Elsewhere, Desjardins’ Michael Markidis raised his target to $5 from $4.75 with a “hold” rating.
“PLZ is emerging from the pandemic in a position of strength with occupancy reaching a multi-year high and a growing development pipeline,” Mr. Markidis said.