Broadstone Net Lease's (BNL) portfolio simplification strategy of shifting away from healthcare towards industrial assets is seen as "priced in at current levels" and is awaiting further "evidence of sustainability of its new algorithm," UBS said in a note Thursday.
"We could improve our stance on BNL once the benefits of portfolio simplification, including better rent escalators, work through the algorithm," UBS said in the note initiating coverage of the real estate investment trust with a neutral rating and a $18 price target. The analysts also said they could "get more negative on the stock if its increased exposure to Industrial creates tenant risk in a softer macro."
The investment firm acknowledged the company's recent "accelerated" industrial developments totaling $454 million as of September, yet cautioning that "high cost of capital may limit future opportunities."
UBS also noted Broadstone Net Lease's "pruning" of healthcare assets, reducing healthcare annualized base rent to less than 10% in Q3, and expanding its "industrial BTS development pipeline".
"If industrial oversupply impacts the company's BTS development opportunities, we would expect slowing growth," UBS said.
Price: 17.00, Change: -0.02, Percent Change: -0.12
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