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Wells Fargo Equity Research upgraded shopping center REITs Kite Realty Group (NYSE:KRG) and Phillips Edison & Company (NASDAQ:PECO) each to Equal Weight from Underweight on Wednesday as analyst Dori Kesten thinks an acceleration in FFO growth Y/Y in 2025 would “provide share price tailwinds.”
Indianapolis, Indiana-based Kite Realty (KRG) is expected to record 2025 adjusted FFO growth above the peer average. In addition to the potential for improved FFO growth, Kesten pointed to a more favorable price/earnings-to-growth multiple and likely positive takeaways from the company’s September investor event.
Such upshots, though, are “offset by above average tenant credit risk, below average ‘essential’ retail exposure by our estimate, and below average propensity to spend among its consumers vs peers,” he wrote in a note to clients.
On Phillips Edison (PECO), the analyst also thinks it’s fairly valued, “with ’25E FFO/sh growth above the peer average and ’25E AFFO/sh growth in line, relatively low tenant credit risk, and leading exposure to ‘essential’ retail by our estimate among peers, offset by a lagging propensity to spend among its consumers vs peers and an implied cap rate below its markets’, we believe the shares are fairly valued.”
Seeking Alpha’s Peer tab compares numerous stats of KRG and PECO. The SA Quan system, meanwhile, gives Agree Realty (ADC) the highest rating among retail REITs, followed by Brixmor Property Group (BRX) and Kite Realty (KRG).
In premarket trading, (PECO) gained 1.6%, while (KRG) was little changed.
