Investors Real Estate Sluggish

Investors Real Estate Trust (IRETS) had a mediocre 1st quarter. The company missed our 1Q FFO [funds from operations] estimates by $0.04 per share, mainly due to higher than expected expenses.

Fundamentals noticeable declined in the company’s office, retail and industrial segments, while improving in multifamily and medical. We think the company’s diversified portfolio will perform better than sector specific REITs in a weakening economic landscape. On a P/FFO basis, the company is trading at an approximate 15% discount to office REITs, and a 20% discount to multifamily REITs in our coverage universe. The company is now trading at an approximate 8% premium to our NAV [net asset value] estimates due to our increase in market cap rate assumptions.

We have lowered our full year 2008 FFO estimates by $0.04 per share to $0.86 per share due to declining fundamentals and what we think will be more difficult operating environment for commercial REITs. We are changing our near term recommendation to Hold and would wait for some of the uncertainty to pan out in the credit markets before we are a buyer. We are setting our six month price target at $11.00 per share or nearly 13x 2008 FFO estimates.

Read the full analyst report on IRETS

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