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W. P. Carey (NYSE:WPC) and EPR Properties (NYSE:EPR) shares dipped 1.9% and 1.3%, respectively, in Monday late morning trading after Bank of America analyst Joshua Dennerlein downgraded the REITs as he turned more cautious on the net lease sector.
“Our models already reflect higher interest costs but risks appear skewed towards further increases in their cost of capital,” the sell-side analyst wrote in a note, adding “we will be watching interest rate moves closely.”
For WPC, in particular, cooling inflation and prospects for further cooling are expected to weigh on the company’s same store growth, with a large portion of its lease income tied to the inflation index. Dennerlein contended that its SS growth has already peaked and thinks it will continue to dispose of vacant office assets in the years ahead.
Even so, SA analyst Juxtaposed Ideas laid out a Buy recommendation for WPC, citing its safe dividends.
Dennerlein, meantime, lowered EPR (EPR) to Neutral from Buy as the ongoing Hollywood writer and actor strike poses “increasing risks of the content pipeline slowing.”
With movie theater exposure comprising 45.1% of its portfolio, he added, “the length of a strike and its impact on content production is the key risk from both an upside / downside perspective on the [stock’s] multiple.”
The Neutral rate disagrees with the SA Quant system rating of Strong Buy and the average Wall Street analyst rating of Buy.
More on EPR Properties and W. P. Carey:
W. P. Carey: Recent Drop A Buying Opportunity
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