8.29% Yield REIT Undervalued, But Carries Material Risk

Leverage for this company is temporarily distorted higher. It has quality properties and the renovations so far have been living up to the billing. The company carries a material amount of risk. More risk-averse investors may want to stay away.

PREIT (PEI) continues to carry a regular buy rating. Investors should be aware that PREIT is riskier than Simon Property Group (SPG), but less risky than CBL Properties (CBL). PEI’s leverage is higher than I like to see for an equity REIT. Regardless of the asset type they are investing in, I would prefer to see lower debt to EBITDA multiples. For PEI, the multiple is expected to peak around 9.1x at the end of 2018. However, the one major weakness for debt to EBITDA is the delay in building EBITDA after the cash expenses for redevelopment.

Source: Seeking Alpha

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