UPDATE: Stifel Upgrades CommonWealth REIT Following Additional Analysis

In a report published Friday, Stifel analyst John Guinee upgraded the rating on CommonWealth REIT (NYSE: CWH) from Sell to Hold.

In the report, Stifel noted, “We are upgrading our rating from Sell to Hold based on additional analysis where we evaluated the 33 asset, 23.6mm SF core portfolio on an Implied Cap Rate and Replacement Cost basis. We think the various valuation metrics are at an appropriate discount to the value office REITs we cover.

"As both prior and new management have stressed that 70-80% of the real estate asset value is in this core portfolio, we carved out the secondary 123 asset, 19.3mm SF portfolio; assuming an 8% cap rate on in-place NOI and a resulting $77/SF of value for the secondary portfolio. At the current $27.34 share price, the resultant core portfolio is valued at a 7.5% Implied NOI Cap Rate or $184/SF.

"We estimate gross and adjusted replacement cost for the core portfolio to be $361/SF and $221/SF.”

CommonWealth REIT closed on Thursday at $27.34.