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UPDATE: Compass Point Initiates Coverage On Trade Street Residential On Cleaned-Up Balance Sheet

Dwight Einhorn

In a report published Wednesday, Compass Point analyst Ryan Gilbert initiated coverage on Trade Street Residential (NASDAQ: TSRE) with a Buy rating and $8.50 price target.

In the report, Compass Point noted, “We are initiating on TSRE with a Buy rating and $8.50 price target. After a rocky first year as a public company, TSRE is poised for rapid AFFO growth, driven by the stabilization of its newly acquired portfolio of pre-stabilized apartment properties at mid 6% yields and 60% NOI margins, well above TSRE's current NOI margin of 53.5%. Additionally, the Company has mitigated headwinds to the stock through its 1Q14 rights offering and management transition, which simplified the ownership structure and reduced TSRE's leverage.

"Currently, the sole remaining headwind to TSRE's stock is the Class A preferred share repurchase, which we expect the Company to complete in 2014. The natural catalyst for TSRE will be demonstrating the strength of the leaseup portfolio through AFFO and NOI margin growth. Other near term catalysts include the Class A repurchase, the disposal of land held for sale, and capital recycling into new properties from non-core properties.”

Trade Street Residential closed on Tuesday at $7.38.

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