In a recent report, Morgan Stanley analysts summarized their outlook for two real estate investment trusts (REITs) that have exposure to Miami, Florida and Puerto Rico retail properties. Analysts recently toured properties owned by DDR Corp DDR 1.95% and Taubman Centers, Inc. TCO 1.63% and broke down their take on the prospects for each area.
DDR Dominating Puerto Rico
About 14 percent of DDR’s net operating income (NOI) comes from its 15 Puerto Rican centers. Investors have been uncomfortable with the REIT’s exposure to such a shaky economy, but analysts believe that these fears are unwarranted.
During their visit, analysts toured three of the REIT’s largest properties on the island. These properties generate strong cash flows, strong tenant demand and a mix of mostly U.S.-based retailers. Analysts believe that current levels represent an attractive entry point into DDR for investors.
Taubman Hot In Miami, Shaky In Puerto Rico
Analysts believe that Taubman’s WorldCenter properties will prove a success, despite competition from Swire’s Brickell City Center development only two miles away. According to the report, the WorldCenter property has a superior location, with access to two of Miami’s busiest highways.
Analysts were not sold on Taubman’s Puerto Rico properties, which have run over-budget and have been plagued by tenant leasing complications. “While we remain favorable on the center’s [long-term] prospects given a healthy appetite for high-end retail on the island, we are incrementally concerned about the project’s outlook nearer-term.”
The Bottom Line
Overall, Morgan Stanley analysts have a positive view of DDR’s properties in Puerto Rico and are bullish on the REIT going forward.
Analysts believe that Taubman’s Miami WorldCenter properties are solid given the upside potential and superior location of the project. However, they are skeptical of Taubman’s San Juan, Puerto Rico development and need to see more from the property before they are convinced of its potential.
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