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Evercore ISI analysts downgraded shares of Paramount Group (NYSE:PGRE) from In Line to Underperform, with the price target cut to $6.50 from $8 per share.
They told investors in a note that the new price target implies limited upside to Friday’s closing price, and they continue to believe that the company faces near-term leasing issues across its office portfolio. In addition, the firm believes pricing power “remains elusive in both NY and SF.”
“While the stock may appear “cheap” trading at an 8.4% implied cap rate, we question the level of NOI growth over the next few years and the lack of debt financing makes any type of external growth nearly impossible for the company given their leverage is nearly 9x on a net debt to adjusted EBITDA basis,” the analysts wrote.
The rating and price target change was part of a broader note on the real estate sector after Evercore analysts attended the Fall NAREIT conference in San Francisco. Still, they said the level of new information was “very limited.”
