OFC Reports Another Weak Quarter

Corporate Office Properties Trust OFC reported yet another week quarter, according to Citigroup, which believes the company is missing estimates because of soft operating fundamentals. In the report, Citigroup writes "An update to 2010 guidance will be provided on the call tomorrow along with 2011 guidance – where we 12c or 5% below the street ($2.42 vs $2.54) and the core run rate of $2.16 is not encouraging. Leverage also continues to increase with almost $300m of debt funded acquisitions and development spend in 3Q. Debt/EBITDA remains elevated at almost 10x with limited liquidity (~$200m) and significant forward spending commitments ($550m of development, $255m 2011 maturities). As such, we believe an equity raise is imminent. Valuation remains rich and does not appear to be pricing in any overhang, with shares trading at a 6.1% implied cap rate close to the CBD companies and far from suburban peers at 8%+." Citigroup maintains its Sell rating and $30 price target. Corporate Office Properties Trust closed yesterday at $37.56.