DEA
Easterly Government Properties, Inc.
$23.75
Real Estate Investment Trust
85%
P/FFO × Office REIT Multiple
Moderate
·
Conviction
Undervalued
Trading 25.1% below fair value
You pay
$23.75
Bear
$24.38
Fair
$31.70
Bull
$39.01
Bear
$24.38
+2.7%
$2.73 FFO × 10x
Fair
$31.70
+33.5%
$2.73 FFO × 13x
Bull
$39.01
+64.2%
$2.73 FFO × 16x
Key Value Driver
FFO/share ($2.73) × office P/FFO multiple
Implied Market Multiple
8.7x
Summary
Our base-case estimate uses P/FFO × Office REIT Multiple. We then blend that result with the average analyst price target of $16.41 from 8 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $31.70 per share.
Warnings
Standard profit figures are misleading for real estate companies — large non-cash accounting charges make profits look artificially low. Dividend yield and funds from operations are better measures.
Dividend yield of 7.6% is unusually high — make sure the company generates enough cash to keep paying it.
Wall Street's average price target is $16.41 (from 8 analysts). Our estimate is 116% above the consensus -- consider that gap carefully.
Key Risks
- P/E and EV/EBITDA are structurally wrong for REITs — use P/FFO and NAV
- Interest rate sensitivity: REIT multiples compress when rates rise
- FFO approximation (NI + D&A) may include gains on property sales — verify