PDM
Piedmont Office Realty Trust, Inc.
$8.20
Real Estate Investment Trust
85%
P/FFO × Office REIT Multiple
Moderate
·
Conviction
Undervalued
Trading 34.9% below fair value
You pay
$8.20
Bear
$9.90
Fair
$12.59
Bull
$15.28
Bear
$9.90
+20.7%
$1.15 FFO × 10x
Fair
$12.59
+53.6%
$1.15 FFO × 13x
Bull
$15.28
+86.4%
$1.15 FFO × 16x
Key Value Driver
FFO/share ($1.15) × office P/FFO multiple
Implied Market Multiple
7.1x
Summary
Our base-case estimate uses P/FFO × Office REIT Multiple. We then blend that result with the average analyst price target of $10.00 from 11 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $12.59 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 6.1% is unusually high — make sure the company generates enough cash to keep paying it.
Dividend-based valuation: $9.32 (30% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $10.00 (from 11 analysts). Our estimate is 32% 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