Education Realty Trust, Inc. (EDR - Free Report) — better known as EdR — announced that its senior unsecured debt and shelf ratings have been upgraded by a notch from Baa3 to Baa2 by Moody's Investor Services (Moody's). The rating agency also upgraded EdR’s preferred equity shelf rating from Ba1 to Baa3.
Nonetheless, Moody’s maintained its outlook.
This move highlights EdR’s presence as a pre-eminent student housing REIT in the United States. Citing the company’s solid credit profile, impressive balance sheet and a large pool of unencumbered assets, Moody’s recognized its high liquidity position. This will enable EdR to pursue its growth plans and settle any short-term obligations on time.
As of Jun 30, 2017, the company had cash and cash equivalents of $33.5 million and outstanding indebtedness of $809.2 million. Moreover, all, except one of its communities, were unencumbered.
Notably, this rating upgrade enhances the company’s creditworthiness in the market and is likely to boost investors’ confidence in the stock. In fact, such moves provide companies an opportunity to enjoy reduced costs on debts and better access to capital. In addition, EdR has a debt-equity ratio of 0.46, relatively lower than its industry’s 0.95.
EdR has a low-levered balance sheet which indicates its efficiency in capital management and allocation. Per management, the latest upgrade will also support the company’s extensive development pipeline and help it tap other growth opportunities.
Recently, EdR completed and successfully delivered Sycamore Suites — the new on-campus residence hall of East Stroudsburg University of Pennsylvania.
Shares of this Zacks Rank #4 (Sell) company have lost 7.4%, while the industry recorded growth of 6.9%, year to date.
Stocks to Consider
Better-ranked stocks in the REIT space are Equity LifeStyle Properties, Inc. (ELS - Free Report) , Independence Realty Trust, Inc. (IRT - Free Report) and Seritage Growth Properties (SRG - Free Report) . All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Equity LifeStyle’s 2017 funds from operation (FFO) per share estimates inched up 0.3% to $3.59 over the past 60 days.
Independence Realty’s FFO per share estimates for 2017 climbed 1.4% to 75 cents in a month’s time.
Seritage’s FFO per share estimates for full-year 2017 inched up 0.5% to $2.01 during the same time frame.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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