Healthcare Realty Trust (NYSE: HR); Sector Perform- $25.78)

• HR is focused on investing in MOBs that are on-campuses of the top 100 systems and MSAs.
• The portfolio should generate attractive organic growth, especially with the 603 assets.
• HR is tracking $400–500 million of developments and should start ~$100 million annually.
• The company is still sourcing attractive acquisitions and should remain modestly active.
• Management will actively recycle assets, investing proceeds into faster-growing properties.

Medical Properties Trust (NYSE: MPW); Outperform - $11.05)

• Management is comfortable with ADPT and noted they continue to drive strong cash flow.
• MPW is marketing groups of assets, but the timing and scope of the sales are still uncertain.
• The company will be measured with respect to new acquisitions, mainly completing relationship deals.
• The LTACH patient criteria could impact coverage, but Ernest appears well positioned.
• Leverage could creep higher, but MPW is committed to improving these metrics over time.

Welltower, Inc. (NYSE: HCN); Outperform - $59.57)

• The company will still complete relationships deals, but activity will be more measured.
• HCN noted that its relationships are aware that deals need higher yields in this environment.
• The JV structure may allow HCN to remain active, completing slightly lower cap rate deals.
• Supply could impact the SHOP, but the assets are well positioned to weather these concerns.
• Leverage metrics appear healthy, and the company does not necessarily need to issue equity.

Lodging

Hersha Hospitality Trust (NYSE: HT); Sector Perform - $23.54

• HT could close NYC asset sales in early 2016.
• HT is considering converting some hotels to independent hotels.
• Philadelphia should be strong in '16 from Rittenhouse tailwinds and the DNC convention.
• Eurozone travel slowness is being partially offset by Brazil, Argentina, and China.
• Buying back stock and reducing shares outstanding should improve takeover attractiveness.

LaSalle Hotel Properties (NYSE: LHO); Sector Perform - $28.07

• LHO will wait until MAR details integration plan to determine the impact of the merger.
• International demand and supply were key concerns for LHO's gateway hotels.
• International travel comps should become easier in 2Q16.
• Visibility remains limited, but LHO will continue to take group when possible.
• There were no issues with the union and everything seems to have been addressed.

Office

Alexandria Real Estate Equities (NYSE: ARE); Outperform - $89.31

• Fundamental trends remain solid despite negative market sentiment in the space.
• VC funds are well positioned and typically deploy raised capital over a 4- to 5-year time frame.
• Management plans to remain active recycling core, non-core, and land assets.
• ARE is tracking significant interest from existing tenants that want to renew 1–2 years early.
• The company indicated that the in-place rental rates are 7–9% below the current market rent.

Boston Properties (NYSE: BXP); Outperform - $124.14)

• Leasing at Embarcadero Center should drive $25–30 M of NOI over the next 2–3 years.
• There is good traction at Salesforce Tower and we expect the property to stabilize by YE17.
• BXP continues to search for solid development projects but the pipeline should trend lower.
• BXP remains encouraged by San Francisco and doesn't expect a meaningful slowdown.
• Debt markets are still strong and the company estimates that it can issue 10-year notes at 3.75%.

Equity Commonwealth (NYSE: EQC); Underperform - $27.81)

• Private valuations remain too steep, and EQC remains cautious in the acquisitions market.
• EQC likely needs a disequilibrium in the market before it would accelerate acquisition activity.
• The company will likely remain active paying down debt and repurchasing common stock.
• Leasing activity is solid; management expects occupancy to remain stable through YE15.
• Market rents are trending higher, but cash lease spreads will likely remain largely flat.

Kilroy Realty Corp. (NYSE: KRC); Outperform - $65.28)

• Management is tracking 2 M SF of demand at the Exchange including a full-building user.
• One of these tenants also indicated interest in leasing a large block of space at 100 Hooper.
• KRC will likely fund the in-place development projects with additional asset sales.
• Management may be willing to bring on a JV partner to fund future development projects.
• The city may be willing increase the Prop M allocation by 2–3 million SF.

Retail

American Assets Trust (NYSE: AAT); Outperform - $40.00

• Recent organizational changes align key personnel to each of the property type segments.
• At Hassalo on Eighth, 45% of the units have been leased despite a delay on the Aster building.
• In addition, leasing at Hassalo has not slowed as much as expected going into the holidays.
• Hawaii retail sales have dropped 7% due to slower global growth but still exceed $1,000/sf.
• AAT would like to add to its retail and apartment portfolios, but pricing remains difficult.

Kimco Realty Corporation (NYSE: KIM); Outperform - $26.25

• Discount and off-price retailers are seeing significant strength in the company's portfolio.
• Big anchors are increasing open-to-buys, which should lead to more re/development.
• The redevelopment pipeline is likely to exceed $1.1 billion over the next several years.
• Cap rates could rise in secondary markets as interest rates increase.
• Management is targeting acquisitions with value-add opportunities.

Simon Property Group (NYSE: SPG); Outperform - $190.24

• Recent retailer malaise is not broad-based; some retailers are showing significant strength.
• Three of the eight planned US Primark stores will open in Simon centers by next year.
• The HBS JV would be the likely vehicle for any potential US street retail transactions.
• European outlet development activity could pick up with partner MacArthurGlen.
• Look for a number of hotel, multifamily, and mixed-use opportunities to be announced.

Tanger Factory Outlet Centers (NYSE: SKT); Outperform - $33.67

• Management expects functionally full occupancy by year-end at 97.5–98.0%.
• Excess inventory from recent slowing retailer sales is likely to find its way to the outlets.
• The portfolio has only eight value department stores, limiting exposure to recent headlines.
• Recent disposition proceeds likely used to unencumber/purchase JV interest in Deer Park.
• The company plans a special dividend of $0.15–0.20/share payable in 1Q16.

Self Storage

Extra Space Storage (NYSE: EXR); Outperform - $80.92

• Revenue growth should come from rate, with occupancy elevated and concessions low.
• Acquisitions are increasingly competitive, with cap rates 5.5–6.5% on average.
• Overbooking is being tested in order to further minimize vacancy.
• EXR should see additional property management opportunities through SmartStop funds.
• Supply appears very manageable, with EXR expecting 400–500 new stores in '16.

Triple Net

EPR Properties (NYSE:EPR); Outperform - $55.29

• The 2015 box office has been one of strongest on record.
• More opportunities exist for theater acquisitions and retrofits.
• TopGolf development deliveries are expected to total $175–225 million through 2017.
• As of this school season, enrollment is full at the company's private schools.
• EPR continues to diversify its operator base across each of its segments.

Realty Income Corporation (NYSE:O); Sector Perform - $49.22

• The availability of capital does not limit investment spending in the current market.
• O is reviewing a broad range of acquisitions including NTR's and public companies.
• The build-to-suit platform continues to grow and could reach $300 million annually.
• Walgreen's acquisition of Rite Aid creates $20–22 million of real estate value.
• The company's cost-of-capital advantage will likely widen in the case of higher interest rates.

Data Centers

CoreSite Realty Corp (NYSE: COR - $57.36; Outperform)

• Priorities of use of capital expenditure are: 1) expand existing campus; 2) expand adjacent to existing campus in the same market; 3) enter a new market; and 4) M&A
• Leverage ratio target is to stay below 4x net debt, including preferred stock, but would consider going above 4x for a strategic deal.
• Rent renewals increase is averaging 4.9% and have been pretty consistent across all markets.
• Management has no plans to offer managed services. It would consider entering new markets such as Atlanta, Dallas, Toronto, and the Pacific Northwest.

Dupont Fabros Tech (NYSE: DFT - $32.55; Sector Perform, Speculative Risk)

• Pricing for the new full-service lease structure will be adjusted to minimize risk. Most of the new deals in 2015 to date wanted N+1 but still signed with N+2.
• Existing customers prefer triple net lease because they understand it but full-service lease can help speed up the sales cycle with tech companies.
• Demand is robust in Toronto and DFT is not looking for a pre-lease to break ground. In Phoenix and Portland, it wants a pre-lease anchor tenant but may go ahead next year with one of the markets even without a pre-lease.
• Management uses N+1 as the base to model cost per MW. In terms of development costs, Toronto will be similar to Chicago ($11M per MW) and Phoenix/Portland will be similar to Ashburn ($8.8M per MW).
• The headcount for a new market includes one sales person and 5–6 full-time operational personnel. DFT outsources security and building maintenance.

Digital Realty Trust Inc. (NYSE: DLR - $71.74; Outperform)

• In Europe, Digital will enter Germany by year-end through a land acquisition in Frankfurt and could potentially build a shell without an anchor tenant. Management is monitoring the divestiture process of peers.
• In Asia, Singapore is the best market, with the first property full and second property tracking well. In Europe, the responsibilities of Bernard Geoghegan will be taken over on an interim basis by regional CFO Wendy Will.
• Key TelX executives who are staying include Michael Terlizzi and Tony Rossabi. Management expects to have all of the pieces in place to realize the full expense synergy run-rate for TelX by end of 2015.
• TelX services should be rolled out in select new international markets in 2017. Domestically, the TelX expansion priorities include Ashburn and Dallas.

Cyrus One Inc (NASDAQ: CONE - $34.02; Outperform)

• Management is targeting an investment grade rating but the process can take longer for tech companies such as CONE compared to traditional REITs.
• Dallas initially, then Phoenix, are the legacy CONE markets where Cervalis services will be offered.
• Most of the top-line benefits from the Cervalis deal arise from Cervalis customers taking space in legacy CONE sites rather than vice versa.
• There is some customer scrutiny of the new 7% administrative charge for metered power, but they are accepting it.