Skip to Content
Stock Strategist Industry Reports

This REIT Is Not Worth Its Skyscraper Price

We like Douglas Emmett's near- and medium-term prospects, but the market likes them even more.

Mentioned:

Although there are reasonable ways to justify  Douglas Emmett's (DEI) current share price, we think the downside risk outweighs the upside potential. We have a positive view on Douglas Emmett's near- and medium-term operating prospects, but the market appears to be anticipating an even rosier outlook. The stock is trading 65% higher than our $13 fair value estimate.

We share the sentiment reflected in recent commercial real estate research that the Los Angeles office leasing market is near or just past a bottom; however, we do not expect Douglas Emmett to immediately enjoy the full benefit of its main market's improving fundamentals, due to in-place, above-market rents. Roughly 30% of its office portfolio is subject to expiring leases through 2013. Most of these leases were written during peak cycle years, and we expect the portfolio to experience negative re-leasing spreads through 2013, as in-place rents roll down to the level of lower market rents.

Todd Lukasik does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.