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• Shares of Biomed Realty Trust Inc (NYSE: BMR) have declined 11.81 percent year-to-date.

• Canaccord Genuity’s Paul Morgan has upgraded the company from Hold to Buy, while raising the price target from $21 to $23.

• Reports of possible M&A are expected to bring investor focus to the stock’s discounted valuation. Morgan believes that there is upside potential following the share price decline after the Q2 earnings report.

According to Canaccord, Bloomberg reported on September 22 that BioMed Realty had engaged the services of Morgan Stanley for advice on a potential takeout. The company had named Blackstone Group LP (NYSE: BX) as one of the interested parties.

“We expect the takeout reports, however, to crystallize the valuation discussion for BMR on the company’s discounts to NAV and to peers, diluting the focus on the nearer-term earnings issues of asset sales and lease terminations that had us on the sidelines previously,” Morgan explained.

BioMed Realty’s stock has underperformed its REIT peer over the past year due to earnings concerns related to recent lease terminations, departure of key executives and the expiration of “abovemarket leases that diluted same-store NOI growth.”

However, with the take-out reports, Morgan expects the market’s attention to shift to the company’s NAV, rather than its near term FFO, as well as “to less transitory phenomena and toward the broader context of a highly-differentiated biotech lab platform with a real estate portfolio that is concentrated in many of the best markets in the United States.”

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