Analyzing TIER REIT (TIER) & Northstar Realty Europe (NRE)

TIER REIT (NYSE: TIER) and Northstar Realty Europe (NYSE:NRE) are both small-cap financials companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, valuation, dividends, analyst recommendations, earnings, profitability and risk.

Institutional and Insider Ownership

57.5% of TIER REIT shares are owned by institutional investors. Comparatively, 70.8% of Northstar Realty Europe shares are owned by institutional investors. 1.2% of TIER REIT shares are owned by company insiders. Comparatively, 2.2% of Northstar Realty Europe shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares TIER REIT and Northstar Realty Europe’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TIER REIT $242.82 million 3.82 -$29.41 million $1.84 10.53
Northstar Realty Europe $151.21 million 4.58 -$61.75 million ($0.35) -35.68

TIER REIT has higher revenue and earnings than Northstar Realty Europe. Northstar Realty Europe is trading at a lower price-to-earnings ratio than TIER REIT, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares TIER REIT and Northstar Realty Europe’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TIER REIT 40.68% 12.86% 5.60%
Northstar Realty Europe -14.48% 7.68% 2.43%

Analyst Ratings

This is a breakdown of current recommendations for TIER REIT and Northstar Realty Europe, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TIER REIT 0 0 3 0 3.00
Northstar Realty Europe 0 0 3 0 3.00

TIER REIT presently has a consensus price target of $21.00, suggesting a potential upside of 8.42%. Northstar Realty Europe has a consensus price target of $16.83, suggesting a potential upside of 34.77%. Given Northstar Realty Europe’s higher possible upside, analysts plainly believe Northstar Realty Europe is more favorable than TIER REIT.

Dividends

TIER REIT pays an annual dividend of $0.72 per share and has a dividend yield of 3.7%. Northstar Realty Europe pays an annual dividend of $0.60 per share and has a dividend yield of 4.8%. TIER REIT pays out 39.1% of its earnings in the form of a dividend. Northstar Realty Europe pays out -171.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Northstar Realty Europe has increased its dividend for 2 consecutive years. Northstar Realty Europe is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

TIER REIT Company Profile

TIER REIT, Inc. is a real estate investment trust. The Company’s business consists of owning, acquiring, developing, operating, investing in, and disposing of real estate assets. The Company’s business is conducted through Tier Operating Partnership LP (Tier OP). As of December 31, 2016, the Company owned interests in 29 operating office properties, one non-operating property and one development property located in 13 markets throughout the United States. It owns properties located in metropolitan cities and suburban markets in the United States. The Company’s office properties include The Terrace Office Park, Domain 3, Domain 4, 5950 Sherry Lane, Burnett Plaza, Loop Central, One BriarLake Plaza, Three Eldridge Place, Eisenhower I, Forum Office Park, 500 E. Pratt, Woodcrest Corporate Center and 111 Woodcrest. The Company’s properties are located in Austin, Dallas, Houston, Charlotte, Nashville, Atlanta and Denver.

Northstar Realty Europe Company Profile

NorthStar Realty Europe Corp. is a real estate investment trust (REIT). The Company is a European focused commercial real estate company with primary office properties in cities within Germany, the United Kingdom and France. Its objective is to provide its stockholders with stable and recurring cash flow supplemented by capital growth over time. The Company conducts its business through two segments: Real Estate and Corporate. Its European commercial real estate business is primarily focused on office properties. Its portfolio consists of approximately 48 properties and a total of approximately 495,588 square meters of rentable space, located in various European markets, including Frankfurt, Hamburg, Berlin, London, Paris, Amsterdam, Milan, Brussels and Madrid. Its overall portfolio is over 87% occupied. In addition, it owns over two hotels, which are leased to third-party operators. It is externally managed and advised by an affiliate of NorthStar Asset Management Group Inc. (NSAM).

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