Once upon a time, the rallying cry in corporate America was "diversify!" At least one real estate firm has heeded the call, and industry analysts like what they see.

This week, Robertson Stephens initiated coverage of Cendant Corporation (NYSE: CD) with a buy-rating and a 12-month price target of $30. The target is a significant one, especially considering that the company’s current stock price is hovering in the $17 to $18 range.

"We believe the fundamentals of the company's real estate and hotel businesses offer the potential for exciting on-line marketing applications, which may ultimately result in accelerated earnings growth exceeding our current estimates," read a statement from two of the firm’s real estate industry analysts, Jay Leupp and Paul Penney. "Should investors ultimately view Cendant as a business-to-consumer and/or business-to-business eCommerce company, we think CD shares would likely be awarded a significant earnings multiple expansion."

Headquartered in New York, Cendant is a global provider of real estate, travel and direct marketing related consumer and business services.

Eleven other firms now follow Cendant’s stock. Of those, six rate it a strong buy, four a moderate buy and one a hold. These ratings have remained consistent over the last quarter.

Right now, Cendant’s shares are holding steady at the middle of its 52-week price spread, which ranges from $13 5/8 to nearly $27. Prices have been buoyed slightly by the company’s stock repurchase program and an initiative to increase executive stock ownership.

Cendant experienced a significant loss in the fourth quarter, despite strong increases in income from continuing operations and revenue. The company has been hit hard by litigation, as well as losses in online operating units.

But as these negatives clear up in the coming months, look for some surprisingly high earnings results and a resurgence in the company’s share price.

In other news, imaging the commission on this baby. Chase H&Q investment bank has signed the largest lease in San Francisco history. The company rented an entire office tower, which will house its West Coast headquarters, in the South of Market area.

First reported by the San Francisco Business Times, the lease includes 665,000 square feet of a proposed building that will be the largest high-rise approved in the city in 15 years. The lease will be worth $600 million to $650 million over its life, based on an estimated per-square-foot cost of $65 over 15 years.

The bank has been active in financing several well-known technology powerhouses, such as Netscape Communications and Apple Computer. Currently, Chase H&Q employs 700 in San Francisco, but the new building could eventually house up to 2,500.

Houston-based Hines is developing the 31-story high-rise in a joint venture with the California Public Employees' Retirement System.

Published: March 14, 2000

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