updated 11/12/2010 1:19:08 PM ET 2010-11-12T18:19:08

A BMO Capital Markets analyst on Friday upgraded the shares of Forest City Enterprises Inc., saying the real estate investment trust is poised to benefit from its exposure to urban areas.

THE OPINION: Analyst Paul Adornato said little development is expected in urban areas in the next few years even as a recovering economy boosts demand for space. Those property owners and developers with a presence in urban areas will have an edge up during the recovery, he said.

Forest City has a $1.7 billion development pipeline for retail, residential and mixed properties in New York, Washington, D.C., and San Francisco.

Adornato upgraded the stock rating to "Outperform" from "Market Perform," lifted his price target on the stock to $21 from $15, and raised estimates for next year's funds from operations to $1.05 a share from 89 cents a share.

Funds from operations, or FFO, adds such items as amortization and depreciation to net income, and is considered a key gauge of a REIT's financial performance.

THE STOCK: Shares of the company slipped 8 cents to $15.33 in afternoon trading.

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