Jeffrey Adler

Avoid Apartment REITs Now

Unfortunately, the author draws the "consensus" conclusion based on existing published data.Markets anticipate, and are a leading not lagging indicator. As a former Chief Property Operations Officer at AIMCO for seven years (just left in 10/08) , I've had a ring side seat to the apartment cycle. We are in a recession and NOI's will decline for 2 years- that's already priced into the stocks--and they are selling at 40%-60% discounts to their Net Asset Values (NAVs- what the apartments would sell for if sold off today in the private real estate market), and are priced currently at 8.5%-10.5% cap rates, which is 200 bps worse that the private market (the inverse of a price/earnings multiple). They are selling at historic lows. I am going to be moving back in to Apartment stocks shortly, given how beaten up they are--- once I see: 1) a decelertion in job losses, and 2) a narrowing of credit spreads. The fundamentals out a few years are very good-- there will be a lot of money made on the upturn in this cycle.