Emerald

Increased Pressure on Rents Is Bad News for Apartment REITs

This article is old news. Rents have come down and will slowly filter through apartment REIT's. These companies have already reported this fact in their second quarter earnings calls and this is priced in. With inflation coming in one to two years, this is a great time to buy apartment REIT's cheap. Most have reasonable debt maturities and lowered dividends in the 5% range. Long: EQR. Looking at AVB.

Avalon Bay: A Look at Apartment REITs

Most apartment REIT's are so heavily discounted that they are trading as if their rents have been slashed already. Your analogy is sound, but only at higher REIT prices. REIT's may suffer some declining cashflow to met the market, but they are good buys at this level.


On Mar 03 05:45 PM Chris B wrote:

> I have one problem with REITs at this point:
>
> New investors are purchasing foreclosure properties all around these
> apartment complexes (and maybe purchasing entire competing apartment
> complexes too!) for 30-40% less than what the REIT paid a couple
> years ago. That means their payments will be lower, which allows
> them to undercut the local REIT on rents. Wouldn't purchasing an
> REIT at this point be the equivalent of assuming the mortgage for
> an underwater landlord?

Conference Call Highlights: Projections For Multi-Family REITs

Apartment REIT's will show lower operating profits in 2009 but historically are the most resilient of all real estate classes. At today's prices, apt REITs make good investments if they have very little debt maturing in the next two years.