Can Apartment REITs Handle Higher Interest Expense?

Nov. 15, 2022 11:03 PM ETAVB, CPT, EQR, ESS, MAA, MAA.PI, UDR20 Comments

Summary

  • Some REITs will see far more pressure on AFFO per share going into 2023.
  • We dug through the debts for each REIT and prepared a model for the impact of higher rates.
  • We've prepared a chart showing the projected impact of the rise in interest rates relative to earnings (2022 AFFO) for each REIT for each of the next 3 years.
  • The REIT Forum members get exclusive access to our real-world portfolio. See all our investments here »

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With the rapid rise in interest rates (excluding the recent reversal), there is more interest (bad pun) in whether REITs are positioned to withstand higher short-term rates. The question is particularly important for short-term earnings growth rates (Core

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Disclosure: I/we have a beneficial long position in the shares of AVB, ESS either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We own several REITs that are not mentioned in this article. Per the standard policy, our disclosure does not reference REITs that are not in the article. Related to housing REITs, we also own SUI and ELS. Those are the two big manufactured housing park REITs.

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