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Multi-Family REIT Update For 09-16-19

|Includes: Apartment Investment and Management Company (AIV), AVB, CPT, EQR, ESS, MAA, UDR

Why are the yields on apartment REITs so dang low?

(1) FFO growth in consistently in the mid single digits

(2) FFO projection accuracy is consistently high

(3) The cap rates on good properties is relatively low

(4) FFO growth results in dividend growth - with both being in the mid single digits.

Multi-Family Update for 09-16-19

Yields are calculated on the Q3-19 dividend. The percent change numbers are since the first of the year - with the exception of the change in the dividend. The LTM or Last Twelve Month dividend change is since Q3-18.The last 3 years number is the annualized dividend change since Q3-16. EQR paid $11 in special dividends in 2016, then cut the dividend - which explains why the dividend growth temporarily has fallen. I do not track small caps Independence Realty Trust (IRT), NexPoint Residential (NXRT), Preferred Apartment Communities (APTS), Bluerock Residential Growth (BRG) and BRT Realty (BRT).

Share Price 19 FFO Est Q3-19 Div/ Div/ Percent Change LTM Last Three Yr
Company and ticker 1-01 09-16 1-01 09-16 Yield FFO19 FFO20 Price Pr+Div FFO Target Div Div FFO
Apartment_Investment_&_Management (AIV) 45.25 51.57 2.67 2.48 3.03 62.90 59.77 13.97 20.15 -7.12 2.19 2.63 6.06 2.61
Avalonbay Communities Inc. (AVB) 174.05 209.90 9.56 9.32 2.90 65.24 61.85 20.60 23.22 -2.51 3.50 3.40 4.20 4.41
Camden Property Trust (CPT) 88.05 109.48 5.01 5.10 2.92 62.75 59.70 24.34 27.06 1.80 4.54 3.90 2.22 3.46
Equity Residential (EQR) 66.01 85.05 3.40 3.46 2.67 65.55 62.65 28.84 31.42 1.76 10.07 5.00 4.18 4.11
Essex Property Trust Inc. (ESS) 245.21 324.30 13.11 13.32 2.41 58.56 55.28 32.25 34.64 1.60 6.05 4.84 7.29 6.85
Mid-America Apartment Communities (MAA) 95.70 128.06 6.55 6.29 3.00 61.05 59.26 33.81 36.82 -3.97 8.00 4.07 5.69 2.14
UDR, Inc. (UDR) 39.62 48.17 2.04 2.08 2.85 65.96 62.36 21.58 24.18 1.96 7.96 6.52 5.42 5.62
Sector Average 2.82 63.14 25.06 28.21 -0.92 6.04 4.34
The cap weighted Dow Jones REIT ETF RWR has a price change of 20.79% year to date - with dividends its total return is 21.42%.
The cap weighted Vanguard ETF VNQ has a price change of 24.10% year to date - with dividends its total return is 24.92%.
The Cohen & Steers 'Realty Majors' ETF ICF has a price change of 25.37% year to date - with dividends its total return is 26.89%.
Dividend dates are: AIV: 8-29-19 AVB: 07-15-19 CPT: 07-16-19 EQR: 07-11-19 ESS: 07-11-19
MAA: 07-30-19 UDR: 07-30-19

AVB and ESS have the growth -- and higher growth leads to lower yields.

Why is AIV under performing? The 2019 FFO projection has fallen noticeably.

Apartment Price/FFO Ratios 09-16

FFO / Share % FFO Growth Price/FFO 19 FFO Range_
Co. 2017 2018 2019 2020 2021 2022 18-19 19-20 20-21 21-22 2019 2020 2021 2022 High Low Range
AIV 245 243 248 261 274 277 2.06% 5.24% 4.98% 1.09% 20.79 19.76 18.82 18.62 252 244 3.23%
AVB 862 898 932 983 1030 1077 3.79% 5.47% 4.78% 4.56% 22.52 21.35 20.38 19.49 938 923 1.61%
CPT 453 475 510 536 560 562 7.37% 5.10% 4.48% 0.36% 21.47 20.43 19.55 19.48 510 506 0.78%
EQR 313 324 346 362 373 378 6.79% 4.62% 3.04% 1.34% 24.58 23.49 22.80 22.50 362 339 6.65%
ESS 1189 1255 1332 1411 1480 1531 6.14% 5.93% 4.89% 3.45% 24.35 22.98 21.91 21.18 1340 1326 1.05%
MAA 592 604 629 648 677 697 4.14% 3.02% 4.48% 2.95% 20.36 19.76 18.92 18.37 634 617 2.70%
UDR 186 194 208 220 226 224 7.22% 5.77% 2.73% -0.88% 23.16 21.90 21.31 21.50 211 205 2.88%
Sector Average 5.36% 5.02% 4.20% 22.46 21.38 20.53 20.16

FFO estimates projection accuracy by Year These FFO numbers are from Seeking Alpha - which reports normalized FFO in the Multi Family Sector. Low ratings are better ratings. The general rules for the ratings - REITs that have had no earning disappointments greater than a negative 5% over the last seven years are assigned a 1 rating. One 5% disappointment adds half a point to the rating. One 10% disappointment adds a full point to a rating. One 20% disappointment adds a point and a half. The shortfalls for AVB, ESS and MAA in 2013 were acquisition related - those occurrences were ignored. The FFO spread is the high FFO projection minus the low projection, with that result divided by the average projection. Here are my accuracy ratings.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Acc FFO
comp Chng Chng Chng Chng Chng Begin End Chng Begin End Chng Begin End Chng Begin End Chng Begin End Chng Begin End Chng Begin End Chng Begin End Chng Begin Cur Chng Rate Sprd

AIV 6% -1% -59% -50% 9% 1.56 1.44 -8% 1.77 1.68 -5% 2.04 2.04 0% 2.17 2.07 -5% 2.23 2.22 -0% 2.37 2.30 -3% 2.44 2.45 0% 2.54 2.43 -4% 2.67 2.48 -7% 2.00 3%
AVB 11% -3% -20% -21% 3% 4.44 4.60 4% 5.43 5.44 0% 6.17 5.05 -18% 6.77 7.25 7% 7.40 8.05 9% 8.24 8.23 -0% 8.72 8.62 -1% 9.07 8.98 -1% 9.56 9.32 -3% 1.00 2%
CPT 11% -7% -24% -12% 1% 2.84 2.72 -4% 3.42 3.62 6% 3.95 4.11 4% 4.27 4.29 0% 4.52 4.54 0% 4.85 4.62 -5% 4.61 4.53 -2% 4.78 4.75 -1% 5.01 5.10 2% 1.00 1%
EQR -7% -3% -11% -12% 16% 2.43 2.42 -0% 2.77 2.76 -0% 3.02 2.35 -22% 3.11 3.15 1% 3.38 3.46 2% 3.24 3.08 -5% 3.16 3.13 -1% 3.25 3.24 -0% 3.40 3.46 2% 1.00 7%
ESS 8% 6% 5% 13% 15% 5.50 5.70 4% 6.47 6.71 4% 7.50 7.59 1% 8.29 7.89 -5% 9.34 9.72 4% 10.89 11.05 1% 11.79 11.89 1% 12.43 12.55 1% 13.11 13.32 2% 1.00 1%
MAA 2% -1% -1% 1% 1% 3.99 3.98 -0% 4.36 4.57 5% 4.81 4.35 -10% 4.99 4.99 0% 5.30 5.51 4% 5.81 5.91 2% 5.93 5.92 -0% 6.22 6.04 -3% 6.55 6.29 -4% 1.50 3%
UDR 0% -6% -27% -18% -1% 1.21 1.27 5% 1.42 1.32 -7% 1.44 1.44 0% 1.49 1.56 5% 1.63 1.66 2% 1.79 1.78 -1% 1.86 1.86 0% 1.96 1.94 -1% 2.04 2.08 2% 1.00 3%

Disclosure: I am/we are long AVB, UDR.