Multi-Family REIT Update For 09-16-19
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% |
Analyst's Disclosure: I am/we are long AVB, UDR.
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