On the downside, Aimco has more subsidized apartment exposure and more Sun Belt exposure. However, for the really strapped Millennials Aimco rentals are decidedly better than living above a storefront.
AvalonBay Communities, Inc. (NYSE:AVB), while now the third largest apartment REIT after the merger closes between Colonial Properties Trust Inc (NYSE:CLP) and Mid America Apartment Communities Inc (NYSE:MAA), has an advantage over thosee merged companies and Aimco. That is its shared purchase with Equity Residential (NYSE:EQR) of Archstone Enterprise from Lehman Brothers late last year.
AvalonBay Communities, Inc. (NYSE:AVB) will hold 40% of Archstone, the high-rent name among big apartment communities in urban hubs and it will expand AvalonBay’s holdings in DC and Southern California. These Archstone projects in development will be very attractive to those Millennials as they have amenities like swimming pools, fitness centers, etc. Equity Residential (NYSE:EQR) will get four properties to AvalonBay Communities, Inc. (NYSE:AVB)’s three.
The other advantage of the Archstone purchase is it skirts the southeast and Arizona. Unfortunately for Colonial and Mid America Apartment Communities Inc (NYSE:MAA) they have a strong presence in the Sun Belt where Equity doesn’t think the competitive landscape is profitable based on zoning environments allowing too much builder competition. Equity has been selling off properties in cities like Atlanta and Phoenix.
Equity is the largest apartment REIT with over 150,000 multi-family units in the US. Its properties are located in the hottest urban centers in 24 states. On valuation it may be the best bet at a10.52 trailing P/E with the lowest price to book of 1.89 compared to AvalonBay Communities, Inc. (NYSE:AVB) at 1.91 and Aimco at 4.90. Its yield, however, is a yawn for a REIT at only 2.90%.
Analysts have a median target of $62.50 on Equity for 15% upside or so from its June 21 close at $54.73.
The trend will be your friend in time
Homebuilders have likely been overbought while multifamily REITs have been oversold. As the Millennial lifestyle plays out this trend is certain to reverse course.
Realtors may be pleased housing prices are rising but that euphoria won’t last when an entire generation postpones indefinitely home ownership. I agree with Fellow Fool Mike Thiessen who wrote, “The consensus opinion from industry analysts is that apartment supply will remain tight for the foreseeable future.”
The student loan crisis isn’t going away and Millennials will have to move where the jobs and the apartments are. That leaves Equity and AvalonBay Communities, Inc. (NYSE:AVB) in the best positions with Aimco running third despite a better analyst growth prediction.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Welcome to the New American Poorhouse Redux originally appeared on Fool.com.
AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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