Equity Residential (EQR), Apartment Investment and Management Co. (AIV), BRE Properties Inc (BRE): Playing the Demise of the American Dream

For the longest time, the American Dream included owning a home, but since the financial crisis, this mentality is changing. More and more individuals and families are turning to renting, in part, because of tight lending standards but also because it’s becoming a favored choice.

Members of Generation Y and young adults are proving to be content with renting, versus buying. The U.S. Census Bureau believes the population of young adults aged 20 to 34 will grow by over three million people between 2010 and 2015.

Top choice

Equity Residential (NYSE:EQR) is the top choice in the industry, owning and operating various apartment properties across the nation. This apartment REIT has interests in over 400 properties for a total of over 115,000 units across the U.S.

Equity Residential (NYSE:EQR) focuses on assets in its six-core metropolitan markets:   Boston, New York, Washington, D.C., Southern California, San Francisco and Seattle. The beauty about these key markets is that the cost of home ownership is much higher than the national average, making renting much more economical.

Its largest geographic market is the New York metro area, making up nearly 14% of net operating income (NOI). Its other key areas include Washington, D.C. (11.5% of NOI), South Florida (9.0%), Los Angeles (9.9%) and San Francisco (7.9%).

Rental rates are expected to be up nearly 5% for the REIT in 2013, as it takes advantage of the robust occupancy levels to drive rates higher. Equity Residential (NYSE:EQR) also snatched up assets (22,000 apartment units) from Archstone Enterprises earlier this year for $9 billion, which will give the company a greater presence in coastal markets.

The REIT had only $56 million in cash at the end of 1Q 2013 versus the $612 million at the end of 2012. This was due to the company’s prepayment of its $543 million in secured debt that carried a 5.7% interest rate.

The next best bet

Apartment Investment and Management Co. (NYSE:AIV) is another one of the major U.S. owners of multi-family apartment properties. Apartment Investment and Management Co. (NYSE:AIV) has a portfolio of 265 properties, including 67,977 apartment units spread across 36 states.

First quarter FFO (funds from operation) per share came in at $0.48 compared to $0.40 for the same period last year. Apartment Investment and Management Co. (NYSE:AIV) is looking to focus on the largest markets in the U.S., expanding to the coastal areas. Via the disposition of its under-performing assets, the company believes it should see material improvements in its average rent per unit.

Earlier this week, Apartment Investment and Management Co. (NYSE:AIV) posted 2Q EPS of $0.07 compared to essentially breaking even for the same quarter last year. Its FFO was also up, coming in at $0.49 compared to last year’s $0.38. The REIT also took the earnings announcement as an opportunity to tighten its fiscal 2013 FFO expectations, but ultimately lowering the top end. The company previously expected to post FFO per share of $1.94 to $2.10, but now sees 2013 FFO coming in at $1.99 to $2.07.