UDR operates as a real estate investment trust that acquires, renovates and manages multifamily apartments, just like Equity Residential. UDR disclosed its performance for the second quarter, which beat estimates. The company reported an FFO of $0.37 per share, where analysts were expecting $0.34 per share. Much of the beat was associated with the hurricane-related recoveries. Further, the company reported occupancy rate of 96.1% after it increased 50 basis points over the first quarter. Over the same time period, rents jumped 1.4%.
Boston, Monterey Peninsula and San Diego are among the best performing regions for UDR, Inc. (NYSE:UDR). Going forward, UDR is expected to increase its rental income from the newly completed 583-unit redeveloped community in Marina de Rey. Further, the company announced more transactions related to property development and land purchases, which is why the management has also increased its 2013 FFO guidance.
HCP, Inc. (NYSE:HCP) is another real estate investment trust that acquires and develops properties for rental income purposes. However, it invests in properties that are not residential in nature. HCP acquires, develops and renovates facilities that provide healthcare. That means it has a different exposure compared to UDR and Equity Residential. That’s why HCP reported disappointing earnings for the second quarter. The reported FFO of $0.72 per share remained $0.01 per share behind expectation, while revenue of $516.3 million was $2.23 million behind estimate. The disappointment in the results was majorly due to a charge related to non-cash rents.
During the quarter, HCP was negatively impacted by the Fed’s comments, which impacted the near-term deal volumes. Going forward, HCP is expected to benefit from its 5 by 5 model, which allows it to invest across the spectrum of asset classes within the healthcare real estate sector of the US. Analysts at Barclays believe the company will experience a 5% year over year growth driven largely by continued new investments in healthcare real estate. During the quarter, the company also experienced a hike in its cost of financing. However, the financing environment is stabilizing, which means deal activity will re-start in the near future.
Conclusion
I am bullish on Equity Residential (NYSE:EQR). Beside reporting stronger-than-expected earnings for the second quarter, I believe the company has the potential for growth in the future as well. So, I recommend investors buy the stock.
The article Growth Drivers in Place for Equity Residential originally appeared on Fool.com and is written by Adnan Khan.
Adnan Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Adnan 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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