Micro Apartments Good For REITs: Equity Residential (EQR), AvalonBay Communities, Inc. (AVB), UDR, Inc. (UDR)

AvalonBay Communities, Inc. (NYSE: AVB)

AvalonBay owns and builds high-end apartment buildings in “high barrier-to-entry markets.” The company owns or has an interest in over 200 apartment communities in nine states and the District of Columbia. It has a focus on just 15 markets, including Boston (31 communities), Metro New York and New Jersey (45), Washington D.C. and Baltimore (25), San Francisco (13), Los Angeles (18), San Diego (8), and Seattle (17). Avalon Bay is an industry leader with a clear focus, for which investors have historically been willing to pay a premium. With a recent yield below 3%, it is pricey. However, it is a great REIT with equally great assets.

Apartment Investment and Management Co. (NYSE: AIV)

Apartment Investment & Management Co. is another major apartment company that focuses on “areas where target customers want to live – coastal and job growth markets.” The company has operations in 20 markets, with about 200 properties in its portfolio. Note that it also provides management services to others. Key markets include Los Angeles (14 properties), San Diego (10), San Francisco (7), Chicago (13), the Washington D.C./Maryland area (17), Boston (11), and Manhattan (22). Another high quality REIT that is afforded premium prices, it currently yields less than 3%.

UDR, Inc. (NYSE: UDR)

UDR, formerly United Dominion Realty, used to focus on second tier markets and rehabilitating older properties. It brought in a new CEO who used to work for Apartment Investment & Management that changed the company’s focus so that it more closely resembles that of his former employer. In fact, the company recently purchased its first building in Manhattan. Yielding around 3.5%, the company recently went through a material and transforming property sale. It is a solid company trying to turn itself into one of the industry leaders, which may make it worth a look for more aggressive investors.

Location, Location, Location

The old saying in real estate is “location, location, location.” That’s particularly true when you are looking for apartments with pricing power. The above REITs own properties in desirable markets, providing them with solid foundations for rent increases.

Yours,

The article Micro Apartments Good For REITs originally appeared on Fool.com and is written by Anh HOANG.