Tags: apartments | AIV | REIT | stocks

AIMCO a Middling Apartment REIT

By    |   Monday, 15 Aug 2011 03:13 PM

The U.S. homeownership rate fell to 65.9 percent in the second quarter, the lowest level since 1998, according to Census Bureau data. Of course that means more and more people are renting their homes. This situation creates a positive backdrop for Apartment Investment and Management (AIV), one of the largest apartment real estate investment trusts (REITs) in the country. It owns 607 apartment communities with about 500,000 residents in 38 states, Washington, D.C., and Puerto Rico.

Apartments have outperformed other sectors of the real estate market since the housing crash began in 2007, and now isn’t the time for investors to abandon that sector, Gleacher analysts maintain. “There is a temptation to rotate out of apartments into other property sectors with
apartments having performed so strongly,” they write.

“Investors should resist. A still slow economic recovery over the next year or so will likely mean still sluggish user demand for office and retail space. Apartment renter demand appears likely to remain relatively robust.”

AIMCO’s portfolio of properties isn’t the most desirable in the country, giving it an average ability to raise rents and average profitability, according to Morningstar data. But a rising tide lifts all boats, so the continued strength of the rental market should buoy AIMCO’s stock.

Funds from operations, a key metric for measuring apartment REITs, were unchanged in the first half of the year from the same period of 2010 at 65 cents a share. Same-store revenue rose 2 percent to $364 million.

An unloved stock

“Despite beating/meeting earnings expectations over several quarters and meaningfully raising guidance, AIV remains an unloved stock,” the Gleacher analysts write. AIMCO shares have dropped about 4.6 percent so far this year.

“Concern about leverage — low 60s percent versus mid-30s percent for its leading peers — management turnover, and the mixed portfolio quality remains, but appears to be fairly fully reflected in a discounted valuation.”

So the analysts have raised their share price target by $1 to $27. AIMCO recently traded at $25. The company next reports around Oct. 29.

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The U.S. homeownership rate fell to 65.9 percent in the second quarter, the lowest level since 1998, according to Census Bureau data. Of course that means more and more people are renting their homes. This situation creates a positive backdrop for Apartment Investment and...
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2011-13-15
Monday, 15 Aug 2011 03:13 PM
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