Apartment stocks hurting in downturn
Posted
Jan 13 2009, 02:36 PM
by
Kim Peterson
Rating:
More job losses are anticipated for this year, and that spells trouble for apartment stocks already hurting in the recession.
Investors are weighing the possibility that demand and rents will fall further in 2009. The rental market is closely tied to job growth, and analysts that had expected a slightly positive rental picture this year are now forecasting declines.
Many apartment companies are hunkered down, placing new development projects on hold and cutting staff to save money. They're trying to ride it out until the job market improves, but that looks to be several quarters away.
Here are some stocks to watch in this downturn:
Apartment Investment and Management (AIV): This company just declared a special dividend of $2.08 per share, or $221 million total. But analysts question whether that dividend is sustainable in the future. Part of that dividend came from taxable gains from selling properties this year. AIV shares stayed above $35 for much of the past year, but took a sharp dive in October and never recovered. The stock was down to $10.40 on Tuesday.
AvalonBay Communities (AVB): This stock has a well-regarded portfolio, with higher-quality properties in markets with less exposure to the single-family housing overhang, said analysts at Barclay's. AvalonBay also has a strong balance sheet. Still, the company isn't taking any chances this year. It canceled plans to develop eight parcels and will cut an unspecified number of jobs, though the 15 apartment communities under construction are still going forward.
Camden Property Trust (CPT): Shares of this company, which develops and manages upscale apartment buildings, are down 35% from a year ago. The stock has been getting some key analyst upgrades recently, which should make investors feel better. Merrill Lynch upgraded to neutral, and Citi upgraded to hold. Camden's holdings in Texas and Washington D.C. should help offset declining markets in Southern California and Florida, Citi said.
Equity Residential (EQR): This company is also freezing development plans, axing five projects it had previously planned (it still has 10 properties currently under construction). But Equity was able to get a $543 million loan through Fannie Mae (FNM) in December, which will help tackle other debt that's maturing as well as fund development.
Essex Property (ESS): Essex has one of the better balance sheets in the business, according to RealMoney.com. And it's holding up in the downturn because of one word: location. The company focuses on cities in the West Coast with limited housing and lots of technology jobs. In Silicon Valley and San Francisco, executives said, the foreclosure rate is half the national average.
