Multifamily REITs Make a Comeback

Various major equity indices have famously staged a comeback since the darkest days of early 2009

Dees Stribling, Contributing Editor

New York–Various major equity indices have famously staged a comeback since the darkest days of early 2009–the Dow Jones Industrial Average, for instance, has recently been hanging around 11,000, compared with the 6000s only about a year ago. Likewise, REITs that specialize in multifamily properties took a beating in share prices, but are bouncing back as well.

Is it more than just a matter of following the Wall Street herd for multifamily REITs? “Considering that underlying asset values are up some 10 percent to 15 percent from trough levels last summer, and fundamentals appear to have turned the corner–a full two quarters ahead of expectations–the interest in multifamily REITs is warranted,” Andy McCulloch, a senior analyst with Green Street Advisors, tells MHN.

Investors have certainly taken a renewed interest in multifamily specialty REITs. As of this week, for instance, Apartment Investment & Management’s share prices were about 230 percent higher than their lowest point in the last 52 weeks. Associated Estates Realty Corp. was up 180 percent and Equity Residential was up 134 percent over their respective 52-week lows.

Even the more modest of the comeback multifamily REIT stocks have seen a significant amount of growth in the last year. For example, Equity Lifestyle Properties is up 69 percent; Home Properties up 65 percent; and Mid-America Apartment Communities up 61 percent.

Analysts have taken notice as well. RBC Capital recently upgraded a number of Residential REITs, including BRE Properties, Camden Property Trust and UDR, to Outperform; and Apartment Investment & Management to Perform.

Or is it merely a re-inflating of a bubble? Green Street’s McCullouch believes there’s more long-term strength in multifamily REITs than that.

“Multifamily is one of the few property sectors that could exhibit healthy demand growth over the next few years even under a tepid job growth scenario, due largely to positive demographic trends and a still-challenged single-family market,” he says. “Whether or not current REIT share prices are fully reflective of these dynamics, however, is not as clear.”

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