Business & Finance
Business and Finance
Business and Finance
Mon, October 11, 2010
Fri, October 8, 2010 AvalonBay Communities, Simon Property Group, Public Storage
CHICAGO--([ BUSINESS WIRE ])--Today, Zacks Equity Research discusses the U.S. Railway Industry, including AvalonBay Communities, Inc. (NYSE: [ AVB ]), Simon Property Group Inc. (NYSE: [ SPG ]) and Public Storage (NYSE: [ PSA ]).
A synopsis of todaya™s Industry Outlook is presented below. The full article can be read at [ http://www.zacks.com/stock/news/41144/REIT+Industry+Outlook+-+Oct.+2010 ]
Many REITs are still trading at discounts to NAVs (net asset values), traditionally a good "buy" signal. Over the past 7 or so years, REITs had traded near or in excess of NAV. Continued issues in the availability of credit is expected to have a positive effect on commercial real estate down the road, as new office, apartment and retail construction has slowed considerably, which will benefit owners in a couple of years. Many companies that we cover have stopped all-new construction.
With plummeting home prices and reduced access to credit, apartment REITs continue to perform strongly. We expect this sector to remain comparatively stable in the coming quarters, as renting has emerged as the only viable option for customers who could not avail mortgage loans or are unwilling to buy a house at present.
In this environment, we remain bullish on AvalonBay Communities, Inc. (NYSE: [ AVB ]), one of the best-positioned apartment REITs, primarily focusing on developing multi-family apartment communities for higher-income clients in high-barrier-to-entry regions of the U.S. AvalonBay has Class A assets located in premium markets, such as Washington DC, New York City, and San Francisco, where the spread between renting and owning is still high despite home price declines.
In addition, AvalonBay has a reasonably strong balance sheet with moderate near-term debt maturities and adequate liquidity. Consequently, the company can capitalize on potential acquisition opportunities due to distressed selling from owners and developers who cannot refinance their properties, which augurs well for its top-line growth.
We are also currently bullish on Simon Property Group Inc. (NYSE: [ SPG ]), the largest publicly traded retail real estate company in North America, with assets in almost all retail distribution channels. The geographic and product diversity of the company insulates it from market volatility to a great extent and provides a steady source of income. Furthermore, Simon Propertya™s international presence gives it a more sustainable long-term growth story than its domestically focused peers.
Another stock worth mentioning is Public Storage (NYSE: [ PSA ]), the largest owner and operator of storage facilities in the U.S. Public Storage has significantly increased the scale and scope of its operations through the acquisition of Shurgard Storage Centers that had a considerable presence in the European markets. Although Public Storage currently owns a 49% stake in Shurgard, the size and scope of its operations have enabled it to achieve economies of scale, thereby generating high operating margins and managerial efficiencies.
In addition, the aPublic Storagea™ brand is the most recognized and established name in the self-storage industry with a presence in all the major markets across 38 states in the U.S. The storage facilities of the company have high visibility and are usually located in heavily populated areas that improve the local awareness of the brand. This provides a significant upside potential for the company.
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