Student Housing: Senior REIT Analyst Views Student Housing As Highest Performing REIT In 2010: (ACC) Has Best Track Record In The Sector
from the Wall Street Transcript
67 WALL STREET, New York – February 10, 2010 – The Wall Street Transcript has just published its REITs Report offering a timely review of the sector to serious investors and industry executives. This 47 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Real Estate Occupancy Rates By Asset Class — 2010 Net Operating Income Growth For Real Estate Assets — Price Relative To Net Asset Value — Current Implied Cap Rates — Past, Present And Future Capital Formation — FFO Multiples — Dividend Rates Versus 10 Year Treasury Rates
Companies include: Fair Value REIT (FVI); W.P. Carey (WPC); Apollo (ARI); BioMed Realty (BMR); Blackstone (BX); Boston Properties (BXP); Brandywine (BDN); Brookfield (BPO); Brookfield Asset Management (BAM); Camden Property (CPT); Colony Financial (CLNY); Crexus (CXS); DCT Industrial (DCT); Developers Diversified (DDR); DiamondRock Hospitality (DRH); Douglas Emmett (DEI); Duke Realty (DRE); Education Realty (EDR); Emeritus (ESC); Equity One (EQY); Equity Residential (EQR); Essex Property Trust (ESS); Federal (FRT); First Potomac (FPO); General Growth (GGWPQ.PK); Health Care REIT (HCN); Home Properties (HME); Hospitality Properties Trust (HPT); Host (HST); IRET (IRET); Kimco (KIM); LaSalle (LHO); Lexington Realty Trust (LXP); Liberty (LRY); Macerich (MAC); National Retail Properties (NNN); Pebblebrook (PEB); ProLogis (PLD); Public Storage (PSA); Regency (REG); Retail Opportunity Investments (ROIC); SL Green (SLG); Simon (SPG); Starwood (STWD); T.J. Maxx (TJX); UDR (UDR); Ventas (VTR); Vornado (VNO); Wal-Mart (WMT); Weingarten Realty Investors (WRI); Westfield (WDC.AX).
In the following brief excerpt from the 47 page report, Alexander D. Goldfarb discusses the outlook for the REIT sector and for investors.
Alexander D. Goldfarb is an Associate Director and the Senior REIT Analyst in the research department of Sandler O’Neill + Partners, L.P. Mr. Goldfarb joined the firm in 2009 following two years as a Director and Senior REIT Analyst at UBS, and five years at Lehman Brothers, where he was a Vice President and REIT Analyst. Mr. Goldfarb has covered the major property types, and has appeared in print media and on television, including The Wall Street Journal, Barron’s, BusinessWeek, Forbes, Bloomberg and CNBC.
He has also presented at real estate and private equity conferences. Before starting a Wall Street career, Mr. Goldfarb worked in the consumer goods industry at companies such as Unilever and Information Resources, Inc., where he worked on the Pepsi-Cola account. Mr. Goldfarb holds a MBA from the F.W. Olin Graduate School of Business at Babson College and a Bachelor of Arts from Wheaton College.
TWST: Since you cover a mix of retail, apartment and office property REITs, all of which have various geographic concentrations, are there property sectors and/or geographic markets you’re particularly bullish or bearish on right now?
Mr. Goldfarb: I like student housing a lot. I think it’s a neat little sector. It’s increasingly gaining institutional acceptance. The real growth there is the crimping of school budgets, which makes schools look to private outfits to help solve their housing needs – whether they are private or public, they still have general needs. They still have to fund their campuses; they still have to build new science labs, sporting facilities and dorms. When you think about it, there was a big baby-boom growth that this country had; a lot of facilities were built in the 1950s and 1960s. I know when I was a kid, you sat in the back of the car, you were happy if your parents had air conditioning, and the air conditioning never really got to the back seat. Today’s generation has the DVDs, dual climate control.
And when they go to school, they’re not going to shower in the communal bathrooms. Everyone wants a private bath. Everyone wants farm-raised food to be served at the cafeteria, they don’t want the mystery meat. And what you’ve seen over the years is colleges outsource the dining facilities to companies like Sodexo and ARAMARK. Housing is along that continue. So they’ve had a number of projects where they’ve had outside developers come on campus, first as a fee developer, where they just hire a developer to build a dorm. The real opportunity is when you get a developer on campus who’s not only a developer but also an operator and has an economic interest in maintaining that asset.
There are only two publicly traded student housing names: ACC, which we cover, and Education Realty (EDR), which we don’t, but I have covered in the past. If you look, you’ll see ACC trades at a premium valuation to EDR, but ACC has had an incredible track record, and they’ve delivered on what they’ve said they’re going to do. I like ACC a lot. I think they are in the right place; they’re going to have growth this year, whereas a lot of REITs are going to be flat at best, if not negative.
TWST: What are some of your other favorite names?
Mr. Goldfarb: I think apartments should do well next year, assuming that we have some sort of a recovery and things start to firm by year end, and you get some job growth next year. There is no new supply because there is no credit to development. The euphoria of owning homes is done. Granted, you are seeing a pickup in move-outs to buy homes because of the tax credits, but it’s nowhere near the level that it was during the boom years. And people want to live closer to work.
All those things are good for the apartment REITs. Valuations are pretty healthy, so I’m hard pressed to advocate increasing a weighting to the sector, but I certainly wouldn’t be a seller either. The interesting name that we like from a value perspective is Liberty (LRY). It is a Philly-based office and industrial company, conservatively run, very attractive valuation on a multiple, implied cap rate and dividend basis. They’re yielding around 6%; the average REIT yield is around 4%. So assuming 2010 is a trough year, their dividend is fine.
The Wall Street Transcript is a unique service for investors and industry researchers – providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 47 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
