High Quality Multi-family REITs - EQR, CPT, ESS, AVB

[Gregmal]

Lol but they’re insolvent because dumbasses bought private reit shares at stupid prices and are now mad they can’t sell them like free trading stock!

[thepupil]

this one is out of blackstone's $30B fund BREP X which closed in 2023. 

 

I think the lower premium / price reflects the fact that this one is being bought by higher cost of capital institutional PE fund rather than the retail BREIT fee machine. 

 

While the 20% premium isn't some giant payday, it shows that public MF REITs clear private "opportunistic" hurdles (at least in this case, it clears BREP X's). 

 

this looks like a $6 billion equity check which seems pretty big for a $30B fund. Perhaps this will be done in conjunction w/ co-investment from say a SWF or they'll rapidly decrease the equity consideration with sales of some portion of the portfolio (a la the classic Equity Office Properties txn).....actually they'll probably put a bit more debt on it than AIRC has on it now so that's another way to decrease the equity check lol. 

 

https://www.wealthmanagement.com/investment-strategies/blackstone-raises-more-30-billion-giant-real-estate-fund

Edited April 8, 2024 by thepupil

[Gregmal]

Hmmm, so all those governance issues at Aimco? Think this bodes very well for AIV.

[Gamecock-YT]

 Starwood putting up the redemption gate to Sreit.

 

https://www.ft.com/content/2b375114-049e-49f4-814a-2abce846f99d

 

Quote

A $10bn property fund managed by Barry Sternlicht’s Starwood Capital is strictly limiting its investors’ ability to exit their investments as it preserves liquidity and avoids a fire sale of assets in what it believes are poor markets.

 

The fund, known as Sreit, on Thursday told investors it would restrict their liquidity rights by more than 80 per cent, limiting redemptions to 0.33 per cent of its net assets a month from as much as 2 per cent — the amount it has allowed them to redeem since its inception in 2018.

 

Sreit’s portfolio spans apartment blocks in Arizona, logistics centres in Norway and a large loan it provided to Blackstone for the acquisition of Australian hotel and casino group Crown Resorts.

 

Facing high redemption requests and dwindling liquidity, Sreit said it would increasingly gate investors because it believes the Federal Reserve will soon cut interest rates, providing for “sunnier skies” in which it would favour selling property.

 

 

[fareastwarriors]

KKR Makes Its Biggest Foray Into Apartments, Betting on Rising Rents

 

Private-equity firm pays $2.1 billion for more than 5,200 apartment units across the country

[Spekulatius]

I am in MAA, CPT and to a lesser extend SUI and they had a nice stealth rally. One thing that clear is that in many of the areas these Reits are operating the influx of people is still ongoing which means the supply bulge should be worked off in 2025/26. Renting is also much much cheaper than buying equivalent townhomes in most locations at current mortgage rates.

 

I am keeping my shares (all in IRA’s for now), I think there is more juice here imo.

 

That was a well timed trade with a one foot hurdle that @BG2008 and @thepupil pointed out, that seemed very easy to grasp.

[BG2008]

1 hour ago, Spekulatius said:

I am in MAA, CPT and to a lesser extend SUI and they had a nice stealth rally. One thing that clear is that in many of the areas these Reits are operating the influx of people is still ongoing which means the supply bulge should be worked off in 2025/26. Renting is also much much cheaper than buying equivalent townhomes in most locations at current mortgage rates.

 

I am keeping my shares (all in IRA’s for now), I think there is more juice here imo.

 

That was a well timed trade with a one foot hurdle that @BG2008 and @thepupil pointed out, that seemed very easy to grasp.

 

I remember walking on the beach and calling @gregmal and saying "dude, I don't know when this investment work, but you're buying large cap, low leverage MF REITs at a 7% cap or 6.7% or whatever it was, and you're gonna make money" 

 

Blue Horseshoe likes MAA and CPT, JK. I'm just some small fry who enjoys shooting the shit with you guys! 

 

Spek, I do agree that MAA and CPT have more juice. I also see more sellside starting to agree that 2H of 25 to 28 will be a period of good rent growth. 

[Gregmal]

Haha yea good times. It was and still kind of is one of those situations where it just seems so obvious. And baffling when you see who’s on the other side of these trades. Like you had your pick of quality and quantity, location, you name it. Getting blasted for little real reason other than “rates”. Except we were already told rates were temporary and going to be lowered in the not too distant future. That supply increase was a big one off. Pacmanification of the space was occurring. All you had to do was wait and get paid lol. 

[Spekulatius]

The bullish thing about multi family is that renting is very very affordable compared to buying a property . The lack of affordability pertains only to buying homes, but not renting. I can see some decent rent increases for a few years as these two will eventually converge. 

[Gregmal]

Stupid real estate investors...these are just a bet on lower rates!

 

Stupid David Tepper, going balls to the wall long financials in 2009 is just a bet on a bailout.

 

Smart real estate investors, just like Mr. Tepper, you're just betting that the Fed will do exactly what they already told you theyre doing. Its easy money?

 

 

 

Thats smart money versus dumb money for you!

Edited August 29, 2024 by Gregmal

[thepupil]

$ELME pretty much saying it's for sale. 

 

I feel good about my basis of $13.25 but don't think the results going to be too exciting. 

 

but that was kind of the deal, when bought in 2023. approaching 7.5 cap, 5% divvy, hard to lose money, maybe a better target since streamlined, but nothing too exciting. 

 

here's to a good 2025 for this most mediocre of REITs! 

 

 

 

Edited February 13, 2025 by thepupil

[thepupil]

Doing some basic napkin math

 

$700mm debt

88mm shares

 

$140mm MF NOI gonna cap slap 6.5% =0.065 $16.50/share as a bear case, going to say 5.25% / $22 as a very bulled up case.

 

watergate is $12mm NOI /300k sf.

gonna say $60mm ($200 / 20% ) as bear case, $120mm ($400 / 10%) as bull case

 

0.7-1.4 from watergate

 

so napkin math = $17.25-$23.40. I’d probably say $19/$20 is realistic.
 

At about $17 in the aftermarket, 0-37% upside with a 4.2% divvy.

 

probably not a terrible amount of risk, but also not too too much reward either.

 

this basically says 5.8% for larger 1980s built DC metro apartments as of 7/2024.

https://berkadia.com/wp-content/uploads/2024/07/Berkadia-Mid-Year-2024-Multifamily-Report-Washington-D.C.pdf

 

bump it to 6% for trump/doge/rates, gets you $18.50 + $1.00 for Watergate = $19.50 = $19 just to use a round number, would be a rough base case. maybe people get a little more timid because DOGE/fear of trump, but maybe not. 

 

Nov 2024: JP Morgan Note (Stock at $16.70): "We calculate ELME to trade at an implied cap rate of 6.5% whcih seems about 75 bps wide of where we anecdotally hear about transactions for similar assets" <-- perhaps they are just repeating the same stuff, but that's another high 5's guesstimate. 

 

 

Edited February 14, 2025 by thepupil

[tnathan]

Time to hop into some ELS here?

[Marco Van Basten]

25 minutes ago, tnathan said:

Time to hop into some ELS here?

I prefer SUI.  ELS is too happy to issue equity here.

[realassetsvalue]

I don't think equity issuance has been a concern at ELS. They issued ~$315m at $70 a share in Q4 2024 to repay their term loan that was maturing. $70 per share was a 24x FFO multiple based on 2024 FFO and ~22.5x 2025 guidance for FFO per share so 4% - 4.5% cost of equity.

 

Their term loan cost of debt is ~120 bps over SOFR, which was ~4.85% at the time so debt would have cost ~6%. SOFR 5yr swaps may have been a bit lower than that but cost of debt would almost certainly have been above 5%.

 

Feels like reasonable capital allocation in my opinion.

 

ELS isn't particularly cheap - but the quality of the business is very good and I don't think it will be. SUI has been cheaper over the past couple years but for good reasons - management issues, an ill-fated foray into the UK, etc. Marinas sale was a great win. I think they're still figuring out who the new leadership of the company will be. I think there's certainly a case to be made that SUI will be simplifying and focusing on their core US business going forward, which I imagine will be well received by investors.

 

The valuation gap to ELS has largely closed on a Price / FFO basis. FWIW I think ELS portfolio quality is better - better locations, age-restricted share, fewer rental homes.

 

[Spekulatius]

Ouch:

Now she is starting a roofing company?

Edited July 6, 2025 by Spekulatius

[thepupil]

I bought some ELS today for my parents' IRA. It's at its highest dividend yield since 2009, lowest EV to sales in about 9 years and above a 5% cap rate, which doesnt' seem spectacular but is cheaper than I've seen in a while. some negative operating momentum regarding RV parks and stuff. starter position. has underperformed REITs by ~7% YTD, 5% 1 yr, 7% 3 yr, 23% 5 yr (all cumulative not per year). 

 

this year have bought ARE, REXR and now ELS for their IRA, nothing super high conviction, just the blue chip darlings of yesteryear that have endured decent drawdowns from very high valuation or just stagnation for a few years. up 12-14% on the first two in a short time, but view them more as seemingly okay times to buy some small position in long term holds in a boring retirree's portfolio. (rather than super juicy upside or anythign.

[Marco Van Basten]

10 hours ago, thepupil said:

I bought some ELS today for my parents' IRA. It's at its highest dividend yield since 2009, lowest EV to sales in about 9 years and above a 5% cap rate, which doesnt' seem spectacular but is cheaper than I've seen in a while. some negative operating momentum regarding RV parks and stuff. starter position. has underperformed REITs by ~7% YTD, 5% 1 yr, 7% 3 yr, 23% 5 yr (all cumulative not per year). 

 

this year have bought ARE, REXR and now ELS for their IRA, nothing super high conviction, just the blue chip darlings of yesteryear that have endured decent drawdowns from very high valuation or just stagnation for a few years. up 12-14% on the first two in a short time, but view them more as seemingly okay times to buy some small position in long term holds in a boring retirree's portfolio. (rather than super juicy upside or anythign.

Yeah, seems like a good idea.  What cap rate do you think it trades based on 2026 numbers?  Thank you.

[Spekulatius]

I also bought a little $ELS today . I recently sold $SUI and it seems that $ELS trades at a similar valuation and has better assets, so I regard this as a free upgrade.

 

I don’t think $ELS can be considered cheap though.

[realassetsvalue]

@Marco Van Basten Assuming 5% growth in operating income and expenses for 2026 vs. 2025 guidance, I see it trading at a ~5.2% cap rate on 2026e NOI. I deduct property management costs from income from property operations to calculate NOI.

 

I see that working out (roughly) to 20x 2026 EBITDA and 22x 2026 AFFO (after deducting estimated recurring CAPEX).

 

 

Thinking about portfolio level unlevered returns, an in-place cap rate of 5% and recurring CAPEX at 12% of operating income results in an economic cap rate of ~4.3%. This is after property management expenses and CAPEX. assuming 4% - 5% NOI growth over time, which is in line with recent and historical returns, that's a 8% - 9.5% or thereabouts annual portfolio-level, unlevered return.

[thepupil]

16 hours ago, Marco Van Basten said:

Yeah, seems like a good idea.  What cap rate do you think it trades based on 2026 numbers?  Thank you.

 

5.2%? 5.3%?

 

1 hour ago, Spekulatius said:

I also bought a little $ELS today . I recently sold $SUI and it seems that $ELS trades at a similar valuation and has better assets, so I regard this as a free upgrade.

 

I don’t think $ELS can be considered cheap though.

 

agreed. it's not cheap.

 

I believe you have to buy on the way down to own some at the bottom. I'd love to lose 10,20,30% on this.

 

with high quality companies/REITs, instead i find they typically just go up a lot after i buy a starter. even if they never get cheap enough to make a real position, it's not a terrible thing....the worst case is kind of what's happened last 5 years...you buy and it makes 0%/yr while market flies. I think that's less likely starting at 20x FFO (rather than 30x 5 years ago) but still possible.

 

7/2020: SPX = 22x P/E, ELS =30x FFO

7/2025: SPX = 26x P/E, ELS = 20x FFO

 

absent something being broken w/ MH...I don't think the dynamic where stocks re-rate positively and MH de-rates continues forever...

 

HSD returns base case.

 

 

 

[Spekulatius]

4 hours ago, thepupil said:

with high quality companies/REITs, instead i find they typically just go up a lot after i buy a starter. even if they never get cheap enough to make a real position, it's not a terrible thing....the worst case is kind of what's happened last 5 years...you buy and it makes 0%/yr while market flies.

 I see this exactly the same way and it happened to me many times that the stock went right away after I purchase a small position. Thats one reasons I have many small positions. I don’t mind it too much either.

[Spekulatius]

Based multiples, Multifamily cos like MAA are cheaper than during the COVID-19 trough. MAA is huge here where I live (CLT area) and while there is a lot of new supply, there is a lot of influx of people too, so I don’t think that rents are going to drop for extended periods of time either. MAA’s dividend yield is 4.7% and it’s going to go up over time. I think it’s a great holding inside and IRA as an inflation correlated bond and I continue to buy more shares there.

 

I also have some PSA and  a lesser amount of CPTin the same bucket.

Edited October 29, 2025 by Spekulatius

[Marco Van Basten]

1 hour ago, Spekulatius said:

Based multiples, Multifamily cos like MAA are cheaper than during the COVID-19 trough. MAA is huge here where I live (CLT area) and while there is a lot of new supply, there is a lot of influx of people too, so I don’t think that rents are going to drop for extended periods of time either. MAA’s dividend yield is 4.7% and it’s going to go up over time. I think it’s a great holding inside and IRA as an inflation correlated bond and I continue to buy more shares there.

 

I also have some PSA and  a lesser amount of CPTin the same bucket.

Any reason that you don't like EQR or AVB?  Thank you.

[Spekulatius]

8 hours ago, Marco Van Basten said:

Any reason that you don't like EQR or AVB?  Thank you.

EQR and AVB  are heavily invested in coastal market like NYC, LA etc, I prefer the sunbelt exposure of CPT and MAA. Sunbelt has better demographics and no crazy politics but less barriers to build Multifamily, so it’s a trade off. It’s cheap to rent in CLT compared to owning a condo - I think it supports rents.