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

[Marco Van Basten]

1 hour ago, Spekulatius said:

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.

Have you looked at BRT?  Has had very significant insider buying and seems to be in the Sunbelt?  (I don't really know the company, but insider buying drew my attention.)

[realassetsvalue]

While not quite as cheap as the recent Q4 2023 lows, sector has certainly gotten cheaper over the course of the year.

 

AvalonBay and Essex trade in the mid 5s on an implied cap rate basis with EQR around 6. The rest trade in the mid 6s. Broadly 16x - 18x AFFO / after maintenance CAPEX cash flow. This is all based on Q2 numbers.

 

 

I think the most recent wall of worry impacting the sector is some combination of supply dropping but not dropping off as hard as people thought due to delays in leasing up recently completed projects and extended development timelines on stuff started in past years and employment weakening, impacting demand.

 

Broadly, coastal - especially NYC and Bay Area - is outperforming the sunbelt in terms of rents, occupancy. This is likely to continue for a while and is really due to supply delivered in sunbelt markets, where it's easier to build. Demand is also higher and I think it's consensus that the switch will flip once the current wave of supply is worked through, and sunbelt will outperform coastal. The coastal REITs are all buying sunbelt assets.

 

Most recent report was EQR yesterday. They bought 2023 vintage in Dallas for a 5% cap and sold 29 year old Boston and Northern Virginia at a 5.1% cap. Transaction volumes are low.

 

I wrote up some thoughts on the sector from a macro view on substack - which multifamily REITs should outperform depending on the macroeconomic "regime" we enter - recession, stagflation, reflation, full on soft landing - in case of interest.

 

Q3 2025 sector reports from Cushman & Wakefield, CBRE, and Avison Young are also pretty useful to contextual what's going on if you haven't been following the sector closely. 

[pricingpower]

ELME (formerly Washington reit) is pretty interesting here, they are under contract for an asset sale and plan to liquidate the remaining properties pretty quickly.  Middle of management's liquidation assumption range works out to a low 20's IRR now.  Some of their multifamily buildings are ~15% federal employee/contractors so there's maybe some idiosyncratic government shutdown / DOGE risk getting priced in.

[Marco Van Basten]

3 hours ago, pricingpower said:

ELME (formerly Washington reit) is pretty interesting here, they are under contract for an asset sale and plan to liquidate the remaining properties pretty quickly.  Middle of management's liquidation assumption range works out to a low 20's IRR now.  Some of their multifamily buildings are ~15% federal employee/contractors so there's maybe some idiosyncratic government shutdown / DOGE risk getting priced in.

Can you please lay out the math?  Thank you.

[pricingpower]

Trades at ~16.43 currently and after a sale of bulk of their assets closes in Q4 they'll pay a distribution of 14.50-14.82/shr per management projections and then when selling rest of multifamily buildings + 1 office building they project distributing another 2.9-3.5.  Quick capital return boosts the IRR even though $ returns are modest, they project sales can be done in only 6 months.

 

they actually lay this out nicely in a table in their merger announcement press release.  special meeting for shareholder vote is tomorrow.

https://ir.elmecommunities.com/news-events/press-releases/detail/372/elme-communities-concludes-strategic-alternatives-review

 

Source(s)	Estimated Amount
Initial Special Distribution	Net proceeds from Portfolio Sale Transaction and a portion of the proceeds from the new debt on Elme’s remaining assets (1)	Between $14.50 and $14.82 per share to be paid following closing of the Portfolio Sale Transaction (2)
Next Regular Quarterly Distribution	Separate from Initial Special Distribution	$0.18 per share to be paid on October 3, 2025, to shareholders of record as of September 17, 2025
Total Upfront Distributions	Initial Special Distribution and Next Regular Quarterly Distribution	Between $14.68 and $15.00 per share
Additional Potential Special Distributions	Net proceeds of the sale of Elme’s nine remaining multifamily assets and Watergate 600	Between $2.90 and $3.50 per share (3)
	Total	Between $17.58 and $18.50 per share

[Spekulatius]

$PSA is not a fat pitch, but it’s a reasonable value here. They are the best managed of the self storage Reits , low leverage and they have the lowest overhead. You get about a 6-6.5% cash yield as a shareholder which I think will be growing over time. It‘s good for IRA accounts f you want some blast that appreciates and provides some cash income. I have bought some recently in my IRA account.