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10 Best Apartment REITs To Buy Now For Income Investors


Updated on August 21st, 2024 by Bob Ciura

Due to the surge of inflation to a 40-year high last year, the Federal Reserve raised interest rates at a rapid pace over the past two years to cool the economy.

But with economic growth slowing, economists now expect the Fed to lower interest rates once again, perhaps as soon as September.

Apartment REITs have proved resilient to recessions thanks to the essential nature of their business. They also widely have high dividend yields well above the S&P 500 Index average.

And, apartment REITs would benefit from falling interest rates, which would lower their cost of capital.

You can download our full REIT list, along with important metrics such as dividend yields and market caps, by clicking on the link below:

 

As a result, apartment REITs are interesting candidates for income investors.

This article will discuss the prospects of the top 10 apartment REITs in our Sure Analysis Research Database.

The following 10 apartment REITs are listed by five-year expected annual returns, in order of lowest to highest:

Table of Contents

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Apartment REITs #10: Camden Property Trust (CPT)

Founded in 1993 and headquartered in Houston, Texas, Camden Property Trust is one of the largest publicly traded multifamily real estate companies in the U.S.

The REIT owns, manages and develops multifamily apartment communities. It currently owns 172 properties that contain over 58,000 apartments.

On October 31st, 2024 Camden reported its Q3 results for the period ending September 30th, 2024. For the quarter, the company reported property revenue of $387.2 million, relatively flat compared to Q3 2023.

This was driven by same property revenues and same-store occupancy coming in flat as well at 95.5%. Same-property expenses grew by 1.8% during the period, while same-property net operating income (NOI) came in flat.

Funds from Operations (FFO) totaled $181.5 million, or $1.65 per share, compared to $191.2 million, or $1.73 per share, in Q3 2023.

Click here to download our most recent Sure Analysis report on Camden Property Trust (CPT) (preview of page 1 of 3 shown below):

Apartment REITs #9: Essex Property Trust (ESS)

Essex Property Trust was founded in 1971. The trust invests in West Coast multi-family residential proprieties where it engages in development, redevelopment, management and acquisition of apartment communities and a few other select properties.

Essex has ownership interests in several hundred apartment communities consisting of over 60,000 apartment homes. The trust has about 1,800 employees and produces approximately $1.6 billion in annual revenue.

Essex is concentrated on the West Coast of the U.S., including cities like Seattle and San Francisco.

Source: Investor Presentation

Essex delivered another strong quarter, exceeding the midpoint of its core funds from operations (FFO) guidance and raising guidance for the third time this year. For Q3, core FFO per share was $3.91, outperforming expectations by $0.04, driven by higher same-property revenues.

The company now anticipates full-year core FFO of $15.56 per share, reflecting a 3.5% year-over-year growth. Same-property revenue growth is forecasted at 3.25% for the year, an increase of 25 basis points, fueled by lower delinquency rates and improved other income.

Seattle emerged as a top performing region for the company, posting 3.8% blended lease rate growth in Q3, with Eastside markets achieving 4.7% growth. Northern California saw 2.3% blended growth, led by Santa Clara County’s 3.6%.

Click here to download our most recent Sure Analysis report on ESS (preview of page 1 of 3 shown below):

Apartment REITs #8: AvalonBay Communities (AVB)

AvalonBay Communities is a multifamily REIT that owns a portfolio of several hundred apartment communities and is also an active developer of apartment communities.

The strategy of the REIT involves owning top-tier properties in the major metropolitan areas of New England, New York/New Jersey, Washington D.C., California, and the Pacific Northwest.

Source: Investor Presentation

AvalonBay reported strong third-quarter 2024 results, with EPS reaching $2.61, a 115.7% increase from Q3 2023, and exceeding projections by $1.16. Revenue was $732.59 million, marking a 5.3% year-over year growth.

Funds from Operations (FFO) per share rose to $2.88, a 16.1% increase, while Core FFO per share was $2.74, up by 3.0%.

Same Store Residential revenue and operating expenses increased by 3.1% and 5.4%, respectively, resulting in a 2.0% growth in net operating income (NOI).

Click here to download our most recent Sure Analysis report on AvalonBay Communities (AVB) (preview of page 1 of 3 shown below):

Apartment REITs #7: Equity LifeStyle Properties (ELS)

Equity LifeStyle Properties, Inc is a real estate investment trust which engages in the ownership and operation of lifestyle-oriented properties consisting primarily of manufactured home and recreational vehicle communities.

Equity LifeStyle Properties operates through the following segments: Property Operations; and Home Sales and Rentals Operations.

The Property Operations segment owns and operates land lease properties. The Home Sales and Rentals Operations segment purchases, sells, and leases homes at the properties.

Today, Equity LifeStyle Properties, Inc. owns or has a controlling interest in more than 400 communities and resorts in 33 states and British Columbia, with more than 165,000 sites.

On October 21st, 2024, Equity LifeStyle Properties reported third-quarter earnings for Fiscal Year (FY) 2024. For the quarter, ELS achieved a 4.9% increase in Normalized Funds from Operations (FFO) per common share, reaching $0.72.

Core property revenues for the quarter rose by 4.4%, while income from property operations, excluding management, saw a 5.8% increase.

Manufactured housing (MH) base rental income also increased by 6.2% for both the quarter and nine months, largely due to rate increases and higher occupancy.

Click here to download our most recent Sure Analysis report on ELS (preview of page 1 of 3 shown below):

Apartment REITs #6: UMH Properties (UMH)

UMH Properties is a REIT that is one of the largest manufactured housing landlords in the U.S. It was founded in 1968 and currently owns tens of thousands of developed sites and 135 communities located across the midwestern and northeastern U.S.

As manufactured homes are cheaper than conventional homes, UMH Properties has proved resilient to recessions.

Source: Investor Presentation

UMH reported a strong third quarter for 2024, with total income reaching $60.7 million, an 8% increase from $56.0 million in the same period in 2023.

The net income attributable to common shareholders was $8.2 million, or $0.11 per diluted share, a notable improvement from a net loss of $5.8 million, or $0.09 per diluted share, in Q3 2023.

Normalized Funds from Operations (FFO) increased to $18.5 million, or $0.24 per diluted share, up from $14.4 million, or $0.22 per diluted share, a 9% improvement.

During the quarter, UMH achieved significant operational growth, including an 8% rise in rental and related income, a 10% increase in manufactured home sales, and a 7% boost in community net operating income (NOI).

Same property occupancy rose by 70 basis points to 87.7%, supporting a strong rental income performance.

Click here to download our most recent Sure Analysis report on UMH Properties (UMH) (preview of page 1 of 3 shown below):

Apartment REITs #5: Equity Residential (EQR)

Equity Residential is one of the largest U.S. publicly-traded owners and operators of high-quality rental apartment properties with a portfolio primarily located in urban and dense suburban communities. The properties of the trust are located in affluent areas around Boston, New York, Washington, D.C., Southern California, San Francisco, Seattle, and Denver.

Equity Residential greatly benefits from the favorable characteristics of its target group. Affluent renters are highly educated, well employed and earn high incomes. As a result, they pay approximately 20% of their incomes on rent and hence they are not burdened by their rent. Thanks to their strong earnings potential, the REIT can easily grow its rent rates year after year.

Equity Residential reported its third-quarter 2024 results, highlighting an earnings per share (EPS) of $0.38, which fell short of expectations by $0.03. However, revenue increased by 3.35% year-over-year to $748.35 million, beating estimates by $4.65 million.

The company noted a decrease in EPS from $0.45 in the same quarter last year, a decline of 15.6%, attributed primarily to lower property sale gains and higher depreciation expenses.

Equity Residential’s funds from operations (FFO) per share rose to $0.99, marking a 3.1% increase from the prior year’s $0.96. Normalized FFO also showed growth, reaching $0.98 per share, up 2.1% from $0.96 a year earlier.

Click here to download our most recent Sure Analysis report on Equity Residential (EQR) (preview of page 1 of 3 shown below):

Apartment REITs #4: Mid-America Apartment Communities (MAA)

Mid-America Apartment Communities is a REIT that owns, operates and acquires apartment communities in the Southeast, Southwest and mid-Atlantic regions of the U.S.

It currently has ownership interest in ~102,000 apartment units across 16 states and the District of Columbia.

MAA is focused on the Sunbelt Region of the U.S., which has exhibited superior population growth and economic growth in the long run.

Source: Investor Presentation

In late October, MAA reported (10/30/24) financial results for the third quarter of fiscal 2024. Same-store net operating income remained flat over the prior year’s quarter.

Core funds from operations (FFO) per share dipped -3.5%, from $2.29 to $2.21, due to higher interest expense, but beat the analysts’ consensus by $0.03.

MAA has missed the analysts’ FFO estimates only once in the last 26 quarters.

Click here to download our most recent Sure Analysis report on Mid-America Apartment Communities (MAA) (preview of page 1 of 3 shown below):

Apartment REITs #3: American Homes 4 Rent (AMH)

Based in Maryland, American Homes 4 Rent is an internally managed REIT that focuses on acquiring, developing, renovating, operating and leasing single-family homes as rental properties. AMH was formed in 2013 and has a market capitalization of $14 billion.

The REIT holds nearly 58,000 single-family properties in more than 30 sub-markets of metropolitan statistical areas in 21 states.

On October 29th, 2024, AMH reported third quarter results for the period ending September 30th, 2024. For the quarter, revenue increased 5.5% to $445.1 million and was in-line with estimates. FFO of $0.44 compared favorably to FFO of $0.35 in the previous year and was $0.01 better than expected.

For the quarter, AMH had a same-home average occupied day percentage of 95.9%, which was 60 basis point decrease from the prior year. New leases signed had rental rate growth of 5.3% while renewal rental rates increased 5.2%., leading to a blended growth rate of 5.2%.

Rents and other single-family property revenues grew 5.5% while occupied homes of 58,899 compared to 58,860 in the first quarter of 2024. Average monthly rents per property was up 5.1% while property expenses increased 2.6% to $118.5 million.

Click here to download our most recent Sure Analysis report on American Homes 4 Rent (AMH) (preview of page 1 of 3 shown below):

Apartment REITs #2: UDR, Inc. (UDR)

UDR, also known as United Dominion Realty Trust, is a luxury apartment REIT. The trust owns, operates, acquires, renovates, and develops multifamily apartment communities in high barrier-to-entry markets in the U.S.

A high barrier-to-entry market consists of limited land for new construction, complicated entitlement processes, low single-family home affordability and strong employment growth potential.

The majority of UDR’s real estate property value is established in Washington D.C., New York City, Orange County, California, and San Francisco.

Source: Investor Presentation

UDR owns or has an ownership interest in ~58,000 apartment homes, 415 of which are homes under development.

UDR reported third quarter 2024 results on October 30th, 2024. The company’s adjusted funds from operations declined 2% year-over-year to $0.54 per share in the third quarter.

The quarterly AFFO payout ratio of 79% is relatively safe for a REIT that must pay out the majority of its earnings to shareholders. Physical occupancy of the real estate portfolio declined 40 basis points compared to the prior year period to 96.3%.

Click here to download our most recent Sure Analysis report on UDR (UDR) (preview of page 1 of 3 shown below):

Apartment REITs #1: American Assets Trust (AAT)

American Assets Trust is a REIT that was formed in 2011 as a successor of American Assets, a privately held company founded in 1967.

AAT has great experience in acquiring, improving and developing office, retail and residential properties throughout the U.S., primarily in Southern California, Northern California, Oregon, Washington and Hawaii.

Its office portfolio and its retail portfolio comprise of approximately 4.0 million and 3.1 million square feet, respectively. AAT also owns more than 2,000 multifamily units.

Source: Investor Presentation

In late October, AAT reported (10/29/24) financial results for the third quarter of fiscal 2024. Adjusted same-store net operating income grew 16% year-over-year.

Funds from operations (FFO) per share grew 20% over last year’s quarter, thanks to a lease termination fee, rent hikes and slightly higher occupancy.

Due to a non-recurring termination fee, AAT raised its guidance for FFO per share in 2024 from $2.48-$2.54 to $2.51-$2.55.

Click here to download our most recent Sure Analysis report on American Assets Trust (AAT) (preview of page 1 of 3 shown below):

Final Thoughts

Many apartment REITs pass under the radar of the majority of investors due to their mundane business model.

However, some of these REITs have offered exceptionally high returns to their shareholders. In addition, apartment REITs have proved resilient to recessions, as the demand for housing remains strong even during rough economic periods.

The above 10 apartment REITs are interesting candidates for the portfolios of income-oriented investors, especially given the increasing risk of an upcoming recession.

If you are interested in finding high-quality dividend growth stocks and/or other high-yield securities and income securities, the following Sure Dividend resources will be useful:

High-Yield Individual Security Research

Other Sure Dividend Resources

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