Job Creation, Home Ownership Trends Boost AvalonBay

ARLINGTON, VA-Friday’s dismal job figures were released almost simultaneously to local REIT AvalonBay Communities’ announcement that it was increasing its outlook for earnings per share. That is okay, though: the REIT has already factored in the stop-and-go nature of the recovery. Instead, according to comments made during its earnings call, and, more immediately, in its announcement about the upgrade, the REIT has its eye on longer-standing trends. These, it seems, are moving in its direction.

First, though, the increase in outlook. AvalonBay has informed its investors that for the quarter ending June 30, 2011, it now expects EPS to be between $0.42 and $0.45. For the full-year ending December 31, 2011, it now expects EPS to be within a range of $3.30 and $3.45.

The reasons have to do with the way both the job and housing markets recovery are shaping up. Specifically job creation during Q1 2011 was concentrated in the 20-34 age range--a group that typically has a high propensity to rent. At the same time the nationwide homeownership rate continues to drop, reaching 66.5% as of Q1, and the supply of new multi-family housing remains constrained. Only 110,000 multifamily units are expected to be completed in 2011, it noted in its update--the lowest level of deliveries in 50 years and almost 70% below the average over the last ten years.

The east coast markets were the first place where these trends became apparent, John Christie, senior director of the REIT’s Investor Relations and Research Division, tells GlobeSt.com. “Now the West Coast markets, particularly Northern California and Seattle, are moving forward and accelerating. We are actually seeing it everywhere now. There is much positive momentum.”

This growth, not surprisingly, has translated into stepped up acquisitions for the REIT nationwide. Locally, it recently acquired Fairfax Towers, a 415-unit high-rise community in Falls Church, VA, for $89.2 million. AvalonBay also purchased its joint venture partner’s interest in Avalon at Rock Spring, a 386-unit apartment building in Rockville, MD, for $6.5 million. That property is subject to a ground lease.