John R. Benda is a Senior Equity Research Analyst covering REITs for National Securities Corporation, with a focus on the multifamily rental REIT sector. In his exclusive interview with the Wall Street Transcript he details his top picks in REITs and his personal investing methodology for choosing them.
The senior analyst with the National Securities Corporation sees a continuing them of consolidation within apartment rental REITs, driven by record breaking rent rates:
“Basically, it’s like a perfect storm for these guys. Everything is really working in their favor and not against them whatsoever. The biggest drivers are median asking rents, which is at a record high for the nation. You’re at $910 for the whole nation right now, which is up 7.4% year over year. You had the Northeast up 12% quarter over quarter and a 21% year-over-year increase, which is very significant. Even the Midwest, which is kind of a sleepy geographic region, is up year over year…So you’re seeing huge increases in median rents across the country.”
Mr. Benda notes that the rate increases are being driven by record levels of debt within the age range that usually buys rather than rents:
“There’s a negative correlation between the percentage of the population with a bachelor’s degree and the homeownership rate under 35; they’re inverse. As more people get educated, less and less people have the funds to service mortgage debt while they service their student loans.”
This in turn is driving mergers in the REIT sector:
“That’s why you’ve also seen a lot of consolidation of the larger players in the industry. MAA (NYSE:MAA) recently purchasing PPS — that was a very big acquisition, but that’s because they’re so strong. In the multifamily sector, in the last 18 months, 24 months, you’ve had four acquisitions. You had AEC being acquired, IRT (NYSE:IRT) bought TSRE, HME was taken private, and MAA bought PPS.”
To see the entire list of Mr. Benda’s current REIT recommendations, read the entire interview in the Wall Street Transcript.