CHICAGO, Feb. 24, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Real Estate Investment Trusts Industry, including: AvalonBay Communities, Inc. (NYSE: AVB), CB Richard Ellis Group Inc. (NYSE: CBG) and HCP (NYSE: HCP).
With a continued decline in the single-family homeownership rate across the U.S. and gradual improvement in the overall economy, apartment REITs have performed strongly in fiscal 2010. We expect this sector to remain comparatively stable in the coming quarters, as renting has emerged as the only viable option for customers who could not avail mortgage loans or are unwilling to buy a house at present.
In this environment, we remain bullish on AvalonBay Communities, Inc. (NYSE: AVB), one of the best-positioned apartment REITs primarily focusing on developing multi-family apartment communities for higher-income clients in high barrier-to-entry regions of the U.S. AvalonBay has Class A assets located in premium markets, such as Washington DC, New York City, and San Francisco, where the spread between renting and owning is still high despite home price declines.
In addition, AvalonBay has a reasonably strong balance sheet with moderate near-term debt maturities and adequate liquidity. Consequently, the company can capitalize on potential acquisition opportunities due to distressed selling by owners and developers who cannot refinance their properties, which augurs well for its top-line growth.
Currently, we are also bullish on CB Richard Ellis Group Inc. (NYSE: CBG), the world's largest commercial real estate services firm (on the basis of 2010 revenues). CB Richard Ellis is the global market leader in commercial real estate brokerage and advisory services for property leasing and sales, forecasting, valuations, origination and servicing of commercial mortgage loans, as well as project and real estate investment management.
The company has a broad range of real estate product and services, and an extensive knowledge of domestic and international real estate markets that enables it to operate as a single-source provider of real estate solutions. In addition, CB Richard Ellis has a hard-to-replicate intellectual capital and technology resources that develop and deliver superior analytical, research and client service tools to its professionals that enable it to meet diverse client needs.
Another stock worth mentioning is HCP (NYSE: HCP), the leading medical REIT in the U.S. with one of the largest and most diversified portfolios in the healthcare sector having exposure to nearly all types of facilities. The product diversity of the company allows it to capitalize on opportunities in different markets based on individual market dynamics, and provides a hard-to-replicate competitive advantage over its peers.
In addition, HCP does not run the health care business at its facilities. Rather, it has established business relationships with a number of experienced healthcare management companies or operators who lease these properties on a long-term basis – generally for 10 to 15 years. Healthcare is also relatively immune to the economic problems faced by office, retail and apartment companies and is the single largest industry in the US, based on Gross Domestic Product (GDP).
Consumers will continue to spend on healthcare while cutting out discretionary purchases. This insulates the company from short-term market swings, and provides a steady source of income.
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