Zacks Industry Outlook Highlights: AvalonBay Communities, Public Storage and Taubman Centers

Oct 03, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Oct. 3, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Real Estate Investment Trust (REIT), including AvalonBay Communities, Inc. (NYSE: AVB), Public Storage (NYSE: PSA), and Taubman Centers Inc. (NYSE: TCO).


A synopsis of today's Industry Outlook is presented below. The full article can be read at

As "echo boomers" (the children of the Baby Boomer generation) opt to move out on their own and more renters decide to part ways with family and roommates, single-family homeownership rate across the U.S. has witnessed a continuous decline and demand for multifamily rental apartments have surged. With new supply remaining muted until late 2013 or 2014, we expect the multifamily sector to remain comparatively stable in the coming quarters, as renting has emerged as the only viable option for customers who could not get 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 focused 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 from owners and developers who cannot refinance their properties, which augurs well for its top-line growth.

We are also bullish on Public Storage (NYSE: PSA), the largest owner and operator of storage facilities in the U.S. The company has significantly increased the scale and scope of its operations through the acquisition of Shurgard Storage Centers that had a considerable presence in the European markets. Although Public Storage currently owns a 49% stake in Shurgard, the size and scope of its operations have enabled it to achieve economies of scale, thereby generating high operating margins and managerial efficiencies.

The "Public Storage" brand is the most recognized and established name in the self-storage industry with a presence in all the major markets across 38 states in the U.S. In addition, the storage facilities of the company have a high visibility and are usually located in heavily populated areas that improve the local awareness of the brand. This provides a significant upside potential for the company.

Another stock worth mentioning is Taubman Centers Inc. (NYSE: TCO), which owns, develops and operates regional and super-regional shopping centers throughout the U.S. and Asia. Retail shopping centers spanning over 400,000 square feet of gross leaseable area (GLA) are generally referred to as "regional" shopping centers, while those centers having in excess of 800,000 square feet of GLA are generally referred to as "super-regional" shopping centers.

Taubman focuses on dominant retail malls that command the highest average sales productivity in the U.S., measured in terms of mall tenants' average sales per square foot. On a trailing 12-month basis, mall tenant sales were $600 per square foot during second quarter 2011 -- a unique record for the company as well as the U.S. public regional mall portfolios.

In addition, a large number of these shopping centers are strategically located in the most affluent regions of the country, which include Los Angeles, San Francisco, Denver, Detroit, Phoenix, Miami, Dallas, Tampa, Orlando and Washington DC. This in turn enables the retailers to target high-end upscale customers and maximize their profitability.

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