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REIT CEOs Upbeat for '07

The CEOs of three multifamily REITs agree most markets will continue to perform well, although they don't expect 2007 to be a repeat performance of the past year.

By Sule Aygoren Carranza | Updated on January 23, 2007

Sule Aygoren Carranza is managing editor of Real Estate Forum and editor of Multi Housing forum, from which this article is excerpted.

New York City—The CEOs of three multifamily REITs remain positive on the sector this year, but acknowledge that valuations may be full. And while they agree that most markets will continue to perform well, they don’t expect 2007 will be a repeat performance of the past year, since rent growth is expected to slow in even some of the hottest areas. That was the consensus of Bank of America‘s recent multifamily CEO dinner, attended by AvalonBay Communities Inc.’s Bryce Blair, BRE Properties Inc.’s Connie Moore and David Neithercut of Equity Residential.

The CEOs agree demand continues to exceed supply, which should lead to same-store NOI growth of at least 5% to 7%. Infill markets on the coasts are expected to outperform other areas as the cooling single-family home and condominium market and higher levels of new supply impact conditions in the Sunbelt markets such as Dallas, Phoenix, Atlanta and South Florida. Further, low yields from acquisitions are keeping all three companies focused on development opportunities.BofA, noting that it fundamentally agrees, questions “whether an unexpected jump in new supply is a risk that the market has been underestimating, even if only from a psychological standpoint.”

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