KeyBanc Raises AvalonBay (AVB) and UDR (UDR) to Buy; Essex (ESS) Cut to Hold

December 12, 2013 7:54 AM EST
Get Alerts AVB Hot Sheet
Price: $176.26 -0.19%

Rating Summary:
    15 Buy, 14 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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KeyBanc upgraded AvalonBay Communities (NYSE: AVB) from Hold to Buy with a price target of $139.00. UDR, Inc. (NYSE: UDR) was upgraded to Buy with a price target of $29. Essex Property Trust Inc. (NYSE: ESS) was cut to Hold.

"We upgrade the Apartment REIT vertical from Market-Weight to OVERWEIGHT based upon attractive valuation levels that overlook the potential for accelerating fundamentals, as the impact of new supply wanes and continued employment gains support greater rental demand into '15," said analyst Karin Ford.

"We believe the short-cycle nature of the apartment vertical's leases place it relatively well within an env't of rising rates driven by an imprv’g economy; the group's underperformance YTD and current relative valuation level (4% discount to REIT sector on AFFO multiple) reflects concern over slowing fundamentals amid elevated new supply. We think new supply should peak in late-'14 and give way to accelerating absorption trends."

"We are incrementally constructive on East Coast exposure; our upgrade of AVB is consistent with this notion," she continued. "Declining supply in UDR's markets should support fundamental outperformance for the Co.'s portfolio going forward."

"While we continue to see West Coast fundamentals as favorable, we believe ESS largely prices that in, particularly following its bullish Investor Day, which highlighted a strong 3-yr. growth plan. Add'lly, the potential acquisition of BRE could be an overhang for the stock," added the analyst.

For an analyst ratings summary and ratings history on AvalonBay Communities click here. For more ratings news on AvalonBay Communities click here.

Shares of AvalonBay Communities closed at $120.55 yesterday.

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