UPDATE: Credit Suisse Starts AvalonBay Communities (AVB) at Neutral
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Credit Suisse analyst Tayo Okusanya initiates coverage on AvalonBay Communities (NYSE: AVB) with a Neutral rating and a price target of $208.00.
The analyst comments "We initiate coverage of AVB with a Neutral rating and $208 TP. In our view, AVB is one of the strongest developers in the Apartment REIT sector, with $4B in development rights expected to provide growth opportunities across all regions over the next several years. Given that development spreads are 250-350 bps higher than acquisition cap rates, this has been a large source of earnings growth for AVB. However, we are concerned that rising construction costs could hurt development yields, thereby causing a slowdown in development starts at AVB. Slowing tech job growth is also an overhang on the current portfolio (18% of NOI in Northern California) and the development rights pipeline (20% in N. California). Our 2023/2024 estimates are below consensus on these two concerns. A growing presence in Denver and Southern Florida should be a positive given migration/demographic patterns driving population, job, and income growth in these two markets."
Shares of AvalonBay Communities closed at $191.40 yesterday.
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