Apartment Investment and Management Company AIV — better known as Aimco — is well positioned to benefit from its portfolio repositioning and diversification. However, weak rent growth and lower lease pricing ability due to stiff competition might curb its profitability.

A mixed trend in estimate revisions for this year and the next have resulted a in Zacks Rank #3 (Hold) for the stock.

Looking at its price performance, the stock has lost 4% since the beginning of the year versus the Zacks categorized REIT and Equity Trust - Residential industry’s 4% gain.

       
Aimco is revamping its portfolio through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth.

Recently, the company shelled out $451.5 million for the complete ownership of three Palazzo communities. This transaction is anticipated to improve the average age of portfolio holdings, internal rate of return and average monthly revenues per apartment home.

The company’s balance sheet and liquidity position should keep supporting this move.

Moreover, Aimco has a solid portfolio — diversified both in terms of geography and price point. This should help the company meet the rise in demand for apartment properties from ‘echo boomers’ — children of the baby boomer generation.

Further, as renting is the only viable option for customers who cannot afford mortgage loans due to high mortgage rates or are unwilling to buy a house at present, demand for Aimco’s premium properties are expected to rise in the coming quarters.

This diversification cushions the company’s performance despite new supply in various markets.

However, stiff competition from new supply in various markets — particularly in Los Angeles and Denver — will keep dampening Aimco’s rent growth and new lease pricing ability. In addition, rising interest rates and dilution of earnings due to asset disposal remain major concerns for the company.

Aimco is slated to report second-quarter 2017 results on Jul 27, after the market closes. The company projects pro forma funds from operation (“FFO”) per share in the band of 56–60 cents for the to-be-reported quarter.

Stocks to Consider

Some better-ranked stocks in the Residential REIT space are Select Income REIT, SIR, Equity LifeStyle Properties, Inc. ELS and Bluerock Residential Growth REIT, Inc BRG. All three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For Select Income REIT, the Zacks Consensus Estimate for full-year 2017 funds from operations (FFO) per share has revised 2.5% downward over the last 30 days.

For Equity LifeStyle, the Zacks Consensus Estimate for full-year 2017 funds from operations (FFO) per share remained unchanged over the last 30 days.

For Bluerock Residential Growth REIT, the Zacks Consensus Estimate for full-year 2017 funds from operations (FFO) per share has revised 65% upward over the last 30 days.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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Apartment Investment and Management Company (AIV) : Free Stock Analysis Report
 
Bluerock Residential Growth REIT, Inc. (BRG) : Free Stock Analysis Report
 
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Select Income REIT (SIR) : Free Stock Analysis Report
 
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