AvalonBay: A Socially-Responsible REIT?

06/28/2018 5:00 am EST

Focus: REITS

Brett Owens

Chief Investment Strategist, BNK Invest, Inc.

AvalonBay Communities (AVB) is one of several real estate investment trusts (REITs) that have penetrated the ranks of the environment, social and governance (ESG) friendly, explains Brett Owens, editor of Contrarian Outlook.

AvalonBay is geographically diverse, boasting apartment communities in the Northeast, Mid-Atlantic, Pacific Northwest, and Northern and Southern California — and doing so across the Avalon, eaves by Avalon and AVA brands.

As of the first quarter, AVB owned or held interest in 288 apartment communities containing 84,162 apartment homes, and also had 18 communities under construction that should contain 5,774 apartment homes when completed.

“How can a REIT be responsible?”, you ask? Well, the company itself specifically points out that operating high-density housing helps “contribute to more efficient land use patterns,” but it also ensures that its properties effectively use energy, water and other resources.

While those ESG practices help endear companies like AvalonBay to millennials, the company itself is right in that generation’s wheelhouse. Millennials are prime tenants in AVB’s high-growth markets, and they are die-hard renters. Homeownership among people 35 and younger has dropped 18% since 2006, according to the Pew Research Center.

That’s helping AVB stay plenty profitable; the company grew core funds from operation (FFO) by 4.3% year-over-year for the first quarter to $2.18 per share.

And AvalonBay isn’t shy about sharing its extra profits with investors. The REIT has pumped up its quarterly payout by 287% since it started paying out a regular dividend in 1994.

Brett Owens, Contrarian Outlook

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