Updated Aug 6 at 2:16pm ET.
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The average rate for a 30-year fixed mortgage climbed to 6.69 percent, up from 6.66 percent last week. While higher rates make buying a home more expensive, which can keep people renting for longer, they also make it more costly for a developer like AvalonBay to borrow money for new construction.
For a company that relies on building its own apartment communities to grow, persistent high borrowing costs can eat into the profit margins of its multi-billion dollar development pipeline.
The two apartment giants have chosen Vivmark Residential as the name for the business they plan to create through their merger. The combined company would own more than 180,000 rental apartments and have a total value, including debt, of about 71 billion dollars.
While a name change is a standard step in a merger, it signals that the deal is moving forward. The success of this tie-up will depend on whether the combined team can manage such a massive portfolio more efficiently than they did as separate companies.
Source: Business Wire
The company reported core funds from operations, a key measure of cash flow for real estate firms that excludes one-time items, of $2.86 per share, up about 1 percent from last year. However, total revenue of 0.71 billion dollars and earnings of $1.11 per share both came in lower than what analysts expected.
Management raised its outlook for rent growth at its existing buildings but suspended its overall profit forecast for the rest of the year because of the proposed merger with Equity Residential. For now, the business is performing steadily, but the real story is whether the merger will close and how the two portfolios will fit together.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
The firm raised its target from $195 to $210. This suggests the analyst sees about 12 percent more value in the stock than where it currently trades, likely reflecting the steady rent growth seen in the company's core apartment markets.
Source: Piper Sandler
The analyst raised the target from $172 to $205. A move of this size usually indicates a significant shift in how the firm views the company's ability to raise rents or the value of its new construction projects.
Source: Deutsche Bank
The company has a mixed track record of meeting analyst targets, but its core operating profits have remained steady even when headline numbers shift due to merger costs.
| Expectation | |
|---|---|
| EPS | $1.22 |
| Revenue | $780M |
Seeking Alpha · Opinion · Aug 4
PRNewsWire · Press release · Jul 31
Business Wire · Press release · Jul 30
Business Wire · Press release · Jul 30
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