UDR (NYSE:UDR), Associated Estates (NYSE:AEC), Equity Lifestyle (NYSE:ELS), Public Storage (NYSE:PSA) and Sovran Self Storage (NYSE:SSS) were analyzed by FBR as to the effect an increase in interest rates would have on the REITs.
FBR concluded, "In recent years, REIT earnings have been goosed by the low rate environment, as companies helped themselves to healthy servings of floating-rate debt. What happens to earnings if rates rise, without any extra growth, other than what is already cooked into 2011 estimates? We ran a simple screen on the short-lease universe (apartments, student and manufactured housing, and self storage). We excluded any debt that is swapped, but included any debt that is capped, and assumed no refi activity (the latter assumption being somewhat unlikely). For some companies there could be downside to current 2011 FFO estimates; for others there is minimal risk. Below, we highlight the most and least impacted REITs, based on a 100 basis point increase in underlying rates. See page
two for a full ranking."
The following companies could see the biggest percentage decline to our forecasted 2011 FFO per share estimates in the test scenario: UDR (Market Perform) and Associated Estates Realty Corp. (Outperform, –4.1%)
The following companies could see the smallest percentage decline to our forecasted 2011 FFO per share estimates in the test scenario: Equity Lifestyle Properties (Market Perform), Public Storage (Underperform, 0%), and Sovran Self Storage (Outperform).
No pun intended, but everything that glitters is not gold. Sometimes you have to look at the whole picture to get a true understanding of the efficacy of a company and the potential for future earnings. Simply evaluating technicals is not enough. NYSE:UDR is in big trouble in California. California is UDR's biggest market and represents over 40% of its revenues. I am just playing the Devil's Advocate but please hear me out. I am a tenant advocate in California and for the past two years have actively research and reported on UDR activites. You can read many articles at http://erinbaldwin.com. However, the most recent and telling of them all is an article called: "NYSE:UDR Sues Blogger For Defamation, Obtains Fraudulent Injunction & Uses Injunction to Hide Truth" at http://erinbaldwin.com/2011/01/03/nyseudr-sues-blogger-for-defamation-obtains-fraudulent-injunction-uses-injunction-to-hide-truth/ Please take a look before your discard this notion because it could significantly change your position on UDR Inc.
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