2 Residential REITs for 2022: Preferred Apartment Communities and BRT Apartments

The Federal Reserve’s decision to raise interest rates multiple times this year to combat high inflation and the Russia-Ukraine crisis could keep the stock market under pressure in the near term. Amid this environment, investors could turn toward residential REIT stocks to hedge their portfolios, as they offer a steady income stream through dividends.

Moreover, the need to move to a bigger and better living and remote-working space is creating a severe supply and demand imbalance in the housing market, leading to solid price gains. This should benefit residential REITs. In addition, the multifamily vacancy rates are meager, and rents are on the rise, which could be a boon for the residential REIT industry.

Investors’ interest in the residential REIT space is evident from the iShares Residential and Multisector Real Estate ETF’s (REZ) 3.7% returns over the past six months versus the SPDR S&P 500 ETF’s (SPY) 0.8% loss.  Therefore, it could be wise to bet on quality residential REIT stocks Preferred Apartment Communities, Inc. (APTS) and BRT Apartments Corp. (BRT). These two stocks are well-positioned to witness solid upside in the near term.

Preferred Apartment Communities, Inc. (APTS)

APTS is a real estate investment trust engaged primarily in the ownership and operation of Class A multifamily properties, with select investments in grocery-anchored shopping centers, Class A office buildings, and student housing properties. It is invested in 125 properties in 15 states, predominantly in the Southeast region of the United States.

On December 13, 2021, APTS announced that it had signed a new 15-year lease for approximately five floors and 127,000 square feet at its Three Ravinia office building in the central perimeter submarket of the Atlanta, Georgia MSA. Joel Murphy, APTS’ Chairman and CEO, said, "This significant long-term lease further diversifies our already high-quality tenant base, creates material additional cash flows, and enhances the value of this Class A asset."

APTS’ total revenue decreased 12.2% year-over-year to $111.01 million for the third quarter ended September 30, 2021. However, its operating income grew 30.4% year-over-year to $34.88 million, while its net income came in at $10.03 million compared to a loss of $3.60 million in the prior-year quarter.

For fiscal 2022, analysts expect APTS’ EPS to increase 11.9% year-over-year. Over the past year, the stock has gained 170.6% to close Friday’s trading session at $22.30.

The company pays an annual dividend of $0.70, translating into a 3.1% yield.

APTS’ POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

The stock has an A grade for Sentiment and a B grade for Value, Momentum, and Growth. Within the REITs - Residential industry, APTS is ranked #1 out of 25 stocks. Click here to see APTS’ ratings for Stability and Quality as well.

BRT Apartments Corp. (BRT)

BRT is a real estate investment trust that either directly or through joint ventures, owns, operates, and, to a lesser extent, develops multifamily properties.

On February 11, 2022, BRT announced that it sold The Veranda at Shavano, a 288-unit multifamily property in San Antonio, Texas, for a sales price of $53.80 million. This property produced an 18.8% internal rate of return over the 5 ½ years the company owned it. Jeffrey A. Gould, CEO and President of BRT, said, “We continue to generate strong returns while producing significant economic gains through the targeted sale of properties that we believe have reached their maximum value in our portfolio.”

BRT’s total revenue increased 5.5% year-over-year to $7.71 million for the third quarter ended September 30, 2021. The company’s net income came in at $28.11 million compared to a loss of $7.48 million in the prior-year quarter, while its EPS came in at $1.55 compared to a loss of $0.44 in the year-ago period.

Analysts expect BRT’s EPS to increase 59.1% year-over-year for the quarter ending March 31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 16.1% year-over-year to $34.16 million in fiscal 2022. The stock has gained 49.3% over the past year to close Friday’s trading session at $22.50.

The company pays an annual dividend of $0.64, which translates to a 2.8% yield.

BRT’s POWR Ratings reflect its solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. In addition, it has an A grade for Sentiment and a B grade for Stability and Momentum.

Click here to see the additional POWR Ratings for BRT (Growth, Quality, and Value). It is ranked #2 in the same industry.

APTS shares were trading at $22.14 per share on Monday afternoon, down $0.16 (-0.72%). Year-to-date, APTS has gained 22.59%, versus a -7.47% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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