AvalonBay Communities (AVB 1.16%) is one of the largest residential REITs in the market, with impressive properties in some of the highest-cost U.S. markets. However, in this Fool Live video clip, recorded on June 15, Fool.com contributors Matt Frankel, CFP, and Jason Hall discuss why AvalonBay could still be a winning long-term investment.
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Matt Frankel: AvalonBay is the biggest residential real estate investment trust in the country. They specialize in high-cost urban apartment buildings, which is why there's so many in the D.C. area like Anand just mentioned. They specialize in six core markets. They have a big presence in the New York area. They used our own brand name Avalon for a lot of their properties. The Boston area, the San Francisco area, the Southern California area, and the Seattle area are the rest of their six core markets. They are gradually expanding into the Denver market and the South Florida market. Those are their two expansion markets. They compete directly with Equity Residential (EQR 0.90%). They pretty much investment in same market. AvalonBay focuses more on development which I love about the company. Development, let's say that they can go out and buy an apartment complex for $50 million. If you could build the same apartment complex for $40 million, you've just instantly created $10 million of value. If you're a good developer like AvalonBay is, there's a lot of value creation potential. Checkout these numbers. They went public in 1993. Since then, they've delivered a 3,400% total return compared to 1,400% for the S&P well over double the S&Ps return since their IPO, 13.3% annualized total return since '93. That's a pretty impressive track record of value creation and why I rank them, I think higher than both of you.
Jason Hall: Yeah. I really like this business honestly, and I struggle with where I rank it because I think the other side of the housing trend that we see is, prices are probably going to continue to go up as long as there's these cramps on supply and demand and it feels like there will. That means a lot of people are going to be living in apartments. Then this is one of the very, very best run apartment REITs in the U.S.
