Solid Equity Residential Pipeline

We maintain our Buy rating on the shares of Equity Residential (EQR - Analyst Report). The company continues to raise rents in most markets, which has led to above average revenue and net operating income growth in EQR’s portfolio. Nearly all of EQR’s top 20 markets reported solid rental rate growth in the 1st quarter.

EQR continues to dispose of assets in lower growth areas to focus on higher growth assets in more supply constrained markets. In addition, EQR’s large development pipeline should incrementally add to earnings as projects come on line.

We think multifamily fundamentals will remain strong throughout 2008, a byproduct of the failing housing markets. We would overweight multifamily operators in the current recessionary economic environment.

The company has a strong balance sheet and plenty of liquidity to be active in acquisitions and development. More private developers are having difficulty obtaining financing, which should decrease competition and increase potential yields on acquisitions and developments.

We expect rent growth to continue at a healthy clip across the company’s portfolio and shares should recover after a recent sell off. On a 2008 estimated Price/FFO basis, the company trades at a 10% premium to sector averages and now a 10% discount to our calculated net asset value. We set our price target at 17x 2008 estimates or $43.00 per share.

Read the full analyst report on EQR