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Investors Real Estate (IRET) Buys Plymouth Property for $92M

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Multifamily REIT Investors Real Estate Trust (IRET - Free Report) — better known as IRET — announced the acquisition of Park Place Apartments in the Twin Cities submarket of Plymouth, MN. The company shelled out $92.3 million for the buyout of this 500-unit multifamily property. The move is in sync with the company’s efforts of expanding its presence in the Twin Cities market.

The above discussed property has around 571,000 rentable square feet of space within four apartment buildings. There is a solid demand for space in this property, as indicated by its current occupancy of more than 95%

This acquisition is a strategic fit for IRET given the demographic trends and the inherent demand present in this submarket. Also, per the company, supply is limited and amid these, it aims at leveraging on incremental revenue-generating prospects and increasing cash flows.

Notably, Plymouth is the third largest suburb of the Minneapolis-Saint Paul MSA. Also, it is the 16th largest metropolitan area in the United States, with around 3.3 million residents. The city offers bright scope for growth because there are a number of factors which will boost demand for apartments.

In fact, Plymouth offers proximity to employers like Cargill, Carlson Companies, General Mills, The Mosaic Company and St. Jude Medical. Further, with an award winning school district and presence of restaurants, shopping, and entertainment venues, as well as trails and parks, Plymouth is likely to enjoy decent demand of residential units in the near future.   

Notably, for the overall U.S. apartment market, job formation and checked move-outs for buying homes acted as catalysts during second-quarter 2017. However, residential REITs have been hit by new apartment deliveries in several markets. The anticipation of the continuation of the stressed environment in the near term is also likely to curb these companies’ ability to command more rents and affect concession levels.

IRET currently has a Zacks Rank #4 (Sell). In addition, shares of IRET descended 0.5% in a year’s time, underperforming 3.1% growth recorded by the industry.

 

Stocks to Consider

Better-ranked stocks in the REIT space include PS Business Parks, Inc. (PSB - Free Report) , InfraREIT Inc. (HIFR - Free Report) and UMH Properties, Inc., (UMH - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While PS Business Parks and InfraREIT have expected long-term growth rates of 5% and 8%, respectively, the expected long-term growth rate for UMH Properties is currently pegged at 10%.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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