- Equity Residential (EQR-an apartment REIT) is at a ten year discount to bonds due to short term pressure on rents.
- We do not think lower EQR rents are a secular move from multifamily, but rather a cyclical event supported by decades of Federal Reserve housing data.
- On a three year horizon, a combination of lower supply and higher demand will eventually create a "perfect storm" for higher rents in EQR markets.
- We particularly recommend corporate bonds as a funding source for EQR. We also recommend options (covered call, short put) for income given the catalyst is some time away.
For further details see:
Buy Equity Residential/Sell Puts: Short Term Thinking Leads To The 'Patient Long'