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REITs Navigate Public vs. Private Value Gap
21 Nov
Summary
- Some REITs are considering portfolio sales due to market value disparities.
- Public REITs find it harder to acquire new properties at current prices.
- AvalonBay Communities made significant Q3 acquisitions and dispositions.
Apartment REITs are currently facing significant headwinds as private market valuations for real estate outpace public markets. This valuation gap is prompting some smaller firms to explore portfolio sales, with entities like AIMCO opting for complete asset liquidation. Larger REITs, while less likely to sell entirely, are finding it increasingly challenging to pursue new acquisitions due to these market conditions.
Executives from major REITs, such as MAA's CEO Brad Hill, have expressed caution, indicating that current capital costs make acquisitions at prevailing prices unfeasible. This sentiment is reflected in revised financial guidance, with some REITs lowering their acquisition projections. For example, Equity Residential adjusted its full-year guidance for both acquisitions and dispositions, highlighting a selective approach to new investments.
Despite these obstacles, the third quarter of 2025 saw continued activity. AvalonBay Communities notably acquired three properties totaling 558 units across Charlotte, North Carolina, Coconut Creek, Florida, and Redmond, Washington, for a combined $186 million. Concurrently, the REIT divested six communities, comprising 1,594 units, for $585.1 million, demonstrating strategic portfolio management.
