10/27/21 10:11 AM EDT

REITS DAILY BRIEF | 10.27.21 | (3Q21 Earnings, AVB, EXR, Office)

Rob Simone, CFA

Takeaway: Flood of calls and earnings today/tonight; watching AVB/EXR closest

AVB: Reports 3Q21 results after the close this evening following fellow Best Idea Long list members EQR and ESS yesterday. The quarter for EQR was not "bad" per se, rather a little lighter than we expected but also showing improving forward growth metrics (blended leasing spreads +7.6% vs. our +5% in the quarter and +9.8% in October), which all else the same raises the bar for FY22 results. Similarly ESS printed equivalent-set metrics of +12.6% and +13.5%, respectively, however with a decelerating monthly sequential change for both September and October. We expect similar forward-looking measure statistics from AVB this evening to EQR, which remains our favorite of the three stocks. We are looking for AVB Core FFO of $2.03/share in 3Q21 on SSNOI +0.3%, or +$0.02/share above the Old Wall and the high-end of AVB's guidance. We are also looking for further improvements to the FY21 outlook with SSNOI trending towards low-single-digit negative for the full year, and any clues on the path for FY22 SSNOI growth which we think could approach the low-teens positive range. Street numbers remain 6-7% too low for FY22/23, and the RoC setup looks exceptional for the Coastal Gateway Apartments over the next 3-4 quarters. We rank the names AVB/EQR/ESS in that order on the long side.

EXR: Long Bench Extra Space (EXR) takes the self-storage REITs out of the gate tonight, and we are in-line with the Street on 3Q21 Core FFO of $1.70/share coming on SSRev +13.2% and SSNOI +18.4%. In our view by far what matters most in this print is the commentary on the seasonal occupancy declines between 3Q/4Q, which is literally the fulcrum between a guidance range increase vs. concerns about a more severe SSNOI decel trend and subsector sell-off. We have average occupancy moving from 96.8% in 3Q to 95.3% in 4Q, which combined with rental rate growth leaves us $0.05/share ahead of consensus on 4Q results. We therefore expect a full year range increase with the midpoint of FY21 Core FFO converging towards the current high-end of $6.60/share. EXR typically provides its forward-year outlook along with 4Q21 results in February. The next 1-2 quarters will be critical in determining how "long in the tooth" the long storage trade is.

Great Note from Neil Howe this morning on Return to Office HERE. Short Bench name PGRE reports 3Q21 results tonight as well.

CHART OF THE DAY: EQR Leasing Spreads Accelerating