U.S. apartment stocks fall on weaker outlook

NEW YORK Thu Feb 5, 2009 1:10pm EST

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NEW YORK (Reuters) - Shares of apartment landlords fell on Thursday after two large apartment real estate investment trusts (REITs) issued lower-than-expected forecasts for 2009, citing the weak U.S. job market.

"It is jobs that are the single most important determinant to the health of the multifamily industry, and today's jobless claim data is further evidence of just how bad the job picture currently is," said David Neithercut, CEO of Equity Residential (EQR.N), the largest U.S. apartment REIT.

The U.S. government said on Thursday the number of U.S. workers filing new claims for jobless benefits last week hit a 26-year high.

The data comes ahead of Friday's closely watched employment report, which is expected to show job losses accelerated in January. An independent report released on Wednesday showed the U.S. private sector purged 522,000 jobs last month.

Job growth enables apartment landlords to raise rents.

"There is no denying we expect to have very little if any pricing power across our markets in 2009," Neithercut said in a conference call with analysts.

Chicago-based Equity Residential said it expects full-year 2009 funds from operations in the range of $2.00 to $2.30 per share. Analysts, on average, expected 2009 FFO of $2.35 per share, according to Reuters Estimates.

For 2009, the company said it expected that its revenue from properties it has managed for more than a year would be down 1.5 percent to 4.5 percent.

AvalonBay Communities Inc (AVB.N) said late on Wednesday that it expected 2009 funds from operations to be in the range of $4.50 to $4.80 compared with a Wall Street's estimate of $4.81 per share, according to Reuters Estimates.

FFO removes the profit-reducing effect of depreciation, a noncash accounting item.

Shares of Equity Residential fell 5.2 percent to $22.21 in afternoon trading on the New York Stock Exchange. AvalonBay's shares were off 3 percent to $48.56.

Other apartment REITs also fell. Apartment Investment and Management Co (AIV.N) shares were down 7.6 percent to $8, while UDR Inc (UDR.N) was off 5 percent to $10.68.

(Reporting by Ilaina Jonas; Editing by Tim Dobbyn)

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