After AEC announced that secondary offering, the second one in just a short span of time, the stock tanked, and immediately analysts started throwing rotten tomatoes all over their press release. Well excuse me, but I’d say the estimable Jeffrey I. Friedman has once again had the last laugh, ladies and germs.

We in the 9th floor have long had respect for the good Jeffrey I. Friedman and his wisecracking ways. So much so that we have held the stock of his most formidable company consecutively through no less than four separate downturns, always buying more.

Now, with bonds melting down globally, the good Mr. Jeffrey I. Friedman’s decision to blanket his company is excess cash is looking precognitive, if not outright clairvoyant.

The stock has held up. It will sell off as our fellow shareholders, disgraced with horrible positioning, get raked across hot coals by the margin clerks. But the company is positioned beautifully, thanks all to one Mr. Jeffrey I. Friedman.

Never bet against the bitter industry veteran.

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I’m busy, and have been for a week. So I thought I’d leave you with some light reading:

The rental vacancy rates for the nation declined from 8.4 percent in 2009 to 7.4 percent in 2011, according to one of two American Community Survey briefs covering the housing market released today by the U.S. Census Bureau. Approximately four times as many metro areas experienced declines in rental vacancy rates as those that experienced increases. The share of U.S. households that rent rather than own increased from 34.1 percent in 2009 to 35.4 percent in 2011. Nearly a quarter of the nation’s metro areas saw a rise in renting households, while less than 3.0 percent of the nation’s metro areas saw a decline.

Rental Housing Market Condition Measures: A Comparison of US Metropolitan Areas examines four characteristics of the rental housing stock using American Community Survey data collected in 2009 and 2011. The characteristics are gross rent, gross rent as a percentage of household income, rental vacancy rates, and renter share of total households and describe changes comparing 2009 with 2011.

The brief found that more renters are spending a high percentage of their household income on rent. Policymakers use gross rent as a percentage of income as a measure of housing affordability, and it is often used to determine eligibility for housing programs. In this report, renters spending 35 percent or more of household income on rent and utilities are considered to have high rental costs.

The share of renters with high housing costs in the United States rose from 42.5 percent in 2009 to 44.3 percent in 2011. However, average rental rates in the United States declined from 2009 to 2011.

“While we saw a decrease in rental vacancy rates and pricing in some areas, the burden of rental costs on households increased across many parts of the nation,” said Arthur Cresce, assistant division chief for housing characteristics at the Census Bureau. “Factors such as supply and demand for rental housing and local economic conditions play an important role in helping to explain these relationships.”

Nationwide, only 11 metro areas reduced their shares of renters with high housing costs, while 62 metro areas increased their shares.

Among the 50 most populous metro areas, some of the heaviest rental costs were borne by renters in metro areas in Florida, California and Louisiana in 2011, despite rent declines between 2009 and 2011. These include Miami with 55.7 percent of renters experiencing heavy rental costs. Orlando, Fla. (52.9 percent); Riverside, Calif. (52.2 percent); and New Orleans (51.3 percent), whose shares did not differ significantly from one another, followed closely.

Among the 50 most populous metro areas, only two became affordable for more renters — Richmond, Va., with a decline of 3.2 percentage points in the share of renters with high rental costs from 42.7 percent to 39.5 percent between 2009 and 2011, and Buffalo, N.Y., with a decline of 3.0 percentage points from 45.6 percent to 42.6.

$AEC and $CLP and the renting class are still in effect.

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The walls of the room irradiate a faint heat absorbed from the hearth where a raging fire keeps back the winter tempest outside. Six stories below a fog is rising from the window panes. And the ground floor two beneath that is completely covered in a thick blanket of snow.

Going into the afternoon, I took the time to lighten up AEC. It had a great quarter, and taking advantage of the punch higher over the last six months, I took profits on everything I purchased when it undeservingly sold off last year. I’m back to holding my core position – which is about 10% of equity assets.

I now have core positions built in AEC, CLP, BAS and RGR. I have an equal sized hedge in EUO. All are equal to about 10% of assets. I have an oversized position in CCJ of almost 30%. Roughly 20% of my account is in cash.

This doesn’t count the silver I hold, which is about 15% of net value. Add that back in and all the position sizes drop a little bit; but not much.

I’m going to be very reserved about making purchases here. I’m rooting on the upside, but I’m keenly perceptive that this is the same old game being played. As prices offer me relief, I’ll just keep taking money off the table, a little at a time.

Winter has been very good to me so far. I’d be remiss to blow that.

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For all the analyst pessimism; for all the downtrodden complaints about cap rates and cash flow; for all the smirks that a company would ever bother “repaying what it owes” rather than leveraging up (more); AEC once again smashed earnings.

FFO gorged itself, plus >30%. Profits swelled. The operations of this multifamily improved considerably. And their flashy new credit rating shows off those improvements.

And through it all, occupancy held 96%.

It’s time for the REIT analysts to face the music – they were wrong. They were wrong about the company. They were wrong about the profitability of AEC being hindered by a paltry few percent in cap rates. They were wrong about an Exodus of renters leaving the market.

None of those things happened.

Or you can keep your head in the sand. I’ll just keep watching FFO build at a 30% clip, add at these ridiculous prices, and take a fat payday down the road.

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And Associated Estates Realty, my little diamond in the rough, has once again raised its dividend following an absolutely wonderful quarter. The move represents a 5.6% increase in payout, bringing the annual yield back up to around 5% from the days’ open.

The stock is up 2% on the announcement, but that’s no consolation.

AEC has been crushed over the last 6 months as trolling analysts and crack addicted gamblers were pissed off that the company decided it was better to control their debt than make failed bids at grand slams and gluttonous attempts at devouring the entire apartment market on nothing but a smile and a signature.

By doing things their more conservative way, not only have profit margins continued to improve, but the company’s operations have become more consolidated, lower cost, containing higher value properties, and lower influence from interest rate swings.

And, because they decided to tender their debt load, they’ve been catching ratings upgrades, which will only serve to save the shareholder more in earnings down the road.

Recently, a series of articles have come out suggesting the Multifamily REIT boom is over, because the resurge in housing prices is foretelling a collapse in occupancy and rates. A second, alternate version of this storyline suggests that because a house could, theoretically, cost less than renting an apartment, we would see a huge shift away from rental occupancy and downward pressure on rates.

Sorry, but no, that’s not how attaining mortgages works.

I continue to forecast strong outperformance from the REIT multifamily sector. And, when the market finally catches on, these stocks will have a long way to go before they’re pricing that in properly.

In the meanwhile, AEC and CLP continue to see FFO bulging. And since that’s money going straight to my pocket, I guess I’ll just have to enjoy these dividend hikes while I wait.

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CLP followed its’ brother, AEC, in reporting earnings this morning before the bell. The theme is the same.

Earnings look bad, cash available to shareholders continues to swell, and FFO blows out.

AEC’s management is scared at the moment, most likely of Fannie or Freddie getting raided by the GOP in a Romney victory, which I can see from them raising a few hundo-million and bunkering down in the third quarter.

CLP doesn’t seem to care.

They’ve continue cycling their operation throughout the third quarter, completing more purchases and sales to bring their costs down while taking advantage of struggling competitors. This multi-billion dollar business (much larger than AEC), at the moment is enjoying a 96.7% occupancy rate.

Rents are rising at a 6% clip this year, uninterrupted. And looking at the state of affairs for Americans, I don’t think that’s changing. I have placed my bets on a major shift in sentiment of US citizens away from home ownership and to renting. Two years in, all data coming from multifamily properties continues to validate this. Even a surge in housing prices, I do not feel, will significantly alter the occupancy rates of quality multifamily apartment REITs.

>90% booked is here to stay, in my opinion.

Here’s my favorite highlight, from their earnings release today:

Development Activity

During the quarter, the company completed construction of Colonial Grand at Hampton Preserve, a $52.2 million multifamily development with 486 units in Tampa, Florida. As of September 30, 2012, the property was 93.8 percent occupied.

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