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And CLP Brings Home The Multifamily Theme, Again

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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Bought CLP And A Word Thereon

CLP is having an issue today, down more than 2% thanks to a press release.

They have entered into an option arrangement to sell a large portion of their properties at some later date. Investors are taking this to signify a bad quarter and liquidity needs.

It doesn’t have to.

In the release, the executives point out that they are keeping in mind the age and condition of their properties, and their desire to hold the most desirable locations. There are plenty of other strategic issues, like keeping your vast network of properties in localized pockets to cut down on maintenance arrangements or management costs, that may be at play here.

Plus, in the release, the company has said it has every intention of rolling over all proceeds into new properties, yet to be selected.

If I were them, I’d use this guarantee to begin the selection process. It’s more ideal than selling first and then trying to roll the funds over. With the option, if they can line up potential purchases, they will know exactly how much money they have to spend. A few right to purchase options, and they can arrange a massive deal with otherwise very illiquid and volatile assets.

I am still convinced the company is doing everything right. I have no reason to suspect anything less than a stellar quarter.

I added to my position conservatively, for $21.11, looking for a large reversal later this week.

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Another Winning Day

The oil sell off isn’t even the crux of my delight today; I need ERX and UCO to go much lower before I begin a dance of elation.

No, no, my joy is in watching a much older strategy begin to really take off.

AEC was up another 2% today, in a quarter’s end buying spree in anticipation of what I expect to be blowout earnings from the multi-family space.

If you missed out on the multi-family REITs, it is entirely your fault, I’m afraid. I highlighted them and their superior barganing position back when I first joined the iBC team.

Friends, watch amazed at the daring feats to be performed before your eyes. Rental rates are rising and occupancy has never been higher.

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