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I am releasing a short professional addendum to address the findings of eduardocaju in regards to his comment on rental property valuation addendum, and more specifically the rental pricing for XXXs student housing properties.


I called 13 properties, all of which were in your analyzed list. The only property where prices clearly moved down was at the University of Central Florida, where application fee was lowered and monthly pricing went down $10. 8 properties reported price increases, including places such as Rutgers University, where you expect a 14.6% price drop. On top of that, most dorms reported that occupancy trends remain the same as last year. I know this sounds counter--intuitive, especially when compared to trends in regular rental buildings. The issue is that if XXX can lock in good yields for this year, it is hard to imagine them running into a short term liquidity issue. They can generate USD 67M/y in FFO if biz doesn't deteriorate. That is enough to pay for USD 65M dividend. They then need to fund a USD 10M/y capex and pay down USD 280M in debt coming due in 09-10. If they tap into USD 205M in cash and revolving lines, Fannie refinancing, and asset sales they will remain solvent. It's a tough call and the stock is definitely not cheap. I am just worried that the catalyst for the story to unfold is not here until we see rents and occupancy trending lower.    

Pro subscribers can download the reply/addendum here: pdf  Residential REIT Summary Professional Addendum 2009-04-01 14:22:21 292.43 Kb