Promising Outlook for Home Properties, Inc.; Miller Tabak Raises PT and FFO Estimates (HME)

Miller Tabak released a report today with a promising outlook for Home Properties, Inc. (NYSE: HME). 2011-2012 FFO estimates and the 2011 price target are raised, and a Buy rating is maintained. This outlook is a result of generally favorable conditions in the apartment sector as a whole, as well as HME's high concentration in areas where residents are more likely choose renting over home ownership.

The U.S. apartment sector is recently benefiting from a major shift away from suburban home ownership toward renting in more urbanized areas. HME is able to ride this wave with concentrations in the right places, such as the Boston-Washington, DC “ACELA” corridor, the report states. Furthermore, Miller Tabak analysts expect HME to beat this market and earn a premium valuation over its peers, thereby supporting their Buy recommendation.

Analysts further believe that HME's concentrated property portfolio is attractive to other REITs (real estate investment trusts) as an acquisition opportunity, since many of them are looking to get a piece of HME's core markets. The report also notes that HME has recently begun a more aggressive acquisition campaign. Given the recent trends in rents and operating margins, Miller Tabak analysts raise their NAV estimate to $72.60 per share, up from $66.90.

2011-2012 FFO estimates are raised to $3.44 and $3.79 per share, respectively. The 2011 price target for HME is raised to $65.66, up from $59.15. Analysts note that while all REITs face the risk of a sustained increase in long-term interest rates, HME is the best value in the sector. It is currently trading at $59.38.