Education Realty Trust (NYSE: EDR), a real estate investment trust (REIT), has a bright future investing in real estate in strong college town across America. While the bottom for real estate may be years away, there is a silent bull market in many popular college towns. Credit goes to the importants put on education in our society, parents will do whatever it takes to send their kids to great colleges and every student needs housing.
Education Realty Trust, engages in the development, acquisition, ownership, and management of high quality student housing communities located near university campuses in the United States. It also provides third-party management services, including residence life and student development, marketing, leasing administration, strategic relationships, information systems, and accounting services for student housing communities owned by educational institutions and charitable foundations.
There is a silent bull market for apartment growth in major college towns, and rents are only going to rise in the years to come as the broader economy rebounds. Commercial properties that contain multiple apartments near college centers will be more resilient through the rest of the housing down turn and will most likely start to show price appreciation before the general housing market due to the demand for quality student housing and rising rents.
EDR was founded in 1964 and based in Memphis, EDR is one of the largest owners and operators of collegiate student housing communities in the U.S. Currently, and EDR owns and manages 65 communities over 21 states. With the continued strength in the collegiate housing market EDR is well positioned in the student housing niche. In the most recent quarter EDR announced that second-quarter FFO earnings of 22 cents per share, which beat expectations by two cents per share.
EDR recently completed a successful secondary offering. From the sale, EDR received about $116 million in proceeds. For the sale, shares were priced at $4.35. Today the stock is trading back around $6.
EDR's dividend is not subject to federal corporate income tax, as long as it distributes at least 90% of its taxable income to shareholders, since it is a REIT. So EDR pays a quarterly dividend of $0.1025 per share, or 41 cents per year. That is a 6.7% yield.
The current 6.7% yield combined with the strong demand for quality student housing makes EDR a very attractive buy for the long term. EDR has had a good run up 140% since the March 2009 low at $2.50. I would hold off buying EDR in the $6's. A better entry into the stock would be on a pull back to the 200 day moving average at around $5.40 or better yet on a stronger pull back to $4.75 where consolidation took place between April and August.
Note: I do not own EDR
