Food, Shelter, and Office?

Recently APTS has begun to further diversify into non-core properties and more recently the company said it is targeting stabilized Class-A office buildings in high-growth markets like Atlanta, Charlotte, Dallas, Nashville, Raleigh, Tampa, and Orlando. APTS seeks to invest in office because (1) it has in-house expertise, (2) is complementary to the core multifamily business, (3) the current pricing is attractive to other asset classes.

In a previous article I explained that,

“…the latest (office) acquisition raises a new question as to how far APTS is extending its line of business. The lines are getting blurred and as an investor in APTS, I am beginning to wonder how the external management team can generate alpha outside of its core circle of competence.

With the exception of healthcare REITs (like VTR and HCN), most REITs are shifting to pure play business models in order to appease analysts and investors. In other words, owning a diversified basket of real estate is less appealing when there are now over 200 US REITs to own with one simple click of the button. An investor can create instant asset-level diversification with a dedicated management team.”

As I ponder the evolution of APTS’s diversification strategy, I am reminded that the company has two options: (1) it can maintain it’s pure pay status and maintain lower earnings growth, or (2) it can reinvest in multiple asset classes and achieve a higher multiple.

As we will discover below, APTS has a unique-positioned capital stack that allows the company to deploy significant capital….