Overall, operations are good as Equity Residential (NYSE: EQR - News) continues to increase rents while holding stable occupancy near 95%. Most of the company's core markets reported strong year-over-year revenue and net operating income (NOI) increases in the most recent quarter. The company continues to dispose of assets in lower growth areas to focus on higher barrier markets. In addition, EQR's large development pipeline should incrementally add to earnings as projects come on line.

We are concerned about a slowdown in rental rates due to unsold rental condos and houses flooding the market, especially in South Florida where the company has moderate exposure with nearly 10k units. Operationally, most multi-family owners continue to report good quarter over quarter results as rents are increasing in most markets.

Concessions are dropping, new construction is limited, and landlords have the ability to consistently increase rents. The 'for sale' housing market should continue to fall in 2008, which will benefit apartment landlords.

Equity had another strong quarter, and due to the move to fewer and better markets over the past couple of years, the company is now one of the better-positioned multi-family operators. We expect rent growth to continue at a healthy clip throughout the company's portfolio and shares should recover after a sell off that starting last year.

On a 2008 estimated price/FFO basis, the company trades at a 7% premium to sector averages and just above our calculated NAV [net asset valuation]. We are setting our price target at 19x 2008 estimates or $58 per share.

Read the full analyst report on EQR.