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Archstone-Smith Cranks It Up

Funds from operations rise 38%.

Luxury apartment owner



reported first-quarter earnings that beat analyst estimates, helped by strength in the Washington, D.C., Southern California and New York City metropolitan markets.

The real estate investment trust said funds from operations, a common REIT performance metric, rose 38% to $126.3 million, or 59 cents per share, compared with $91.8 million, or 46 cents per share, a year ago. Analysts expected 55 cents, according to First Call.

The company's same-store net operating income grew 9.8% in the quarter, driven primarily by strong results in Washington, D.C. (NOI up 9.9%), Southern California (NOI up 12.4%) and the New York City area (NOI up 10.9%). These areas represent 68% of the company's apartment portfolio.

"This impressive growth is a direct result of our continued strategy of owning apartments in highly desirable neighborhoods with very expensive housing costs, together with our ongoing commitment to innovation," said CEO R. Scot Sellers in a statement.

So far this year, Archstone has acquired $765 million of new apartment communities, including New York City purchases that made the company the largest public owner of apartment rentals in that city.

"We expect Archstone's shares to react positively to the earnings news," wrote Bank of America analysts Karin Ford and Ross Nussbaum, who reiterated their buy rating and $53 target on the stock. "We believe Archstone offers exposure to high quality markets with potential for 6-8% NOI growth as well as a large $4 billion development pipeline, high quality management team and technology advantages."