This Real Estate Play Keeps Hauling In The Bricks

Real estate is starting to pay off again--in the stock market. After being in the cellar for years, shares of companies linked to real estate are back in vogue. One that's being eyed as a pure play on land and housing is AMREP Corp. The Big Board stock has risen from 5 a share in April to 8 1/4 recently.

This New York-based company develops entire communities, building and selling low-to-medium-priced single-family homes, townhouses, and condominiums. Its model town is Rio Rancho, a 91,000-acre subdivision near Albuquerque, N.M. AMREP constructed some 432 homes last year in Rio Rancho. This year, 540 homes are being built, and 700 more are going up next year. True, AMREP has been chastised periodically by regulators for allegedly aggressive sales practices, but its regulatory problems seem to be a thing of the past.

LOCATION, LOCATION. So far, AMREP has built 14,000 homes in Rio Rancho, priced between $46,000 and $180,000. Some custom-designed homes cost as much as $515,000. The giant semiconductor maker Intel recently announced that it will soon double the size of its $1 billion plant at Rio Rancho. So a bigger Intel facility could boost even more the demand for housing. AMREP CEO Anthony Gliedman says AMREP has made plans to build an additional 15,000 homes in Rio Rancho.

The company turned a modest profit of 10 a share during its first fiscal quarter ended July, 1993, after losing money for the past three years. One portfolio manager, Rudy Mueller at Winchester Group, figures the company will earn 30 to 50 a share in the year ending Apr. 30, 1994, on revenues of $110 million. Gliedman says the estimates are in the ballpark but could be too modest if AMREP is able to satisfy the rapidly growing demand for homes in Rio Rancho and other homesites in Denver, Eldorado, N.M. (in Santa Fe), and West Palm Beach, Fla. In Denver alone, Gliedman expects AMREP to build 300 homes a year in the next several years.

One possible kicker to AMREP's stock is the company's profitable Kable News subsidiary, which distributes some 700 magazines for 190 publishers in the U.S., Canada, and overseas. Whispers are some 40% of the unit--which one analyst estimates is worth $45 million--will be spun off. He believes AMREP's stock could double in a year.