UPDATE: MLV & Co Initiates Coverage On Preferred Apartment Communities On Very Attractive Risk/Reward

In a report published Friday, MLV & Co analyst Ryan Meliker initiated coverage on Preferred Apartment Communities (NYSE: APTS) with a Buy rating and $13.00 price target.In the report, MLV & Co noted, “We are initiating on Preferred Apartment Communities, Inc. with a BUY-rating and a $13 price target. Our positive view of APTS is driven by the company's unique and attractive investment strategy, coupled with a valuation disconnect, that leads to over 50% upside to our year-end 2014 price target. The main driver of our expectation for gross out-performance in the coming months is the value of APTS' purchase options on maturing development mezzanine loans, which we peg at $24mm, or about $1.50 per share."While we acknowledge certain challenges associated with illiquidity, small size and external management, we believe the valuation discount is too great and see an extremely attractive risk/reward skew driven by a support level from the current 7.5% dividend yield and the upside of the development lending platform.”Preferred Apartment Communities closed on Thursday at $8.50.