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MAA ( MAA - Snapshot Report ) , an apartment-only real estate investment trust (REIT), has recently closed on an unsecured term loan worth $150 million to increase its liquidity and repay its debt. The five-year term loan has a variable interest rate of LIBOR plus a spread of 1.40% to 2.15%, depending on the company's leverage levels.
J.P. Morgan Securities LLC, the investment banking division of JPMorgan Chase & Co. ( JPM - Analyst Report ) and Keybank National Association that provides various banking services in the U.S. under holding company KeyCorp ( KEY - Analyst Report ) acted as joint lead arrangers for the transaction.
MAA intends to utilize the proceeds from the funding to repay its outstanding debt on secured line of credit. The strategic ploy is aimed to maintain a conservative capital structure with sufficient cash to fuel its growth engine.
Since its inception in 1994, MAA has evolved as a publicly owned company from a portfolio of 6,000 apartments in the Mid-South area to a portfolio of 48,537 high-quality apartment homes spread across the Sunbelt region of the U.S.
The company typically divides its portfolio in two tiers – larger primary markets and lower population secondary markets. Secondary markets often have stable fundamentals due to limited new supply. Having a diversified presence in different types of markets helps mitigate risk and decreases volatility in the event of a slowdown in any one product type.
MAA’s diversified market profile with its focus on solid employment markets of the Sunbelt region across both the high-growth primary markets and the less cyclical secondary markets provides a stable earnings platform for the company.
Furthermore, as ‘echo boomers’ (children of the baby boomer generation) opt to move out and more renters decide to part ways with families and roommates, the single-family home-ownership rate across the U.S. has witnessed a continuous decline and the demand for multi-family rental apartments has surged.
With new supply remaining muted until late 2013 or 2014, we expect the multifamily sector to remain comparatively stable in the coming quarters, as renting has emerged as the only viable option for customers who could not get mortgage loans or are unwilling to buy a house at present.
We maintain our ‘Neutral’ recommendation on MAA, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating.
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