Mid-America Apartment Communities ( MAA Quick Quote MAA - Free Report) , also known as MAA, is seeing growth in demand and rent in its Sun Belt-focused portfolio, backed by favorable in-migration trends of jobs and households in the region. However, elevated supply and the pandemic-led choppy scenario might hinder its momentum.
This residential real estate investment trust (REIT) has a well-diversified portfolio in terms of markets, submarkets, product types and price points. Moreover, a high-quality resident profile has resulted in solid collection performance even amid the pandemic.
The Sun Belt area has been less affected amid the coronavirus mayhem. The pandemic has accelerated employment shifts and population inflow into the company’s markets. These favorable longer-term secular dynamic trends are enhancing the desirability of its markets. Among this, MAA is well poised to capture recovery in demand and leasing compared to the expensive coastal market.
MAA enjoys a robust balance-sheet position, with low leverage and ample availability under its revolving credit facility, which enables it to navigate through any negative externalities. Backed by an in-place at-the-market equity share offering program, MAA is well poised to source attractively-priced capital from the equity markets. It also generates 95.3% unencumbered net operating income (NOI), which offers scope for tapping additional secured debt capital if required. The company sustains investment grade ratings of BBB+/BBB+ and a stable outlook from Standard and Poor’s, and Fitch Ratings, respectively, which renders the company’s favorable access to debt.
The company projects a development funding of $250-$350 million for 2021. Such efforts are likely to enhance portfolio quality and propel the company’s growth over the long term. Amid a competitive pricing environment for acquisitions and growing demand for apartment housing across its Sunbelt markets, the company’s focus on its development pipeline for external growth opportunities is a strategic fit.
Shares of this Zacks Rank #3 (Hold) company have rallied 39% over the past six months, outperforming the
industry’s growth of 31.5%. Also, the Zacks Consensus Estimate for 2021 funds from operations (FFO) per share moved up marginally over the past month. Image Source: Zacks Investment Research
However, new supply of residential properties has been high for the past few years. This elevated supply adversely impacts landlords’ capability to demand more rents and results in lesser absorption, particularly at apartment communities located in urban sub-markets. It is anticipated to put pressure on the company’s rental rates and erode revenue growth in the near term.
While development activities are accretive for long-term value creation, the same require huge capital outlays. An extensive development pipeline increases the company’s operational risks by exposing it to construction cost overruns, entitlement delays and lease-up risks. Rising real estate taxes might inflate expenses and hurt the bottom line to some extent.
Key Industry Picks
A few better-ranked REIT stocks are mentioned below:
BRT Apartments Corp.’s ( BRT Quick Quote BRT - Free Report) Zacks Consensus Estimate for 2021 funds from operations (FFO) per share moved up 6.1% over the past two months. The company currently flaunts a Zacks Rank of 1 (Strong Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here Bluerock Residential Growth REIT, Inc.’s ( BRG Quick Quote BRG - Free Report) Zacks Consensus Estimate for the current-year FFO per share moved 3.1% north in two months’ time. The company carries a Zacks Rank of 2(Buy) at present. RPT Realty’s ( RPT Quick Quote RPT - Free Report) FFO per share estimate for the ongoing year has been revised upward by 4.9% over the past 60 days. The company carries a Zacks Rank of 2, currently.
Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.