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, particularly among the apartment communities located in the urban submarkets, is a concern.
MAA has a well-diversified portfolio in terms of markets, submarkets, product types and price points. Moreover, a high-quality resident profile resulted in solid collections even amid the pandemic. MAA noted that rent collections in third-quarter 2021 improved, sequentially.
The residential REIT has been focusing on its three internal investment programs, such as interior redevelopment, property repositioning projects and Smart Home installations for a while. The programs will help MAA capture upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base in late 2021 and 2022.
Additionally, MAA enjoys a robust balance-sheet position, with low leverage and ample availability under its revolving credit facility, enabling it to navigate any negative externalities. As of Sep 30, 2021, $1 billion of combined cash and capacity was available under its unsecured revolving credit facility, net of commercial paper borrowings.
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 95.1% unencumbered net operating income (NOI), which offers scope for tapping additional secured debt capital if required.
Shares of this presently Zacks Rank #2 (Buy) MAA have rallied 30.7% over the past six months, outperforming the
industry’s growth of 14.6%. Additionally, the Zacks Consensus Estimate for 2021 funds from operations (FFO) per share has moved up marginally in the past week. Image Source: Zacks Investment Research
However, the new supply of residential properties has been high for the past few years. This expanded supply adversely impacts landlords’ capability to demand more rents, thus resulting in lesser absorption, particularly among the apartment communities located in the urban sub-markets. Moreover, stiff competition in the residential real-estate market curtails MAA’s power to raise the rent or increase occupancy and induces aggressive pricing for acquisitions.
While development activities are accretive for long-term value creation, the same require huge capital outlays. An extensive development pipeline heightens MAA’s operational risks by exposing it to construction cost overruns, entitlement delays and lease-up risks.
Other Key Picks
Some other top-ranked stocks from the REIT sector are
Equity Residential ( EQR Quick Quote EQR - Free Report) , AvalonBay Communities ( AVB Quick Quote AVB - Free Report) and Equity Lifestyle Properties ( ELS Quick Quote ELS - Free Report) .
The Zacks Consensus Estimate for Equity Residential’s 2021 FFO per share has been raised marginally over the past month. EQR carries a Zacks Rank of 2, currently. You can see
the complete list of today’s Zacks #1 Rank stocks here.
Over the last four quarters, Equity Residential’s FFO per share surpassed the consensus estimate thrice and reported in-line results once, the average surprise being 4.20%. Shares of EQR have appreciated 2.5% in the past three months, outperforming the industry’s rally of 2.3%.
The Zacks Consensus Estimate for AvalonBay’s current-year FFO per share has been raised 1.3% in the past month. AVB currently holds a Zacks Rank of 2.
Over the last four quarters, AvalonBay’s FFO per share surpassed the consensus estimate on three occasions and missed the mark on the remaining one, the average surprise being 0.82%. Shares of AVB have appreciated 4.8% in the past three months, outperforming the industry’s rally of 2.3%.
The Zacks Consensus Estimate for Equity Lifestyle Properties’s 2021 FFO per share has moved 1.6% north in the past two months. ELS currently carries a Zacks Rank of 2.
Over the last four quarters, Equity Lifestyle Properties’s FFO per share surpassed the consensus mark on all occasions, the average surprise being 7%. Shares of ELS have inched up 19.7% in the past six months against the industry’s decline of 16%.
Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.