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Mid-America Apartment (MAA) Tops Q3 FFO & Revenue Estimates

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Mid-America Apartment Communities, Inc. (MAA - Free Report) , commonly referred as MAA, reported third-quarter 2018 funds from operations (FFO) of $1.50 per share, in line with the Zacks Consensus Estimate. Further, the figure remained unchanged as compared to the prior-year tally.

This residential REIT’s quarterly results reflect growth in same-store net operating income (NOI) and rise in average effective rent per unit for the same-store portfolio.

Rental and other property revenues came in at $397.1 million in the quarter, 3.3% higher than the prior-year tally. Further, it surpassed the Zacks Consensus Estimate of $395.5 million.

Quarter in Detail

During the reported quarter, the company’s same-store NOI increased to $224.2 million, registering 1.9% year-over-year growth.

The same-store portfolio revenues increased 2% as a result of year-over-year increase in average effective unit of 2.1%. Moreover, average physical occupancy for the same-store portfolio was 96%, reflecting a contraction of 10 basis points from the year-earlier quarter.

As of Sep 30, 2018, MAA held cash and cash equivalents of nearly $46.1 million, significantly up from approximately $10.8 million as of Dec 31, 2017. Furthermore, as of the same date, around $674.3 million of combined cash and capacity were available under its unsecured revolving credit facility.

The Post Properties Merger

During third-quarter 2018, MAA incurred a total of 2 cents per share of merger and integration costs. Notably, the company expects full consolidation of MAA and Post Properties to be accomplished later this year.

Additionally, MAA continues to project synergies of around $20 million in gross overhead costs to be realized from this merger.

Portfolio Activity

During the quarter under review, MAA purchased 7,500 square feet of multi-tenant retail space at the company’s Hue apartment community in Raleigh, NC. The company had previously purchased apartment space at the community in 2010.

During the Jul-Sep period, it also sold a seven-acre land parcel in Atlanta, GA, for $1.8 million.

During the nine-month period ended Sep 30, 2018, MAA completed the renovation of 6,549 units under its redevelopment program. Notably, it attained an increase in the average rental rate of 10.6%, above non-renovated units.

At the end of the Sep-end quarter, MAA had four development community projects under construction, consisting of 717 units, with total projected cost of $148 million. Notably, an estimated $102.3 million remained to be funded as of Jun 30, 2018.

Outlook

MAA narrowed its guidance for 2018 FFO per share and expects it to be in the range of $5.99-$6.11, up from the previous band of $5.96-$6.16. Currently, the company’s Zacks Consensus Estimate for the same is pegged at $6.05.

Our Viewpoint

The company’s redevelopment program has likely enabled it to achieve higher rents through its renovation program. MAA remains poised for long-term growth, backed by a well-balanced portfolio, which is diversified in terms of markets, submarkets and price points.

Nevertheless, elevated supply in a number of the company’s markets has likely decreased occupancy at its properties. Escalating competition from other housing alternatives will likely curb the company’s ability to raise rents or increase occupancy.


MAA currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of Host Hotels & Resorts, Inc.  (HST - Free Report) , Lamar Advertising Company (LAMR - Free Report) and Outfront Media Inc. (OUT - Free Report) . While Host Hotels is scheduled to report its quarterly numbers on Nov 2, Lamar and Outfront are slated to report their third-quarter earnings on Nov 8 and Nov 5, respectively.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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