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Mid-America Apartment (MAA) Meets Q4 FFO Estimates, NOI Up

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Mid-America Apartment Communities, Inc. (MAA - Free Report) , commonly referred as MAA, reported fourth-quarter 2018 funds from operations (FFO) of $1.55 per share, in line with the Zacks Consensus Estimate. The bottom line came in higher than the prior-year quarter figure of $1.50.

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 $398.1 million in the quarter, missing the Zacks Consensus Estimate of $400.2 million. Nonetheless, the top line was higher than the prior-year figure of $382.7 million.

FFO per share for 2018 came in at $6.04, indicating a year-over-year increase of 1.7%. Yet, it missed the Zacks Consensus Estimate of $6.05. MAA recorded rental and other property revenues of $1.6 billion, increasing 2.8%.

Quarter in Detail

During the reported quarter, the company’s same-store NOI increased to $231.9 million, registering 2% year-over-year growth.

The same-store portfolio revenues increased 2.3%, backed by rise in average effective rent per unit of 2.3%. Moreover, average physical occupancy for the same-store portfolio was 96.1%, unchanged from the earlier quarter.

As of Dec 31, 2018, MAA held cash and cash equivalents of nearly $34.2 million, significantly up from approximately $10.8 million as of Dec 31, 2017.

Furthermore, as of the same date, around $490.1 million of combined cash and capacity were available under its unsecured revolving credit facility.

Post Properties Merger

During the fourth quarter, MAA completed its integration efforts with respect to the Post Properties merger, incurring 1 cent per share of merger and integration costs.

Portfolio Activity

During the quarter under review, MAA purchased 10 acres of land in Denver, CO and a nine-acre land parcel in Houston, TX.

During the October-December quarter, it closed on the sale of a three-acre land parcel in Atlanta, GA for $0.7 million.

During the year ended Dec 31, 2018, MAA completed the renovation of 8,155 units under its redevelopment program. Notably, it attained an increase in the average rental rate of 10.5%, above non-renovated units.

At the end of the quarter, MAA had three development community projects under construction, consisting of 577 units, with total projected cost of $118.5 million. Notably, an estimated $87.6 million remained to be funded as of Dec 31, 2018.

Outlook

For first-quarter 2019, MAA expects FFO per share in the range of $1.41-$1.53. Currently, the Zacks Consensus Estimate for the same is pegged at $1.51.

MAA provided guidance for 2019 FFO per share and expects it to be in the range of $6.03-$6.27. Currently, the Zacks Consensus Estimate for the same is pegged at $6.23.

Further, annual same-store portfolio property revenue and expense growth is anticipated to be 1.80%-2.80% and 2.6%-3.6%, respectively, resulting in same-store NOI growth of 1.30%-2.30%.

Our Viewpoint

The company witnessed rent growth reflecting strong job growth and superior household formation trends at its Sunbelt-focused portfolio. Further, with a strong balance sheet, MAA is well poised to capture redevelopment opportunities that will unlock embedded value for the company.

Nevertheless, elevated supply in a number of the company’s markets will likely hamper occupancy at its properties. Escalating competition from other housing alternatives will likely curb the company’s ability to raise rents, thereby affecting its pricing power.

Mid-America Apartment Communities, Inc. Price, Consensus and EPS Surprise

MAA currently has a Zacks Rank #4 (Sell).

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 Liberty Property Trust , Highwood Properties (HIW - Free Report) and Digital Realty (DLR - Free Report) . All three companies are scheduled to report its quarterly numbers on Feb 5.

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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