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Mid-America Apartment (MAA) Beats Q2 FFO & Revenue Estimates

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Mid-America Apartment Communities, Inc. (MAA - Free Report) , commonly referred to as MAA, reported second-quarter 2019 funds from operations (FFO) of $1.57 per share, surpassing the Zacks Consensus Estimate of $1.53. The bottom line was higher than the prior-year quarter figure of $1.55.

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 were $407.4 million in the quarter, outpacing the Zacks Consensus Estimate of $405.7 million. Further, the reported figure was higher than the prior-year figure of $390.1 million.

Quarter in Detail

The same-store portfolio revenues grew 3.2%, backed by rise in average effective rent per unit of 3.2% year over year. During the second quarter, the company’s same-store NOI increased 3% year over year. Moreover, average physical occupancy for the same-store portfolio was 96%.

As of Jun 30, 2019, MAA held cash and cash equivalents of nearly $41 million, up from approximately $34.3 million as of Dec 31, 2018.

Furthermore, as of the same date, around $671.5 million of combined cash and capacity were available under its unsecured revolving credit facility.

Portfolio Activity

In the quarter, MAA purchased a two-acre parcel of land in Orlando, FL, and is also performing pre-development work for which the development is expected to start later this year.

During the June-end quarter, it closed on the sale of a four-acre land parcel located in Huntsville, AL.

During the quarter ended Jun 30, 2019, MAA completed the renovation of 2,185 units under its redevelopment program. Notably, the company attained an increase in the average rental rate of 9-10%, above non-renovated units. Further, it expects to redevelop a total of 7,500-8,500 units in 2019.

At the end of the second quarter, MAA had five development community projects under construction, with total projected costs of $230.5 million. Notably, an estimated $148 million remained to be funded as of Jun 30, 2019.

Outlook

For third-quarter 2019, MAA expects FFO per share to be $1.51-$1.59. Currently, the Zacks Consensus Estimate for the same is pegged at $1.54.

MAA revised its guidance for 2019 FFO per share to $6.20-$6.36 from the previous estimate of $6.11-$6.35. Currently, the Zacks Consensus Estimate for the same is pinned at $6.24.

Our Viewpoint

MAA is witnessing favorable demand for its apartment communities on the back of strategic location in the high-growth Sunbelt markets. This enabled the company to capture high tenant retention while maintaining strong occupancy rates.

Nevertheless, escalating competition from other housing alternatives will likely curb its ability to raise rents.

MAA currently has a Zacks Rank #2 (Buy). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Cousins Properties Incorporated (CUZ - Free Report) reported second-quarter 2019 FFO per share (before TIER transaction costs) of 71 cents, missing the Zacks Consensus Estimate by a whisker. Nonetheless, the figure was higher than the prior-year quarter figure of 60 cents.

Public Storage’s (PSA - Free Report) second-quarter 2019 core FFO per share of $2.64 improved 2.7% from the prior-year figure of $2.57. The reported figure also surpassed the Zacks Consensus Estimate by a whisker.

Ventas, Inc. (VTR - Free Report) reported second-quarter 2019 normalized FFO of 97 cents, beating the Zacks Consensus Estimate of 96 cents. However, the figure was lower than the year-ago quarter number of $1.08.

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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