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Mid-America Apartment Communities Inc. Message Board

  • steveca21 steveca21 Jan 6, 2002 3:25 AM Flag

    How do I get my hands on preferreds?

    I'm a common stock shareholder of MAA, but I was wondering if anyone here can tell me if preferred shares are available for individual investors in Mid-America Apts? Thanx

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    • >>I'm just saying we can't forget that
      REITs are being downgraded. Earning are suffering with the
      weak economy. However, with a 10% drop in MAA, I'd be
      buying aggressively. But, you can't rule it out based on all
      the other REITs. It's gonna be important to listen to the
      conference call in Feb. <<

      Agreed that things are a little weak in the industry.
      However, if there was going to be any kind of significant disappointment with our company, they would have preannounced it by now - so I look for an OK report.

    • >>Further, if such an event has a chilling effect
      on others, it is only temporary, even desireable as a buying
      opportunity. <<

      True, depending on whether you own preferred shares or want to own
      more of them at the time. When Hicks, Muse did their thing, I was in Walden, but not too much in others. I ended up owning lots of MAA preferred at low prices, and it was, in fact, an opportunity I appreciated.

      True, the Hicks, Muse thing failed. But, class-actions against them kind of threw a wrench in a deal that they were in a hurry to make, so they backed off. From what I have heard, they might have won it if they had had the patience -- that's what makes it still something that worries me.
      With interest rates down, aggressive buyouts/raids may well be more likely today, not less.

      Anyway, your points are smart ones, and I welcome the give-and-take.

    • <<If they bought back shares at 25, that would provide support, and the shares should hover at $25. If MAA is able to call A's and haven't yet...it makes me wonder.>>

      I am not an accountant, but Preferred shares are treated differently than bonds ("debt"); therefore, to call the Preferred and pay for it with debt would hurt the balance sheet. MAA has done a great job over the last couple of years strengthening the balance sheet. We wouldn't want to go in the reverse direction now.

    • You're right, of course, that MAA common does have short-term risk, given the weakness in some of their markets.

      But, keep in mind, their stock is already significantly discounted compared to most of their peers.
      This gives us some degree of protection, and, importantly, potential for upside.
      That's what makes this stock stand-out.

    • Hey. Thanx for continuing to write back. Don't get me wrong, I'm a common MAA owner, and I'm confident that MAA is a strong investment. One thing you have to consider is that common shares are more volatile than preferred shares. At least in the short term. Consider Cornerstone (TCR), it dropped 10% in a week by lowering earnings guidance and being downgraded. (PPS) (SMT) also down 10% in a week, just to name a few REITs. I'm just saying we can't forget that REITs are being downgraded. Earning are suffering with the weak economy. However, with a 10% drop in MAA, I'd be buying aggressively. But, you can't rule it out based on all the other REITs. It's gonna be important to listen to the conference call in Feb. Thanks to everybody's opinion on preferred shares. I never considered a hostile takeover of MAA or other REITS. If MAA has no intention of buying back preferred shares, then it would seem that since preferreds are almost like bonds, when int rates climb, preferred shares will drop. If they bought back shares at 25, that would provide support, and the shares should hover at $25. If MAA is able to call A's and haven't yet...it makes me wonder.
      Good luck and hopefully we'll see MAA at $30 by year end

    • To debate a couple of your other points (while I'm at it):

      >>MAA senior management has come on these boards on
      numerous occasions and stated that they have no plans to
      redeem the preferred stock.<<

      Maybe they commented on it once, and, I think you overstate what they said..
      Also, if they can borrow at a lot less than the 9+% rates of the preferreds --as, in fact, they can now -- they may be tempted to do so
      at some point. I don't think they've ever ruled that out at all.

      >> In conjunction with the fact
      that the preferred is not selling at a significant premium
      (just a little patience will allow purchase at $25 or below),
      the call risk is minimal.<<

      Unfortunately(if you own the preferreds) the call risk is not as minimal as the upside potential.
      Why go for the preferred when you can buy the common, yielding the same, with significant upside intact, and no call risk whatsoever?

    • >>but the
      particular type of event risk you keep referring to in your
      posts is a million-to-one shot and not worth considering,
      whatever bad past experience you may have had.<<

      Million to one? Hardly. If a Walden-like deal comes along against ANY other REIT, where the preferreds shareholders get treated like Hicks, Muse tried to treat the Walden Residential preferred shareholders a couple years back, it will reverberate against all REIT preferreds..
      All you need to do to look for proof of this is look at what happened to MAA preferred shares (and all other REIT preferred shares) when the Walden deal happened: Within a very short time, the preferreds dropped from mid-$20's and plunged into the mid-teens, and stayed there for quite a while. Why? A cloud was cast over the entire class of preferreds. Investors suddenly were aware of this inherent flaw in preferred shares.

      The possibility of this fear coming back is very worthy of consideration.
      IMHO, it may only be a 100-1 risk that someone comes after MAA anytime soon.
      But, more importantly, the odds that someone comes after one of the other scores of REITs, and tries a similar tactic, is a much greater. I would guess such an event is about a 10% chance.
      Not great, but, considering the damage that could be (and was) done,
      worth considering.
      And, if you can buy the common at the same yield, with upside potential, and without this weakness, why would you prefer to own the preferred at current prices? (If you bought them, like I did, at $14, after the Walden-scare, well, different story -- but then, would you still want to be holding them at $25?).

      I'm not just saying this could happen again just because it happened before to me. (Anymore than you should say it couldn't happen again because it didn't happen before to you.)

      The rest of what you wrote about the contemplated margin play were good points.
      (Question: Just who can't write off margin interest? People that don't itemize is all I could come up with).

    • Yeah, there are three preferred issues, the A, B and C shares.
      Quotes and other particulars on these are available here on Yahoo under
      symbols MAA_pa, MAA_pb and MAA_pc. They all are currently priced around $25, and yield in the 9% range.
      The first two pay monthly dividends, and the Cs pay quarterly dividends.

      You can call the company and get info on these. Also you can look at one of the original SEC filings for one of the preferred shares here (more info than you will find anywhere else on these):
      http://www.sec.gov/Archives/edgar/data/912595/0000890566-97-002502.txt

      The A shares are redeemable/callable as of the end of last year, so, if you want something that can't be called away, I'd stick with the B(which are callable, I believe, starting 12/01/02) and the C(which are callable, I believe, starting 6/03). If the co. calls them you get paid $25.
      Since the fixed interest rates on all of these is higher than rates that could currently be obtained by the co., it is very possible that they will get called.

      Personally, I have owned both for a couple of years or more, and currently I would rather own the common shares. - more upside, same yield. Also, strangely, the preferreds, IMHO, carry more event risk. I won't get into that again, but if you are interested in what I am referring to, look back over the past year or two for posts where I and others discuss what I refer to as the "Walden" scare/risk.

      Good luck.

 
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