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Mid-America Apartment Communities Inc. Message Board

  • zebraspit zebraspit Oct 4, 2003 2:01 PM Flag

    No bubble(yet)...

    As always, a great read on REITs...

    With reference to his discussion on premiums to NAV(where the writer opines that 5-15% is not too crazy, given current market conditions)MAA is currently trading, what, about 10% over NAV? (comments from management here would be appreciated)

    Personally, I expect the trading range of the stock to be between $27-32 over the next year --$27 if/when we get a general market sell-off, which I expect is likely at some point soon, and/or we get significantly higher interet rates.
    I think we(apartment REITs) are somewhat insulated in the long-run from rising rates since higher rates mean less homebuyers, more tenants.

    So, all in all, a good hold at current prices, though not really a compelling buy.


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    • Z & M-ford,

      Good chat about relative yields. Z, you're last post is hinting at the other end of the yield question. If there is a sell-off in the equity mkt & the high yield (equity-proxy) window closes to new issues, REIT's may enjoy a bump.

      As an over-weighted holder of REIT common & pfd's, I think the case for this group remains solid: Relatively high yield 2) Tax advantages 3) Inflation protection 4) And all those institutions with visions of pretty new shopping malls in their eyes...

      Good luck longs,

    • And, four of the apartment REITs I track(AVB, BRE, EQR, SMT) are now trading at high-5% yields.
      And some of these companies have had more problems than MAA in this downturn.

      I'm starting to think perhaps we could soon get to at least 6.5%, which is $36 or so.
      Probably some of that ($150 million) redeemed pfd. money has been sitting impatiently on the sidelines waiting for a pullback and, since that isn't happening, some of it may still come on in, keeping demand strong.
      Sure seems to be more buyers than sellers almost everyday lately.

    • Few investors buy 30 year bonds. Individual and institutional investors buy 10 year bonds (give or take a little) and those yield 3.95% MAA yields 7.33% presently, so the comparison is really 3.95% vs. 7.33%. Now MAA can raise it's dividend in the future. The bond can't. Last, I do not know what the ten year will be yielding when MAA hits 6%, if it does. It won't be the same rate it is yielding now. I agree that 6% REITS are a stretch, but did you ever think Lucent ($2.29 today) would sell at $68?

    • Well, first off, I didn't say it should or would go to 6%..only that that wasn't out-of-the-question. My original post that started this off was that it would mostly likely trade 27-32 looking ahead.

      That said, investors may prefer paying up a bit for REIT yield because they also get equity exposure in something that historically goes up in inflationary times - unlike bonds or preferred stocks. What is riskier if people are concerned about rising rates and inflation, real estate or fixed-income securities? And apartment REITs actually benefit by rising rates in that tenants stay tenants more when mortgage rates are climbing.


    • An excellent article, great reading.

      I have owned MAA since 7/99, and have been very happy with the total return.

      I think the price will be in the 25-31 region over the next 12 months, but tend to think the lower end. I do not see a compelling reason for 32+, even with the (extra)preferred buyers.

      I agree, nice stock to hold, but no real reason to buy at the present price. Rising rates should not hurt us too much either.

      • 1 Reply to monl30
      • I agree that $32 seems a bit pricey, but relative to its peers, many of which are now priced to yield 6%, the stock could still go up a few dollars from here.
        (At a 6.5% yield the stock would be $36.)

        After all, there is less and less reason for such a disparity in pricing between MAA and its peers since MAA is quickly making up the dividend shortfall.

        Not predicting it, but, in a way, the market is..

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