given this reit's debt load,
why buy it
instead of udr?
udr yields ~10.8%, less debt, and
strong track record...
should raise the dividend
slightly, and restructuring
should raise ffo later this
so again, what makes maa a buy over udr?
I guess that there are as many reasons for making
this (wrong) decision as there are investors, but one
common thread seems to be that small cap stocks such as
ours are out, generically.
Others don't like
"high" leverage. I don't consider ours high, running at
levels far below the traditional (80% or so) debt levels
at which private real estate should
Another is - that the markets are often wrong.
What's fun is adding to share value. If that can
be done better with plan A than plan B, we're all
for plan A.
I commend "Here's Your Sign" on
this bulletin board page for some very thoughtful
insights regarding development, its risks and rewards, all
in the context vis-a-vis share buybacks (which
several of you have raised, and which we assess more or
less continually - but see earlier note, that I won't
be commenting on our specific thinking in this
regard on this public page).
The source of my patience is first and foremost
the yield and secondly the growing FFO. The source of
my worries are languishing price (is the market
smarter than me), debt level, and rapid expansion (i.e.
that this bloodbath in the REIT sector is
designed to make you
so disgusted that you capitulate
and sell your shares at a loss
for it only to be
snatched up by "strong hands". IMHO if it's
to buy at 25 it's even better to buy at 20,
of course, these are good co.'s with strong cash
For some strange reason, anything that throws off
is reviled, while anything that promises
to throw off cash in the
future,no matter how far
out, e.g., internet stocks, is coveted.
I wonder why? Most that I follow, and to my
recent regret own in some cases, went down between 1%
and 2.5%. Most of my favorite REITs are improving FFO
at a pretty good rate (equal to the S&P). A few of
them with the cheapest valuations have a certain risk
to them, but others with little apparent downside
risk are doing just as poorly. I just can't get it or
even figure out what it is - just frustrated.
I don't know what the problem is at UDR, but its
FFO slid a penny or 3% in the latest quarter and its
FFO for the year exactly equalled the previous year.
Such results are unusual among REITs today I think.
MAA's FFO grew 5.7% in its most recent quarter and 7.4%
for the year over previous year. Both REITs have
almost the same fiscal year and the earnings were both
published in the last week or two. UDR has the nod in yield
at 10.8 versus 10.3 and price to FFO at 7.2 versus
MAA's 7.8. The yahoo detailed research for the forward
five years estimated the growth rates at 7.3% for MAA
and 6.3% for UDR. Admittedly, five year forward
estimates can't be too accurate, but I think that you can
say that MAA is expected to grow its FFO better than
UDR. That growth should be worth the half percent less
yield for MAA and if MAA does improve its FFO at a
faster rate than UDR as expected you should expect it to
increase its dividends at a faster rate.
As far as
debt, according to the yahoo profile (which often has
this information wrong) page the debt equity ratio for
MAA is 1.45 and for 1.27 for UDR so UDR seems to have
a better debt ratio, but UDR has preferred shares
and these probably aren't considered in the
debt/equity ratio so that might make UDR's debt situation not
that superior over MAA.
I am less concerned with
debt than you are. This amount of debt does not appear
that excessive for an apartment REIT for my tasted.
Office, hotel, or retail REITs with this amount of debt
would make me think twice about holding the
I am more concerned with what MAA does with its
extra cash than its amount of debt. I would love to see
it buy back shares, but few REITs seem to do this.
At these valuations it would seem like a no risk no
brainer. I also wouldn't mind it buying existing
properties should they be able to find motivated sellers and
good prices, but not new construction which appears
expensive right now. Until they find such value properties
the stock piling of cash or reduction of debt to make
the purchase of those properties
Overall, I would give the edge to MAA for its slightly
better growth potential. Inside buying which is
something that I like looks pretty good at both MAA & UDR.