Fri, Aug 29, 2014, 10:51 AM EDT - U.S. Markets close in 5 hrs 9 mins

Recent

% | $
Quotes you view appear here for quick access.

Mid-America Apartment Communities Inc. Message Board

  • Sapper588 Sapper588 Oct 29, 1999 11:54 PM Flag

    FFO Down, Earnings Up????

    At first this didn't make a lot of sense that
    earnings could be up so strongly and FFO down fairly
    strongly as well. Small differences aren't uncommon, but
    this was two fairly significant moves in opposite
    directions. Doesn't seem to make sense at first. I think that
    there may be 3 reasons for this.

    1) Some gains
    on disposal of property.

    2) Deleveraging
    which the property disposals and JV's are contributing
    to will negatively effect FFO, much more than
    earnings.

    3) The JV passes through only earnings to the MAA
    earnings statement and no depreciation so MAA's FFO will
    be a little artificially punished by the JV. Overall
    this is still pretty insignificant due to the small
    amount of capital in the JV's, but as more properties
    are placed int the JV's this will become more
    significant.

    Earnings may be become as important as FFO in judging
    MAA's performance.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • I think the answer to this question lies much
      more in item one on your list (Gains on disposition of
      real estate) than in any of the other items. It seems
      to me that deleveraging would affect both FFO and
      Net Income, since both have property NOI and interest
      included. Item three is a good point, but in my experience
      most REIT's adjust the net earnings from JV's and
      include in FFO their portion of the calculated FFO of
      unconsolidated subsidiary. The reconciling items after FFO then
      bring the earnings to net income.

      MAA closed a
      large portion of the sale of properties to the JV this
      quarter, which gives the large gain on sale of real
      estate.

      Just my thoughts.

      • 1 Reply to follyanddiscipline
      • Al, you may be right that the predominate factor
        in EPS and FFO going in substantially different
        directions is gain on disposition of property. However, I am
        fairly certain that leverage effects FFO and EPS very
        differently. I will calculate out that difference in my next
        post. As far as the JV not carrying over the
        depreciation to contribute to FFO, I don't think that it does,
        but I could be wrong. Have read a couple of articles
        on the growing use of JVs by REITs. The articles
        were more focused on the change in debt structure. One
        article spelled out how through the use of JVs REITs were
        appearing a lot less leveraged than they really were.
        According to several of the articles neither the JV debt
        showed up on the balance statement or JV interest on the
        income statement. From looking at MAA's 2nd quarter
        income statement published in August, all I could see
        specifically listed was net earnings from the JV. I don't
        believe the depreciation figure on the income statement
        including any depreciation from the JV, but I could be
        wrong.

    • Good article by Ralph Block author of "Investing
      in REITs" by the Bloomberg Press at the URL below.
      The article IMHO was much better most of what was in
      his book. The article discusses that using straight
      FFO or even AFFO might give you an unrealistic view
      of your return on real estate as all componenets of
      a building and other improvements really do have a
      finite usable life. Synopsis - plant oaks and maple on
      your properties at least they really do appreciate,
      but everything else deteriorates. The URL
      is:

      www.undiscoveredmanagers.com

    • Good article by Ralph Block author of "Investing
      in REITs" by the Bloomberg Press at the URL below.
      The article IMHO was much better most of what was in
      his book. The article discusses that using straight
      FFO or even AFFO might give you an unrealistic view
      of your return on real estate as all componenets of
      a building and other improvements really do have a
      finite usable life. Synopsis - plant oaks and maple on
      your properties at least they really do appreciate,
      but everything else deteriorates.

 
MAA
72.25+0.38(+0.53%)10:49 AMEDT

Trending Tickers

i
Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.