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Mid-America Apartment Communities Inc. Message Board

  • trenttrautman trenttrautman Apr 13, 2004 10:01 PM Flag

    small request for Eric


    I was walking through a 10q today (just refreshing my memory) and I noticed book value per share isn't published.

    I think that would be usefull for investors to know. You guys do a great job with disclosure already, and I'd like to see even more.

    My logic goes like so: We already report income from our assets per share...why not report the assets or change in assets *per share*? If these things aren't important, then what is? It seems inconsistant to report one measure per share, but not another.

    Some insurance companies report "total return to shareholders". I think that would be nice.

    I realize this is something that can be computed by us, however it may not be immediately apparent to shareholders that this has changed considerably over the past few years. For example...I'd like to just sit down and take a quick glance at a 10k or a 10q and say "yep, these guys built value", or "nope they didn't".

    I'll probably get blown off as being a nut, but I think this is darn important.

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    • We'll provide some update on our opinion surrounding MAA pricing and value in the routine upcoming quarterly earnings release. Meanwhile, the last published and publicly available information we've put out about pricing and value can be viewed in the 8-K we filed a few months ago on January 28th. You can obtain a copy by going to our web site at, the Investors sub-directory, the SEC filings sub-directory and the January 28th 8-K filing. We discuss current pricing (in January) and intinsic value near the end of that presentation.

      We do periodically comment on total return to shareholders (share price change + dividends). In our last release we commented on the 47% total investment return that MAA shareholders earned in calendar year 2003.

      In my opinion, accounting book value is not a reasonable measure of current value. This is especially true for real estate where the original purchase price is impacted over time by operating performance, maintenance, capital spending, inflation, property specific financing terms and multiple market factors. The best "snap shot" valuation approach is net asset value - derived by dividing current net operating income (depressed in today's weak operating environment), less the appropriate amount of routine capital spending, by the appropriate "cap rate" (a judgement call based on interest rates, buyer/seller pressure in the market and investor specific parameters). It's a real "moving" valuation metric.

      I think the best approach to valuing a business is capture through a traditional discounted cash flow analysis where projected cash flows of the business are discounted to present value using whatever discount rate you feel appropriate for your investment objectives.

      Good thoughts and question - but, there really isn't a single measurement or approach that works for everyone.

      Eric Bolton

      • 2 Replies to ericbolton_maa
      • Eric,

        So when buying a property, how does MAA make this determination? I remember reading something about the Byrne test here awhile back. Perhaps you could elaborate.

        I'm curious. When buying a property, could I really trust that the capex numbers were appropriate? How do you tell that an owner isn't dressing up the numbers to make things look good?

        When I buy a piece of MAA, it isn't like I can go walk a property and make sure things are well taken care of (I live too far away). How does one tell if the cash flow numbers are accurate and reasonable in such an instance? If I could make such a determination, then in fact I could do a discounted cash flow analysis. Without a proper yardstick, I don't think I could intelligently measure. I can't tell if an inch is an inch or three inches.

      • Eric
        how many companies can you run at one time. I own afew I would like to turn over to you. Thanks, Jim OBrien, shareholder

    • Book value is historical - what the company paid, years ago, for their properties - and is therefore pretty meaningless. Curent asset/instrinsic value has mostly to do with cap rates at any given time, and cap rates are a moving target, so I'm not sure a company could really formally say what their assets are worth, since that is mostly a matter of opinion. More appropriate for an outsider(someone like Green Street Advisors, perhaps)to assess, from time to time.

      From informal conversations I've had recently, I believe a good guess at the company's intrinsic value, based on current cap rates, is $30 a share, give or take a couple of dollars.

      • 1 Reply to zebraspit
      • Yep, I realize all that zebra, and I'd put the IV at around $29 myself...but I'm a bit more conservative myself (and just guessing).

        My problem is not in calculating the value of the assets but rather in the *growth* of said assets. If we can't accurately use IV without pulling numbers from our rears, then I'd rather be mostly right and use book value. Better to be mostly right than completely wrong...don't you think?

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