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Mid-America Apartment Communities Inc. Message Board

  • joea40 joea40 Mar 18, 1999 7:33 PM Flag

    Risk is very important consideration, no

    The risk is that Wall Street has sold these REITs
    as growth companies, and this forces them to take
    risks for growth (like expanding just before the market
    turns down). The biggest risk is trying to force growth
    by more debt leverage. Let's call REITs income
    stocks with inflation protection, and forget trying to
    hype super multiples! The real estate cycle is not
    dead, just momentarily dormant. If MAA could maintain
    4-5% growth witout increasing it would be a great long
    term investment.

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    • REITs are NOT growth stocks, in our view.
      Imbedded in a conservative portfolio, with leverage in the
      50% or so range, is something like 4% - 7% per year,
      depending upon numerous operating assumptions. Couple that
      with a big fat dividend (over 10% at present in our
      case), and you should reasonably expect to see an
      overall return (FFO/share growth plus dividend) of
      mid-teens. That's not "dot.com" stuff, but should be
      delivered year in, year out, "good" years and "bad" years -
      this housing is pretty fundamental stuff, folks. The
      track record for good apartment properties over the
      years: stable, predictable, unexciting, steady but low
      growth.

      Not even changing our name to Midamerica.com would
      change it...

    • I couldn't agree with you more, joea40. I bought
      MAA for the good dividend, not for growth, to
      diversify my portfolio. I've got plenty of growth stock and
      don't really need another, particularly if the strategy
      for growth puts that dividend at risk. I'm treating
      this like a two-year note and even if I see no growth
      in the stock price I'm about 400 basis points better
      off than the 2-year treasury note, more than enough
      to compensate me for the greater risk from investing
      in MAA.

      On another topic, just because the
      company says it's going to buy back stock doesn't mean
      that it will.

 
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