MAA (MAA), an apartment-only real estate investment trust (:REIT), has recently completed a debt offering of $175 million worth of senior unsecured notes to increase its liquidity. The debt issuance has a weighted average term of 9.5 years and a weighted average interest rate of 4.02%.
The simultaneous issuance and sale of the notes is likely to take place in three separate tranches. These include $62 million worth of note offering on August 31; $59 million on September 28; and the balance $54 million on November 30, 2012.
MAA intends to utilize the proceeds from the debt offer to fund its future acquisitions and fuel its development pipeline. Since its inception in 1994, MAA has evolved as a publicly owned company from a portfolio of 6,000 apartments in the Mid-South area to a portfolio of 49,264 high-quality apartment homes spread across the Sunbelt region of the U.S.
The company typically divides its portfolio in two tiers – larger primary markets and lower population secondary markets. Secondary markets often have stable fundamentals due to limited new supply. Having a diversified presence in different types of markets helps mitigate risk and decrease volatility in the event of a slowdown in any one product type.
MAA’s diversified market profile with its focus on solid employment markets of the Sunbelt region across both the high-growth primary markets and the less cyclical secondary markets provides a stable earnings platform and mitigates operating risks.
With new supply remaining muted until late 2013 or 2014, we expect the multifamily sector to remain comparatively stable in the coming quarters, as renting has emerged as the only viable option for customers who could not get mortgage loans or are unwilling to buy a house at present.
We maintain our Neutral recommendation on MAA, which presently has a Zacks #2 Rank that translates into a short-term Buy rating. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold rating) for UDR, Inc. (UDR), one of the competitors of MAA.
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