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4 Reasons This Analyst Stepped To The Sidelines On Mid-America Apartment Communities

Jayson Derrick

For Mid-America Apartment Communities Inc (NYSE: MAA), a multifamily REIT with roughly 100,000 apartment units and a small development platform, the multiple concerns moving forward outweigh the positives, according to Stifel.

The Analyst

Stifel's John Guinee downgraded Mid-America Apartment Communities from Buy to Hold with an unchanged $100 price target.

The Thesis

The analyst's concerns outweigh the positives:

  • Few barriers for rival REITs to compete in Mid-America Apartment Communities' existing or future markets;
  • Increasing development and/or replacement costs;
  • Management's revised assumptions for its core portfolio operations to the downside are unlikely to reverse in the near term; and
  • The company's development platform isn't very active.

Investors looking for exposure to the REIT sector may want to consider instead multifamily platforms that boast strong development efforts or trading at a more attractive total enterprise value/unit versus Mid-America Apartment Communities' TEV/unit of $164,000.

Mid-America Apartment Communities' reported second-quarter results Wednesday, which unlike many of its peers didn't include an increase to the underlying drivers to funds from operations (FOO) growth, the analyst wrote.

Price Action

Shares of Mid-America Apartment Communities were trading around $101.67 Friday.

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Latest Ratings for MAA

Date Firm Action From To
Aug 2018 Stifel Nicolaus Downgrades Buy Hold
May 2018 BTIG Research Downgrades Buy Neutral
Feb 2018 Cantor Fitzgerald Maintains Overweight

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