Mid-America Apartment (MAA) Q2 FFO & Revenues Beat Estimates
Mid-America Apartment Communities, Inc. MAA reported second-quarter 2023 core funds from operations (FFO) per share of $2.28, which surpassed the Zacks Consensus Estimate by a penny. Moreover, the reported figure climbed 12.9% year over year.
This residential REIT’s quarterly results were driven by an increase in the average effective rent per unit for the same-store portfolio. MAA also revised its outlook for 2023.
Rental and other property revenues were $535.1 million, outpacing the Zacks Consensus Estimate of $534.2 million. The reported figure was 8.1%, higher than the previous-year quarter’s $495 million.
Per Eric Bolton, the chairman and chief executive officer of MAA, “Our Sunbelt markets continue to demonstrate solid employment conditions and positive migration trends that are further supporting absorption of the new apartment supply delivering in our markets.”
Quarter in Detail
The same-store portfolio’s revenues grew 8.1% on a year-over-year basis, due to a rise of 9.3% in the average effective rent per unit.
However, the average physical occupancy for the same-store portfolio in the second quarter declined 20 basis points year over year to 95.5%. Our expectation for the same was pegged at 95.8%. The resident turnover for the same period was 45.7%. Same-store portfolio operating expenses increased 7.2%.
On a blended basis, effective during the second quarter, the same-store portfolio leasing pricing of both new and renewing leases rose 3.8% from the prior lease. A 6.8% increase in renewing leases and a 0.5% increase for leases to new move-in residents supported this growth.
Moreover, the same-store net operating income (NOI) reflected year-over-year growth of 8.6%.
Balance Sheet Position
MAA exited the second quarter of 2023 with cash and cash equivalents of $150.2 million, significantly up from $142.4 million recorded as of Mar 31, 2023.
As of Jun 30, 2023, MAA had a strong balance sheet with $1.4 billion in combined cash and capacity available under its unsecured revolving credit facility. Also, it had a historically low Net Debt/Adjusted EBITDAre ratio of 3.41.
As of the same date, the total debt outstanding was $4.4 billion. Its total debt average years to maturity was 7.5 years. As of Jun 30, 2023, unencumbered NOI was 95.1% of the total NOI.
Furthermore, during the reported quarter, MAA’s long-term debt rating was upgraded by Moody's Investors Service to A3 with a Stable outlook.
Portfolio Activity
As of the end of the second quarter of 2023, MAA redeveloped 1,878 apartment homes, while Smart Home technology installations completed were in 2,276 units.
As of Jun 30, 2023, MAA had six communities under development, with a total projected cost of $735 million and an estimated $343.5 million remaining to be funded. The projected average stabilized NOI yield on the four communities, which are expected to start leasing in the coming quarter or are currently leasing, is 7.2%.
2023 Guidance Revised
MAA revised its guidance for 2023 core FFO per share.
This residential REIT now estimates the same in the range of $9-$9.28, with the midpoint being $9.14. The earlier projected range was $8.93-$9.29, with a midpoint of $9.11. The Zacks Consensus Estimate for the same is currently pegged at $9.14, which lies within the guided range.
For the full year, management also revised its outlook for same-store property revenue growth at 5.50-7% from 5.25-7.25% projected earlier. Also, the operating expense growth was expected to be in the range of 5.30-6.80% from 5.15-7.15% projected earlier.
As a result, the same-store NOI growth was expected to be in the range of 5.60-7.10% from the 5.30-7.30% projected earlier. Average physical occupancy for the same-store portfolio was projected to be in the range of 95.4-95.6% from the previously projected range of 95.6-96.0%.
MAA projects third-quarter 2023 core FFO per share in the band of $2.18-$2.34, with the midpoint being $2.26. The Zacks Consensus Estimate for the same is currently pegged at $2.27.
MAA currently carries a Zacks Rank #3 (Hold).
Mid-America Apartment Communities, Inc. Price, Consensus and EPS Surprise
Mid-America Apartment Communities, Inc. price-consensus-eps-surprise-chart | Mid-America Apartment Communities, Inc. Quote
Upcoming Earnings Releases
We are looking forward to the earnings releases of other REITs like SBA Communications SBAC and Host Hotels & Resorts HST, which are slated to report their results on Jul 31 and Aug 3, respectively.
The Zacks Consensus Estimate for SBA Communications’ second-quarter 2023 FFO per share is pegged at $3.14, suggesting year-over-year growth of 2.3%. SBAC currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Host Hotels & Resorts’ second-quarter 2023 FFO per share is pegged at 56 cents, implying a year-over-year decrease of 3.5%. HST currently carries a Zacks Rank of #3.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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