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Mid-America Apartment's (MAA) Q3 AFFO Misses Estimates, NOI Up

Zacks Equity Research

Mid-America Apartment Communities, Inc. MAA, commonly referred to as MAA, reported third-quarter 2019 adjusted funds from operations (AFFO) of $1.53 per share, missing the Zacks Consensus Estimate of $1.55. Nonetheless, the reported tally comes in higher than the prior-year quarter’s $1.32.

This residential REIT’s quarterly results reflect growth in same-store net operating income (NOI) and rise in average effective rent per unit for the same-store portfolio.

Rental and other property revenues were $415.6 million in the quarter, outpacing the Zacks Consensus Estimate of $411.2 million. Further, the reported figure comes in higher than the year-ago quarter’s $397.1 million.

Quarter in Detail

The same-store portfolio revenues grew 4%, backed by rise in average effective rent per unit of 3.9% year over year. During the third quarter, the company’s same-store NOI increased 4.5% year over year. Moreover, average physical occupancy for the same-store portfolio was 96.1%, expanding 10 basis points (bps) sequentially.

During third-quarter 2019, rent growth in the company’s same-store portfolio for both new and renewing leases, compared with the prior lease, increased 4.9% on a combined basis. This indicates a 190-basis point improvement year over year.

As of Sep 30, 2019, unencumbered NOI was 90.6% of total NOI, lower than 92.6% reported as of Dec 31, 2018.

As of Sep 30, 2019, MAA held cash and cash equivalents of nearly $25.8 million, down from approximately $34.3 million as of Dec 31, 2018.

Additionally, as of the same date, total debt outstanding was $4.5 billion.
Furthermore, as of the same date, around $823 million of combined cash and capacity were available under its unsecured revolving credit facility, net of commercial paper borrowings.

Portfolio Activity

During the September-end quarter, the company acquired 14,941 square feet of multi-tenant retail space at its 220 Riverside apartment community in Jacksonville, FL.

During the quarter ended Sep 30, 2019, MAA completed the renovation of 2,732 units under its redevelopment program. Notably, for 2019, the company expects to attain an increase in the average rental rate of 9-10%, above non-renovated units by redeveloping a total of 7,500-8,500 units.

At the end of the third quarter, MAA had six development community projects under construction, with total projected costs of $389.5 million. Notably, an estimated $282.8 million remained to be funded as of Sep 30, 2019.

Outlook

For fourth-quarter 2019, MAA expects FFO per share to be $1.59-$1.67. Currently, the Zacks Consensus Estimate for the same is pegged at $1.60.

MAA has raised its guidance for 2019 FFO per share to $6.46-$6.54 from the previous estimate of $6.20-$6.36. Further, outlook for AFFO per share has been revised to $5.82 to $5.90 from the prior band of $5.56 to $5.72. Currently, the Zacks Consensus Estimate for the same is pinned at $6.30.

Our Viewpoint

MAA’s results were favored by encouraging leasing conditions across its Sunbelt portfolio in the busy summer season. Moreover, robust demand for apartment housing enabled MAA to witnessed decent growth in its same store portfolio. This also supported low resident turnover as indicated by 47.4% of resident move outs for the same store portfolio for third-quarter 2019 on a rolling 12-month basis.

Mid-America Apartment Communities, Inc. Price, Consensus and EPS Surprise
 

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

MAA currently carries a Zacks Rank #3 (Hold). You can see   the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Highwoods Properties Inc.’s HIW third-quarter FFO per share of 88 cents surpassed the Zacks Consensus Estimate of 85 cents. The reported tally excluded the net impact of 5 cents relating to the company’s market rotation plan. The figure also improved 2.3% year over year.

Boston Properties Inc.’s BXP third-quarter 2019 FFO per share of $1.64 surpassed the Zacks Consensus Estimate of $1.62. Nonetheless, the reported tally was flat year over year.

Ventas, Inc. VTR delivered third-quarter normalized FFO per share of 96 cents, beating the Zacks Consensus Estimate of 94 cents. However, the figure came in lower than the year-ago tally of 99 cents.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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