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Is it Wise to Hold On to Mid-America Apartment (MAA) Now?

Zacks Equity Research
·4 min read

Mid-America Apartment Communities MAA, also known as MAA, has been witnessing high demand for its apartment communities in the Sunbelt area. Also, its solid balance-sheet position gives it a strong footing. However, high levels of supply and uncertainties related to the coronavirus crisis will dampen the company’s growth prospects in the near term.

MAA has a well-balanced, diverse portfolio across the Southeast and Southwest regions of the United States. The portfolio is diversified in terms of markets, submarkets, product types and price points. This diversification shields the company from economic downturns in any particular market, turbulence in any product-type or assets belonging to specific price points, and helps generate a consistent revenue stream. Moreover, a high-quality resident profile has resulted in solid collection performance amid the pandemic.

The company enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of Mar 31, 2020, the company held cash and cash equivalents of $34.5 million as well as $931.8 million of available capacity under its unsecured revolving credit facility. Backed by an in place at-the-market equity share offering program, the company is well poised to source attractively-priced capital from the equity markets. The company also has limited near-term maturities and funding obligations, which makes it well positioned to navigate through the pandemic-related challenges.

Also, the company’s focus on smart homes and interior development initiatives is likely to stoke growth. Although both these programs were suspended in March due to the coronavirus pandemic, the same is likely to resume in July. Upgrades will include renovations of amenities and common areas. Such repositioning efforts are likely to drive additional value and rent growth, delivering higher yield benefits beginning 2021.

However, the coronavirus pandemic is likely to affect demand for apartments in the prime summer leasing season and prevail in the slower winter leasing season. Moreover, amid this situation, the rent-paying capability of tenants is likely to get maimed. The company’s top line is likely to bear the brunt in the near term, with adverse impact on rental rates and occupancy.

Management also expects supply levels to remain elevated in the current year. This high supply adversely impacts the landlord’s capability to demand more rents and results in lesser absorption. This is likely to put pressure on rental rates and affect revenue growth in the near term.

The Zacks Consensus Estimate for funds from operations (FFO) has been revised 1.1% and 1.7% downward for 2020 and 2021, respectively, over the past month.

Shares of this Zacks Rank #3 (Hold) company have declined 5.9% compared with the industry's fall of 15.8% over the past 12 months.


Stocks to Consider

Alexander & Baldwin, Inc.’s ALEX funds from operations (FFO) per share estimate for 2020 moved up from 22 cents to 83 cents over the past two months. The stock currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

City Office REIT, Inc.’s CIO Zacks Consensus Estimate for the ongoing-year FFO per share moved 13.3% north to $1.11 over the past two months. The stock currently flaunts a Zacks Rank of 1.

Gladstone Land Corporation’s LAND Zacks Consensus Estimate for the current year’s FFO per share moved 9.7% north to 68 cents over the past two months. The stock currently carries a Zacks Rank of 2 (Buy).

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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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MidAmerica Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
Alexander Baldwin Holdings, Inc. (ALEX) : Free Stock Analysis Report
Gladstone Land Corporation (LAND) : Free Stock Analysis Report
City Office REIT, Inc. (CIO) : Free Stock Analysis Report
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