Mid-America Apartment Trades At A Discount To Peers

maa same store noi growth

The regional apartment REIT Mid-America Apartment Communities (NYSE:MAA) has enjoyed a good ride. The apartment sector is closely linked with the economy; as long as it shows improvement, unemployment rates decrease and demographics are in its favor (as the housing needs of millennials are expected to go up in the future), the company should manage to do well. Likewise, although MAA has been demonstrating strong growth rates, it is trading at a discount.

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MAA has been present in 47 Metropolitan Statistical Areas in the US Southeast and Southwest. Large and secondary markets comprise 64 and 36 percent of its same-store NOI, respectively, but while the former have shown better same-store growth rates, the latter tend to be steadier and more resilient, enabling the company to weather down times. MAA has been public for about 21 years, during which time it has gone through several stages of real estate cycles.

maa top mkts

Same-store revenue growth has been 5 percent greater in 2015 Q1 than in 2014 Q1, mainly because of a 3.9 percent increase in average effective rent per unit. Same-store occupancy has also crept up to 96.3 percent. The company has witnessed a growing appetite for apartment real estate from institutional investors, a development of which the company is taking advantage by selling old assets and buying newer ones. This year, they sold eighteen properties whose average age was twenty-six, some of them from tertiary markets. Several buyers have been so aggressive that MAA may be a target.

During MAA’s history, dividends have never dropped, and annual dividend per share is expected to increase by 5.5 percent in 2015 over the previous year. Price-to-FFO and dividend yield have been, respectively, at 14.5x and 4.1 percent, one of the lowest and highest among its peers. Implied cap rate is around 11 percent, a good purchase opportunity.

maa cap

Source: Mid-America Apartment Communities, REIT Stream, Fast Graphs


Written by Heli Brecailo

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