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Why It Is Wise to Hold Mid-America Apartment (MAA) Stock Now
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Amid favorable in-migration trends of jobs and household formations in the Sun Belt sub-markets, Mid-America Apartment Communities (MAA - Free Report) , also known as MAA is seeing growth in demand and rent in its Sun Belt-focused portfolio. However, elevated supply, particularly at apartment communities located in urban submarkets, is a concern for the company.
The pandemic has accelerated employment shifts and population inflow into the company’s Sun Belt markets, thereby enhancing the desirability of its markets. Amid these, MAA is well poised to capture recovery in demand and leasing compared to the expensive coastal market.
MAA has a well-diversified portfolio in terms of markets, submarkets, product types and price points. Also, a high-quality resident profile has resulted in solid collection performance even amid the pandemic. The company noted a sequential improvement in rent collections in second-quarter 2021.
The residential REIT has been focusing on its internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs will help the company capture upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base in late 2021 and 2022.
Apart from these, a solid balance sheet, with low leverage and ample availability under its revolving credit facility, enables the company to navigate through any negative externalities. Backed by an in-place at-the-market equity share-offering program, it is well poised to source attractively-priced capital from the equity markets. Further, the company generates 94.6% unencumbered net operating income (NOI), which offers scope for tapping additional secured debt capital if required. MAA maintains investment grade ratings of BBB+/BBB+, and a stable outlook from Standard and Poor’s and Fitch Ratings, respectively which renders the company favorable access to debt.
Shares of this Zacks Rank #3 (Hold) company have rallied 34.6% over the past six months, outperforming the industry’s growth of 26.1%. Additionally, the Zacks Consensus Estimate for 2021 funds from operations (FFO) per share moved up 1.2% over the past month.
Image Source: Zacks Investment Research
However, new supply of residential properties has been high for the past few years. This elevated supply adversely impacts landlords’ capability to demand more rents and results in lesser absorption, particularly at apartment communities located in urban sub-markets. It might put pressure on the company’s rental rates and affect revenue growth in the near term.
While development activities are accretive for long-term value creation, the same require huge capital outlays. An extensive development pipeline increases the company’s operational risks by exposing it to construction cost overruns, entitlement delays and lease-up risks.
Key Industry Picks
A few better-ranked REIT stocks are mentioned below:
BRT Apartments Corp.’s (BRT - Free Report) Zacks Consensus Estimate for 2021 funds from operations (FFO) per share moved up 1.9% in the past week. The company currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Equity Residential’s (EQR - Free Report) Zacks Consensus Estimate for the current-year FFO per share moved 2.2% north in a month’s time. The company carries a Zacks Rank of 2(Buy), at present.
Independence Realty Trust, Inc.’s (IRT - Free Report) FFO per share estimate for the ongoing year has been revised upward by 2.5% in the past week. The company carries a Zacks Rank of 2, currently.
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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Why It Is Wise to Hold Mid-America Apartment (MAA) Stock Now
Amid favorable in-migration trends of jobs and household formations in the Sun Belt sub-markets, Mid-America Apartment Communities (MAA - Free Report) , also known as MAA is seeing growth in demand and rent in its Sun Belt-focused portfolio. However, elevated supply, particularly at apartment communities located in urban submarkets, is a concern for the company.
The pandemic has accelerated employment shifts and population inflow into the company’s Sun Belt markets, thereby enhancing the desirability of its markets. Amid these, MAA is well poised to capture recovery in demand and leasing compared to the expensive coastal market.
MAA has a well-diversified portfolio in terms of markets, submarkets, product types and price points. Also, a high-quality resident profile has resulted in solid collection performance even amid the pandemic. The company noted a sequential improvement in rent collections in second-quarter 2021.
The residential REIT has been focusing on its internal investment programs — interior redevelopment, property repositioning projects and Smart Home installations. The programs will help the company capture upside potential in rent growth, generate accretive returns and boost earnings from its existing asset base in late 2021 and 2022.
Apart from these, a solid balance sheet, with low leverage and ample availability under its revolving credit facility, enables the company to navigate through any negative externalities. Backed by an in-place at-the-market equity share-offering program, it is well poised to source attractively-priced capital from the equity markets. Further, the company generates 94.6% unencumbered net operating income (NOI), which offers scope for tapping additional secured debt capital if required. MAA maintains investment grade ratings of BBB+/BBB+, and a stable outlook from Standard and Poor’s and Fitch Ratings, respectively which renders the company favorable access to debt.
Shares of this Zacks Rank #3 (Hold) company have rallied 34.6% over the past six months, outperforming the industry’s growth of 26.1%. Additionally, the Zacks Consensus Estimate for 2021 funds from operations (FFO) per share moved up 1.2% over the past month.
Image Source: Zacks Investment Research
However, new supply of residential properties has been high for the past few years. This elevated supply adversely impacts landlords’ capability to demand more rents and results in lesser absorption, particularly at apartment communities located in urban sub-markets. It might put pressure on the company’s rental rates and affect revenue growth in the near term.
While development activities are accretive for long-term value creation, the same require huge capital outlays. An extensive development pipeline increases the company’s operational risks by exposing it to construction cost overruns, entitlement delays and lease-up risks.
Key Industry Picks
A few better-ranked REIT stocks are mentioned below:
BRT Apartments Corp.’s (BRT - Free Report) Zacks Consensus Estimate for 2021 funds from operations (FFO) per share moved up 1.9% in the past week. The company currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Equity Residential’s (EQR - Free Report) Zacks Consensus Estimate for the current-year FFO per share moved 2.2% north in a month’s time. The company carries a Zacks Rank of 2(Buy), at present.
Independence Realty Trust, Inc.’s (IRT - Free Report) FFO per share estimate for the ongoing year has been revised upward by 2.5% in the past week. The company carries a Zacks Rank of 2, currently.
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.