Mid-America Apartment Communities MAA reported fourth-quarter 2023 core funds from operations (FFO) per share of $2.32, which surpassed the Zacks Consensus Estimate of $2.30. Moreover, the reported figure remained unchanged 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 issued its guidance for 2024.
Rental and other property revenues were $542.2 million, lagging the Zacks Consensus Estimate of $543.4 million. However, the reported figure was 2.7% higher than the year-ago quarter’s nearly $528 million.
Per Eric Bolton, the chairman and chief executive officer of MAA, “Stable employment conditions, continued positive migration trends, and historically low resident move-outs continue to drive solid demand. As expected, the delivery of new apartment supply is currently impacting rent growth performance and will likely persist through the summer leasing season. We expect that the volume of new apartment deliveries will start to decline in late 2024, setting the stage for improved rent growth. We are encouraged by the stable demand trends and are optimistic about the longer-term outlook for rent growth and higher values.”
For the full-year 2023, the core FFO per share came in at $9.17, higher than the prior-year tally of $8.50 and also ahead of the Zacks Consensus Estimate of $9.16. This was backed by 6.4% growth in total revenues to $2.15 billion.
Quarter in Detail
The same-store portfolio’s revenues grew 2.1% on a year-over-year basis due to a rise of 2.2% in the average effective rent per unit.
However, the average physical occupancy for the same-store portfolio in the fourth quarter declined 10 basis points year over year to 95.5%. Our expectation for the same was pegged at 95.6%.
As of Dec 31, 2023, resident turnover remained low at 44.9% on a trailing 12-month basis. This stemmed from historically low levels of move-outs related to buying single-family homes. Same-store portfolio operating expenses increased 5.9%.
On a blended basis, effective during the fourth quarter, the same-store portfolio lease pricing for new and renewing leases declined 1.6% from the prior lease. This was driven by a 7% decrease in new lease pricing and a steady 4.8% increase in renewal lease pricing.
Moreover, the same-store net operating income (NOI) reflected year-over-year growth of 0.1%. Our expectation for the same was pegged at 2.5%.
Portfolio Activity
In the fourth quarter of 2023, MAA redeveloped 1,394 apartment homes, while Smart Home technology installations completed were in 216 units.
As of Dec 31, 2023, MAA had five communities under development, with a total projected cost of $647.3 million and an estimated $255.6 million remaining to be funded. The projected average stabilized NOI yield on the four communities recently completed or are currently leasing is 6.5%.
In the fourth quarter, MAA acquired a 323-unit multifamily community in the Phoenix, AZ market for $103 million. It also acquired a 352-unit multifamily community in the Charlotte, NC market for $107 million.
MAA closed the buyout of a half-acre land parcel in the Raleigh, NC market.
Balance Sheet Position
MAA exited the fourth quarter of 2023 with cash and cash equivalents of $41.3 million, down from $161.9 million recorded as of Sep 30, 2023.
As of Dec 31, 2023, MAA had a strong balance sheet with $791.8 million in combined cash and capacity available under its unsecured revolving credit facility. Also, it had a Net Debt/Adjusted EBITDAre ratio of 3.6.
As of the same date, the total debt outstanding was $4.5 billion. Its total debt average years to maturity was 6.8 years. As of Dec 31, 2023, unencumbered NOI was 95.9% of the total NOI.
2024 Guidance
This residential REIT issued its guidance for 2024 core FFO per share in the range of $8.68-$9.08, with a midpoint of $8.88. This is lower than the Zacks Consensus Estimate of $9.14.
For 2024, management anticipates same-store property revenue growth of 0.15-1.65%, and operating expense growth is projected between 4.10% and 5.60%. As a result, the same-store NOI decline is anticipated between negative 2.80% and 0.20%. Average physical occupancy for the same-store portfolio is guided in the range of 95.4-96.0%, with the midpoint being 95.7%.
MAA projects first-quarter 2024 core FFO per share in the band of $2.12-$2.28, with $2.20 at the midpoint. This is lower than the Zacks Consensus Estimate of $2.29.
MAA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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
Performance of Other Residential REITs
UDR Inc. UDR reported fourth-quarter 2023 funds from operations as adjusted per share of 63 cents, in line with the Zacks Consensus Estimate.
UDR’s quarterly revenues from rental income were $410.9 million, which outpaced the Zacks Consensus Estimate of $409.4 million. Total revenues came in at $413.3 million.
Essex Property Trust Inc. ESS reported fourth-quarter 2023 core FFO per share of $3.83, beating the Zacks Consensus Estimate of $3.81. The figure also improved 1.6% from the year-ago quarter.
Results reflect favorable growth in same-property revenues and NOI. However, the same-property operating expenses partly acted as a dampener. ESS issued first-quarter and full-year 2024 guidance for core FFO per share.
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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