Mid-America Apartment Communities Inc. (MAA), an apartment-only real estate investment trust (REIT), reported first quarter 2010 funds from operations (FFO) of $31.1 million or $0.99 per share compared to $30.7 million or $1.01 per share in the year-earlier quarter.
Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. The first quarter FFO per share exceeded the mid-point of the original guidance of the company by about 8 cents.
Same-store occupancy at the end of the quarter was 96.6%, the highest first quarter occupancy in the history of the company, compared to 95.4% in the year-ago quarter. In addition, same-store resident turnover was record low at 56.9%. However, net operating income decreased 3.5% year-over-year as effective rents declined as the same store portfolio had to be re-priced to current market rent levels.
Mid-America’s diversified market profile with its focus on solid employment markets of the Sunbelt region across both the high-growth primary markets and the less cyclical secondary markets generate a stable earnings platform for the company. The weak for-sale housing market and the overall economy have further helped Mid-America to maintain strong occupancy levels, as more people are opting to rent due to the trouble in obtaining financing and continued housing price declines. Mid-America is seeing a decrease in move-outs due to home purchase, which is a good sign as the battered housing market will continue to benefit residential REITs.
Mid-America completed the redevelopment of a 354-unit property during the quarter at an average cost of $3,629 per unit. The renovated units generated an average monthly rent increase of $73 per unit (10.6%) compared to the rents of non-renovated apartment units.
Subsequent to the quarter end, Mid-America acquired Broadstone Cypress, a newly-developed 312-unit apartment community located in the premium northwest sub-market of Houston, Texas. The company intends to transfer the property to Mid-America Multifamily Fund II, LLC, a joint-venture with private capital in which the company retains a one-third ownership stake.
Mid-America has a strong balance sheet with total debt to gross assets at 49% and over $175 million of liquidity at quarter end. During the quarter, the company refinanced a $50 million debt maturing in 2010 and extended the maturity by two years. About 86% of the total debt was fixed-rated.
Since the beginning of the year through the end of April 2010, Mid-America issued common shares worth $72.6 million at an average price of $52.14 each under its continuous equity offering program. The company intends to utilize the proceeds to redeem 50% of the outstanding 8.30% Series H Cumulative Redeemable Preferred Stock during the second quarter of 2010.
Mid-America has decided to continue its dividend rate of $2.46 per share on an annualized basis. For full year 2010, the company expects FFO in the range of $3.57 to $3.77 per share.
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