Mid-America Updates Guidance – Analyst Blog

Mid-America Apartment Communities Inc. (MAA), an apartment-only real estate investment trust (REIT), has recently provided an updated first quarter 2010 earnings guidance based on strong occupancy and better-than-expected fee income.

 

The company currently expects first quarter 2010 funds from operations (FFO) in the range of $30.1 million to $31.6 million or 96 cents to $1.00 per share. 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 updated FFO figures exceed the earlier guidance of 86−96 cents per share. The earnings forecast also exceeds the current Zacks Consensus Estimate of 91 cents per share. 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 divides its portfolio in two tiers – larger primary markets and lower population secondary markets. Secondary markets often have stable fundamentals due to a limited new supply. Having a diversified presence in different types of markets helps mitigate risk and decreases volatility in the event of a slowdown in any one product type.