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Mid-America Apartment MAA stands to benefit from its diversified portfolio concentrated in the thriving Sun Belt region. Robust in-migration of jobs and households in these markets, combined with the high cost of homeownership, is expected to sustain strong renter demand.
The company's redevelopment initiatives and advancements in technology are poised to drive margin improvements, while its solid balance sheet provides a strong foundation for growth opportunities.
However, increased rental unit supply in certain markets may heighten competition, limiting MAA’s ability to raise rents and tempering its growth momentum. Elevated interest expenses also remain a headwind.
Last week, MAA reported fourth-quarter 2024 core funds from operations (FFO) per share of $2.23, which missed the Zacks Consensus Estimate of $2.24. The reported figure fell 3.9% year over year from $2.32. Results reflected a record level of new supply deliveries, though continued strong demand provided some support. However, the company witnessed low levels of resident turnover. The REIT also provided its initial outlook for 2025.
What’s Aiding MAA?
MAA’s portfolio is well-positioned to benefit from healthy operating fundamentals in the Sunbelt region. The pandemic spurred employment growth and population migration to the company’s markets, as renters favored business-friendly, low-tax and less densely populated cities. These favorable long-term trends have enhanced the appeal of its markets. The elevated cost of single-family homeownership, compounded by persistently high interest rates, continues to fuel demand for rental apartments. Against this backdrop, MAA is expected to sustain high occupancy levels in the near term.
MAA remains focused on its three internal investment initiatives: interior redevelopments, property repositioning projects and Smart Home installations. In 2024, MAA redeveloped 5,665 apartment homes. As of Dec. 31, 2024, the company installed Smart Home technology in more than 96,000 units across its apartment community portfolio since the initiative began in the first quarter of 2019. These efforts are expected to capitalize on rent growth opportunities, deliver accretive returns and enhance earnings from the company's existing property portfolio.
MAA enjoys a solid balance sheet, with low leverage and ample availability under its revolving credit facility. As of Dec. 31, 2024, MAA had $1.0 billion of combined cash and available capacity under its unsecured revolving credit facility. It also has a low net debt/adjusted EBITDAre ratio of 4. Its outstanding debt has an average maturity of 7.3 years as of Dec. 31, 2024. In the fourth quarter of 2024, it generated 95.5% unencumbered net operating income (NOI), providing the scope for tapping additional secured debt capital if required. Hence, the company is well-positioned to bank on growth scopes.
Solid dividend payouts are arguably the biggest enticements for REIT shareholders, and MAA remains committed to that. In the last five years, MAA has increased its dividend seven times, and its five-year annualized dividend growth rate is 10.70%. Moreover, it has a lower dividend payout compared with the industry. Backed by healthy operating fundamentals, we expect its dividend distribution to be sustainable in the upcoming period.