Real estate investment trusts (REITs) are becoming an increasingly popular way to diversify a portfolio and gain exposure to the real estate market. And while there are several great REITs to invest in right now, a few really stand out from the crowd, like Mid-America Apartment Communities (NYSE: MAA). Mid-America Apartment Communities is getting a lot of attention right now on the internet and from major media outlets. Here's why everyone is talking about this residential REIT.
Resilient business model
Mid-America Apartment Communities is a residential REIT that owns, develops, acquires, and manages multifamily apartment communities in 16 states across the United States. Right now, the company has 102,271 rental units under management, which include class A and B properties.
Unlike other high-end residential REITs that focus exclusively on high-rises in the urban core, Mid-America has a diversified portfolio of properties, including garden, mid-rise, and high-rise apartments, with 90% of its gross asset values from properties located in the inner loop (outside of the central business district) and suburban markets.
These markets traditionally pull less rents and see slightly less demand than some of its higher-end competitors, but the tables have turned over the last year and a half. In the wake of the pandemic, renters are looking for more affordable housing that can offer more space and less high-density living -- the exact demographics MAA serves.
The company was definitely impacted by the pandemic. Since the start of the pandemic, MAA has assisted around 8,200 tenants with a modification to the terms of their lease or rent deferral. But the quality of its tenant base and the strategic asset locations means the company isn't impacted as greatly as other landlords may have been, and it has shown resilience in up and down markets.
Strategic locations across the booming Sun Belt
The Sun Belt market is experiencing record growth after remote working became the norm during the pandemic. Renters have started to rethink their housing situation, seeking more space and more affordable housing by moving to new, warmer locations with steady job opportunities. 67.5% of Mid-America Apartment Communities portfolio is located in the Sun Belt region, including major metro markets like Houston, Atlanta, and Tampa, Florida, but also smaller tertiary markets with strong employment, like Jackson, Mississippi, and Huntsville, Alabama. Having exposure to both markets, the major and the smaller ones means they have more diversification of their portfolio and can benefit from big-city booms as well as suburban growth.
The company's top ten markets as a percentage of net operating income are all Sun Belt regions, many of which -- like Charlotte, North Carolina, and Austin, Texas -- are experiencing the highest rates of inward migration over the past year.
Stellar year-over-year performance
The company's latest earnings, as reported July 28, 2021, showed another strong quarter for the company. Year-over-year earnings per share was up 189%, funds from operations (FFO) increased 6.3%, and revenues rose 4.7%. The average effective rental rate climbed 3.1% and blended lease-over-lease pricing increased 12% in the quarter alone, showing super strong demand for rental housing in their prospective markets and asset classes.
In the second quarter, 99.2% of all rents billed were collected, and occupancy is at 96%. And it's not this quarter alone that had strong performance -- the company has been growing steadily for over the past decade (with the exception of the pandemic crash in March 2020).