Published on 2 May 2024 on Zacks via Yahoo Finance

Mid-America Apartment (MAA) Q1 FFO Lags Estimates, Revenues Beat

Mid-America Apartment Communities MAA reported first-quarter 2024 core funds from operations (FFO) per share of $2.22, which missed the Zacks Consensus Estimate of $2.23. Moreover, the reported figure fell 2.6% year over year from $2.28.Although this residential REIT experienced growth in the average effective rent per unit for the same-store portfolio, its quarterly results reflect a fall in the occupancy level and high supply across its markets. The company also experienced an increase in operating expenses, real estate taxes and insurance and interest expenses year over year.Rental and other property revenues were $543.6 million, which surpassed the Zacks Consensus Estimate of $541.8 million. The reported figure was 2.8% higher than the year-ago quarter’s nearly $529.0 million.Per Eric Bolton, the chairman and chief executive officer of MAA, "Performance trends and Core FFO results for the first quarter were in line with our expectations reflecting the impact of new supply deliveries across a number of markets.  We enter the busy summer leasing season well positioned with stable occupancy, high leasing traffic, low resident turnover, and strong collections performance.  With continued solid demand and the resulting steady absorption of the new supply pipeline, we continue to believe that the decline in new supply deliveries expected late this year and into 2025 will fuel a strong and quick rebound in rent performance.”

Quarter in Detail

The same-store portfolio’s revenues grew 1.4% on a year-over-year basis due to a rise of 1.5% in the average effective rent per unit.However, the average physical occupancy for the same-store portfolio in the first quarter declined 20 basis points year over year to 95.3%. Our expectation for the same was pegged at 95.4%.As of Mar 31, 2024, resident turnover remained historically low at 44.4% 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 5.4%.During the first quarter, new lease pricing declined 6.2%, denoting an 80-basis point improvement sequentially. However, the rise in renewal lease pricing remained steady, increasing 5%, representing a 20-bps improvement sequentially. As a result, there was a decrease of 0.6% for both new and renewing lease pricing on a blended basis in the first quarter of 2024. This marked a 100-bps improvement sequentially.Moreover, the same-store net operating income (NOI) reflected a year-over-year decline of 0.7%. Our expectation for the same was pegged at 0.0%.During the first quarter, the company experienced an 8.8% increase in operating expenses, excluding real estate taxes and insurance. Moreover, real estate taxes and insurance were up 7.3% year over year. MAA also witnessed an 8.3% year-over-year jump in interest expenses.