Mid America Apartments

Mid America Apartments boasted of soaring rents, citing the unaffordability of single family homes

Mid America Apartments reported double digits rent increases on its properties and predicted further large increases in 2023. “Tim Argo – Executive VP, Chief Strategy and Analysis Officer: Thank you, Eric and good morning everyone. Same-store performance for the quarter was once again strong and ahead of our expectations. We saw broad-based strength and pricing performance across the portfolio. During the third quarter, with blended lease-over-lease pricing achieved up 13.9%. As a result, effective rent growth or the growth on all in-place leases for the third quarter was 16.7% versus the prior year and 5.6% sequentially from the prior quarter. Based on our forecast for in-place rents at the end of 2022, we expect our earned in or baked in rent growth for 2023 to be in the 6% range before considering any new rent growth that may occur in 2023. Alongside the robust pricing performance, average daily occupancy for the quarter remained strong at 95.8%.” (Mid-America Apartments Communities Earnings Call Transcript, 10/27/2022)

Mid America Apartments’ CEO cited “the stress of single-family affordability” as a reason he predicted “positive rent growth.” “Eric Bolton – Chairman and CEO: Well, thanks, Neil. What I would tell you is that as we start to think about the next year 2023, I’m pretty encouraged still about our ability to continue to drive top line performance that’s going to be well above our long-term averages. As Tim alluded to, based on where we sit today, we think the earn-in to next year based on the rent trajectories that we’ve captured over the last number of months is baked in next year is going to be 6% and then you start to think about what sort of market rent growth we’re going to get on top of that next year. And as we sit here today and think about the drivers of demand surrounding the employment markets, the stress of single-family affordability and these net continued positive migration trends that we see across our markets, we continue to see an expectation lease I have a positive rent growth next year on top of the earn-in that we’re getting.” (Mid-America Apartments Communities Earnings Call Transcript, 10/27/2022)

Mid America Apartments saw a 2008 like opportunities for large scale acquisitions

Mid America Apartments told analysts it was preparing for large scale acquisitions as it had done after the 2008 crash. “Brad Hill – Executive VP, Chief Investment Officer: Just for perspective, in the acquisition side of things, after the last recession for a three-year period, 2010 to 2012, we executed on almost 10,000 units, single transactions, 9,500 units. And if we were able that similar type environment plays out over the next year, two years, three years. that’s 10,000 units and at today’s pricing even at a discount, that’s $3 billion to $4 billion. And so that’s what we’re really preparing for is for an environment where we’re able to execute on opportunities. It may or may not be that size of opportunities.” (Mid-America Apartments Communities Earnings Call Transcript, 10/27/2022)

Mid America Apartments pointed the large amount of construction started in 2020 and 2021 that developers were seeking to unload as opportunities. “Brad Hill – Executive VP, Chief Investment Officer: But to your point, the amount of construction that started in 2020, 2021 in our region of the country was significant.And as you mentioned, the cost to refinance that, the cost to extend loans, banks are not going to be willing to do that. They want to clear these loans off their books at this point. So I think you will see, as you get into next year, a number of these merchant developers will need to transact. And I also think the basis of these developments that went under construction in 2020, 2021 still have profit in them. So, I do think a market will be made on these assets, and there will be an opportunity for us to step in and execute in that area.” (Mid-America Apartments Communities Earnings Call Transcript, 10/27/2022)

Mid America Apartments was dismissive of rent control measures

A Wall Street Analyst asked if Mid America Apartments would be able to “educate voters on the downfalls of rent control”  “John Kim, : Okay. So, it’s in placement versus what you signed versus the market, which may or may not be the same number. My second question is the concept of rent control has almost been an overnight potential risk in Orlando, one of your top five markets. And I’m wondering if you’re concerned that this may actually be tasked given it was just put on the ballot as a few weeks ago, and you may not have enough time to educate voters on the downfalls of rent control.” (Mid-America Apartments Communities Earnings Call Transcript, 10/27/2022)

Mid America Apartments General Counsel predicted rent control ordinances wouldn’t stand and that it violated the law. “Rob DelPriore – Executive VP, CAO and General Counsel: Hey John, this is Rob. Yes, I think if it gets on the ballot, I think it’s okay. The one court that’s actually looked at the ordinance itself effectively said that they consider that it violates for a law. So even if it passes, ultimately, I don’t think that it will be upheld as an effective ordinance. And then if you look at it for us, we’ve got nine properties in Orange County, seven in same-store, and it’s about 4.4% of our third quarter same-store NOI.” (Mid-America Apartments Communities Earnings Call Transcript, 10/27/2022)

Mid America Apartment’s General Counsel: “we think it probably doesn’t pass, and we think it’s not material to us overall anyway.” “Rob DelPriore – Executive VP, CAO and General Counsel: And we went back and looked at it as it were in place in 2022, and it would really only have an 18 basis point impact on same-store revenue and about a 17 basis point impact on total revenue. So overall, not that material to us as we think about it. So, we think it probably doesn’t pass, and we think it’s not material to us overall anyway. And also that was in some of the highest growth rate rent increases that we’ve had over this period in Orange County compared to until recently, a relatively low CPI.” (Mid-America Apartments Communities Earnings Call Transcript, 10/27/2022)