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Residential REITs Update on Coronavirus-led Market Mayhem

Zacks Equity Research
·3-min read

The coronavirus outbreak has been wreaking havoc on all financial markets and beyond, with the residential REIT sector being no exception. Hence, a few residential REITs have provided updates regarding the current situation and how the companies are dealing with it.

Mid-America Apartment Communities, Inc MAA, a residential REIT with notable presence in the Southeast, Southwest and Mid-Atlantic regions of the United States, has suspended its 2020 guidance. The company will provide further updates during the first-quarter earnings conference call on Apr 29. Per management’s previous guidance, the core FFO per share was projected at $6.38-$6.62. The company’s full-year outlook was based on same-store portfolio revenue growth of 3.25-4.25%, same-store portfolio operating expense rise of 3.75-4.75% and same-store NOI increase of 3-4%.

Beside, per management, the first-quarter results are aligned with the previously-announced guidance, according to which the quarterly core FFO per share was expected to be $1.53-$1.65. Until Mar 24, 2020, the company had same-store average physical occupancy of 95.7%.

Further, management noted that the company’s balance-sheet position remains strong, given the low leverage levels, substantial capacity from undrawn credit lines and limited debt maturities.

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Apartment Investment and Management Company AIV has also followed suit in this regard, withdrawing the current-year guidance. Aimco mentioned that the company would be in a place to provide its full-year guidance, after it gathers more information on the coronavirus outbreak’s impact on the economy.

Per management, the company’s first-quarter results are aligned with its previously-provided estimates. The company’s 2020 outlook for the pro forma FFO per share is projected at $2.62-$2.72. Full-year projections are backed by assumptions of same-store revenue growth of 3-3.8% and same-store expense growth of 1.6-2.4%, resulting in same-store NOI improvement of 3.2-4.6%.

Further, the company’s balance-sheet position remained solid with the loan to value (LTV) ratio at 32% and has limited maturities in the near term. To have access to liquidity during this turbulent situation, the company informed that it “drew down” $300 million under its credit facility. Also, Aimco has access to an asset pool of $2.4 billion without any debt encumbrances. The company also delayed its planned capital expenditure of around $150 million. However, total construction to the tune of $420 million is expected to continue.

Furthermore, Essex Property Trust, Inc. ESS and Equity Residential EQR, two other notable multi-family REITS, announced adoption of certain policies in the wake of the coronavirus pandemic to support residents and employees. The policies include halting evictions for residents for 90 days, curbing rent escalations, creating payment plans and protecting employees by maintaining social-distancing measures, like remote working.

The price performance of the above-mentioned Zacks Rank #3 (Hold) stocks for the past year compared with the industry are given below. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Apartment Investment and Management Company (AIV) : Free Stock Analysis Report
 
Mid-America Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
 
Equity Residential (EQR) : Free Stock Analysis Report
 
Essex Property Trust, Inc. (ESS) : Free Stock Analysis Report
 
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