MAA (MAA), an apartment-only real estate investment trust (REIT), has recently completed the acquisition of Adalay Bay – a 240-unit upscale apartment community in Chesapeake, Virginia — for an undisclosed price. The transaction was funded with the proceeds from a secondary offering of approximately 1.96 million shares completed earlier in the year.
Developed in 2002, Adalay Bay is strategically located in the Hampton Roads area of Chesapeake that houses the commercial Port of Hampton Roads, which is serviced by about 90% of the world’s shipping lines. The region is also famous for the presence of several Fortune 500 companies, including 3M (MMM), AT&T (T), Boeing (BA), Federal Express (FDX), Xerox (XRX) and Lockheed Martin (LMT). Besides the booming technology industry, Hampton Roads also boasts a strong tourism industry with several tourist hotspots such as the Maritime Center, Colonial Williamsburg, Busch Gardens and Virginia Beach.
In addition to the locational advantage, the property offers luxury amenities such as a resort-style pool, picnic spot with outdoor grill, and separate garages. Spanning 1,026 square feet of space on an average, the units also feature crown molding, garden tubs oversized walk-in closets and sunrooms.
Since its inception in 1994, MAA has evolved as a publicly owned company from a portfolio of 6,000 apartments in the Mid-South area to a portfolio of 48,777 high-quality apartment homes spread across the Sunbelt region of the U.S.
The company typically divides its portfolio in two tiers – larger primary markets and lower population secondary markets. Secondary markets often have stable fundamentals due to limited new supply. Having a diversified presence in different types of markets helps mitigate risk and decreases volatility in the event of a slowdown in any one product type.
MAA’s diversified market profile with its focus on solid employment markets of the Sunbelt region across both the high-growth primary markets and the less cyclical secondary markets provides a stable earnings platform for the company.
With new supply remaining muted until late 2013 or 2014, we expect the multifamily sector to remain comparatively stable in the coming quarters, as renting has emerged as the only viable option for customers who could not get mortgage loans or are unwilling to buy a house at present.
We maintain our Neutral recommendation on MAA, which presently has a Zacks #2 Rank that translates into a short-term Buy rating. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold rating) for UDR, Inc. (UDR), one of the competitors of MAA.
View original at: Zacks Investment Research – All Commentary Articles
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