Lenders are tightening the purse strings and making it harder for multifamily developers to secure construction loans, a trend that is helping insulate Mid-America Apartment Communities’ properties from competition, said Eric Bolton, the REIT's CEO.
“I’ve had a lot of conversations with developers over the last several months. And it’s a consistent message that financing is very difficult, right now. Equity capital’s available but the financing is difficult,” he said, adding that lenders are particularly wary of luxury product in major urban markets,” he said, on the firm’s fourth-quarter earnings call.
Demand for apartment housing remains strong, especially in Fort Worth, Atlanta and Orlando, with leasing traffic consistent to what the firm has been experiencing over the past year, he said. Bolton added that adding that resident turnover or move-outs in the fourth quarter were down as compared to prior year.
The firm reported same-property NOI growth of 4.2%, driven by a 3.6% jump in revenue. All in-place effective rents increased by 3.9% from the prior year. January’s average daily physical occupancy of 96% matched January of last year.
The REIT’s 60-day exposure, which is current vacancy plus all notices for a 60-day period is just 7.3%. Move-outs for the portfolio were down for the quarter by 9% over the prior year and turnover dropped again to a low 50.3% on a rolling 12-month basis. Move-outs to home buying dropped 5% and move-outs to renting a house declined 14%.
“The homeownership rate is dropping again,” said the firm’s executive vice president and COO Thomas Grimes. “I just think it is people pushing back major life decisions, they are buying homes, they’re getting myriad later, they’re buying homes later, and they’re investing in their pets. And so they tend to want to rent longer and value that flexibility.”
During the quarter, blended lease prices on a lease over lease basis increased 2%. Among the firm’s secondary markets, Memphis, Greenville and Charleston stood out, he said.
MAA expects continued strong occupancy levels averaging about 96% for 2017 combined with average rental pricing in the 3% to 3.5% range for the year.
MAA, which completed its acquisition of Post Properties in December, said it might try to sell some overlapping properties in saturated markets such as Atlanta and Houston, and that the firm might purchase a land parcel or two for future developments.
Bolton said he doesn’t foresee any big developments coming online from the company next year because of the aforementioned tight financing markets.