Multifamily REITs Face Pricing Challenges Amid Competitive Pressures: Analyst Adjusts Outlook For CPT And MAA

Wedbush analyst Richard Anderson cut the price target and estimates for Mid-America Apartment Communities Inc (NYSE: MAA) and Camden Property Trust (NYSE: CPT). 

The analyst lowered the price target for CPT to $98 (from $105) with a maintained Outperform rating and MAA to $128 (from $137) while reiterating the Neutral rating.

The analyst expects supply to make competitive pressures for parts of the REIT portfolios, with private owners/developers offering 2+ months of concessions, creating pricing challenges for the neighboring communities owned by the REITs.

Anderson expects REITs to set expectations around supply, as seen in the past. 

On the other hand, demand for apartments mainly from college-educated residents (amid higher mortgage rates) can offset more than expected supply headwind, causing management teams to start expressing fundamental optimism before the narrative shifts to supply starting to meaningful decline (and it will), says the analyst.

The analyst projects capital to start flowing into Sunbelt multifamily either from private sources or from the REITs themselves (deploying dry powder and liquidity), on the view that the supply situation is entirely temporary. 

Anderson cut FY24 estimates for same-store NOI growth for both CPT and MAA to slightly negative from positive low single digits. 

Consequently, for CPT, the analyst trimmed the FY24 AFFO estimates to $5.90 from $6.13. For MAA, FY24 AFFO estimates were lowered to $8.15 from $8.44. 

Price Action: CPT shares are trading higher by 0.06% at $92.68 and MAA lower by 0.29% at $126.43 on the last check Monday.

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