Mid-America Apartment Communities Inc., which consolidated its position as the top REIT owner of apartment properties in the middle of the U.S. by acquiring Post Properties, said tenant demand remains strong across most of its portfolio even as some major markets decline.
In an earnings conference call, company executives said only Houston, which represents 3.6% of the company's portfolio following the merger, has seen a demand collapse, as a result of low oil prices. Meanwhile, they said the company's strongest markets in 2017 should include Atlanta; Orlando, Fla.; Phoenix, Ariz.; Raleigh, N.C.; Tampa, Fla.; Jacksonville, Fla.; Charleston, S.C., and Memphis, Tenn.
Mid-America's relatively optimistic forecasts followed more downbeat comments from executives at Equity Residential and UDR Inc., which primarily own properties in large coastal cities.
Company executives said they expect some growth in new construction — which has plagued large markets like New York and San Francisco — in Austin, Texas, Nashville, Tenn., and Atlanta.
Yet Chairman, President and CEO H. Eric Bolton Jr. said his conversations with developers in recent months suggest that financing for new construction is "very difficult." As a result, he said, he expects new supply nationwide to peak in 2017 and abate in 2018.
Asked whether Mid-America might seek to diversify its holdings into coastal markets in anticipation of stronger growth there, Bolton replied, "We like staying where we are."
In more institutionally owned markets with sophisticated capital sources and operators, "the opportunity to really carve out a differentiation and carve out a competitive advantage, I think, becomes much more challenging," Bolton said.
"Ultimately … the value proposition is built around creating a competitive advantage, holding onto that, and then exploiting that," he added. "And we think the region we're in allows that."