Mid-America Apartment Communities Inc MAA's deal to buy Post Properties Inc PPS is appealing to Oppenheimer for four reasons:
- "The strong market overlap should give MAA added depth."
- "We believe assets are 10-15% cheaper in the public than private market."
- "PPS's same-store operating metrics have lagged MAA's recently."
- "Finally, we believe MAA will successfully integrate the acquisition having cut its teeth with the 2014 acquisition of Colonial Properties."
Analyst Steve Manaker noted that at 0.71 shares of Mid-America for each share of Post Properties, the deal values the latter's real estate assets at about $4.7 billion, or $230,000/unit. The common stock portion is about $3.9 billion ($72.52/share) and represents a 16.6 percent premium to Friday's close of $62.22/share.
The combined company is expected to have a pro forma equity market capitalization of about $12 billion and a total market capitalization of about $17 billion.
The merger combines two highly complementary multifamily portfolios with a combined asset base consisting of approximately 105,000 multifamily units in 317 properties. The companies expect annual gross synergies at about $20 million.
Commenting on the FFO impact, Manaker said, "In our base case (PPS generating $236 million of NOI in next 12-months) we estimate about 2.5 percent dilution. If NOI increases 5 percent from our base case, dilution decreases to 1 percent. Our break-even is 13 percent NOI growth above our base case."
Mid-America's revenue/NOI increased 5.7 percent/7.2 percent in 2015 and 2016 guidance is for 4.0–4.5 percent/4.75–5.25 percent. On the other hand, Post Properties had 2.8 percent/2.2 percent in 2015 and expects 3.0–3.3 percent/2.5–3.3 percent in 2016.
Manaker has an Outperform rating and $115 price target on Mid-America shares.
At time of writing, shares of Mid-America were down 4.68 percent at $97.37, while Post Properties shares were up 9.54 percent at $68.17.
Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.