Housing Slump Helps Apartment REIT

The housing crisis doesn't surprise Eric Bolton, the top executive of Mid-America Apartment Communities.

"We were evicting people who then went and bought houses," the company's president and chief executive officer told shareholders at the Memphis-based company's annual meeting Tuesday.

The nose dive in single-family home sales is one of the factors Bolton cited for the growth prospects of the firm.

"More people are coming in the front door, and we're holding on to our customers longer," he said.

When those things happen, not only does Mid-America avoid losing revenue from vacant units, but it also saves money it would have spent preparing those units for new tenants, Bolton said.

Also fueling the long-term trend for apartment demand is the growing number of people from 20 to 34 years old, the key age group of renters, he said.

A concern, though, is slow job growth -- apartment dwellers need jobs to pay the rent. Although that is expected to be flat or down slightly this year, that will be "a relatively short-lived issue," Bolton said.

More specifically, he said, the company's renovation program, now in its fourth year, is boosting results. Mid-America has revamped 6,000 units -- mostly bathrooms and kitchens -- has plans to redo 3,000 this year and 5,000 to 6,000 more in the next two to three years.

So far Mid-America has been able to raise rents an average of 13 percent on renovated apartments and is reaping a 13 percent return on its investment in the work, Bolton said.

"Mid-America has considerable wind at its back," said Napoleon Overton, analyst at Morgan Keegan & Co.

Its complexes are in the Southwest and Southeast, two regions with stable employment pictures and no extreme housing bubbles, he said.

The firm has plenty of financial flexibility, and its borrowing costs are falling, Overton noted.

Mid-America shares are the only ones of 12 publicly traded apartment real estate investment trusts that have risen in value in the year ending May 15, according to figures from Green Street Advisors.

That came from a 30 percent jump in the stock price so far this year, Bolton said.

Referring to the record funds from operations -- the most closely watched measure of REIT performance -- of $99.1 million or $3.55 a share, Bolton said he expected to be standing at the same spot a year from now talking about another record.

Directors terms: Changed to one year from three years, effective when current terms expire.