MAA Scores Central Avenue in Phoenix Lease-Up for $102M in Cash

As more apartments are delivered across the country, many REITs see an opportunity to buy new properties at what could be a discount to replacement costs.

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MAA Central Avenue
A meticulously designed apartment community that offers a harmonious blend of contemporary aesthetics and thoughtful details, creating a haven of comfort and sophistication. Residents enjoy premium amenities, including a state-of-the-art fitness center, a resort-style pool, and a rooftop lounge with breathtaking Camelback Mountain views. With the vibrant Midtown neighborhood at its doorstep, MAA Central Ave is a gateway to the best in dining, entertainment, and culture. The pinnacle of luxury living in Midtown Phoenix.

For executives at Memphis-based REIT MAA, Central Avenue is the type of opportunity that should emerge over the next year. The company bought the 323-unit, mid-rise property from a developer under stress in October. Toll Brothers was the seller, according to The Phoenix Business Journal.

“The property is in its initial lease-up and the seller was under some pressure to close on the sale by a specific date,” MAA Chief Investment Officer Brad Hill said on the REIT’s recent third-quarter earnings call.

MAA secured the property for $102 million, or $317,000 per unit, which is “substantially below current replacement costs,” according to Hill. The property should provide an initial stabilized NOI yield of 5.5%.

Further Insight

“We think over the next couple of years that we’ll see that yield meaningfully go up from there,” CEO Eric Bolton said on the call. Bolton sees more opportunities to buy for MAA in high-supply markets like Phoenix. “I think that we’re going to continue to see more of those opportunities emerge over the coming year,” he said. Bolton thinks MAA can squeeze 100 to 200 basis points in additional efficiencies out of MAA Central Avenue once it’s absorbed into the REIT’s platform.

“With the property nearing stabilization, we expect over the following year or so to capture further margin and yield expansion opportunities as a result of adopting MAA’s more sophisticated revenue management practices and technology platform, coupled with our future ability to achieve operational synergies with another MAA property that is only half a mile away,” Hill said.

“Our familiarity with the market, speed of execution and balance sheet strength that supports an ability to close all cash with no financing contingencies were all aspects of our offer that were very important to the sellers.” Hill said MAA also has a balance sheet that puts it in a position to be aggressive when more deals come to market. “Our transaction team is very active in evaluating other acquisition opportunities across our footprint,” Hill said.