Mid-America Apartment Communities, Inc. (MAA)

How it makes money

Revenue is monthly rent collected from residents across the owned communities, plus smaller fees for services like parking or pet deposits. Because leases typically run about a year, rent growth shows up gradually as leases turn over and are re-signed at prevailing market rates, rather than all at once; occupancy and the pace of rent increases on renewals and new leases are the two levers that move revenue most.

Owning roughly 105,000 units clustered in Sun Belt metro areas lets the company spread property management, maintenance and technology costs over a larger base than smaller local landlords, and gives it easier access to capital markets. It is not a durable advantage in the way a patent or network effect would be — any well-capitalized competitor can build or buy apartments in the same markets — but scale does give an ongoing cost edge in day-to-day operations.

People need housing regardless of the economic cycle, which makes apartment demand steadier than most businesses, but rent growth and occupancy still move with local job markets and, importantly, with how much new apartment supply competing developers deliver in the same submarkets at the same time. A wave of new construction can hold down rents even while the broader economy is healthy.

Key risks

• New supply in Sun Belt markets — The company notes that elevated levels of new apartment construction in several Sun Belt markets in recent years have increased competition and pressured pricing power for landlords, including itself.
• Competition from other housing types — Residents can choose competing apartment communities, single-family rental homes, manufactured housing or condominiums, and rival landlords can offer concessions or lower rents to win tenants away.
• Rent regulation and local law — Changes in rent control, building codes or environmental rules in the states and cities where the company operates could raise operating costs or limit its ability to raise rents.