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MAA-PPS Deal About Market Share, Submarket Diversity

Atlanta, Dallas two of Biggest Concentrations

By Carl Whitaker | Wednesday, September 14, 2016

Mid-America Apartments’ (MAA) planned purchase of Post Properties (PPS) will be one of the largest apartment REIT acquisitions of this cycle. Of course, MAA has its reasons for absorbing Post’s portfolio.  

One of the primary purposes of the MAA-PPS deal appears to be reinforcement of markets in which MAA currently operates. Almost all of the PPS properties on which MAA hopes to close in the fourth quarter are located in MAA markets. Silver Spring, MD is the lone PPS market without an existing MAA property.

Atlanta and Dallas are the two largest PPS markets, with MAA adding 5,802 and 4,762 units in the two markets, respectively, as shown in the maps below.

MAA’s presence in these markets was similarly concentrated, with Dallas (7,337 units) and Atlanta (5,417 units) its Nos. 1 and 3 markets by number of units. The purchase will bring MAA’s total number of units to 12,063 in Dallas and 11,219 in Atlanta.

The submarkets in which the PPS properties are located also were likely a factor in MAA’s strategy. MAA has historically operated more heavily in suburban submarkets rather than urban-core areas, while PPS had the opposite focus.

In many cases, PPS’ suburban properties functioned as urban core-type properties because of their proximity to urban core-type sites such as mixed-use centers. In essence, these properties provide similar urban core characteristics such as walkability, close proximity to large employment centers, etc., although their suburban location technically classifies them as non-urban core.

Urban core properties were outperforming their suburban counterparts earlier in the current real-estate cycle. Now, however, the paradigm has shifted to suburban areas outperforming their urban core counterparts.

Many components are at play within this overall shift, but supply is the primary cause. While urban core areas have seen intense amounts of new supply in recent years, suburban areas have seen less concentrated development and have been able to maintain more sustainable absorption levels that some urban core areas have not.

The price points for MAA and PPS properties are quite different, part of which can be explained by the urban core/suburban dynamic previously discussed. The following maps show the differences in price points between MAA and PPS properties.

In Dallas, MAA properties are located primarily in the northern part of the market, with some properties located between Dallas and Fort Worth. PPS, meanwhile, is heavily concentrated in the urban core Oak Lawn submarket, with some properties extending north, almost all of which are located along the Dallas North Tollway.

Rents at PPS-owned properties in Dallas averaged $1,570 per month in August, indicative of the higher rental rates found in urban core and similar locations. MAA, on the other hand, averages a monthly rent of $1,194 in Dallas – almost a $400 difference. Again, the lower price point of MAA properties is an indicator of its suburban focus.

MAA’s presence within Atlanta is primarily outside of the Interstate 285 loop, although three properties were located within it. PPS, meanwhile, operates almost exclusively inside the I-285 loop. Should the MAA-PPS deal close, MAA will have a heavy presence in both suburban Atlanta as well as the Atlanta urban core.

Carl Whitaker

Carl Whitaker

Real Estate Analyst

Carl Whitaker is a Real Estate Analyst for Axiometrics.

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