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Mid-America Apartment Communities WACC %

:5.57% (As of Today)
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As of today (2021-10-25), Mid-America Apartment Communities's weighted average cost of capital is 5.57%. Mid-America Apartment Communities's ROIC % is 3.72% (calculated using TTM income statement data). Mid-America Apartment Communities earns returns that do not match up to its cost of capital. It will destroy value as it grows.


Mid-America Apartment Communities WACC % Historical Data

The historical data trend for Mid-America Apartment Communities's WACC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

Mid-America Apartment Communities Annual Data
Trend Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20
WACC %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 4.30 3.79 5.57 3.90 4.54

Mid-America Apartment Communities Quarterly Data
Sep16 Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21
WACC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 4.53 4.35 4.54 5.29 5.23

Competitive Comparison

For the REIT - Residential subindustry, Mid-America Apartment Communities's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

   

Mid-America Apartment Communities WACC % Distribution

For the REITs industry and Real Estate sector, Mid-America Apartment Communities's WACC % distribution charts can be found below:

* The bar in red indicates where Mid-America Apartment Communities's WACC % falls into.



Mid-America Apartment Communities WACC % Calculation

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.

WACC=E/(E + D)*Cost of Equity+D/(E + D)*Cost of Debt*(1 - Tax Rate)

1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, Mid-America Apartment Communities's market capitalization (E) is $23193.139 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Jun. 2021, Mid-America Apartment Communities's latest two-year average Short-Term Debt & Capital Lease Obligation was $121 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $4387.655 Mil. The total Book Value of Debt (D) is $4508.655 Mil.
a) weight of equity = E / (E + D) = 23193.139 / (23193.139 + 4508.655) = 0.8372
b) weight of debt = D / (E + D) = 4508.655 / (23193.139 + 4508.655) = 0.1628

2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 1.68000000%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. Mid-America Apartment Communities's beta is 0.71.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 1.68000000% + 0.71 * 6% = 5.94%

3. Cost of Debt:
GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.
As of Dec. 2020, Mid-America Apartment Communities's interest expense (positive number) was $167.562 Mil. Its total Book Value of Debt (D) is $4508.655 Mil.
Cost of Debt = 167.562 / 4508.655 = 3.7165%.

4. Multiply by one minus Average Tax Rate:
GuruFocus uses the latest two-year average tax rate to do the calculation. The calculated average tax rate is limited to between 0% and 100%. If the calculated average tax rate is higher than 100%, it is set to 100%. If the calculated average tax rate is less than 0%, it is set to 0%.
The latest Two-year Average Tax Rate is 1.125%.

Mid-America Apartment Communities's Weighted Average Cost Of Capital (WACC) for Today is calculated as:

WACC=E / (E + D)*Cost of Equity+D / (E + D)*Cost of Debt*(1 - Tax Rate)
=0.8372*5.94%+0.1628*3.7165%*(1 - 1.125%)
=5.57%

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


Mid-America Apartment Communities  (NYSE:MAA) WACC % Explanation

Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, Mid-America Apartment Communities's weighted average cost of capital is 5.57%. Mid-America Apartment Communities's ROIC % is 3.72% (calculated using TTM income statement data). Mid-America Apartment Communities earns returns that do not match up to its cost of capital. It will destroy value as it grows.


Be Aware

1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.

2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.

3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.

4. GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.


Related Terms

Mid-America Apartment Communities Business Description

Mid-America Apartment Communities logo
Industry
Real Estate » REITs NAICS : 531110 SIC : 6798
Traded in Other Exchanges
Address
6815 Poplar Avenue, Suite 500, Germantown, TN, USA, 38138
Mid-America Apartment Communities Inc, or MAA, is a real estate investment trust engaged in the acquisition, operation, and development of multifamily apartment communities primarily located in the southeastern and southwestern United States. The company's real estate portfolio contains holdings in most of the states in these two regions. Specifically, the states of Texas, Florida, and North Carolina contain a majority of Mid-America Apartment's total number of apartment units. The company derives nearly all of its income in the form of rental revenue from leases. Most of this income comes from its holdings in Texas, Florida, and North Carolina as well. MAA also has partial ownership and operation of a number of commercial properties as well.
Executives
Mcgurk Monica Houle director 6584 POPLAR AVENUE MEMPHIS TN 38138
Lowder Thomas H director C/O COLONIAL PROPERTIES TRUST 2101 6TH AVE N. #750 BIRMINGHAM AL 35203
Sanders William Reid director C/O TWO HARBORS INVESTMENT CORP. 601 CARLSON PARKWAY, SUITE 1400 MINNETONKA MN 55305
Kelly Green Edith director 3131 DEMOCRAT ROAD BLDG B206 MEMPHIS TN 38118
French Russell R director 9 NORTH PARKWAY SQUARE 4200 NORTHSIDE PARKWAY ATLANTA GA 30327
Norwood Philip W director 121 WEST TRADE STREET SUITE 2700 CHARLOTTE NC 28202
Shorb Gary director 6584 POPLAR AVE MEMPHIS TN 38138
Stockert David P director 4401 NORTHSIDE PARKWAY SUITE 800 ATLANTA GA 30327-3057
Nielsen Claude B director 2101 6TH AVE N STE 750 BIRMINGHAM AL 35203
Lowder James K director C/O COLONIAL PROPERTIES TRUST 2101 6TH AVE N. #750 BIRMINGHAM AL 36203
Graf Alan B Jr director 1600 ROYAL ST JASPER IN 47549
Jennings Toni director C/O NEXTERA ENERGY, INC. 700 UNIVERSE BLVD JUNO BEACH FL 33408
Campbell Albert M Iii officer: EVP, Chief Financial Officer 6584 POPLAR AVE., STE. 300 MEMPHIS TN 38138
Delpriore Robert J. officer: EVP, General Counsel 6584 POPLAR AVENUE MEMPHIS TN 38138
Grimes Thomas L Jr officer: EVP, Chief Operating Officer 6584 POPLAR AVE., STE. 300 MEMPHIS TN 38138

Mid-America Apartment Communities Headlines

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