(the following statement changed into launched by way of the
score organisation) ny, August 15 (Fitch) Fitch scores has upgraded the
provider Default rankings (IDRs) of Mid-the united states condominium
communities, Inc. and its running partnership, Mid-the usa apartments LP to
'BBB+' from 'BBB'. The score Outlook is stable. KEY score DRIVERS The score
improve displays the sustained development in MAA's key credit metrics in
recent years, along with leverage and unencumbered asset insurance of unsecured
debt (UA/UD). The all-stock acquisition of decrease-levered post houses, Inc.
announced nowadays will similarly enhance MAA's balance sheet to stage's that
Fitch believes will provide sufficient cushion to preserve a stronger credit
score profile via-the-cycle. lower LEVERAGE WITH via-CYCLE CUSHION Fitch
initiatives leverage may be in the 5x - 5.5x range in 2017 relying upon the
time of the near. This compares favorably to five.7x for 2015, 6.4x for 2014
and the sub 6.5x stage that Fitch views as being constant with the 'BBB+'
rating. Fitch estimates the transaction terms (i.e. the idea of PPS' debt and
the issuance of zero.seventy one shares of MAA for every share of PPS) will
reduce leverage via approximately zero.3x, all else being same. however,
because the transaction is initially dilutive on an earnings foundation, the
provider has some incentive to keep or growth leverage to reduce the amount of
dilution and the time frame for it to turn accretive. Fitch defines leverage as
debt much less comfortably to be had cash to ordinary running EBITDA. Fitch
expects fixed-charge insurance will enhance similarly to the mid-4x variety via
2017 as compared to a few.7x for 2Q16 and 3.6x for 2015. Fitch defines
fixed-charge insurance as ordinary operating EBITDA much less maintenance
capital prices to overall hobby. LOGICAL TRANSACTION WITH MODEST exchange IN
approach The PPS acquisition is a logical strategic transaction that improves
MAA's portfolio quality and need to bring about scale blessings from deeper
market penetration. The blended corporation's improved size ought to also
enhance its public debt and fairness markets get entry to, resulting in lower
capital fees. Fitch is cozy with the integration hazard given MAA's tested
experience integrating Colonial properties accept as true with and deriving
operational upgrades. A modest detraction from the transaction that working
effects can be greater unstable relative to MAA's prior method which had less
infill places and did now not have a material development strategy. MAA paid a
fairly excessive top class to consensus internet asset value (NAV) for post a
good way to purpose the transaction to be dilutive to begin with to earnings
and NAV according to proportion. these troubles are less of a near-time period
credit score attention given the all-stock financing. however, they may weigh
on MAA's fairness valuation and, consequently get right of entry to going
forward, likely influencing its financial coverage goals. close to-term
LIQUIDITY pressure The transaction isn't challenge to any financing threat
given the all-inventory consideration being paid and MAA's assumption of all of
PPS' debt (aside from the balance on its revolving credit facility).
nevertheless, liquidity coverage can be careworn initially given the assumption
of PPS' improvement pipeline. Fitch calculates sources of liquidity cover uses
of liquidity by means of 0.7x for the length July 1, 2016 thru Dec. 31, 2017.
as the liquidity deficit totals $359 million, Fitch envisions MAA will appearance
to improve coverage by using issuing unsecured debt, increasing its revolving
credit score facility or a few combination thereof. Fitch considers assets of
liquidity as without problems to be had coins, availability underneath the
revolving credit facility pro forma for transaction prices and the PPS
stability and estimated retained cash go with the flow from operations. Fitch
considers makes use of of liquidity as overall debt maturities, estimated
recurring capital prices and devoted improvement expenses. EXPECTS TO rate PPS
obligations As MAA could be merging the PPS operating partnership into its own,
Fitch expects to fee submit's senior unsecured duties at 'BBB+' upon final
touch of the merger. strong OUTLOOK The stable Outlook displays Fitch's expectancies
that the running environment will continue to be accommodative but decelerating
and that the provider will preserve leverage around 5.5x via 2018. KEY
ASSUMPTIONS Fitch's key assumptions in the rating case for MAA consist of:
--boom in equal-save internet working profits of two% - 5% in line with yr via
2018; --the purchase of PPS as contemplated but no other material acquisitions;
--The investment of PPS' current improvement pipeline and $80 million in step
with yr of redevelopment expenditures; --Senior unsecured debt issuances of at
the least $250 million in 2016 and 2018. rating SENSITIVITIES effective
Momentum: Fitch views MAA's ability to illustrate advanced, REIT-zone main
capital access through-cycle because the number one driver of advantageous
momentum. Fitch does now not expect this may arise during the rating horizon.
have been this to occur, Fitch might additionally search for MAA to illustrate
and feature a financial policy to maintain leverage beneath five.5x. poor
Momentum: the following factors should have poor momentum on the ratings and/or
Outlook. --Fitch's expectation of leverage maintaining above 6.5x; --ought to
MAA display a better danger tolerance from both a enterprise and liquidity
angle primarily based on the sizing of its improvement pipeline. full listing
OF score movements Fitch has upgraded the subsequent rankings: Mid-the usa
condo groups, Inc. --IDR to 'BBB+' from 'BBB'. Mid-america flats, L.P. --IDR to
'BBB+' from 'BBB'; --Unsecured revolving credit score facility to 'BBB+' from
'BBB'; --Senior unsecured term loans to 'BBB+' from 'BBB'; --Senior unsecured
notes to 'BBB+' from 'BBB'. contact: primary Analyst Britton Costa, CFA
Director +1-212-908-0524 Fitch rankings Inc. 33 Whitehall street ny, the big
apple 10004 Secondary Analyst Steven Marks handling Director +1-212-908-9161
Committee Chairperson Stephen Boyd, CFA Senior Director +1-212-908-9153 Media
relations: Sandro Scenga, ny, Tel: +1 212-908-0278, email:
sandro.scenga@fitchratings.com. extra information is available on
www.fitchratings.com. summary of financial announcement adjustments - economic
assertion adjustments that leave materially from those contained within the
published economic statements of the applicable rated entity or obligor are
disclosed beneath: --ancient and projected habitual working EBITDA is adjusted
to feature back non-cash stock primarily based compensation and consist of
working income from discontinued operations; --Fitch has adjusted the historic
and projected internet debt via assuming the provider calls for $20 million of
coins for operating capital purposes that is otherwise unavailable to repay
debt. relevant standards company rating methodology - together with brief-term
scores and discern and Subsidiary Linkage (pub. 17 Aug 2015) here additional
Disclosures Dodd-Frank rating data Disclosure form right here _id=1010403
Solicitation repute right here Endorsement coverage here ail=31 ALL FITCH
credit scores ARE difficulty TO certain boundaries AND DISCLAIMERS. PLEASE
study those barriers AND DISCLAIMERS via FOLLOWING THIS link: here. in
addition, score DEFINITIONS AND THE phrases OF USE OF SUCH rankings ARE
available at the corporation'S PUBLIC website 'WWW.FITCHRATINGS.COM'. posted
rankings, standards AND METHODOLOGIES ARE available FROM THIS website always.
FITCH'S CODE OF conduct, CONFIDENTIALITY, CONFLICTS OF hobby, affiliate
FIREWALL, COMPLIANCE AND other relevant policies AND processes are also to be
had FROM THE 'CODE OF behavior' phase OF THIS website online. FITCH may
additionally HAVE furnished another PERMISSIBLE provider TO THE RATED ENTITY OR
ITS related third events. details OF THIS service FOR rankings FOR WHICH THE
LEAD ANALYST IS based totally IN an eu-REGISTERED ENTITY may be located on the
ENTITY precis web page FOR THIS provider on the FITCH website.
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