MAA Mid America Apartment Communities Inc

GERMANTOWN, Tenn., Oct. 25, 2023 /PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), today announced operating results for the quarter ended September 30, 2023.

A reconciliation of FFO and Core FFO to Net income available for MAA common shareholders, and discussion of the components of FFO and Core FFO, can be found later in this release. FFO per Share – diluted and Core FFO per Share – diluted include diluted common shares and units. 

Eric Bolton, Chairman and Chief Executive Officer, said, "Third quarter results were ahead of our expectations supported by the continued solid demand for apartment housing.  Stable employment conditions along with continued positive migration trends to our markets and historically low resident move-outs are combining to drive solid demand.  The delivery of new apartment supply is currently impacting rent growth performance associated with new move-in residents, and we expect this pressure to persist for another few quarters.  The volume of new apartment starts has begun to decline, and we expect that leasing conditions will be supportive of higher rent growth in late 2024 as markets absorb the current development pipeline. MAA's uniquely diversified portfolio, along with a strong operating platform and balance sheet, is well positioned to work through the current new supply pipeline, as well as pursue new growth opportunities that are emerging."

Highlights

• During the third quarter of 2023, MAA's Same Store Portfolio produced growth in revenues of 4.1%, as compared to the same period in the prior year, with Average Effective Rent per Unit up 4.5% while capturing strong Average Physical Occupancy of 95.7%.
• During the third quarter of 2023, MAA's Same Store Portfolio property operating expense and Net Operating Income (NOI) increased by 4.7% and 3.7%, respectively, as compared to the same period in the prior year.
• As of September 30, 2023, resident turnover remained low at 45.2% on a trailing 12 month basis driven by historically low levels of move-outs associated with buying single family-homes.
• As of the end of the third quarter of 2023, MAA had five communities under development, representing 1,970 units once complete, with a projected total cost of $642.7 million and an estimated $296.4 million remaining to be funded.
• As of the end of the third quarter of 2023, MAA had two recently completed development communities in lease-up. One community is expected to stabilize in the fourth quarter of 2023 and one in the third quarter of 2024. 
• MAA completed the redevelopment of 2,258 apartment homes during the third quarter of 2023, capturing average rental rate increases of approximately 7% above non-renovated units. 
• Subsequent to the end of the third quarter of 2023, MAA acquired a 323-unit multifamily community located in the Phoenix, Arizona market. 
• MAA's balance sheet remains strong with a historically low Net Debt/Adjusted EBITDAre ratio of 3.4x and $1.4 billion of combined cash and available capacity under MAALP's unsecured revolving credit facility as of September 30, 2023. 

Same Store Portfolio Operating Results
To ensure comparable reporting with prior periods, the Same Store Portfolio includes properties that were owned by MAA and stabilized at the beginning of the previous year. Same Store Portfolio results for the three and nine months ended September 30, 2023 as compared to the same period in the prior year are summarized below:

A reconciliation of NOI, including Same Store NOI, to Net income available for MAA common shareholders, and discussion of the components of NOI, can be found later in this release.

Same Store Portfolio operating statistics for the three and nine months ended September 30, 2023 are summarized below:

Same Store Portfolio lease pricing for both new and renewing leases effective during the third quarter of 2023, on a blended basis, increased 1.6% as compared to the prior lease, driven by a 5.0% increase for renewing leases and a 2.2% decrease for leases to new move-in residents.

Same Store Portfolio lease pricing for both new and renewing leases effective during the nine months ended September 30, 2023, on a blended basis, increased 2.9% as compared to the prior lease, driven by a 6.4% increase for renewing leases and a 0.8% decrease for leases to new move-in residents.

Development and Lease-up Activity
A summary of MAA's development communities under construction as of the end of the third quarter of 2023 is set forth below (dollars in thousands):

During the third quarter of 2023, MAA funded $47.0 million of costs for current and planned projects, including predevelopment activities. MAA expects to begin multifamily development projects on four to six land parcels currently owned or under contract over the next 18 to 24 months.

A summary of the total units, physical occupancy and cost of MAA's lease-up communities as of the end of the third quarter of 2023 is set forth below (dollars in thousands):

The current expected average stabilized NOI yield on the five communities either currently leasing or expected to begin leasing during the fourth quarter of 2023 is 6.7%.

Acquisition Activity
In October 2023, MAA acquired a 323-unit multifamily community currently in lease-up and located in the Phoenix, Arizona market for approximately $102 million. 

Property Redevelopment and Repositioning Activity
A summary of MAA's interior redevelopment program and Smart Home technology initiative as of the end of the third quarter of 2023 is set forth below:

As of September 30, 2023, MAA had completed installation of Smart Home technology (unit entry locks, mobile control of lights and thermostat and leak monitoring) in over 92,000 units across its apartment community portfolio since the initiative began during the first quarter of 2019.

During the third quarter of 2023, MAA continued its property repositioning program to upgrade and reposition the amenity and common areas at select apartment communities resulting in higher and above market rent growth. The five active projects during the nine months ended September 30, 2023 are expected to deliver yields on cost averaging 8%. Two of the five projects are complete with the remainder expected to be completed in the fourth quarter of 2023. An additional six projects are expected to start in the fourth quarter of 2023. For the nine months ended September 30, 2023, MAA spent $9.7 million on this program.  As of September 30, 2023, for all projects completed and either fully or partially repriced, MAA has captured yields on cost averaging approximately 15%.

Capital Expenditures
A summary of MAA's capital expenditures and Funds Available for Distribution (FAD) for the three and nine months ended September 30, 2023 and 2022 is set forth below (dollars in millions, except per Share data):

A reconciliation of FFO, Core FFO, Core AFFO and FAD to Net income available for MAA common shareholders, and discussion of the components of FFO, Core FFO, Core AFFO and FAD, can be found later in this release. 

Balance Sheet and Financing Activities
As of September 30, 2023, MAA had $1.4 billion of combined cash and available capacity under MAALP's unsecured revolving credit facility. MAALP refers to Mid-America Apartments, L.P., which is MAA's operating partnership.

Dividends and distributions paid on shares of common stock and noncontrolling interests during the third quarter of 2023 were $167.8 million, as compared to $148.3 million for the same period in the prior year.

Balance sheet highlights as of September 30, 2023 are summarized below (dollars in billions):

A reconciliation of Net Debt to Unsecured notes payable and Secured notes payable and a reconciliation of Adjusted EBITDAre to Net income, along with discussion of the components of Net Debt and Adjusted EBITDAre, can be found later in this release.

119th Consecutive Quarterly Common Dividend Declared
MAA declared its 119th consecutive quarterly common dividend, which will be paid on October 31, 2023 to holders of record on October 13, 2023. The current annual dividend rate is $5.60 per common share. The timing and amount of future dividends will depend on actual cash flows from operations, MAA's financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986 and other factors as MAA's Board of Directors deems relevant. MAA's Board of Directors may modify the dividend policy from time to time.

2023 Earnings and Same Store Portfolio Guidance
MAA is updating its prior 2023 guidance for Earnings per common share, Core FFO per Share and Core AFFO per Share, along with its expectations for growth in Property revenue, Property operating expense and NOI for the Same Store Portfolio in 2023.

FFO, Core FFO and Core AFFO are non-GAAP financial measures. Acquisition and disposition activity materially affects depreciation and capital gains or losses, which combined, generally represent the majority of the difference between Net income available for common shareholders and FFO. As discussed in the definitions of non-GAAP financial measures found later in this release, MAA's definition of FFO is in accordance with the National Association of Real Estate Investment Trusts', or NAREIT's, definition, and Core FFO represents FFO as adjusted for items that are not considered part of MAA's core business operations. MAA believes that Core FFO is helpful in understanding operating performance in that Core FFO excludes not only depreciation expense of real estate assets and certain other non-routine items, but it also excludes certain items that by their nature are not comparable over periods and therefore tend to obscure actual operating performance.

MAA expects Core FFO for the fourth quarter of 2023 to be in the range of $2.21 to $2.37 per Share, or $2.29 per Share at the midpoint. MAA does not forecast Earnings per common share on a quarterly basis as MAA generally cannot predict the timing of forecasted acquisition and disposition activity within a particular quarter (rather than during the course of the full year). Additional details and guidance items are provided in the Supplemental Data to this release.

Supplemental Material and Conference Call
Supplemental data to this release can be found on the "For Investors" page of the MAA website at www.maac.com. MAA will host a conference call to further discuss third quarter results on October 26, 2023, at 9:00 AM Central Time. The conference call-in number is 877-830-2597. You may also join the live webcast of the conference call by accessing the "For Investors" page of the MAA website at www.maac.com. MAA's filings with the Securities and Exchange Commission (SEC) are filed under the registrant names of Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P.

About MAA
MAA, an S&P 500 company, is a real estate investment trust (REIT) focused on delivering full-cycle and superior investment performance for shareholders through the ownership, management, acquisition, development and redevelopment of quality apartment communities primarily in the Southeast, Southwest and Mid-Atlantic regions of the United States. As of September 30, 2023, MAA had ownership interest in 101,987 apartment units, including communities currently in development, across 16 states and the District of Columbia. For further details, please visit the MAA website at www.maac.com or contact Investor Relations at investor.relations@maac.com, or via mail at MAA, 6815 Poplar Ave., Suite 500, Germantown, TN 38138, Attn: Investor Relations.

Forward-Looking Statements
Sections of this release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Such forward-looking statements include, without limitation, statements regarding expected operating performance and results, property stabilizations, property acquisition and disposition activity, joint venture activity, development and renovation activity and other capital expenditures, and capital raising and financing activity, as well as lease pricing, revenue and expense growth, occupancy, interest rate and other economic expectations. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "forecasts," "projects," "assumes," "will," "may," "could," "should," "budget," "target," "outlook," "proforma," "opportunity," "guidance" and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, as described below, which may cause our actual results, performance or achievements to be materially different from the results of operations, financial conditions or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such forward-looking statements included in this release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

The following factors, among others, could cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements:

• inability to generate sufficient cash flows due to unfavorable economic and market conditions, changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws, or other factors;
• exposure to risks inherent in investments in a single industry and sector;
• adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets which we may seek to enter in the future, limitations on our ability to increase or collect rental rates, competition, our ability to identify and consummate attractive acquisitions or development projects on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns;
• failure of development communities to be completed within budget and on a timely basis, if at all, to lease-up as anticipated or to achieve anticipated results;
• unexpected capital needs;
• material changes in operating costs, including real estate taxes, utilities and insurance costs, due to inflation and other factors;
• inability to obtain appropriate insurance coverage at reasonable rates, or at all, or losses from catastrophes in excess of our insurance coverage;
• ability to obtain financing at favorable rates, if at all, or refinance existing debt as it matures;
• level and volatility of interest or capitalization rates or capital market conditions;
• the effect of any rating agency actions on the cost and availability of new debt financing;
• the impact of adverse developments affecting the U.S. or global banking industry, including bank failures and liquidity concerns, which could cause continued or worsening economic and market volatility, and regulatory responses thereto;
• significant change in the mortgage financing market or other factors that would cause single-family housing or other alternative housing options, either as an owned or rental product, to become a more significant competitive product;
• ability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, the ability of MAALP to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of our taxable REIT subsidiaries to maintain their status as such for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;
• inability to attract and retain qualified personnel;
• cyber liability or potential liability for breaches of our or our service providers' information technology systems, or business operations disruptions;
• potential liability for environmental contamination;
• changes in the legal requirements we are subject to, or the imposition of new legal requirements, that adversely affect our operations;
• extreme weather and natural disasters;
• disease outbreaks and other public health events and measures that are taken by federal, state, and local governmental authorities in response to such outbreaks and events;
• impact of climate change on our properties or operations;
• legal proceedings or class action lawsuits;
• impact of reputational harm caused by negative press or social media postings of our actions or policies, whether or not warranted;
• compliance costs associated with numerous federal, state and local laws and regulations; and 
• other risks identified in this release and in reports we file with the SEC or in other documents that we publicly disseminate.

New factors may also emerge from time to time that could have a material adverse effect on our business. Except as required by law, we undertake no obligation to publicly update or revise forward-looking statements contained in this release to reflect events, circumstances or changes in expectations after the date of this release.