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MAA REPORTS SECOND QUARTER 2022 RESULTS

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GERMANTOWN, Tenn., July 27, 2022 /PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), today announced operating results for the quarter ended June 30, 2022.

MAA logo. (PRNewsFoto/MAA)
MAA logo. (PRNewsFoto/MAA)

Second Quarter 2022 Operating Results


Three months ended June 30,



Six months ended June 30,




2022



2021



2022



2021


Earnings per common share - diluted


$

1.82



$

1.88



$

2.76



$

2.28















Funds from operations (FFO) per Share - diluted


$

1.82



$

1.84



$

3.89



$

3.34















Core FFO per Share - diluted


$

2.02



$

1.69



$

4.00



$

3.33


A reconciliation of FFO and Core FFO to Net income available for MAA common shareholders, and an expanded 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, "Leasing conditions across our Sunbelt markets remain robust as strong job growth, positive migration trends and the higher cost of single-family homeownership fuels a growing demand for apartment housing.  Results for the second quarter were ahead of expectations, and we have again increased our outlook for growth in Core FFO performance for the year."

Highlights

  • During the second quarter of 2022, MAA's Same Store Portfolio produced increases in property revenues, operating expenses and Net Operating Income (NOI) of 13.7%, 8.1% and 17.1%, respectively, as compared to the same period in the prior year.

  • As of the end of the second quarter of 2022, MAA had five communities under development, representing 1,759 units once complete, with a projected total cost of $444.0 million and an estimated $213.6 million remaining to be funded.

  • As of the end of the second quarter of 2022, MAA had four recently completed development communities in initial lease-up. Two communities are expected to stabilize in the third quarter of 2022 and two in the first quarter of 2023.

  • MAA completed redevelopment of 1,844 apartment homes during the second quarter of 2022, capturing average rental rate increases of approximately 11% above non-renovated units.

  • MAA closed on the disposition of two multifamily communities in the Fort Worth, Texas market for combined gross proceeds of approximately $167 million during the second quarter of 2022.

  • During the second quarter of 2022, MAA closed on the acquisition of a four acre land parcel located in the Orlando, Florida market for future development expected to begin in late 2023.

  • Subsequent to the end of the second quarter of 2022, MAA acquired a 196-unit multifamily community located in the Tampa, Florida market and a six acre land parcel in the Denver, Colorado market for future development expected to begin in late 2023.

  • During the second quarter of 2022, Fitch Ratings upgraded MAA's long-term debt rating to A- with a Stable outlook.

  • Subsequent to the end of the second quarter of 2022, MAALP amended its unsecured revolving credit facility increasing borrowing capacity to $1.25 billion with an option to expand to $2.0 billion. MAALP refers to Mid-America Apartments, L.P., which is MAA's operating partnership.

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 six months ended June 30, 2022 as compared to the same periods in the prior year are summarized below:



Three months ended June 30, 2022 vs. 2021


Six months ended June 30, 2022 vs. 2021



Revenues


Expenses


NOI


Average Effective Rent per Unit


Revenues


Expenses


NOI


Average Effective Rent per Unit

Same Store Operating Growth


13.7 %


8.1 %


17.1 %


14.3 %


12.9 %


6.2 %


17.0 %


13.3 %

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

Same Store Portfolio operating statistics for the three and six months ended June 30, 2022 are summarized below:



Three months ended June 30, 2022


Six months ended June 30, 2022


June 30, 2022



Average Effective Rent per Unit



Average Physical Occupancy


Average Effective Rent per Unit



Average Physical Occupancy


Resident Turnover

Same Store Operating Statistics


$

1,529



95.7 %


$

1,499



95.8 %


44.9 %
















Same Store Portfolio lease pricing for leases effective during the second quarter of 2022, as compared to the prior lease, increased 18.0% for leases to new move-in residents and increased 16.5% for renewing leases, which produced an increase of 17.2% for both new and renewing leases on a blended basis. The rent-to-resident-income relationship for new leases signed during the second quarter of 2022 remained consistent with recent trends in the range of 22%.

Same Store Portfolio lease pricing for leases effective during the six months ended June 30, 2022, as compared to the prior lease, increased 17.3% for leases to new move-in residents and increased 16.9% for renewing leases, which produced an increase of 17.1% for both new and renewing leases on a blended basis.

Additionally, through July 25, 2022, Same Store Portfolio lease pricing for leases effective during July 2022, as compared to the prior lease, increased 17.9% for leases to new move-in residents and increased 15.4% for renewing leases, which produced an increase of 16.6% for both new and renewing leases on a blended basis.

Development and Lease-up Activity
A summary of MAA's development communities under construction as of the end of the second quarter of 2022 is set forth below (dollars in thousands):




Units as of



Development Costs as of



Expected Project


Total



June 30, 2022



June 30, 2022



Completions By Year


Development












Expected



Spend



Expected





Projects



Total



Delivered



Leased



Total



to Date



Remaining



2022



2023



2024



5




1,759




148




144



$

444,000



$

230,428



$

213,572




1




3




1









































The expected average stabilized NOI yield on these communities is 5.7%. During the second quarter of 2022, MAA funded $53.9 million of costs for current and completed projects, including predevelopment activities related to land parcels located in the Denver, Colorado market, the Tampa, Florida market and the Orlando, Florida market.

A summary of the total units, cost and the average physical occupancy of MAA's lease-up communities as of the end of the second quarter of 2022 is set forth below (dollars in thousands):

Total



As of June 30, 2022



Expected Project Stabilizations By Year


Lease-Up



Total



Physical



Spend





Projects



Units



Occupancy



to Date



2022



2023



4




1,247




81.5

%


$

297,078




2




2

























Property Redevelopment and Repositioning Activity
A summary of MAA's interior redevelopment program and Smart Home technology initiative as of the end of the second quarter of 2022 is set forth below:



As of June 30, 2022












Average



Increase in



Remaining Units



Units Completed



Units Completed



Cost



Average Effective



Expected to be Completed



QTD



YTD



per Unit



Rent per Unit



Through December 31, 2022

Redevelopment



1,844




2,942



$

5,364



$

142



3,100 - 4,100
















Smart Home



9,438




20,456



$

1,491



$

25


 (1)

2,550 - 3,550

(1)     Projected increase upon lease renewal, opt in or unit turnover.

As of June 30, 2022, MAA had completed installation of the Smart Home technology (unit entry locks, mobile control of lights and thermostat and leak monitoring) in over 67,000 units across its apartment community portfolio since the initiative began during the first quarter of 2019.

During the second quarter of 2022, MAA continued its property repositioning program to upgrade and reposition the amenity and common areas at select apartment communities. The program includes targeted plans to move all units at the properties to higher rents that are expected to deliver yields on cost averaging 8%. During the six months ended June 30, 2022, work continued on properties selected for this program in 2021. For the six months ended June 30, 2022, MAA spent $8.0 million on this program.

Acquisition and Disposition Activity
In June 2022, MAA closed on the disposition of two multifamily communities in the Fort Worth, Texas market totaling 730 units.  MAA received combined gross proceeds of approximately $167 million and recognized a combined gain on the sale of depreciable real estate assets of approximately $132 million.

During the second quarter of 2022, MAA closed on the acquisition of a four acre land parcel located in the Orlando, Florida market for approximately $12 million.  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.

In July 2022, MAA acquired a 196-unit multifamily community located in the Tampa, Florida market for approximately $73 million.  At the time of acquisition, the community's physical occupancy was 89.8%.  During July 2022, MAA also acquired a six acre land parcel in the Denver, Colorado market for future development.

Capital Expenditures
A summary of MAA's capital expenditures and Funds Available for Distribution (FAD) for the three and six months ended June 30, 2022 and 2021 is set forth below (dollars in millions, except per Share data):



Three months ended June 30,



Six months ended June 30,




2022



2021



2022



2021


Core FFO


$

239.9



$

199.7



$

474.0



$

394.2


Recurring capital expenditures



(31.0)




(22.8)




(45.6)




(35.4)


Core adjusted FFO (Core AFFO)



208.9




176.9




428.4




358.8


Redevelopment, revenue enhancing, commercial and other capital expenditures



(63.7)




(44.7)




(87.2)




(79.2)


FAD


$

145.2



$

132.2



$

341.2



$

279.6















Core FFO per Share - diluted


$

2.02



$

1.69



$

4.00



$

3.33


Core AFFO per Share - diluted


$

1.76



$

1.49



$

3.61



$

3.03


A reconciliation of FFO, Core FFO, Core AFFO and FAD to Net income available for MAA common shareholders, and an expanded 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 June 30, 2022, MAA had $1.1 billion of combined cash and available capacity under MAALP's unsecured revolving credit facility.

In July 2022, MAALP amended its unsecured revolving credit facility, increasing borrowing capacity to $1.25 billion with an option to expand to $2.0 billion. The amended facility has a maturity date of October 2026 with two six-month extension options, and bears interest at an adjusted Secured Overnight Financing Rate plus a spread based on an investment ratings grid, currently at 0.775%.

Dividends and distributions paid on shares of common stock and noncontrolling interests during the second quarter of 2022 were $129.0 million, as compared to $121.5 million for the same period in the prior year.

Balance sheet highlights as of June 30, 2022 are summarized below (dollars in billions):

Total debt to adjusted total assets (1)


Net Debt/Adjusted EBITDAre (2)


Total debt outstanding



Average effective interest rate


Fixed rate debt as a % of total debt


Total debt average years to maturity

29.4 %


3.97x


$

4.5



3.4 %


100.0 %


8.2














(1)

   As defined in the covenants for the bonds issued by MAALP.

(2)

   Adjusted EBITDAre is calculated for the trailing twelve month period ended June 30, 2022.

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

114th Consecutive Quarterly Common Dividend Declared
MAA declared its 114th consecutive quarterly common dividend, which will be paid on July 29, 2022 to holders of record on July 15, 2022. The current annual dividend rate is $5.00 per common share, an increase of 15% from the immediately prior rate. 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.

2022 Earnings and Same Store Portfolio Guidance
MAA is updating its prior 2022 guidance for Net income per diluted common share, Core FFO per Share and Core AFFO per Share, along with its expectations for growth of Property revenue, Property operating expense and NOI for the Same Store Portfolio in 2022. MAA expects to update its 2022 Net income per diluted common share, Core FFO per Share and Core AFFO per Share guidance on a quarterly basis.

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 further 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.

2022 Guidance


Previous Range


Previous Midpoint



Revised Range


Revised Midpoint

Earnings:


Full Year 2022


Full Year 2022



Full Year 2022


Full Year 2022

Earnings per common share - diluted


$5.96 to $6.28


$6.12



$5.65 to $5.89


$5.77

Core FFO per Share - diluted


$7.92 to $8.24


$8.08



$8.13 to $8.37


$8.25

Core AFFO per Share - diluted


$7.14 to $7.46


$7.30



$7.34 to $7.58


$7.46











MAA Same Store Portfolio:










Property revenue growth


10.0% to 12.0%


11.0 %



11.5% to 12.5%


12.0 %

Property operating expense growth


5.5% to 6.5%


6.0 %



6.5% to 7.5%


7.0 %

NOI growth


12.5% to 14.5%


13.5 %



14.0% to 16.0%


15.0 %

MAA expects Core FFO for the third quarter of 2022 to be in the range of $1.99 to $2.15 per Share, or $2.07 per Share at the midpoint. MAA does not forecast Net income per diluted 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 second quarter results on July 28, 2022, at 9:00 AM Central Time. The conference call-in number is 877-830-2598. 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 June 30, 2022, MAA had ownership interest in 101,229 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:

  • the COVID-19 pandemic and measures taken or that may be taken by federal, state and local governmental authorities to combat the spread of the disease;

  • 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;

  • 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, natural disasters, disease outbreaks and other public health 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.

 

 

FINANCIAL HIGHLIGHTS



Dollars in thousands, except per share data


Three months ended June 30,



Six months ended June 30,




2022



2021



2022



2021


Rental and other property revenues


$

495,040



$

436,927



$

971,118



$

861,932















Net income available for MAA common shareholders


$

209,780



$

215,556



$

319,660



$

261,827