Toggle SGML Header (+)


Section 1: 8-K (8-K)

maa-8k_20190731.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  July 31, 2019

 

MID-AMERICA APARTMENT COMMUNITIES, INC.

(Exact name of registrant as specified in its charter)

 

TENNESSEE

001-12762

62-1543819

(State or Other Jurisdiction of incorporation)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

 

MID-AMERICA APARTMENTS, L.P.

(Exact name of registrant as specified in its charter)

 

TENNESSEE

333-190028-01

62-1543816

(State or Other Jurisdiction of incorporation)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

6815 Poplar Avenue, Suite 500

 

Germantown, Tennessee

38138

(Address of Principal Executive Offices)

(Zip Code)

 

(901) 682-6600

(Registrant's telephone number, including area code)

 

N/A

(Former name or former address, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share (Mid-America Apartment Communities, Inc.)

MAA

New York Stock Exchange

8.50% Series I Cumulative Redeemable Preferred Stock, $.01 par value per share (Mid-America Apartment Communities, Inc.)

MAA^I

New York Stock Exchange

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[ ] Pre-commencement communications pursuant to Rule 13 e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company [ ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

 

 

 

 


 

ITEM 2.02Results of Operations and Financial Condition.

 

On July 31, 2019, the Registrant issued a press release announcing its consolidated results of operations and financial condition as of June 30, 2019 for the three and six months then ended.  Copies of the press release and supplemental data schedules are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report.

 

The information in this Current Report (including Exhibits 99.1 and 99.2) is being furnished pursuant to Item 2.02 and shall not be deemed to be "filed" for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference into any previous or future filings by the Registrant under the Exchange Act or the Securities Act of 1933, as amended.

 

ITEM 9.01Financial Statements and Exhibits.

 

(d)Exhibits. The following exhibits are being furnished as part of this Report.

 

Exhibit Number

 

Description

99.1

 

Press Release dated July 31, 2019

99.2

 

Supplemental Data Schedules dated June 30, 2019

 

 

 

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

MID-AMERICA APARTMENT COMMUNITIES, INC.

 

 

 

 

Date:

July 31, 2019

 

/s/Albert M. Campbell, III

 

 

 

Albert M. Campbell, III

 

 

 

Executive Vice President and Chief Financial Officer

 

 

 

(Principal Financial Officer)

 

 

 

 

MID-AMERICA APARTMENTS, L.P.

 

 

 

By: Mid-America Apartment Communities, Inc.

 

 

 

 

Date:

July 31, 2019

 

/s/Albert M. Campbell, III

 

 

 

Albert M. Campbell, III

 

 

 

Executive Vice President and Chief Financial Officer

 

 

 

(Principal Financial Officer)

 

 

(Back To Top)

Section 2: EX-99.1 (EX-99.1)

maa-ex991_7.htm

Exhibit 99.1


 


 

TABLE OF CONTENTS

 

Overview

1

Financial Highlights

6

Consolidated Statements of Operations

8

Share and Unit Data

9

Consolidated Balance Sheets

10

Reconciliation of Non-GAAP Financial Measures

11

Non-GAAP Financial Measures

13

Other Key Definitions

14

Portfolio Statistics

S-1

Components of Net Operating Income/Components of Same Store Portfolio Property Operating Expenses

S-3

NOI Contribution Percentage by Market

S-4

Multifamily Same Store Portfolio Comparisons

S-5

Multifamily Development Pipeline/Multifamily Redevelopment Pipeline/Multifamily Lease-up Communities/2019 Acquisition Activity & Disposition Activity (Through June 30, 2019)

S-8

Investments in Unconsolidated Real Estate Entities

S-9

Debt and Debt Covenants as of June 30, 2019

S-10

2019 Guidance/Reconciliation of Net Income per Diluted Common Share Guidance to FFO and AFFO per Share Guidance

S-12

Credit Ratings/Common Stock/Investor Relations Data

S-13

 

 

 


 

OVERVIEW

 

MAA REPORTS SECOND QUARTER RESULTS

GERMANTOWN, TN, July 31, 2019 /PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), today announced operating results for the quarter ended June 30, 2019.

 

Net Income Available for Common Shareholders

For the quarter ended June 30, 2019, net income available for MAA common shareholders was $61.0 million, or $0.53 per diluted common share, compared to $58.9 million, or $0.52 per diluted common share, for the quarter ended June 30, 2018. Results for the quarter ended June 30, 2019 included $4.6 million, or $0.04 per diluted common share, of non-cash income related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares. Results for the quarter ended June 30, 2018 included $4.4 million, or $0.04 per diluted common share, of income related to the settlement of an executive life insurance policy claim and $2.8 million, or $0.02 per diluted common share, of non-cash income related to the embedded derivative in the preferred shares.

 

For the six months ended June 30, 2019, net income available for MAA common shareholders was $123.7 million, or $1.09 per diluted common share, compared to $107.0 million, or $0.94 per diluted common share, for the six months ended June 30, 2018. Results for the six months ended June 30, 2019 included $4.1 million, or $0.04 per diluted common share, of non-cash income related to the embedded derivative in the preferred shares and $9.2 million, or $0.08 per diluted common share, of gains related to the sale of real estate assets. Results for the six months ended June 30, 2018 included $4.4 million, or $0.04 per diluted common share, of income related to the settlement of an executive life insurance policy claim and $2.9 million, or $0.03 per diluted common share, of gains related to the sale of real estate assets. Non-cash income related to the embedded derivative in the preferred shares was negligible for the six months ended June 30, 2018.

 

Funds from Operations (FFO)

For the quarter ended June 30, 2019, FFO was $185.7 million, or $1.57 per diluted common share and unit, or per Share, compared to $182.9 million, or $1.55 per Share, for the quarter ended June 30, 2018.  Results for the quarter ended June 30, 2019 included $4.6 million, or $0.04 per Share, of non-cash income related to the embedded derivative in the preferred shares.  Results for the quarter ended June 30, 2018 included $4.4 million, or $0.04 per Share, of income related to the settlement of an executive life insurance policy claim and $2.8 million, or $0.02 per Share, of non-cash income related to the embedded derivative in the preferred shares.

 

For the six months ended June 30, 2019, FFO was $372.1 million, or $3.15 per Share, compared to $352.6 million, or $2.99 per Share, for the six months ended June 30, 2018.  Results for the six months ended June 30, 2019 included $4.1 million, or $0.03 per Share, of non-cash expense related to the embedded derivative in the preferred shares and $9.2 million, or $0.08 per Share, of gains related to the sale of non-depreciable real estate assets.  Results for the six months ended June 30, 2018 included $4.4 million, or $0.04 per Share, of income related to the settlement of an executive life insurance policy claim.  Non-cash income related to the embedded derivative in the preferred shares was negligible for the six months ended June 30, 2018.

 

A reconciliation of FFO to net income available for MAA common shareholders, and an expanded discussion of the components of FFO, can be found later in this release.

 

Eric Bolton, Chairman and Chief Executive Officer, said, “Demand for apartment housing remains strong across our high-growth Sunbelt markets.  Rent growth trends are the strongest we have captured over the past eight quarters and performance is ahead of expectations.  As a result, we have increased our revenue forecast for the year and also increased our expectations for higher FFO growth.”

 

Highlights

 

Property revenues from the Same Store Portfolio increased 3.2% during the second quarter of 2019 as compared to the same period in the prior year, which was a 90 basis point improvement from the performance in the first quarter of 2019.  Results were driven by a 3.2% growth in Average Effective Rent per Unit and continued strong Average Physical Occupancy of 96.0%.

 

Property operating expenses for the Same Store Portfolio increased 3.6% during the second quarter of 2019 as compared to the same period in the prior year.

 

Net Operating Income, or NOI, from the Same Store Portfolio increased 3.0% during the second quarter of 2019 as compared to the same period in the prior year.

 

As a result of the strong performance year-to-date, MAA is revising revenue growth expectations for the Same Store Portfolio from a mid-point of 2.3% to a mid-point of 3.0%.  In addition, NOI for the Same Store Portfolio for the year has been increased from a mid-point of 1.8% to 3.0%.  

1


 

Strong demand for apartment housing continues to support low resident turnover as resident move outs for the Same Store Portfolio for the second quarter of 2019 remained low at 47.3% on a rolling twelve month basis.

 

As of the end of the second quarter of 2019, MAA had five development projects under construction, which included 1,090 units, with a total projected cost of $230.5 million and an estimated $148.0 million remaining to be funded.

 

As of the end of the second quarter of 2019, MAA had two properties in their initial lease-up, and average physical occupancy for the lease-up portfolio was 63.8%.  These properties are expected to stabilize over the remainder of 2019.

 

Redevelopment activity across the portfolio remains robust with plans to upgrade interiors at 7,500 to 8,500 units over the course of the year with expected rent increases averaging 9% to 10%.  

 

Same Store Portfolio Operating Results

To ensure comparable reporting with prior periods, the Same Store Portfolio includes properties that were stabilized and owned by MAA at the beginning of the previous year.

 

The Same Store Portfolio revenue growth of 3.2% during the second quarter of 2019 was primarily a result of a 3.2% increase in Average Effective Rent per Unit, as compared to the same period in the prior year.  Rent growth for both new and renewing leases, as compared to the prior lease, on a combined basis increased an average of 5.0% during the second quarter of 2019, a 170 basis point improvement over the performance from same period in the prior year.  Average Physical Occupancy for the Same Store Portfolio was strong at 96.0% for the second quarter of 2019, consistent with the same period in the prior year.  Property operating expenses increased 3.6% for the second quarter of 2019 as compared to the same period in the prior year, primarily driven by a 4.6% increase in real estate property taxes. This resulted in Same Store Portfolio NOI growth of 3.0% for the second quarter of 2019 as compared to the same period in the prior year.

 

The Same Store Portfolio revenue growth of 2.8% during the six months ended June 30, 2019 was primarily a result of a 3.1% increase in Average Effective Rent per Unit, as compared to the same period in the prior year.  Rent growth for both new and renewing leases, as compared to the prior lease, on a combined basis increased an average of 4.5% during the six months ended June 30, 2019, a 200 basis point improvement over the performance from same period in the prior year.  Average Physical Occupancy for the Same Store Portfolio was strong at 95.9% for the six months ended June 30, 2019, a slight decrease from 96.1% in the same period in the prior year.  Property operating expenses increased 2.8% for the six months ended June 30, 2019 as compared to the same period in the prior year, primarily driven by a 5.3% increase in real estate property taxes. This resulted in Same Store Portfolio NOI growth of 2.7% for the six months ended June 30, 2019 as compared to the same period in the prior year.

 

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.

 

Development and Lease-up Activity

As of the end of the second quarter of 2019, MAA had five development communities under construction.  Total development costs for the five communities are projected to be $230.5 million, of which an estimated $148.0 million remained to be funded as of the end of the second quarter of 2019.  The expected average stabilized NOI yield on these communities is 6.2%. During the second quarter of 2019, MAA funded $25.9 million of construction costs on current and completed development projects.  MAA expects to complete two of these developments in the second half of 2019, one development in the first half of 2020, one in the second half of 2020 and one in the first half of 2021.

 

During the second quarter of 2019, MAA had two apartment communities, Sync 36 I and Post River North, both located in Denver, Colorado, complete their initial lease-up and move into MAA's stabilized portfolio.  MAA had two apartment communities, containing a total of 578 units, remaining in initial lease-up as of the end of the second quarter of 2019: 1201 Midtown II, located in Charleston, South Carolina and Post Centennial Park, located in Atlanta, Georgia.  Physical occupancy for both of these lease-up projects averaged 63.8% at the end of the second quarter of 2019.

 

Acquisition and Disposition Activity

In April 2019, MAA acquired a two acre parcel of land located in the Orlando, Florida market and is currently performing pre-development work with a development start expected in late 2019.  

 

In April 2019, MAA closed on the disposition of a four acre land parcel located in the Huntsville, Alabama market.

 

Redevelopment Activity

MAA continues its redevelopment program at select apartment communities throughout the portfolio.  During the second quarter of 2019, MAA redeveloped the interiors of 2,185 units at an average cost of $5,547 per unit, bringing the total units renovated during the six months ended June 30, 2019 to 3,864 at an average cost of $5,831 per unit.  MAA expects a total of 7,500 to 8,500 units to be redeveloped in 2019, achieving average rental rate increases of approximately 9% to 10% above non-renovated units.

 

2


Capital Expenditures

Recurring capital expenditures totaled $24.4 million for the second quarter of 2019, or approximately $0.20 per Share, as compared to $24.9 million, or $0.21 per Share, for the same period in the prior year.  These expenditures led to Adjusted Funds from Operations, or AFFO, of $1.37 per Share for the second quarter of 2019, compared to $1.34 per Share for the same period in the prior year.

 

Redevelopment, revenue enhancing, commercial and other capital expenditures during the second quarter of 2019 were $29.9 million, as compared to $36.2 million for the same period in the prior year. These expenditures led to Funds Available for Distribution, or FAD, of $131.5 million for the second quarter of 2019, compared to $121.9 million for the same period in the prior year.

 

Recurring capital expenditures totaled $36.9 million for the six months ended June 30, 2019, or approximately $0.31 per Share, as compared to $34.4 million, or $0.29 per Share, for the same period in the prior year.  These expenditures led to AFFO of $2.84 per Share for the six months ended June 30, 2019, compared to $2.70 per Share for the same period in the prior year.

 

Redevelopment, revenue enhancing, commercial and other capital expenditures during the six months ended June 30, 2019 were $55.7 million, as compared to $62.3 million for the same period in the prior year. These expenditures led to FAD of $279.5 million for the six months ended June 30, 2019, compared to $255.9 million for the same period in the prior year.

 

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

 

Financing Activities

During the second quarter of 2019, MAA's operating partnership, Mid-America Apartments, L.P. (referred to as MAALP or the Operating Partnership), entered into a new unsecured revolving credit facility, replacing the previous credit facility, with a borrowing capacity remaining at $1.0 billion and an option to expand to $1.5 billion. The new facility extends the maturity date of the credit facility to May 2023 with two six-month extension options, and bears interest at the London Interbank Offered Rate, or LIBOR, plus a spread based on an investment ratings grid, currently at 0.83%.  As of June 30, 2019, there was no outstanding balance drawn on the credit facility.  

 

During the second quarter of 2019, MAALP established a $500.0 million unsecured commercial paper program (the “CP Program”) in the United States. Under the CP Program, MAALP may issue, from time-to-time, commercial paper notes up to a maximum aggregate amount outstanding of $500.0 million.  As of June 30, 2019, approximately $367.0 million of borrowings were outstanding on the CP Program with a weighted average interest rate of approximately 2.68% and a weighted average maturity of 16 days.

 

As of June 30, 2019, MAA had approximately $671.5 million combined cash and available capacity under MAALP's unsecured revolving credit facility, net of commercial paper borrowings.

 

Dividends and distributions paid on shares of common stock and noncontrolling interests during the second quarter of 2019 were $113.4 million, as compared to $108.8 million for the same period in the prior year.

 

Balance Sheet

As of June 30, 2019:

 

Total debt to adjusted total assets (as defined in the covenants for the bonds issued by MAALP) was 32.3%;

 

Total debt outstanding was $4.5 billion with an average effective interest rate of approximately 3.8%;

 

85.3% of total debt was fixed or hedged against rising interest rates for an average of approximately 7.7 years; and

 

Unencumbered NOI was 90.1% of total NOI, as compared to 92.6% as of December 31, 2018.

 

102nd Consecutive Quarterly Common Dividend Declared

MAA declared its 102nd consecutive quarterly common dividend.  The current annual dividend rate is $3.84 per common share, which was paid on July 31, 2019 to holders of record on July 15, 2019.

 

2019 Net Income per Diluted Common Share and FFO and AFFO per Share Guidance

MAA is updating and increasing prior 2019 guidance for Net income per diluted common share, as well as FFO per Share and AFFO per Share.  FFO and AFFO are non-GAAP 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 outlined in the definitions of non-GAAP measures accompanying this release, MAA's definition of FFO is in accordance with the National Association of Real Estate Investment Trusts', or NAREIT's, definition. MAA believes that FFO is helpful in understanding operating performance in that FFO excludes depreciation expense of real estate assets and certain other non-routine items.

 

3


Net income per diluted common share is expected to be in the range of $2.67 to $2.83 per diluted common share, or $2.75 per diluted common share at the midpoint, for the full year of 2019.  FFO per Share for the year is expected to be in the range of $6.20 to $6.36 per Share, or $6.28 per Share at the midpoint.  AFFO per Share for the year is expected to be in the range of $5.56 to $5.72 per Share, or $5.64 per Share at the midpoint.  MAA expects FFO for the third quarter of 2019 to be in the range of $1.51 to $1.59 per Share, or $1.55 per Share at the midpoint.  The full year guidance for Net income, FFO and AFFO assumes that the net impact from the fair value adjustment of the embedded derivative in the preferred shares will be $0, with the adjustment reflected in our fourth quarter forecast.  MAA does not forecast Net income per diluted share on a quarterly basis as it is not reasonable to accurately predict the timing of forecasted acquisition and disposition activity within a particular quarter (rather than during the course of the full year).

 

Supplemental Material and Conference Call

Supplemental data to this release can be found under the "Financial Results" navigation tab on the "For Investors" page of our website at www.maac.com. MAA will host a conference call to further discuss second quarter results Thursday, August 1, 2019, at 9:00 AM Central Time.  The conference call-in number is 877-830-2596.  You may also join the live webcast of the conference call by accessing the "For Investors" page of our website at www.maac.com.  MAA's filings with the Securities and Exchange Commission, or 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, or REIT, focused on delivering full-cycle and superior investment performance for shareholders through the ownership, management, acquisition, development and redevelopment of quality apartment communities in the Southeast, Southwest, and Mid-Atlantic regions of the United States.  As of June 30, 2019, MAA had ownership interest in 101,954 apartment units, including communities currently in development, across 17 states and the District of Columbia. For further details, please visit the MAA website at www.maac.com or contact Investor Relations at [email protected], 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 concerning forecasted operating performance and results, property acquisitions and dispositions, joint venture activity, development and renovation activity as well as other capital expenditures, capital raising activities, rent and expense growth, occupancy, financing activities, and interest rate and other economic expectations. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” 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 market conditions, changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws, or other factors;

 

exposure, as a multifamily focused REIT, 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 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 new acquisitions to achieve anticipated results or be efficiently integrated;

 

failure of development communities to be completed, if at all, within budget and on a timely basis, to lease-up as anticipated or to achieve anticipated results;

 

unexpected capital needs;

 

changes in operating costs, including real estate taxes, utilities and insurance costs;

 

losses from catastrophes in excess of our insurance coverage;

 

ability to obtain financing at favorable rates, if at all, and refinance existing debt as it matures;

4


 

level and volatility of interest or capitalization rates or capital market conditions;

 

loss of hedge accounting treatment for interest rate swaps;

 

the continuation of the good credit of our interest rate swap providers;

 

price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on financing;

 

the effect of any rating agency actions on the cost and availability of new debt financing;

 

the effect of the phase-out of the London Interbank Offered Rate, or LIBOR, as a variable rate debt benchmark by the end of 2021 and the transition to a different benchmark interest rate could have adverse effects on our interest expense and our cash flow for general corporate requirements;

 

significant decline in market value of real estate serving as collateral for mortgage obligations;

 

significant change in the mortgage financing market that would cause single-family housing, either as an owned or rental product, to become a more significant competitive product;

 

our 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 privacy or information security systems;

 

potential liability for environmental contamination;

 

adverse legislative or regulatory tax changes;

 

legal proceedings relating to various issues, which, among other things, could result in a class action lawsuit;

 

compliance costs associated with laws requiring access for disabled persons; and

 

other risks identified in this press release and, from time to time, 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.

 

 

5


FINANCIAL HIGHLIGHTS

 

Dollars in thousands, except per share data

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

 

 

2018

 

Rental and other property revenues

 

$

407,390

 

 

$

390,073

 

 

$

808,568

 

 

 

 

$

776,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for MAA common shareholders

 

$

60,995

 

 

$

58,885

 

 

$

123,733

 

 

 

 

$

106,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total NOI(1)

 

$

253,248

 

 

$

241,343

 

 

$

505,049

 

 

 

 

$

482,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.53

 

 

$

0.52

 

 

$

1.09

 

 

 

 

$

0.94

 

Diluted

 

$

0.53

 

 

$

0.52

 

 

$

1.09

 

 

 

 

$

0.94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from operations per Share - diluted:(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO(1)

 

$

1.57

 

 

$

1.55

 

 

$

3.15

 

 

 

 

$

2.99

 

AFFO(1)

 

$

1.37

 

 

$

1.34

 

 

$

2.84

 

 

 

 

$

2.70

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.9600

 

 

$

0.9225

 

 

$

1.9200

 

 

 

 

$

1.8450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends/ FFO (diluted) payout ratio

 

 

61.1

%

 

 

59.5

%

 

 

61.0

%

 

 

 

 

61.7

%

Dividends/ AFFO (diluted) payout ratio

 

 

70.1

%

 

 

68.8

%

 

 

67.6

%

 

 

 

 

68.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated interest expense

 

$

45,936

 

 

$

43,585

 

 

$

91,636

 

 

 

 

$

84,490

 

Mark-to-market debt adjustment

 

 

86

 

 

 

2,901

 

 

 

171

 

 

 

 

 

5,852

 

Debt discount and debt issuance cost amortization

 

 

(1,835

)

 

 

(1,501

)

 

 

(3,640

)

 

 

 

 

(2,884

)

Capitalized interest

 

 

705

 

 

 

488

 

 

 

1,093

 

 

 

 

 

1,283

 

Total interest incurred

 

$

44,892

 

 

$

45,473

 

 

$

89,260

 

 

 

 

$

88,741

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of principal on notes payable

 

$

1,825

 

 

$

2,580

 

 

$

3,672

 

 

 

 

$

5,290

 

 

(1) A reconciliation of the following items and an expanded discussion of their respective components can be found later in this release: (i) NOI to Net income available for MAA common shareholders; and (ii) FFO and AFFO to Net income available for MAA common shareholders.

(2) See the "Share and Unit Data" section for additional information.

 

6


FINANCIAL HIGHLIGHTS (CONTINUED)

 

Dollars in thousands, except share price

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

 

December 31, 2018

 

Gross Assets(1)

 

$

14,066,436

 

 

$

13,873,068

 

Gross Real Estate Assets(1)

 

$

13,900,428

 

 

$

13,735,247

 

Total debt

 

$

4,539,989

 

 

$

4,528,328

 

Common shares and units outstanding

 

 

118,133,172

 

 

 

117,955,568

 

Share price

 

$

117.76

 

 

$

95.70

 

Book equity value

 

$

6,284,629

 

 

$

6,381,603

 

Market equity value

 

$

13,911,362

 

 

$

11,288,348

 

Net Debt/Recurring Adjusted EBITDAre (2)

 

4.92x

 

 

4.99x

 

 

(1) A reconciliation of Gross Assets to Total assets and Gross Real Estate Assets to Real estate assets, net, along with an expanded discussion of their components, can be found later in this release.

(2) Recurring Adjusted EBITDAre in this calculation represents the trailing twelve month period for each date presented. A reconciliation of the following items and an expanded discussion of their respective components can be found later in this release: (i) EBITDA, EBITDAre, Adjusted EBITDAre and Recurring Adjusted EBITDAre to Net income; and (ii) Net Debt to Unsecured notes payable and Secured notes payable.

 

 

7


 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

Dollars in thousands, except per share data

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

407,390

 

 

$

390,073

 

 

$

808,568

 

 

$

776,090

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expense, excluding real estate taxes and insurance

 

 

96,172

 

 

 

92,980

 

 

 

185,965

 

 

 

182,128

 

Real estate taxes and insurance

 

 

57,970

 

 

 

55,750

 

 

 

117,554

 

 

 

111,006

 

Depreciation and amortization

 

 

123,944

 

 

 

122,925

 

 

 

246,733

 

 

 

243,669

 

Total property operating expenses

 

 

278,086

 

 

 

271,655

 

 

 

550,252

 

 

 

536,803

 

Property management expenses

 

 

13,454

 

 

 

11,396

 

 

 

27,296

 

 

 

24,276

 

General and administrative expenses

 

 

10,598

 

 

 

9,211

 

 

 

23,751

 

 

 

19,343

 

Merger and integration related expenses

 

 

 

 

 

2,826

 

 

 

 

 

 

6,625

 

Interest expense

 

 

45,936

 

 

 

43,585

 

 

 

91,636

 

 

 

84,490

 

(Gain) loss on sale of depreciable real estate assets

 

 

 

 

 

(2

)

 

 

13

 

 

 

(2

)

Gain on sale of non-depreciable real estate assets

 

 

(297

)

 

 

(2,761

)

 

 

(9,260

)

 

 

(2,911

)

Other non-operating income

 

 

(4,775

)

 

 

(8,032

)

 

 

(5,710

)

 

 

(5,691

)

Income before income tax expense

 

 

64,388

 

 

 

62,195

 

 

 

130,590

 

 

 

113,157

 

Income tax expense

 

 

(682

)

 

 

(570

)

 

 

(1,323

)

 

 

(1,210

)

Income from continuing operations before real estate joint venture         activity

 

 

63,706

 

 

 

61,625

 

 

 

129,267

 

 

 

111,947

 

Income from real estate joint venture

 

 

435

 

 

 

356

 

 

 

832

 

 

 

854

 

Net income

 

 

64,141

 

 

 

61,981

 

 

 

130,099

 

 

 

112,801

 

Net income attributable to noncontrolling interests

 

 

2,224

 

 

 

2,174

 

 

 

4,522

 

 

 

3,975

 

Net income available for shareholders

 

 

61,917

 

 

 

59,807

 

 

 

125,577

 

 

 

108,826

 

Dividends to MAA Series I preferred shareholders

 

 

922

 

 

 

922

 

 

 

1,844

 

 

 

1,844

 

Net income available for MAA common shareholders

 

$

60,995

 

 

$

58,885

 

 

$

123,733

 

 

$

106,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.53

 

 

$

0.52

 

 

$

1.09

 

 

$

0.94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.53

 

 

$

0.52

 

 

$

1.09

 

 

$

0.94

 

 

 

 

8


 

SHARE AND UNIT DATA

 

Shares and units in thousands

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net Income Shares (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - basic

 

 

113,838

 

 

 

113,646

 

 

 

113,783

 

 

 

113,595

 

Effect of dilutive securities

 

 

249

 

 

 

207

 

 

 

211

 

 

 

174

 

Weighted average common shares - diluted

 

 

114,087

 

 

 

113,853

 

 

 

113,994

 

 

 

113,769

 

Funds From Operations Shares And Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and units - basic

 

 

117,935

 

 

 

117,783

 

 

 

117,886

 

 

 

117,754

 

Weighted average common shares and units - diluted

 

 

118,139

 

 

 

117,951

 

 

 

118,079

 

 

 

117,922

 

Period End Shares And Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares at June 30,

 

 

114,043

 

 

 

113,808

 

 

 

114,043

 

 

 

113,808

 

Operating Partnership units at June 30,

 

 

4,090

 

 

 

4,136

 

 

 

4,090

 

 

 

4,136

 

Total common shares and units at June 30,

 

 

118,133

 

 

 

117,944

 

 

 

118,133

 

 

 

117,944

 

 

(1) For additional information on the calculation of diluted common shares and earnings per common share, please refer to the Notes to Condensed Consolidated Financial Statements in MAA's Quarterly Report on Form 10-Q for the three and six months ended June 30, 2019, expected to be filed with the SEC on or about August 1, 2019.

 

 

9


 

CONSOLIDATED BALANCE SHEETS

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

June 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

1,883,960

 

 

$

1,868,828

 

Buildings and improvements and other

 

 

11,775,716

 

 

 

11,670,216

 

Development and capital improvements in progress

 

 

97,526

 

 

 

59,506

 

 

 

 

13,757,202

 

 

 

13,598,550

 

Less: Accumulated depreciation

 

 

(2,791,606

)

 

 

(2,549,287

)

 

 

 

10,965,596

 

 

 

11,049,263

 

Undeveloped land

 

 

58,257

 

 

 

58,257

 

Investment in real estate joint venture

 

 

43,997

 

 

 

44,181

 

Real estate assets, net

 

 

11,067,850

 

 

 

11,151,701

 

Cash and cash equivalents

 

 

40,972

 

 

 

34,259

 

Restricted cash

 

 

16,712

 

 

 

17,414

 

Other assets

 

 

149,296

 

 

 

120,407

 

Total assets

 

$

11,274,830

 

 

$

11,323,781

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Unsecured notes payable

 

$

3,879,526

 

 

$

4,053,302

 

Secured notes payable

 

 

660,463

 

 

 

475,026

 

Accrued expenses and other liabilities

 

 

450,212

 

 

 

413,850

 

Total liabilities

 

 

4,990,201

 

 

 

4,942,178

 

Redeemable common stock

 

 

12,103

 

 

 

9,414

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

9

 

 

 

9

 

Common stock

 

 

1,138

 

 

 

1,136

 

Additional paid-in capital

 

 

7,146,076

 

 

 

7,138,170

 

Accumulated distributions in excess of net income

 

 

(1,086,665

)

 

 

(989,263

)

Accumulated other comprehensive loss

 

 

(9,092

)

 

 

(212

)

Total MAA shareholders' equity

 

 

6,051,466

 

 

 

6,149,840

 

Noncontrolling interests - Operating Partnership units

 

 

215,404

 

 

 

220,043

 

Total Company's shareholders' equity

 

 

6,266,870

 

 

 

6,369,883

 

Noncontrolling interest - consolidated real estate entities

 

 

5,656

 

 

 

2,306

 

Total equity

 

 

6,272,526

 

 

 

6,372,189

 

Total liabilities and equity

 

$

11,274,830

 

 

$

11,323,781

 

 

 

 

10


 

RECONCILIATION OF FFO, AFFO AND FAD TO NET INCOME AVAILABLE FOR MAA COMMON SHAREHOLDERS

 

Amounts in thousands, except per share and unit data

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income available for MAA common shareholders

 

$

60,995

 

 

$

58,885

 

 

$

123,733

 

 

$

106,982

 

Depreciation and amortization of real estate assets

 

 

122,323

 

 

 

121,745

 

 

 

243,533

 

 

 

241,311

 

(Gain) loss on sale of depreciable real estate assets

 

 

 

 

 

(2

)

 

 

13

 

 

 

(2

)

Depreciation and amortization of real estate assets of real estate joint venture

 

 

166

 

 

 

144

 

 

 

311

 

 

 

289

 

Net income attributable to noncontrolling interests

 

 

2,224

 

 

 

2,174

 

 

 

4,522

 

 

 

3,975

 

Funds from operations attributable to the Company

 

 

185,708

 

 

 

182,946

 

 

 

372,112

 

 

 

352,555

 

Recurring capital expenditures

 

 

(24,358

)

 

 

(24,925

)

 

 

(36,918

)

 

 

(34,402

)

Adjusted funds from operations

 

 

161,350

 

 

 

158,021

 

 

 

335,194

 

 

 

318,153

 

Redevelopment capital expenditures

 

 

(14,826

)

 

 

(13,645

)

 

 

(27,271

)

 

 

(24,429

)

Revenue enhancing capital expenditures

 

 

(9,813

)

 

 

(9,345

)

 

 

(17,852

)

 

 

(14,008

)

Commercial capital expenditures

 

 

(1,037

)

 

 

(3,288

)

 

 

(2,456

)

 

 

(4,339

)

Other capital expenditures

 

 

(4,187

)

 

 

(9,885

)

 

 

(8,164

)

 

 

(19,512

)

Funds available for distribution

 

$

131,487

 

 

$

121,858

 

 

$

279,451

 

 

$

255,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and distributions paid

 

$

113,373

 

 

$

108,787

 

 

$

226,644

 

 

$

217,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - diluted

 

 

114,087

 

 

 

113,853

 

 

 

113,994

 

 

 

113,769

 

FFO weighted average common shares and units - diluted

 

 

118,139

 

 

 

117,951

 

 

 

118,079

 

 

 

117,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.53

 

 

$

0.52

 

 

$

1.09

 

 

$

0.94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from operations per Share - diluted

 

$

1.57

 

 

$

1.55

 

 

$

3.15

 

 

$

2.99

 

Adjusted funds from operations per Share - diluted

 

$

1.37

 

 

$

1.34

 

 

$

2.84

 

 

$

2.70

 

 

RECONCILIATION OF NET OPERATING INCOME TO NET INCOME AVAILABLE FOR MAA COMMON SHAREHOLDERS

 

Dollars in thousands

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

2019

 

 

March 31,

2019

 

 

June 30,

2018

 

 

June 30,

2019

 

 

June 30,

2018

 

Net Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store NOI

 

$

237,305

 

 

$

237,439

 

 

$

230,414

 

 

$

474,744

 

 

$

462,069

 

Non-Same Store NOI

 

 

15,943

 

 

 

14,362

 

 

 

10,929

 

 

 

30,305

 

 

 

20,887

 

Total NOI

 

 

253,248

 

 

 

251,801

 

 

 

241,343

 

 

 

505,049

 

 

 

482,956

 

Depreciation and amortization

 

 

(123,944

)

 

 

(122,789

)

 

 

(122,925

)

 

 

(246,733

)

 

 

(243,669

)

Property management expenses

 

 

(13,454

)