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Section 1: 8-K (8-K)

maa-8k_20201028.htm
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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):  October 28, 2020

 

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)

 

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 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

 

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 October 28, 2020, Mid-America Apartment Communities, Inc. (“MAA”) issued a press release announcing its consolidated results of operations and financial condition as of September 30, 2020 and for the three and nine 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 under this Item 2.02 (including Exhibits 99.1 and 99.2) is being “furnished” 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 MAA or Mid-America Apartments, L.P. (“MAALP”) under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”).

 

ITEM 7.01Regulation FD Disclosure.

 

On October 28, 2020, MAA issued a press release announcing its consolidated results of operations and financial condition as of September 30, 2020 and for the three and nine months then ended.  In that press release, MAA also provided an update regarding the financial impact of COVID-19 on MAA’s business in October 2020.  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 under this Item 7.01 (including Exhibits 99.1 and 99.2) is being “furnished” and shall not be deemed to be “filed” for any purpose, including for the purposes of Section 18 of 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 MAA or MAALP under the Exchange Act or the Securities Act.

 

ITEM 9.01Financial Statements and Exhibits.

 

(d)Exhibits.

 

Exhibit Number

 

Description

99.1

 

Press Release dated October 28, 2020

99.2

 

Supplemental Data Schedules (Third Quarter 2020)

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

 


 

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:

October 28, 2020

 

/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., its general partner

 

 

 

 

Date:

October 28, 2020

 

/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

14

Other Key Definitions

15

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/2020 Acquisition Activity/2020 Disposition Activity

S-8

Investments In Unconsolidated Real Estate Entities/Debt and Debt Covenants as of September 30, 2020

S-9

Credit Ratings/Common Stock

S-11

COVID-19 Update

S-12

Investor Relations Data

S-13

 

 

 


 

OVERVIEW

 

MAA REPORTS THIRD QUARTER RESULTS

GERMANTOWN, TN, October 28, 2020/PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), today announced operating results for the quarter ended September 30, 2020.

 

Net Income Available for Common Shareholders

For the quarter ended September 30, 2020, net income available for MAA common shareholders was $59.0 million, or $0.52 per diluted common share, compared to $77.7 million, or $0.68 per diluted common share, for the quarter ended September 30, 2019.  Results for the quarter ended September 30, 2020, included $1.3 million, or $0.01 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 September 30, 2019, included $15.5 million, or $0.14 per diluted common share, of non-cash income related to the embedded derivative in the preferred shares.

 

For the nine months ended September 30, 2020, net income available for MAA common shareholders was $168.9 million, or $1.47 per diluted common share, compared to $201.5 million, or $1.77 per diluted common share, for the nine months ended September 30, 2019.  Results for the nine months ended September 30, 2020, included $14.6 million, or $0.13 per diluted common share, of non-cash expense related to the fair value adjustment of the embedded derivative in the preferred shares.  Results for the nine months ended September 30, 2019, included $19.6 million, or $0.17 per diluted common share, of non-cash income related to the embedded derivative in the preferred shares.

 

Core Funds from Operations (FFO) and FFO

Core FFO, which adjusts FFO for items that are not considered part of MAA’s core business operations, for the quarter ended September 30, 2020 was $185.9 million, or $1.57 per diluted common share and unit, or per Share, as compared to $185.0 million, or $1.57 per Share, for the quarter ended September 30, 2019. For the quarter ended September 30, 2020, FFO was $187.2 million, or $1.58 per Share, compared to $202.9 million, or $1.72 per Share, for the quarter ended September 30, 2019.  FFO results for the quarter ended September 30, 2020, included $1.3 million, or $0.01 per Share, of non-cash income related to the fair value adjustment of the embedded derivative in the preferred shares. FFO results for the quarter ended September 30, 2019, included $15.5 million, or $0.13 per Share, of non-cash income related to the embedded derivative in the preferred shares.

 

Core FFO for the nine months ended September 30, 2020 was $565.9 million, or $4.78 per Share, as compared to $543.2 million, or $4.60 per Share, for the nine months ended September 30, 2019. For the nine months ended September 30, 2020, FFO was $551.8 million, or $4.66 per Share, compared to $575.0 million, or $4.87 per Share, for the nine months ended September 30, 2019.  FFO results for the nine months ended September 30, 2020, included $14.6 million, or $0.13 per Share, of non-cash expense related to the fair value adjustment of the embedded derivative in the preferred shares.  FFO results for the nine months ended September 30, 2019, included $19.6 million, or $0.17 per Share, of non-cash income related to the embedded derivative in the preferred shares.

 

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.

 

Eric Bolton, Chairman and Chief Executive Officer, said, “Our third quarter results were better than expected.  MAA’s portfolio of high quality communities, well diversified across the Sunbelt markets, supported by a strong operating platform and a dedicated team of associates, is performing well.  While recovery in the economy and employment markets from the impact of COVID-19 is still underway, we were encouraged by the positive sequential revenue growth in the third quarter as compared to the second quarter in each of our markets.”

 

Third Quarter 2020 Highlights

 

Property revenues from the Same Store Portfolio increased 2.1% during the third quarter of 2020 as compared to the same period in the prior year.  Results were driven by a 1.8% growth in Average Effective Rent per Unit for the Same Store Portfolio.

 

Property operating expenses for the Same Store Portfolio increased 7.2% during the third quarter of 2020 as compared to the same period in the prior year.  As expected, growth in real estate taxes, insurance expenses, and marketing costs drove the majority of the increase.  

 

Net Operating Income, or NOI, from the Same Store Portfolio decreased 1.1% during the third quarter of 2020 as compared to the same period in the prior year.

 

Resident turnover continued to decline and remained low as resident move outs for the Same Store Portfolio for the third quarter of 2020 was 45.9% on a rolling twelve month basis.

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As of the end of the third quarter of 2020, MAA had six properties under development, representing 1,940 units once complete, with a total projected cost of $459.5 million and an estimated $195.5 million remaining to be funded.

 

As of the end of the third quarter of 2020, MAA had two properties in their initial lease-up with physical occupancy averaging 83.6%.  One property is expected to stabilize in the fourth quarter of 2020 and the other property is expected to stabilize in the second quarter of 2021.

 

During the third quarter of 2020, MAA's operating partnership, Mid-America Apartments, L.P. (referred to as MAALP or the Operating Partnership), issued $450.0 million of 10-year senior unsecured notes at a coupon of 1.7% and an issue price of 99.465%.

 

COVID-19 Developments

MAA believes the best way it can continue to help its residents is to work with those who have lost wages or compensation due to the COVID-19 pandemic so that they can remain in their homes. MAA has offered these impacted residents amendments to their leases that provided varying degrees of payment flexibility with respect to rent and waived late fees and interest charges under the original lease for rent that was deferred under a lease amendment.  

 

MAA’s on-site leasing offices have remained open throughout the COVID-19 pandemic while adhering to orders and directives issued by state and local governments. During the third quarter of 2020, MAA continued normal operations at its on-site leasing offices, permitting public access and walk-in traffic, subject to social distancing restrictions. Further, property amenities were open as permitted by governmental orders, directives and guidelines.

 

MAA continues to support its on-site associates with enhanced leave and sick time policies, enhanced flextime arrangements and additional COVID-19 paid time off, among other benefits. MAA continues to monitor and comply with the various federal, state and local laws, orders and directives issued in response to the COVID-19 pandemic that affect apartment owners and operators, including the Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19 issued by the Centers for Disease Control and Prevention in September 2020.

 

Operating metrics for the third quarter of 2020 and the month of October (through October 26, 2020) include the following:

 

 

Through October 26, 2020, rent cash collections and promises to pay under lease amendments signed by residents financially impacted by COVID-19, combined, represented 99.2% of billed residential rent for the third quarter of 2020.

 

Through October 26, 2020, rent cash collections represented 98.6% of billed residential rent for October 2020.  This compares to 98.4% average cash collections of July, August and September rents through the 26th of each such month. Rent cash collections and promises to pay under lease amendments signed by residents financially impacted by COVID-19, combined, represented 98.8% of billed residential rent for October 2020. This compares to 98.6% average combined collections and deferrals of July, August and September rents through the 26th of each such month.

 

Through October 26, 2020, Average Physical Occupancy for the Same Store Portfolio was 95.6% for the month of October.

 

Additional metrics related to the impact of the COVID-19 pandemic on MAA’s business are included in the supplemental schedules accompanying this release.

 

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 2.1% during the third quarter of 2020 was primarily a result of a 1.8% increase in Average Effective Rent per Unit, as compared to the same period in the prior year.  Rent growth for the Same Store Portfolio for both new and renewing leases, as compared to the prior lease, on a combined basis increased an average of 0.8% during the third quarter of 2020.  Average Physical Occupancy for the Same Store Portfolio was 95.6% for the third quarter of 2020, as compared to 96.1% in the same period in the prior year.  Property operating expenses for the Same Store Portfolio increased 7.2% for the third quarter of 2020 as compared to the same period in the prior year.  Growth in real estate taxes, insurance expense, and marketing costs drove the majority of the increase. In addition, MAA incurred $0.8 million of storm costs during the third quarter of 2020. The rollout of the new high-speed bulk cable internet package contributed 0.7% in revenue growth and 0.5% in expense growth for the Same Store Portfolio during the third quarter of 2020.  All of this resulted in a Same Store NOI decrease of 1.1% for the third quarter of 2020 as compared to the same period in the prior year.

 

The Same Store Portfolio revenue growth of 2.8% during the nine months ended September 30, 2020 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 the Same Store Portfolio for both new and renewing leases, as compared to the prior lease, on a combined basis increased an average of 1.4% during the nine months ended September 30, 2020.  Average Physical Occupancy for the Same Store Portfolio

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was 95.6% for the nine months ended September 30, 2020, as compared to 96.0% in the same period in the prior year.  Property operating expenses for the Same Store Portfolio increased 4.3% for the nine months ended September 30, 2020 as compared to the same period in the prior year. All of this resulted in Same Store NOI growth of 1.9% for the nine months ended September 30, 2020 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 third quarter of 2020, MAA had six development communities under construction.  MAA expects to complete construction of one of these development communities in 2020, four in 2021 and one in 2022.  Total development costs for the six communities are projected to be $459.5 million, of which an estimated $195.5 million remained to be funded as of the end of the third quarter of 2020.  The expected average stabilized NOI yield on these communities is 6.1%. During the third quarter of 2020, MAA funded $49.7 million of construction costs on current development projects.  

 

As of the end of the third quarter of 2020, MAA had two apartment communities, representing a total of 439 units, remaining in initial lease-up: The Greene, located in Greenville, South Carolina and Copper Ridge II, located in Ft. Worth, Texas.  Physical occupancy for these lease-up projects averaged 83.6% at the end of the third quarter of 2020.

 

Acquisition and Disposition Activity

In September 2020, MAA closed on the disposition of a 27 acre land parcel located in the Huntsville, Alabama market for net proceeds of $2.6 million, resulting in a gain on sale of non-depreciable real estate assets of $1.3 million.

 

MAA did not acquire any apartment communities, land parcels or commercial properties during the three months ended September 30, 2020.

 

Property Redevelopment and Repositioning Activity

MAA continued its interior redevelopment program at select apartment communities throughout the portfolio.  During the third quarter of 2020, MAA redeveloped the interior of 1,205 units, bringing the total units renovated during the nine months ended September 30, 2020 to 3,300 at an average cost of $5,939 per unit, achieving average rental rate increases of approximately 9.3% above non-renovated units.

 

MAA restarted its SmartHome technology initiative (mobile control of lights, thermostat and security, as well as leak monitoring) in July 2020.  During the third quarter of 2020, 13,887 units were installed, bringing the total units installed during the nine months ended September 30, 2020 to 21,884 at an average cost of approximately $1,350 per unit and achieved an average rent increase of $25 per unit.  MAA expects to complete a total of 24,000 units by the end of 2020.  

 

During the third quarter of 2020, MAA continued its program to upgrade and reposition the amenity and common areas at select properties. 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% beginning in calendar year 2021.  During the third quarter of 2020, repositioning work continued at eight of these properties.  For the nine months ended September 30, 2020, MAA has spent $6.8 million on this program. MAA expects to begin work at two additional properties later this year or early in 2021 as market conditions stabilize.

 

Capital Expenditures

Recurring capital expenditures totaled $19.7 million for the third quarter of 2020, or approximately $0.17 per Share, as compared to $21.5 million, or $0.18 per Share, for the same period in the prior year.  These expenditures led to Core Adjusted Funds from Operations, or Core AFFO, of $1.40 per Share for the third quarter of 2020, compared to $1.38 per Share for the same period in the prior year.

 

Redevelopment, revenue enhancing, commercial and other capital expenditures during the third quarter of 2020 were $26.9 million, as compared to $33.9 million for the same period in the prior year. These expenditures led to Funds Available for Distribution, or FAD, of $139.2 million for the third quarter of 2020, compared to $129.6 million for the same period in the prior year.

 

Recurring capital expenditures totaled $59.4 million for the nine months ended September 30, 2020, or approximately $0.50 per Share, as compared to $58.5 million, or $0.50 per Share, for the same period in the prior year.  These expenditures led to Core AFFO of $4.28 per Share for the nine months ended September 30, 2020, compared to $4.10 per Share for the same period in the prior year.

 

Redevelopment, revenue enhancing, commercial and other capital expenditures during the nine months ended September 30, 2020 were $79.5 million, as compared to $89.6 million for the same period in the prior year. These expenditures led to FAD of $427.0 million for the nine months ended September 30, 2020, compared to $395.1 million for the same period in the prior year.

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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.

 

Financing Activities

In August 2020, MAALP issued $450.0 million of 1.70% senior unsecured notes due in 2031 at an effective interest rate of 1.76%.  

 

During the third quarter of 2020, MAALP retired a $300.0 million unsecured term loan before maturity, $63.6 million of secured property mortgages at maturity and $72.2 million of secured property mortgages before maturity with proceeds received from borrowings under MAALP’s unsecured commercial paper program.  Those commercial paper borrowings were then repaid with the proceeds received from the senior unsecured notes issued in August 2020.

 

As of September 30, 2020, MAA had approximately $980.0 million of 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 third quarter of 2020 were $118.2 million, as compared to $113.4 million for the same period in the prior year.

 

Balance Sheet

As of September 30, 2020:

 

Total debt to adjusted total assets (as defined in the covenants for the bonds issued by MAALP) was 30.6%;

 

Total debt outstanding was $4.4 billion with an average effective interest rate of approximately 3.7%;

 

99.2% of total debt was fixed against rising interest rates for an average of approximately 8.0 years; and

 

Unencumbered NOI was 93.2% of total NOI.

 

107th Consecutive Quarterly Common Dividend Declared

MAA declared its 107th consecutive quarterly common dividend, which will be paid on October 30, 2020 to holders of record on October 15, 2020.  The current annual dividend rate is $4.00 per common share.  

 

2020 Net Income per Diluted Common Share, Core FFO and Core AFFO per Share Guidance

As a result of the material change in broad economic conditions in the U.S., in late March, MAA withdrew its calendar year 2020 guidance for Net income per diluted common share, Core FFO per Share and Core AFFO per Share.  Given continued higher than normal uncertainty in the outlook for the U.S. economy and the number and timing of actions enacted by federal, state and local governments to help stop the spread of COVID-19, and the potential for wide-ranging impact on rent collections, fees and occupancy, MAA is not providing guidance for Net income per diluted common share, Core FFO per Share or Core AFFO per Share for the remainder of the year.  The supplemental schedules accompanying this release include an update on certain third quarter of 2020 operating metrics as well as certain October 2020 operating metrics. MAA will continue to monitor conditions related to the COVID-19 pandemic and expects to provide full year guidance for 2021 in its fourth quarter 2020 earnings release.

 

Supplemental Material and Conference Call

Supplemental data to this release can be found on the “For Investors” page of our website at www.maac.com. MAA will host a conference call to further discuss third quarter results on Thursday, October 29, 2020, 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 September 30, 2020, MAA had ownership interest in 102,105 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 [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 regarding the potential impact of the COVID-19 pandemic on our business, statements regarding expected operating performance and results, property stabilizations, property acquisition and disposition activity, joint venture activity,

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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,” “target,” “outlook,” “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, 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 within budget and on a timely basis, if at all, 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;

 

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, and refinance existing debt as it matures;

 

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

 

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;

 

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 or our service providers’ information technology systems, or business operations disruptions;

 

potential liability for environmental contamination;

 

adverse legislative or regulatory developments;

 

extreme weather, natural disasters, disease outbreak and public health events;

 

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

 

compliance costs associated with numerous federal, state and local laws and regulations, including those costs associated with laws requiring access for disabled persons; 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.

 

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FINANCIAL HIGHLIGHTS

 

Dollars in thousands, except per share data

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

 

 

2019

 

Rental and other property revenues

 

$

423,199

 

 

$

415,632

 

 

$

1,254,323

 

 

 

 

$

1,224,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for MAA common shareholders

 

$

58,988

 

 

$

77,723

 

 

$

168,854

 

 

 

 

$

201,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total NOI (1)

 

$

253,385

 

 

$

256,093

 

 

$

773,866

 

 

 

 

$

761,142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.52

 

 

$

0.68

 

 

$

1.48

 

 

 

 

$

1.77

 

Diluted

 

$

0.52

 

 

$

0.68

 

 

$

1.47

 

 

 

 

$

1.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from operations per Share - diluted: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO (1)

 

$

1.58

 

 

$

1.72

 

 

$

4.66

 

 

 

 

$

4.87

 

Core FFO (1)

 

$

1.57

 

 

$

1.57

 

 

$

4.78

 

 

 

 

$

4.60

 

Core AFFO (1)

 

$

1.40

 

 

$

1.38

 

 

$

4.28

 

 

 

 

$

4.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

1.00

 

 

$

0.96

 

 

$

3.00

 

 

 

 

$

2.88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends/Core FFO (diluted) payout ratio

 

 

63.7

%

 

 

61.1

%

 

 

62.8

%

 

 

 

 

62.6

%

Dividends/Core AFFO (diluted) payout ratio

 

 

71.4

%

 

 

69.6

%

 

 

70.1

%

 

 

 

 

70.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated interest expense

 

$

41,010

 

 

$

44,513

 

 

$

126,610

 

 

 

 

$

136,149

 

Mark-to-market debt adjustment

 

 

(83

)

 

 

51

 

 

 

9

 

 

 

 

 

222

 

Debt discount and debt issuance cost amortization

 

 

(1,223

)

 

 

(1,288

)

 

 

(3,603

)

 

 

 

 

(4,928

)

Capitalized interest

 

 

1,764

 

 

 

754

 

 

 

4,783

 

 

 

 

 

1,847

 

Total interest incurred

 

$

41,468

 

 

$

44,030

 

 

$

127,799

 

 

 

 

$

133,290

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of principal on notes payable

 

$

1,055

 

 

$

1,796

 

 

$

4,538

 

 

 

 

$

5,468

 

 

 

(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, Core FFO and Core 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

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Gross Assets (1)

 

$

14,445,414

 

 

$

14,185,703

 

Gross Real Estate Assets (1)

 

$

14,263,492

 

 

$

13,996,700

 

Total debt

 

$

4,425,594

 

 

$

4,454,598

 

Common shares and units outstanding

 

 

118,428,070

 

 

 

118,313,567

 

Share price

 

$

115.95

 

 

$

131.86

 

Book equity value

 

$

6,133,096

 

 

$

6,303,590

 

Market equity value

 

$

13,731,735

 

 

$

15,600,827

 

Net Debt/Adjusted EBITDAre (2)

 

4.66x

 

 

4.71x

 

 

 

(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)

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 and 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 September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

423,199

 

 

$

415,632

 

 

$

1,254,323

 

 

$

1,224,200

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses, excluding real estate taxes and insurance

 

 

105,108

 

 

 

100,319

 

 

 

292,031

 

 

 

286,284

 

Real estate taxes and insurance

 

 

64,706

 

 

 

59,220

 

 

 

188,426

 

 

 

176,774

 

Depreciation and amortization

 

 

127,679

 

 

 

124,684

 

 

 

381,257

 

 

 

371,417

 

Total property operating expenses

 

 

297,493

 

 

 

284,223

 

 

 

861,714

 

 

 

834,475

 

Property management expenses

 

 

12,691

 

 

 

13,899

 

 

 

39,064

 

 

 

41,195

 

General and administrative expenses

 

 

11,360

 

 

 

10,225

 

 

 

35,181

 

 

 

32,960

 

Interest expense

 

 

41,010

 

 

 

44,513

 

 

 

126,610

 

 

 

136,149

 

(Gain) loss on sale of depreciable real estate assets

 

 

(20

)

 

 

(1,000

)

 

 

7

 

 

 

(987

)

Gain on sale of non-depreciable real estate assets

 

 

(1,366

)

 

 

 

 

 

(995

)

 

 

(9,260

)

Other non-operating (income) expense

 

 

(242

)

 

 

(18,800

)

 

 

13,647

 

 

 

(23,494

)

Income before income tax expense

 

 

62,273

 

 

 

82,572

 

 

 

179,095

 

 

 

213,162

 

Income tax expense

 

 

(665

)

 

 

(1,491

)

 

 

(2,532

)

 

 

(2,814

)

Income from continuing operations before real estate joint venture activity

 

 

61,608

 

 

 

81,081

 

 

 

176,563

 

 

 

210,348

 

Income from real estate joint venture

 

 

428

 

 

 

378

 

 

 

1,153

 

 

 

1,210

 

Net income

 

 

62,036

 

 

 

81,459

 

 

 

177,716

 

 

 

211,558

 

Net income attributable to noncontrolling interests

 

 

2,126

 

 

 

2,814

 

 

 

6,096

 

 

 

7,336

 

Net income available for shareholders

 

 

59,910

 

 

 

78,645

 

 

 

171,620

 

 

 

204,222

 

Dividends to MAA Series I preferred shareholders

 

 

922

 

 

 

922

 

 

 

2,766

 

 

 

2,766

 

Net income available for MAA common shareholders

 

$

58,988

 

 

$

77,723

 

 

$

168,854

 

 

$

201,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.52

 

 

$

0.68

 

 

$

1.48

 

 

$

1.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.52

 

 

$

0.68

 

 

$

1.47

 

 

$

1.77

 

 

 

 

8


 

SHARE AND UNIT DATA

 

Shares and units in thousands

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net Income Shares (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - basic

 

 

114,216

 

 

 

113,877

 

 

 

114,177

 

 

 

113,814

 

Effect of dilutive securities

 

 

252

 

 

 

260

 

 

 

310

 

 

 

238

 

Weighted average common shares - diluted

 

 

114,468

 

 

 

114,137

 

 

 

114,487

 

 

 

114,052

 

Funds From Operations Shares And Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and units - basic

 

 

118,274

 

 

 

117,958

 

 

 

118,238

 

 

 

117,910

 

Weighted average common shares and units - diluted

 

 

118,432

 

 

 

118,151

 

 

 

118,400

 

 

 

118,104

 

Period End Shares And Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares at September 30,

 

 

114,370

 

 

 

114,066

 

 

 

114,370

 

 

 

114,066

 

Operating Partnership units at September 30,

 

 

4,058

 

 

 

4,074

 

 

 

4,058

 

 

 

4,074

 

Total common shares and units at September 30,

 

 

118,428

 

 

 

118,140

 

 

 

118,428

 

 

 

118,140

 

 

 

(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 nine months ended September 30, 2020, expected to be filed with the SEC on or about October 29, 2020.

 

9


 

CONSOLIDATED BALANCE SHEETS

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

1,909,343

 

 

$

1,905,757

 

Buildings and improvements and other

 

 

12,037,042

 

 

 

11,841,978

 

Development and capital improvements in progress

 

 

220,685

 

 

 

116,424

 

 

 

 

14,167,070

 

 

 

13,864,159

 

Less: Accumulated depreciation

 

 

(3,316,710

)

 

 

(2,955,253

)

 

 

 

10,850,360

 

 

 

10,908,906

 

Undeveloped land

 

 

34,548

 

 

 

34,548

 

Investment in real estate joint venture

 

 

43,467

 

 

 

43,674

 

Real estate assets, net

 

 

10,928,375

 

 

 

10,987,128

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

18,407

 

 

 

20,476

 

Restricted cash

 

 

9,182

 

 

 

50,065

 

Other assets

 

 

172,740

 

 

 

172,781

 

Total assets

 

$

11,128,704

 

 

$

11,230,450

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Unsecured notes payable

 

$

3,939,425

 

 

$

3,828,201

 

Secured notes payable

 

 

486,169

 

 

 

626,397

 

Accrued expenses and other liabilities

 

 

570,014

 

 

 

472,262

 

Total liabilities

 

 

4,995,608

 

 

 

4,926,860

 

 

 

 

 

 

 

 

 

 

Redeemable common stock

 

 

13,841

 

 

 

14,131

 

 

 

 

 

 

 

 

 

 

Shareholders equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

9

 

 

 

9

 

Common stock

 

 

1,140

 

 

 

1,140

 

Additional paid-in capital

 

 

7,173,391

 

 

 

7,166,073

 

Accumulated distributions in excess of net income

 

 

(1,258,072

)

 

 

(1,085,479

)

Accumulated other comprehensive loss

 

 

(12,396

)

 

 

(13,178

)

Total MAA shareholders equity

 

 

5,904,072

 

 

 

6,068,565

 

Noncontrolling interests - Operating Partnership units

 

 

208,072

 

 

 

214,647

 

Total Companys shareholders equity

 

 

6,112,144

 

 

 

6,283,212

 

Noncontrolling interests - consolidated real estate entities

 

 

7,111

 

 

 

6,247

 

Total equity

 

 

6,119,255

 

 

 

6,289,459

 

Total liabilities and equity

 

$

11,128,704

 

 

$

11,230,450

 

 

 

 

10


 

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

 

Amounts in thousands, except per share and unit data

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income available for MAA common shareholders

 

$

58,988

 

 

$

77,723

 

 

$

168,854

 

 

$

201,456

 

Depreciation and amortization of real estate assets

 

 

125,916

 

 

 

123,171

 

 

 

376,430

 

 

 

366,704

 

(Gain) loss on sale of depreciable real estate assets

 

 

(20

)

 

 

(1,000

)

 

 

7

 

 

 

(987

)

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

 

 

153

 

 

 

154

 

 

 

458

 

 

 

465

 

Net income attributable to noncontrolling interests

 

 

2,126

 

 

 

2,814

 

 

 

6,096

 

 

 

7,336

 

Funds from operations attributable to the Company

 

 

187,163

 

 

 

202,862

 

 

 

551,845

 

 

 

574,974

 

(Income) loss on embedded derivative in preferred shares (1)

 

 

(1,342

)

 

 

(15,522

)

 

 

14,603

 

 

 

(19,592

)

Gain on sale of non-depreciable real estate assets

 

 

(1,366

)

 

 

 

 

 

(995

)

 

 

(9,260

)

Loss (gain) from unconsolidated limited partnerships, net of tax (1)(2)

 

 

100

 

 

 

(3,493

)

 

 

(4,085

)

 

 

(3,169

)

Net casualty loss (gain) and other settlement proceeds (1)

 

 

511

 

 

 

(46

)

 

 

1,207

 

 

 

(1,899

)

Loss on debt extinguishment (1)

 

 

345

 

 

 

5

 

 

 

344

 

 

 

60

 

Non-routine legal costs and settlements (1)

 

 

 

 

 

1,260

 

 

 

40

 

 

 

2,276

 

COVID-19 related costs (1)

 

 

376

 

 

 

 

 

 

2,983

 

 

 

 

Mark-to-market debt adjustment (3)

 

 

83

 

 

 

(51

)

 

 

(9

)

 

 

(222

)

Core funds from operations

 

 

185,870

 

 

 

185,015

 

 

 

565,933

 

 

 

543,168

 

Recurring capital expenditures

 

 

(19,720

)

 

 

(21,543

)

 

 

(59,412

)

 

 

(58,461

)

Core adjusted funds from operations

 

 

166,150

 

 

 

163,472

 

 

 

506,521

 

 

 

484,707

 

Redevelopment capital expenditures

 

 

(11,627

)

 

 

(17,789

)

 

 

(35,650

)

 

 

(45,060

)

Revenue enhancing capital expenditures

 

 

(8,135

)

 

 

(8,215

)

 

 

(24,510

)

 

 

(26,067

)

Commercial capital expenditures

 

 

(765

)

 

 

(2,563

)

 

 

(2,303

)

 

 

(5,019

)

Other capital expenditures

 

 

(6,389

)

 

 

(5,330

)

 

 

(17,065

)

 

 

(13,494

)

Funds available for distribution

 

$

139,234

 

 

$

129,575

 

 

$

426,993

 

 

$

395,067

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and distributions paid

 

$

118,232

 

 

$

113,408

 

 

$

354,976

 

 

$

340,052

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - diluted

 

 

114,468

 

 

 

114,137

 

 

 

114,487

 

 

 

114,052

 

FFO weighted average common shares and units - diluted

 

 

118,432

 

 

 

118,151