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Section 1: 8-K (8-K)

maa-8k_20200729.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):  July 29, 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 13 e-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 July 29, 2020, Mid-America Apartment Communities, Inc. (“MAA”) issued a press release announcing its consolidated results of operations and financial condition as of June 30, 2020 and 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 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 July 29, 2020, MAA issued a press release announcing its consolidated results of operations and financial condition as of June 30, 2020 and for the three and six months then ended.  In that press release, MAA also provided an update regarding the financial impact of COVID-19 on MAA’s business in July 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 July 29, 2020

99.2

 

Supplemental Data Schedules (Second 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:

July 29, 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:

July 29, 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_6.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 (Through June 30, 2020) & Investments In Unconsolidated Real Estate Entities

S-8

Debt and Debt Covenants as of June 30, 2020

S-9

Credit Ratings/Common Stock

S-11

COVID-19 Update

S-12

Investor Relations Data

S-13

 

 

 


 

OVERVIEW

 

MAA REPORTS SECOND QUARTER RESULTS

GERMANTOWN, TN, July 29, 2020/PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), today announced operating results for the quarter ended June 30, 2020.

 

Net Income Available for Common Shareholders

For the quarter ended June 30, 2020, net income available for MAA common shareholders was $74.1 million, or $0.65 per diluted common share, compared to $61.0 million, or $0.53 per diluted common share, for the quarter ended June 30, 2019.  Results for the quarter ended June 30, 2020, included $11.7 million, or $0.10 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 and $4.3 million, or $0.04 per diluted common share, of non-cash income, net of tax, related to gains recognized from an unconsolidated limited partnership.  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 embedded derivative in the preferred shares.

 

For the six months ended June 30, 2020, net income available for MAA common shareholders was $109.9 million, or $0.96  per diluted common share, compared to $123.7 million, or $1.09 per diluted common share, for the six months ended June 30, 2019.  Results for the six months ended June 30, 2020, included $15.9 million, or $0.14 per diluted common share, of non-cash expense related to the fair value adjustment of the embedded derivative in the preferred shares and $4.2 million, or $0.04 per diluted common share, of non-cash income, net of tax, related to gains recognized from an unconsolidated limited partnership.  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.

 

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 June 30, 2020 was $188.9 million, or $1.59 per diluted common share and unit, or per Share, as compared to $180.8 million, or $1.53 per Share, for the quarter ended June 30, 2019. For the quarter ended June 30, 2020, FFO was $202.6 million, or $1.71 per Share, compared to $185.7 million, or $1.57 per Share, for the quarter ended June 30, 2019.  FFO results for the quarter ended June 30, 2020, included $11.7 million, or $0.10 per Share, of non-cash income related to the fair value adjustment of the embedded derivative in the preferred shares and $4.3 million, or $0.04 per Share, of non-cash income, net of tax, related to gains recognized from an unconsolidated limited partnership. FFO 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.

 

Core FFO for the six months ended June 30, 2020 was $380.1 million, or $3.21 per Share, as compared to $358.2 million, or $3.03 per Share, for the six months ended June 30, 2019. For the six months ended June 30, 2020, FFO was $364.7 million, or $3.08 per Share, compared to $372.1 million, or $3.15 per Share, for the six months ended June 30, 2019.  FFO results for the six months ended June 30, 2020, included $15.9 million, or $0.14 per Share, of non-cash expense related to the fair value adjustment of the embedded derivative in the preferred shares and $4.2 million, or $0.04 per Share, of non-cash income, net of tax, related to gains recognized from an unconsolidated limited partnership.  FFO results for the six months ended June 30, 2019, included $4.1 million, or $0.03 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 second quarter results were better than expected.  While the country continues to work through challenges associated with COVID-19, 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.

 

Second Quarter 2020 Highlights

 

Property revenues from the Same Store Portfolio increased 2.1% during the second quarter of 2020 as compared to the same period in the prior year.  Results were driven by a 3.4% growth in Average Effective Rent per Unit for the Same Store Portfolio.

 

Property operating expenses for the Same Store Portfolio increased 2.4% during the second quarter of 2020 as compared to the same period in the prior year.

 

Net Operating Income, or NOI, from the Same Store Portfolio increased 2.0% during the second quarter of 2020 as compared to the same period in the prior year.

 

Resident turnover remained low as resident move outs for the Same Store Portfolio for the second quarter of 2020 was 46.3% on a rolling twelve month basis.

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During the second quarter of 2020, MAA completed the development of Copper Ridge II in the Fort Worth, TX market.

 

As of the end of the second 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 $243.7 million remaining to be funded.

 

During the second quarter of 2020, MAA completed the initial lease-up of Sync 36 II in the Denver, CO market.

 

As of the end of the second quarter of 2020, MAA had two properties in their initial lease-up with physical occupancy averaging 63.3%.  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.

 

COVID-19 Developments

In these unprecedented times, MAA believes the best way it can 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 April, May, June and July 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.  As governmental authorities began issuing orders and directives to combat the spread of COVID-19, MAA’s leasing offices transitioned to operate on a virtual basis, with full staff still on-site to continue serving current and prospective new residents.  To support its associates who continued to work on-site on a daily basis, MAA provided those associates with enhanced leave and sick time policies, enhanced flextime arrangements and additional COVID-19 paid time off, among other benefits.  In addition, MAA made modifications to its health and retirement plans to assist all of its associates and their families during this time of crisis.  In May, MAA resumed normal operations at its on-site leasing offices, once again permitting public access and walk-in traffic, subject to social distancing restrictions.  Likewise, in May, MAA began reopening property amenities as permitted by governmental orders, directives and guidelines.

 

MAA’s balance sheet remains very strong, with low leverage, significant availability from its unsecured revolving credit facility, and limited near-term debt maturities and funding obligations. Operating metrics for the second quarter of 2020 and the month of July (through July 27, 2020) include the following:

 

 

Through July 27, 2020, rent cash collections and promises to pay under lease amendments signed by residents financially impacted by COVID-19, combined, represented 99.4% of billed residential rent for the second quarter of 2020.

 

Through July 27, 2020, rent cash collections represented 98.1% of billed residential rent for July 2020.  This compares to 96.4% average cash collections of April, May and June rents through the 27th of each such month. Rent cash collections and promises to pay under lease amendments signed by residents financially impacted by COVID-19, combined, represented 98.4% of billed residential rent for July 2020. This compares to 98.7% average combined collections and deferrals of April, May and June rents through the 27th of each such month.

 

Through July 27, 2020, Average Physical Occupancy for the Same Store Portfolio was 95.3% for the month of July.

 

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 second quarter of 2020 was primarily a result of a 3.4% increase in Average Effective Rent per Unit, as compared to the same period in the prior year. Average Effective Rent per Unit growth was partially offset by lower Average Physical Occupancy and lower collections as compared to the more normal operating conditions during the second quarter of 2019. 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 1.2% during the second quarter of 2020.  Average Physical Occupancy for the Same Store Portfolio was 95.4% for the second quarter of 2020, as compared to 96.0% in the same period in the prior year.  Property operating expenses increased 2.4% for the second quarter of 2020 as compared to the same period in the prior year. This resulted in Same Store NOI growth of 2.0% for the second quarter of 2020 as compared to the same period in the prior year.

 

The Same Store Portfolio revenue growth of 3.2% during the six months ended June 30, 2020 was primarily a result of a 3.8% 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 1.8% during the six months ended June 30, 2020.  Average Physical Occupancy for the Same Store Portfolio was 95.6% for the six months ended June 30, 2020, as compared to 95.9% in the same period in the prior year.  Property operating expenses

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increased 2.8% for the six months ended June 30, 2020 as compared to the same period in the prior year. This resulted in Same Store NOI growth of 3.4% for the six months ended June 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 second 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 $243.7 million remained to be funded as of the end of the second quarter of 2020.  The expected average stabilized NOI yield on these communities is 6.1%. During the second quarter of 2020, MAA funded $57.4 million of construction costs on current and completed development projects.  

 

During the second quarter of 2020, MAA completed construction on the Phase II multifamily apartment community expansion of Copper Ridge, located in Fort Worth, Texas, and that apartment community moved into MAA’s lease-up portfolio. As of the end of the second 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.  Physical occupancy for these lease-up projects averaged 63.3% at the end of the second quarter of 2020.

 

Acquisition and Disposition Activity

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

 

Redevelopment Activity

MAA suspended its interior redevelopment activities as of the beginning of the second quarter as a result of COVID-19 shelter-in-place governmental directives, but MAA restarted these activities in May in accordance with governmental guidelines issued in connection with the reopening of the U.S. economy.  Upon restart, MAA continued its interior redevelopment program at select apartment communities throughout the portfolio.  During the second quarter of 2020, MAA redeveloped the interior of 655 units, bringing the total units renovated during the six months ended June 30, 2020 to 2,095 at an average cost of $6,601 per unit, achieving average rental rate increases of approximately 9.1% above non-renovated units. MAA’s SmartHome technology initiative (mobile control of lights, thermostat and security, as well as leak monitoring) was also suspended during the second quarter, after installing 8,017 units in the first quarter of 2020. MAA restarted this program in early July and expects to complete an additional 16,000 units by the end of 2020. The 8,017 units completed in the first quarter were installed at an average cost of approximately $1,350 per unit and achieved an average rent increase of $25 per unit.  

 

During the second 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 second quarter of 2020, repositioning work continued at five of these properties and work was initiated on an additional three properties. Work will begin at the other two identified properties later this year or early in 2021 as market conditions stabilize.

 

Capital Expenditures

Recurring capital expenditures totaled $25.1 million for the second quarter of 2020, or approximately $0.21 per Share, as compared to $24.4 million, or $0.21 per Share, for the same period in the prior year.  These expenditures led to Core Adjusted Funds from Operations, or Core AFFO, of $1.38 per Share for the second quarter of 2020, compared to $1.32 per Share for the same period in the prior year.

 

Redevelopment, revenue enhancing, commercial and other capital expenditures during the second quarter of 2020 were $24.8 million, as compared to $29.9 million for the same period in the prior year. These expenditures led to Funds Available for Distribution, or FAD, of $139.0 million for the second quarter of 2020, compared to $126.6 million for the same period in the prior year.

 

Recurring capital expenditures totaled $39.7 million for the six months ended June 30, 2020, or approximately $0.33 per Share, as compared to $36.9 million, or $0.31 per Share, for the same period in the prior year.  These expenditures led to Core AFFO of $2.88 per Share for the six months ended June 30, 2020, compared to $2.72 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, 2020 were $52.6 million, as compared to $55.7 million for the same period in the prior year. These expenditures led to FAD of $287.8 million for the six months ended June 30, 2020, compared to $265.5 million for the same period in the prior year.

 

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.

 

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Financing Activities

As of June 30, 2020, MAA had approximately $926.6 million of combined cash and available capacity under Mid-America Apartments, L.P.’s unsecured revolving credit facility, net of commercial paper borrowings.  Mid-America Apartments, L.P. (referred to as MAALP) is MAA’s operating partnership.

 

Dividends and distributions paid on shares of common stock and noncontrolling interests during the second quarter of 2020 were $118.4 million, as compared to $113.4 million for the same period in the prior year.

 

Balance Sheet

As of June 30, 2020:

 

Total debt to adjusted total assets (as defined in the covenants for the bonds issued by MAALP) was 31.2%;

 

Total debt outstanding was $4.5 billion with an average effective interest rate of approximately 3.7%;

 

91.3% of total debt was fixed against rising interest rates for an average of approximately 7.7 years; and

 

Unencumbered NOI was 91.1% of total NOI.

 

106th Consecutive Quarterly Common Dividend Declared

MAA declared its 106th consecutive quarterly common dividend, which will be paid on July 31, 2020 to holders of record on July 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 a number of actions being considered by federal, state and local governments to help stop the spread of the COVID virus, and the potential for wide-ranging impact on rent collections, fees and occupancy, at this point MAA is not providing quarterly or full year 2020 guidance for Net income per diluted common share, Core FFO per Share or Core AFFO per Share.  The supplemental schedules accompanying this release include an update on certain second quarter of 2020 operating metrics as well as certain July 2020 operating metrics. MAA will continue to monitor conditions related to the COVID-19 pandemic and will reestablish full year guidance as more information becomes available. However, given the comparable stability of operating expenses, MAA does reconfirm that it expects Same Store Portfolio operating expense growth for the full year to fall within the range initially projected of 3.75% to 4.75%, as compared to 2019. As previously disclosed, pressures on real estate taxes and insurance along with the roll out of the Double Play bulk cable and internet program are driving the majority of the expected increase.

 

Supplemental Material and Conference Call

Supplemental data to this release can be found under the “Filings and Financials” 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 on Thursday, July 30, 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 June 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, 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

4


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.

 

 

5


FINANCIAL HIGHLIGHTS

 

Dollars in thousands, except per share data

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

 

 

2019

 

Rental and other property revenues

 

$

413,026

 

 

$

407,390

 

 

$

831,124

 

 

 

 

$

808,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for MAA common shareholders

 

$

74,140

 

 

$

60,995

 

 

$

109,866

 

 

 

 

$

123,733

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total NOI (1)

 

$

255,555

 

 

$

253,248

 

 

$

520,481

 

 

 

 

$

505,049

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.65

 

 

$

0.53

 

 

$

0.96

 

 

 

 

$

1.09

 

Diluted

 

$

0.65

 

 

$

0.53

 

 

$

0.96

 

 

 

 

$

1.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from operations per Share - diluted: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO (1)

 

$

1.71

 

 

$

1.57

 

 

$

3.08

 

 

 

 

$

3.15

 

Core FFO (1)

 

$

1.59

 

 

$

1.53

 

 

$

3.21

 

 

 

 

$

3.03

 

Core AFFO (1)

 

$

1.38

 

 

$

1.32

 

 

$

2.88

 

 

 

 

$

2.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

1.00

 

 

$

0.96

 

 

$

2.00

 

 

 

 

$

1.92

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends/Core FFO (diluted) payout ratio

 

 

62.9

%

 

 

62.7

%

 

 

62.3

%

 

 

 

 

63.4

%

Dividends/Core AFFO (diluted) payout ratio

 

 

72.5

%

 

 

72.7

%

 

 

69.4

%

 

 

 

 

70.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated interest expense

 

$

42,118

 

 

$

45,936

 

 

$

85,600

 

 

 

 

$

91,636

 

Mark-to-market debt adjustment

 

 

58

 

 

 

86

 

 

 

92

 

 

 

 

 

171

 

Debt discount and debt issuance cost amortization

 

 

(1,190

)

 

 

(1,835

)

 

 

(2,380

)

 

 

 

 

(3,640

)

Capitalized interest

 

 

1,628

 

 

 

705

 

 

 

3,019

 

 

 

 

 

1,093

 

Total interest incurred

 

$

42,614

 

 

$

44,892

 

 

$

86,331

 

 

 

 

$

89,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of principal on notes payable

 

$

1,743

 

 

$

1,825

 

 

$

3,483

 

 

 

 

$

3,672

 

 

 

(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

 

 

 

 

 

 

 

 

 

 

June 30, 2020

 

 

December 31, 2019

 

Gross Assets (1)

 

$

14,338,256

 

 

$

14,185,703

 

Gross Real Estate Assets (1)

 

$

14,165,312

 

 

$

13,996,700

 

Total debt

 

$

4,472,608

 

 

$

4,454,598

 

Common shares and units outstanding

 

 

118,423,860

 

 

 

118,313,567

 

Share price

 

$

114.67

 

 

$

131.86

 

Book equity value

 

$

6,184,910

 

 

$

6,303,590

 

Market equity value

 

$

13,579,664

 

 

$

15,600,827

 

Net Debt/Adjusted EBITDAre (2)

 

4.69x

 

 

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 June 30,

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

413,026

 

 

$

407,390

 

 

$

831,124

 

 

$

808,568

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses, excluding real estate taxes and insurance

 

 

95,555

 

 

 

96,172

 

 

 

186,923

 

 

 

185,965

 

Real estate taxes and insurance

 

 

61,916

 

 

 

57,970

 

 

 

123,720

 

 

 

117,554

 

Depreciation and amortization

 

 

127,190

 

 

 

123,944

 

 

 

253,578

 

 

 

246,733

 

Total property operating expenses

 

 

284,661

 

 

 

278,086

 

 

 

564,221

 

 

 

550,252

 

Property management expenses

 

 

11,730

 

 

 

13,454

 

 

 

26,373

 

 

 

27,296

 

General and administrative expenses

 

 

10,557

 

 

 

10,398

 

 

 

23,821

 

 

 

22,735

 

Interest expense

 

 

42,118

 

 

 

45,936

 

 

 

85,600

 

 

 

91,636

 

(Gain) loss on sale of depreciable real estate assets

 

 

(2

)

 

 

 

 

 

27

 

 

 

13

 

(Gain) loss on sale of non-depreciable real estate assets

 

 

(5

)

 

 

(297

)

 

 

371

 

 

 

(9,260

)

Other non-operating (income) expense

 

 

(14,643

)

 

 

(4,575

)

 

 

13,889

 

 

 

(4,694

)

Income before income tax expense

 

 

78,610

 

 

 

64,388

 

 

 

116,822

 

 

 

130,590

 

Income tax expense

 

 

(1,200

)

 

 

(682

)

 

 

(1,867

)

 

 

(1,323

)

Income from continuing operations before real estate joint venture activity

 

 

77,410

 

 

 

63,706

 

 

 

114,955

 

 

 

129,267

 

Income from real estate joint venture

 

 

318

 

 

 

435

 

 

 

725

 

 

 

832

 

Net income

 

 

77,728

 

 

 

64,141

 

 

 

115,680

 

 

 

130,099

 

Net income attributable to noncontrolling interests

 

 

2,666

 

 

 

2,224

 

 

 

3,970

 

 

 

4,522

 

Net income available for shareholders

 

 

75,062

 

 

 

61,917

 

 

 

111,710

 

 

 

125,577

 

Dividends to MAA Series I preferred shareholders

 

 

922

 

 

 

922

 

 

 

1,844

 

 

 

1,844

 

Net income available for MAA common shareholders

 

$

74,140

 

 

$

60,995

 

 

$

109,866

 

 

$

123,733

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.65

 

 

$

0.53

 

 

$

0.96

 

 

$

1.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.65

 

 

$

0.53

 

 

$

0.96

 

 

$

1.09

 

 

 

 

8


 

SHARE AND UNIT DATA

 

Shares and units in thousands

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net Income Shares (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - basic

 

 

114,204

 

 

 

113,838

 

 

 

114,158

 

 

 

113,783

 

Effect of dilutive securities

 

 

234

 

 

 

249

 

 

 

324

 

 

 

211

 

Weighted average common shares - diluted

 

 

114,438

 

 

 

114,087

 

 

 

114,482

 

 

 

113,994

 

Funds From Operations Shares And Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and units - basic

 

 

118,263

 

 

 

117,935

 

 

 

118,220

 

 

 

117,886

 

Weighted average common shares and units - diluted

 

 

118,423

 

 

 

118,139

 

 

 

118,383

 

 

 

118,079

 

Period End Shares And Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares at June 30,

 

 

114,365

 

 

 

114,043

 

 

 

114,365

 

 

 

114,043

 

Operating Partnership units at June 30,

 

 

4,059

 

 

 

4,090

 

 

 

4,059

 

 

 

4,090

 

Total common shares and units at June 30,

 

 

118,424

 

 

 

118,133

 

 

 

118,424

 

 

 

118,133

 

 

 

(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, 2020, expected to be filed with the SEC on or about July 30, 2020.

 

9


 

CONSOLIDATED BALANCE SHEETS

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

June 30, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

1,910,655

 

 

$

1,905,757

 

Buildings and improvements and other

 

 

11,960,028

 

 

 

11,841,978

 

Development and capital improvements in progress

 

 

196,824

 

 

 

116,424

 

 

 

 

14,067,507

 

 

 

13,864,159

 

Less: Accumulated depreciation

 

 

(3,206,943

)

 

 

(2,955,253

)

 

 

 

10,860,564

 

 

 

10,908,906

 

Undeveloped land

 

 

34,548

 

 

 

34,548

 

Investment in real estate joint venture

 

 

43,590

 

 

 

43,674

 

Real estate assets, net

 

 

10,938,702

 

 

 

10,987,128

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

19,667

 

 

 

20,476

 

Restricted cash

 

 

15,927

 

 

 

50,065

 

Other assets

 

 

157,017

 

 

 

172,781

 

Total assets

 

$

11,131,313

 

 

$

11,230,450

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Unsecured notes payable

 

$

3,849,784

 

 

$

3,828,201

 

Secured notes payable

 

 

622,824

 

 

 

626,397

 

Accrued expenses and other liabilities

 

 

473,795

 

 

 

472,262

 

Total liabilities

 

 

4,946,403

 

 

 

4,926,860

 

 

 

 

 

 

 

 

 

 

Redeemable common stock

 

 

13,333

 

 

 

14,131

 

 

 

 

 

 

 

 

 

 

Shareholders equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

9

 

 

 

9

 

Common stock

 

 

1,140

 

 

 

1,140

 

Additional paid-in capital

 

 

7,168,886

 

 

 

7,166,073

 

Accumulated distributions in excess of net income

 

 

(1,202,536

)

 

 

(1,085,479

)

Accumulated other comprehensive loss

 

 

(12,665

)

 

 

(13,178

)

Total MAA shareholders equity

 

 

5,954,834

 

 

 

6,068,565

 

Noncontrolling interests - Operating Partnership units

 

 

209,894

 

 

 

214,647

 

Total Companys shareholders equity

 

 

6,164,728

 

 

 

6,283,212

 

Noncontrolling interests - consolidated real estate entities

 

 

6,849

 

 

 

6,247

 

Total equity

 

 

6,171,577

 

 

 

6,289,459

 

Total liabilities and equity

 

$

11,131,313

 

 

$

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 June 30,

 

 

Six months ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income available for MAA common shareholders

 

$

74,140

 

 

$

60,995

 

 

$

109,866

 

 

$

123,733

 

Depreciation and amortization of real estate assets

 

 

125,668

 

 

 

122,323

 

 

 

250,514

 

 

 

243,533

 

(Gain) loss on sale of depreciable real estate assets

 

 

(2

)

 

 

 

 

 

27

 

 

 

13

 

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

 

 

153

 

 

 

166

 

 

 

305

 

 

 

311

 

Net income attributable to noncontrolling interests

 

 

2,666

 

 

 

2,224

 

 

 

3,970

 

 

 

4,522

 

Funds from operations attributable to the Company

 

 

202,625

 

 

 

185,708

 

 

 

364,682

 

 

 

372,112

 

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

 

 

(11,693

)

 

 

(4,594

)

 

 

15,945

 

 

 

(4,070

)

(Gain) loss on sale of non-depreciable real estate assets

 

 

(5

)

 

 

(297

)

 

 

371

 

 

 

(9,260

)

(Gain) loss from unconsolidated limited partnerships, net of tax (1)(2)

 

 

(4,262

)

 

 

179

 

 

 

(4,185

)

 

 

324

 

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

 

 

(151

)

 

 

(309

)

 

 

696

 

 

 

(1,853

)

Loss (gain) on debt extinguishment (1)

 

 

 

 

 

47

 

 

 

(1

)

 

 

55

 

Non-routine legal costs and settlements (1)

 

 

 

 

 

200

 

 

 

40

 

 

 

1,016

 

COVID-19 related costs (1)

 

 

2,411

 

 

 

 

 

 

2,607

 

 

 

 

Mark-to-market debt adjustment (3)

 

 

(58

)

 

 

(86

)

 

 

(92

)

 

 

(171

)

Core funds from operations

 

 

188,867

 

 

 

180,848

 

 

 

380,063

 

 

 

358,153

 

Recurring capital expenditures

 

 

(25,118

)

 

 

(24,358

)

 

 

(39,692

)

 

 

(36,918

)

Core adjusted funds from operations

 

 

163,749

 

 

 

156,490

 

 

 

340,371

 

 

 

321,235

 

Redevelopment capital expenditures

 

 

(10,075

)

 

 

(14,826

)

 

 

(24,023

)

 

 

(27,271

)

Revenue enhancing capital expenditures

 

 

(8,447

)

 

 

(9,813

)

 

 

(16,375

)

 

 

(17,852

)

Commercial capital expenditures

 

 

(1,143

)

 

 

(1,037

)

 

 

(1,538

)

 

 

(2,456

)

Other capital expenditures

 

 

(5,086

)

 

 

(4,187

)

 

 

(10,676

)

 

 

(8,164

)

Funds available for distribution

 

$

138,998

 

 

$

126,627

 

 

$

287,759

 

 

$

265,492

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and distributions paid

 

$

118,407

 

 

$

113,373

 

 

$

236,744

 

 

$

226,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - diluted

 

 

114,438

 

 

 

114,087

 

 

 

114,482

 

 

 

113,994

 

FFO weighted average common shares and units - diluted

 

 

118,423

 

 

 

118,139

 

 

 

118,383

 

 

 

118,079