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Section 1: 8-K (8-K)

maa-8k_20200506.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):  May 6, 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 May 6, 2020, the Registrant issued a press release announcing its consolidated results of operations and financial condition as of March 31, 2020 and for the three 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 the Registrant under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”).

 

ITEM 7.01Regulation FD Disclosure.

 

On May 6, 2020, the Registrant issued a press release announcing its consolidated results of operations and financial condition as of March 31, 2020 and for the three months then ended.  In that press release, the Registrant also provided an update regarding the impact of COVID-19 on the Registrant’s business in the second quarter of 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 the Registrant under the Exchange Act or the Securities Act.

 

ITEM 9.01Financial Statements and Exhibits.

 

(d)Exhibits.

 

Exhibit Number

 

Description

99.1

 

Press Release dated May 6, 2020

99.2

 

Supplemental Data Schedules (First 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:

May 6, 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:

May 6, 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 March 31, 2020) & Investments In Unconsolidated Real Estate Entities

S-7

Debt and Debt Covenants as of March 31, 2020

S-8

Credit Ratings/Common Stock

S-10

COVID-19 Update

S-11

Investor Relations Data

S-12

 

 

 


 

OVERVIEW

 

MAA REPORTS FIRST QUARTER RESULTS

GERMANTOWN, TN, May 6, 2020/PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), today announced operating results for the quarter ended March 31, 2020.

 

Net Income Available for Common Shareholders

For the quarter ended March 31, 2020, net income available for MAA common shareholders was $35.7 million, or $0.31 per diluted common share, compared to $62.7 million, or $0.55 per diluted common share, for the quarter ended March 31, 2019. Results for the quarter ended March 31, 2020, included $27.6 million, or $0.24 per diluted common share, of non-cash expense related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares compared to $0.5 million of non-cash expense related to the embedded derivative in the preferred shares recognized in the quarter ended March 31, 2019

 

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 March 31, 2020 was $191.2 million, or $1.62 per diluted common share and unit, or per Share, as compared to $177.3 million, or $1.50 per Share, for the quarter ended March 31, 2019. For the quarter ended March 31, 2020, FFO was $162.1 million, or $1.37 per Share, compared to $186.4 million, or $1.58 per Share, for the quarter ended March 31, 2019.  FFO results for the quarter ended March 31, 2020 included $27.6 million, or $0.23 per Share, of non-cash expense related to the fair value adjustment of the embedded derivative in the preferred shares as compared to $0.5 million of non-cash expense related to the embedded derivative in the preferred shares recognized in the quarter ended March 31, 2019.  

 

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 focus over the past few weeks has centered on a number of actions taken to protect and serve our residents and our associates during this time of unprecedented challenge. While there continues to be uncertainty as to when the U.S. economy will reopen and begin to recover, we believe MAA is in a strong position to work through the downturn.   The high quality of our properties diversified across the Sunbelt region, the strength of our operating platform and our balance sheet, and the commitment of our associates to serve all of our constituents, positions MAA to successfully work through the current challenge and drive higher value as the economy begins to recover.”

 

First Quarter 2020 Highlights

 

Property revenues from the Same Store Portfolio increased 4.2% during the first quarter of 2020 as compared to the same period in the prior year.  Results were driven by a 4.2% growth in Average Effective Rent per Unit for the Same Store Portfolio.

 

Property operating expenses for the Same Store Portfolio increased 3.2% during the first quarter of 2020 as compared to the same period in the prior year.

 

Net Operating Income, or NOI, from the Same Store Portfolio increased 4.8% during the first 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 first quarter of 2020 was 47.3% on a rolling twelve month basis.

 

As of the end of the first quarter of 2020, MAA had seven properties under development, representing 2,108 units once complete, with a total projected cost of $489.5 million and an estimated $304.9 million remaining to be funded.

 

As of the end of the first quarter of 2020, MAA had two properties in their initial lease-up with physical occupancy averaging 82.6%.  One property is expected to stabilize in the second quarter of 2020 and the other property is expected to stabilize in the fourth quarter of 2020.

 

During the first quarter of 2020, MAA completed renovation of 1,440 units under its redevelopment program, achieving average rental rate increases of 9.4% above non-renovated units.  

 

Recent Developments – COVID-19

In March of 2020, MAA began to take steps to respond to the COVID-19 pandemic. The health and well-being of MAA’s residents, associates and all who visit MAA’s properties are of highest priority. 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 residents an amendment to their lease that provides payment flexibility of up to 60 days for April and May rent, waives late fees and interest charges under the lease and reflects MAA’s agreement not to pursue remedies for nonpayment of April and May rent under the original lease.

 

MAA’s on-site leasing offices have remained open on a virtual basis, operating with full staff to serve residents and prospective new customers.  MAA has encouraged its associates to wear face coverings at work and to practice appropriate social

1


distancing while performing their job responsibilities.  To support its associates who have continued to work on-site on a daily basis, MAA has 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 has made modifications to its health and retirement plans to assist all of its associates and their families during this time of crisis.  Work is currently underway to ensure that MAA is prepared to seamlessly return to normal operations as governmental orders, directives and policies allow.

 

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 months of April and May (through May 5, 2020) include the following:

 

 

Through May 5, 2020, combined, rent cash collections and promises to pay under lease amendments signed by residents financially impacted by COVID-19 represented 99.3% of billed rent for April 2020.  This compares to 99.4% average cash collections in 2019 as of the 5th day of the following month.  Rent cash collections represented 98.0% of billed April 2020 rent and promises to pay by financially impacted residents under lease amendments represented 1.3% of billed April 2020 rent.  

 

Through May 5, 2020, combined, rent cash collections and promises to pay under lease amendments signed by residents financially impacted by COVID-19 represented 94.2% of billed rent for May 2020.  This compares to 92.6% combined collections of April 2020 rent at the same point in April and 94.3% cash collections of March 2020 rent at the same point in March 2020.   Rent cash collections represented 90.4% of billed May 2020 rent and promises to pay by financially impacted residents under lease amendments represented 3.8% of billed May 2020 rent.  

 

Average Physical Occupancy for the Same Store Portfolio was strong at 95.4% for April 2020.

 

Additional metrics related to the impact of the COVID-19 pandemic on MAA’s business in April 2020 are included in the supplemental schedules accompanying this release.

 

First Quarter 2020 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 4.2% during the first quarter of 2020 was primarily a result of a 4.2% 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 2.6% during the first quarter of 2020.  Average Physical Occupancy for the Same Store Portfolio was 95.7% for the first quarter of 2020, as compared to 95.9% in the same period in the prior year.  Property operating expenses increased 3.2% for the first quarter of 2020 as compared to the same period in the prior year. This resulted in Same Store NOI growth of 4.8% for the first quarter of 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 first quarter of 2020, MAA had seven development communities under construction.  Total development costs for the seven communities are projected to be $489.5 million, of which an estimated $304.9 million remained to be funded as of the end of the first quarter of 2020.  The expected average stabilized NOI yield on these communities is 6.2%. During the first quarter of 2020, MAA funded $42.2 million of construction costs on current and completed development projects.  MAA expects to complete construction for two of these developments in 2020, four in 2021 and one in 2022.

 

During the first quarter of 2020, two MAA multifamily apartment community expansion developments, Post Parkside at Wade III, located in Raleigh, North Carolina, and 1201 Midtown II, located in Charleston, South Carolina, completed their initial lease-up and moved into MAA's stabilized portfolio. As of the end of the first quarter of 2020, MAA had two apartment communities, representing a total of 350 units, remaining in initial lease-up: Sync 36 II, located in Denver, Colorado, and The Greene, located in Greenville, South Carolina.  Physical occupancy for these lease-up projects averaged 82.6% at the end of the first quarter of 2020.

 

Acquisition and Disposition Activity

In January 2020, MAA acquired a 22 acre land parcel located in the Austin, Texas market for future development.

 

MAA did not dispose of any apartment communities, land parcels or commercial properties during the three months ended March 31, 2020.

 

 

 

2


Redevelopment Activity

MAA continued its redevelopment program at select apartment communities throughout the portfolio.  During the first quarter of 2020, MAA redeveloped the interior of 1,440 units at an average cost of $6,008 per unit, achieving average rental rate increases of 9.4% above non-renovated units.  In addition, during the first quarter of 2020, MAA installed SmartHome technology (mobile control of lights, thermostat and security, as well as leak monitoring) in 8,017 units at an average cost of approximately $1,350 per unit and an average rent increase of $25 per unit.  As of the beginning of the second quarter of 2020, both of these programs have been suspended as a result of the COVID–19 shelter-in-place government directives and will restart at a later date.

 

During the first quarter of 2020, MAA initiated more extensive upgrades and repositioning of ten properties involving renovations of amenity and common areas with 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.  Repositioning work continues at five of these properties with plans to initiate work at the other five properties later this year as market conditions stabilize.  

 

Capital Expenditures

Recurring capital expenditures totaled $14.6 million for the first quarter of 2020, or approximately $0.13 per Share, as compared to $12.6 million, or $0.11 per Share, for the same period in the prior year.  These expenditures led to Core Adjusted Funds from Operations, or Core AFFO, of $1.49 per Share for the first quarter of 2020, compared to $1.40 per Share for the same period in the prior year.

 

Redevelopment, revenue enhancing, commercial and other capital expenditures during the first quarter of 2020 were $27.9 million, as compared to $25.9 million for the same period in the prior year. These expenditures led to Funds Available for Distribution, or FAD, of $148.8 million for the first quarter of 2020, compared to $138.9 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.

 

Financing Activities

As of March 31, 2020, MAA had approximately $931.8 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 first quarter of 2020 were $118.3 million, as compared to $113.3 million for the same period in the prior year.

 

Balance Sheet

As of March 31, 2020:

 

Total debt to adjusted total assets (as defined in the covenants for the bonds issued by MAALP) was 31.5%;

 

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

 

91.1% of total debt was fixed against rising interest rates for an average of approximately 7.9 years; and

 

Unencumbered NOI was 90.6% of total NOI.

 

105th Consecutive Quarterly Common Dividend Declared

MAA declared its 105th consecutive quarterly common dividend, which was paid on April 30, 2020 to holders of record on April 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.  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 April 2020 operating and financial metrics as well as limited May 2020 operating data. The Company will continue to monitor conditions associated with efforts by federal, state and local governments to reopen the U.S. economy and will reestablish full year guidance as more information becomes available.

 

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 first quarter results on Thursday, May 7, 2020, at 9:00 AM Central Time.  The conference call-in number is 877-876-9173.  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.

3


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 March 31, 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,” 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;

 

loss of hedge accounting treatment for interest rate swaps;

 

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

 

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

 

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

 

the effect of the phase-out of the London Interbank Offered Rate, or LIBOR, as a variable rate debt benchmark by the end of 2021 and the transition to a different benchmark interest rate;

 

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

4


 

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, from time to time, in reports we file with the SEC or in other documents that we publicly disseminate.

 

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

 

 

5


FINANCIAL HIGHLIGHTS

 

Dollars in thousands, except per share data

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Rental and other property revenues

 

$

418,098

 

 

$

401,178

 

 

 

 

 

 

 

 

 

 

Net income available for MAA common shareholders

 

$

35,726

 

 

$

62,738

 

 

 

 

 

 

 

 

 

 

Total NOI (1)

 

$

264,926

 

 

$

251,801

 

 

 

 

 

 

 

 

 

 

Earnings per common share: (2)

 

 

 

 

 

 

 

 

Basic

 

$

0.31

 

 

$

0.55

 

Diluted

 

$

0.31

 

 

$

0.55

 

 

 

 

 

 

 

 

 

 

Funds from operations per Share - diluted: (2)

 

 

 

 

 

 

 

 

FFO (1)

 

$

1.37

 

 

$

1.58

 

Core FFO (1)

 

$

1.62

 

 

$

1.50

 

Core AFFO (1)

 

$

1.49

 

 

$

1.40

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

1.00

 

 

$

0.96

 

 

 

 

 

 

 

 

 

 

Dividends/Core FFO (diluted) payout ratio

 

 

61.7

%

 

 

64.0

%

Dividends/Core AFFO (diluted) payout ratio

 

 

67.1

%

 

 

68.6

%

 

 

 

 

 

 

 

 

 

Consolidated interest expense

 

$

43,482

 

 

$

45,700

 

Mark-to-market debt adjustment

 

 

34

 

 

 

85

 

Debt discount and debt issuance cost amortization

 

 

(1,190

)

 

 

(1,805

)

Capitalized interest

 

 

1,391

 

 

 

388

 

Total interest incurred

 

$

43,717

 

 

$

44,368

 

 

 

 

 

 

 

 

 

 

Amortization of principal on notes payable

 

$

1,740

 

 

$

1,847

 

 

 

(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

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Gross Assets (1)

 

$

14,236,426

 

 

$

14,185,703

 

Gross Real Estate Assets (1)

 

$

14,080,141

 

 

$

13,996,700

 

Total debt

 

$

4,483,693

 

 

$

4,454,598

 

Common shares and units outstanding

 

 

118,338,319

 

 

 

118,313,567

 

Share price

 

$

103.03

 

 

$

131.86

 

Book equity value

 

$

6,226,832

 

 

$

6,303,590

 

Market equity value

 

$

12,192,397

 

 

$

15,600,827

 

Net Debt/Adjusted EBITDAre (2)

 

4.71x

 

 

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 March 31,

 

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

418,098

 

 

$

401,178

 

Expenses:

 

 

 

 

 

 

 

 

Operating expense, excluding real estate taxes and insurance

 

 

91,368

 

 

 

89,793

 

Real estate taxes and insurance

 

 

61,804

 

 

 

59,584

 

Depreciation and amortization

 

 

126,388

 

 

 

122,789

 

Total property operating expenses

 

 

279,560

 

 

 

272,166

 

Property management expenses

 

 

14,643

 

 

 

13,842

 

General and administrative expenses

 

 

13,264

 

 

 

12,337

 

Interest expense

 

 

43,482

 

 

 

45,700

 

Loss on sale of depreciable real estate assets

 

 

29

 

 

 

13

 

Loss (gain) on sale of non-depreciable real estate assets

 

 

376

 

 

 

(8,963

)

Other non-operating expense (income)

 

 

28,532

 

 

 

(119

)

Income before income tax expense

 

 

38,212

 

 

 

66,202

 

Income tax expense

 

 

(667

)

 

 

(641

)

Income from continuing operations before real estate joint venture activity

 

 

37,545

 

 

 

65,561

 

Income from real estate joint venture

 

 

407

 

 

 

397

 

Net income

 

 

37,952

 

 

 

65,958

 

Net income attributable to noncontrolling interests

 

 

1,304

 

 

 

2,298

 

Net income available for shareholders

 

 

36,648

 

 

 

63,660

 

Dividends to MAA Series I preferred shareholders

 

 

922

 

 

 

922

 

Net income available for MAA common shareholders

 

$

35,726

 

 

$

62,738

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic:

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.31

 

 

$

0.55

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.31

 

 

$

0.55

 

 

 

 

8


 

SHARE AND UNIT DATA

 

Shares and units in thousands

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Net Income Shares (1)

 

 

 

 

 

 

 

 

Weighted average common shares - basic

 

 

114,111

 

 

 

113,726

 

Effect of dilutive securities

 

 

383

 

 

 

207

 

Weighted average common shares - diluted

 

 

114,494

 

 

 

113,933

 

Funds From Operations Shares And Units

 

 

 

 

 

 

 

 

Weighted average common shares and units - basic

 

 

118,176

 

 

 

117,837

 

Weighted average common shares and units - diluted

 

 

118,344

 

 

 

118,018

 

Period End Shares And Units

 

 

 

 

 

 

 

 

Common shares at March 31,

 

 

114,279

 

 

 

113,916

 

Operating Partnership units at March 31,

 

 

4,059

 

 

 

4,105

 

Total common shares and units at March 31,

 

 

118,338

 

 

 

118,021

 

 

 

(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 months ended March 31, 2020, expected to be filed with the SEC on or about May 7, 2020.

 

9


 

CONSOLIDATED BALANCE SHEETS

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

1,910,637

 

 

$

1,905,757

 

Buildings and improvements and other

 

 

11,897,869

 

 

 

11,841,978

 

Development and capital improvements in progress

 

 

158,893

 

 

 

116,424

 

 

 

 

13,967,399

 

 

 

13,864,159

 

Less: Accumulated depreciation

 

 

(3,080,449

)

 

 

(2,955,253

)

 

 

 

10,886,950

 

 

 

10,908,906

 

Undeveloped land

 

 

34,548

 

 

 

34,548

 

Investment in real estate joint venture

 

 

43,686

 

 

 

43,674

 

Real estate assets, net

 

 

10,965,184

 

 

 

10,987,128

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

34,508

 

 

 

20,476

 

Restricted cash

 

 

14,539

 

 

 

50,065

 

Other assets

 

 

141,746

 

 

 

172,781

 

Total assets

 

$

11,155,977

 

 

$

11,230,450

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Unsecured notes payable

 

$

3,859,040

 

 

$

3,828,201

 

Secured notes payable

 

 

624,653

 

 

 

626,397

 

Accrued expenses and other liabilities

 

 

445,452

 

 

 

472,262

 

Total liabilities

 

 

4,929,145

 

 

 

4,926,860

 

 

 

 

 

 

 

 

 

 

Redeemable common stock

 

 

11,267

 

 

 

14,131

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

9

 

 

 

9

 

Common stock

 

 

1,140

 

 

 

1,140

 

Additional paid-in capital

 

 

7,170,148

 

 

 

7,166,073

 

Accumulated distributions in excess of net income

 

 

(1,160,944

)

 

 

(1,085,479

)

Accumulated other comprehensive loss

 

 

(12,934

)

 

 

(13,178

)

Total MAA shareholders' equity

 

 

5,997,419

 

 

 

6,068,565

 

Noncontrolling interests - Operating Partnership units

 

 

211,498

 

 

 

214,647

 

Total Company's shareholders' equity

 

 

6,208,917

 

 

 

6,283,212

 

Noncontrolling interest - consolidated real estate entities

 

 

6,648

 

 

 

6,247

 

Total equity

 

 

6,215,565

 

 

 

6,289,459

 

Total liabilities and equity

 

$

11,155,977

 

 

$

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 March 31,

 

 

 

2020

 

 

2019

 

Net income available for MAA common shareholders

 

$

35,726

 

 

$

62,738

 

Depreciation and amortization of real estate assets

 

 

124,846

 

 

 

121,210

 

Loss on sale of depreciable real estate assets

 

 

29

 

 

 

13

 

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

 

 

152

 

 

 

145

 

Net income attributable to noncontrolling interests

 

 

1,304

 

 

 

2,298

 

Funds from operations attributable to the Company

 

 

162,057

 

 

 

186,404

 

Loss on embedded derivative in preferred shares (1)

 

 

27,638

 

 

 

524

 

Loss (gain) on sale of non-depreciable real estate assets

 

 

376

 

 

 

(8,963

)

Loss from unconsolidated limited partnerships (1)

 

 

77

 

 

 

145

 

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

 

 

847

 

 

 

(1,544

)

(Gain) loss on debt extinguishment (1)

 

 

(1

)

 

 

8

 

Non-routine legal costs and settlements (1)

 

 

40

 

 

 

816

 

COVID-19 related costs (1)

 

 

196

 

 

 

 

Mark-to-market debt adjustment (2)

 

 

(34

)

 

 

(85

)

Core funds from operations

 

 

191,196

 

 

 

177,305

 

Recurring capital expenditures

 

 

(14,574

)

 

 

(12,560

)

Core adjusted funds from operations

 

 

176,622

 

 

 

164,745

 

Redevelopment capital expenditures

 

 

(13,948

)

 

 

(12,445

)

Revenue enhancing capital expenditures

 

 

(7,928

)

 

 

(8,039

)

Commercial capital expenditures

 

 

(395

)

 

 

(1,419

)

Other capital expenditures

 

 

(5,590

)

 

 

(3,977

)

Funds available for distribution

 

$

148,761

 

 

$

138,865

 

 

 

 

 

 

 

 

 

 

Dividends and distributions paid

 

$

118,337

 

 

$

113,271

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - diluted

 

 

114,494

 

 

 

113,933

 

FFO weighted average common shares and units - diluted

 

 

118,344

 

 

 

118,018

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.31

 

 

$

0.55

 

 

 

 

 

 

 

 

 

 

Funds from operations per Share - diluted

 

$

1.37

 

 

$

1.58

 

Core funds from operations per Share - diluted

 

$

1.62

 

 

$

1.50

 

Core adjusted funds from operations per Share - diluted

 

$

1.49

 

 

$

1.40

 

 

 

(1)

Included in Other non-operating expense (income) in the Consolidated Statements of Operations.

 

(2)

Included in Interest expense in the Consolidated Statements of Operations.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11


 

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

 

Dollars in thousands

 

Three Months Ended

 

 

 

March 31,

2020

 

 

December 31,

2019

 

 

March 31,

2019

 

Net Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

Same Store NOI

 

$

249,287

 

 

$

250,971

 

 

$

237,838

 

Non-Same Store NOI

 

 

15,639

 

 

 

16,059

 

 

 

13,963

 

Total NOI

 

 

264,926

 

 

 

267,030

 

 

 

251,801

 

Depreciation and amortization

 

 

(126,388

)

 

 

(125,426

)

 

 

(122,789

)

Property management expenses

 

 

(14,643

)

 

 

(13,816

)

 

 

(13,842

)

General and administrative expenses

 

 

(13,264

)

 

 

(10,885

)

 

 

(12,337

)

Interest expense

 

 

(43,482

)

 

 

(43,698

)

 

 

(45,700

)

(Loss) gain on sale of depreciable real estate assets

 

 

(29

)

 

 

80,001

 

 

 

(13

)

(Loss) gain on sale of non-depreciable real estate assets

 

 

(376

)

 

 

2,787

 

 

 

8,963

 

Other non-operating (expense) income

 

 

(28,532

)

 

 

(495

)

 

 

119

 

Income tax expense

 

 

(667

)

 

 

(882

)

 

 

(641

)

Income from real estate joint venture

 

 

407

 

 

 

444

 

 

 

397

 

Net income attributable to noncontrolling interests

 

 

(1,304

)

 

 

(5,471

)

 

 

(2,298

)

Dividends to MAA Series I preferred shareholders

 

 

(922

)

 

 

(922

)

 

 

(922

)

Net income available for MAA common shareholders

 

$

35,726

 

 

$

148,667

 

 

$

62,738

 

 

 

RECONCILIATION OF EBITDA, EBITDAre AND ADJUSTED EBITDAre TO NET INCOME

 

Dollars in thousands

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

 

March 31, 2020

 

 

December 31, 2019

 

Net income

 

$

37,952

 

 

$

65,958

 

 

$

338,613

 

 

$

366,618

 

Depreciation and amortization

 

 

126,388

 

 

 

122,789

 

 

 

500,443

 

 

 

496,843

 

Interest expense

 

 

43,482

 

 

 

45,700

 

 

 

177,628

 

 

 

179,847

 

Income tax expense

 

 

667

 

 

 

641

 

 

 

3,721

 

 

 

3,696

 

EBITDA

 

 

208,489

 

 

 

235,088

 

 

 

1,020,405

 

 

 

1,047,004

 

Loss (gain) on sale of depreciable real estate assets

 

 

29

 

 

 

13

 

 

 

(80,971

)

 

 

(80,988

)

Adjustments to reflect the Company's share of EBITDAre of unconsolidated affiliates

 

 

336

 

 

 

338

 

 

 

1,349

 

 

 

1,351

 

EBITDAre

 

 

208,854

 

 

 

235,439

 

 

 

940,783

 

 

 

967,367

 

Loss (gain) on embedded derivative in preferred shares (1)

 

 

27,638

 

 

 

524

 

 

 

9,228

 

 

 

(17,886

)

Loss (gain) on sale of non-depreciable real estate assets

 

 

376

 

 

 

(8,963

)

 

 

(2,708

)

 

 

(12,047

)

Loss (gain) from unconsolidated limited partnerships (1)

 

 

77

 

 

 

145

 

 

 

(3,022

)

 

 

(2,954

)

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

 

 

847

 

 

 

(1,544

)

 

 

(999

)

 

 

(3,390

)

(Gain) loss on debt extinguishment (1)

 

 

(1

)

 

 

8

 

 

 

244

 

 

 

253

 

Non-routine legal costs and settlements (1)

 

 

40

 

 

 

816

 

 

 

1,500

 

 

 

2,276

 

COVID-19 related costs (1)

 

 

196

 

 

 

 

 

 

196

 

 

 

 

Mark-to-market debt adjustment (2)

 

 

(34

)

 

 

(85

)

 

 

(205

)

 

 

(256

)

Adjusted EBITDAre

 

$

237,993

 

 

$

226,340

 

 

$

945,017

 

 

$

933,363

 

 

 

(1)

Included in Other non-operating expense (income) in the Consolidated Statements of Operations.

 

(2)

Included in Interest expense in the Consolidated Statements of Operations.

 

 

 

 

 

 

12


 

RECONCILIATION OF NET DEBT TO UNSECURED NOTES PAYABLE AND SECURED NOTES PAYABLE

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Unsecured notes payable

 

$

3,859,040

 

 

$

3,828,201

 

Secured notes payable

 

 

624,653

 

 

 

626,397

 

Total debt

 

 

4,483,693

 

 

 

4,454,598

 

Cash and cash equivalents

 

 

(34,508

)

 

 

(20,476

)

1031(b) exchange proceeds included in Restricted cash (1)

 

 

 

 

 

(33,843

)

Net Debt

 

$

4,449,185

 

 

$

4,400,279

 

 

 

(1)

Included in Restricted cash on the Condensed Consolidated Balance Sheets.

 

RECONCILIATION OF GROSS ASSETS TO TOTAL ASSETS

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Total assets

 

$

11,155,977

 

 

$

11,230,450

 

Accumulated depreciation

 

 

3,080,449

 

 

 

2,955,253

 

Gross Assets

 

$

14,236,426

 

 

$

14,185,703

 

 

 

RECONCILIATION OF GROSS REAL ESTATE ASSETS TO REAL ESTATE ASSETS, NET

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

Real estate assets, net

 

$

10,965,184

 

 

$

10,987,128

 

Accumulated depreciation

 

 

3,080,449

 

 

 

2,955,253

 

Cash and cash equivalents

 

 

34,508

 

 

 

20,476

 

1031(b) exchange proceeds included in Restricted cash (1)

 

 

 

 

 

33,843

 

Gross Real Estate Assets

 

$

14,080,141

 

 

$

13,996,700

 

 

 

(1)

Included in Restricted cash on the Condensed Consolidated Balance Sheets.

 

13


 

NON-GAAP FINANCIAL MEASURES

 

Adjusted EBITDAre

For purposes of calculations in this release, Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization for real estate, or Adjusted EBITDAre, represents EBITDAre further adjusted for items that are not considered part of MAA’s core operations such as adjustments related to the fair value of the embedded derivative in the MAA Series I preferred shares, loss or gain on sale of non-depreciable assets, adjustments for gains or losses from unconsolidated limited partnerships, net casualty gain or loss, loss or gain on debt extinguishment, non-routine legal costs and settlements, COVID-19 related costs and mark-to-market debt adjustments.  As an owner and operator of real estate, MAA considers Adjusted EBITDAre to be an important measure of performance from core operations because Adjusted EBITDAre does not include various income and expense items that are not indicative of operating performance.  MAA's computation of Adjusted EBITDAre may differ from the methodology utilized by other companies to calculate Adjusted EBITDAre.  Adjusted EBITDAre should not be considered as an alternative to Net income as an indicator of operating performance.

 

Core Adjusted Funds from Operations (Core AFFO)

Core AFFO is composed of Core FFO less recurring capital expenditures. Core AFFO should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of operating performance.  As an owner and operator of real estate, MAA considers Core AFFO to be an important measure of performance from operations because Core AFFO measures the ability to control revenues, expenses and recurring capital expenditures.

 

Core Funds from Operations (Core FFO)

Core FFO represents FFO as adjusted for items that are not considered part of MAA’s core business operations such as adjustments related to the fair value of the embedded derivative in the MAA Series I preferred shares, loss or gain on sale of non-depreciable assets, adjustments for gains or losses from unconsolidated limited partnerships, net casualty gain or loss, loss or gain on debt extinguishment, non-routine legal costs and settlements, COVID-19 related costs and mark-to-market debt adjustments. While MAA's definition of Core FFO may be similar to others in the industry, MAA's methodology for calculating Core FFO may differ from that utilized by other REITs and, accordingly, may not be comparable to such other REITs. Core FFO should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of operating performance. MAA believes that Core FFO is helpful in understanding its core operating performance between periods in that it removes certain items that by their nature are not comparable over periods and therefore tend to obscure actual operating performance.

 

EBITDA

For purposes of calculations in this release, Earnings Before Interest, Income Taxes, Depreciation and Amortization, or EBITDA, is composed of net income plus depreciation and amortization, interest expense, and income taxes.  As an owner and operator of real estate, MAA considers EBITDA to be an important measure of performance from core operations because EBITDA does not include various expense items that are not indicative of operating performance. EBITDA should not be considered as an alternative to Net income as an indicator of operating performance.

 

EBITDAre

For purposes of calculations in this release, Earnings Before Interest, Income Taxes, Depreciation and Amortization for real estate, or EBITDAre, is composed of EBITDA, as defined above, excluding the gain or loss on sale of depreciable asset sales and plus adjustments to reflect MAA's share of EBITDAre of unconsolidated affiliates.  As an owner and operator of real estate, MAA considers EBITDAre to be an important measure of performance from core operations because EBITDAre does not include various expense items that are not indicative of operating performance. While MAA's definition of EBITDAre is in accordance with NAREIT's definition, it may differ from the methodology utilized by other companies to calculate EBITDAre. EBITDAre should not be considered as an alternative to Net income as an indicator of operating performance.

 

Funds Available for Distribution (FAD)

FAD is composed of Core FFO less total capital expenditures, excluding development spending and property acquisitions.  FAD should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of operating performance.  As an owner and operator of real estate, MAA considers FAD to be an important measure of performance from core operations because FAD measures the ability to control revenues, expenses and total capital expenditures.

 

 

 

 

 

14


 

NON-GAAP FINANCIAL MEASURES (Continued)

 

Funds From Operations (FFO)

FFO represents net income available for MAA common shareholders (calculated in accordance with GAAP) excluding gains or losses on disposition of operating properties and asset impairment, plus depreciation and amortization of real estate assets, net income attributable to noncontrolling interests, and adjustments for joint ventures.  Because noncontrolling interest is added back, FFO, when used in this document, represents FFO attributable to the Company.  While MAA's definition of FFO is in accordance with NAREIT's definition, it may differ from the methodology for calculating FFO utilized by other companies and, accordingly, may not be comparable to such other companies.  FFO should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of operating performance.  MAA believes that FFO is helpful in understanding operating performance in that FFO excludes depreciation and amortization of real estate assets.  MAA believes that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies.

 

Gross Assets

Gross Assets represents Total assets plus Accumulated depreciation.  MAA believes that Gross Assets can be used as a helpful tool in evaluating its balance sheet positions.  MAA believes that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies.