MAA Reports Fourth Quarter And Full Year Results

GERMANTOWN, Tenn., Feb. 3, 2021 /PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), today announced operating results for the quarter and year ended December 31, 2020.

Net Income Available for Common Shareholders
For the quarter ended December 31, 2020, net income available for MAA common shareholders was $82.4 million, or $0.72 per diluted common share, compared to $148.7 million, or $1.30 per diluted common share, for the quarter ended December 31, 2019.  Results for the quarter ended December 31, 2020, included $17.2 million, or $0.15 per diluted common share, of non-cash income related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares.  Results for the quarter ended December 31, 2019, included $82.8 million, or $0.72 per diluted common share, of gains related to the sale of real estate assets and $1.7 million, or $0.01 per diluted common share, of non-cash expense related to the embedded derivative in the preferred shares.

For the year ended December 31, 2020, net income available for MAA common shareholders was $251.3 million, or $2.19 per diluted common share, compared to $350.1 million, or $3.07 per diluted common share, for the year ended December 31, 2019.  Results for the year ended December 31, 2020, included $2.6 million, or $0.02 per diluted common share, of non-cash income related to the fair value adjustment of the embedded derivative in the preferred shares and $1.0 million, or $0.01 per diluted common share, of gains related to the sale of real estate assets.  Results for the year ended December 31, 2019, included $93.0 million, or $0.82 per diluted common share, of gains related to the sale of real estate assets and $17.9 million, or $0.16 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 December 31, 2020 was $195.4 million, or $1.65 per diluted common share and unit, or per Share, as compared to $196.0 million, or $1.66 per Share, for the quarter ended December 31, 2019. For the quarter ended December 31, 2020, FFO was $213.4 million, or $1.80 per Share, compared to $198.2 million, or $1.68 per Share, for the quarter ended December 31, 2019.  FFO results for the quarter ended December 31, 2020, included $17.2 million, or $0.14 per Share, of non-cash income related to the fair value adjustment of the embedded derivative in the preferred shares. FFO results for the quarter ended December 31, 2019, included $2.8 million, or $0.02 per Share, of gains related to the sale of non-depreciable real estate assets and $1.7 million, or $0.01 per Share, of non-cash expense related to the embedded derivative in the preferred shares.

Core FFO for the year ended December 31, 2020 was $761.4 million, or $6.43 per Share, as compared to $739.2 million, or $6.26 per Share, for the year ended December 31, 2019.  For the year ended December 31, 2020, FFO was $765.3 million, or $6.46 per Share, compared to $773.2 million, or $6.55 per Share, for the year ended December 31, 2019.  FFO results for the year ended December 31, 2020, included $2.6 million, or $0.02 per Share, of non-cash income related to the fair value adjustment of the embedded derivative in the preferred shares.  FFO results for the year ended December 31, 2019, included $12.0 million, or $0.10 per Share, of gains related to the sale of non-depreciable real estate assets and $17.9 million, or $0.15 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, "We continue to capture strong demand for apartment housing across our Sunbelt markets.  Improving job growth and in-migration trends, that are higher than national trends, continue to support solid occupancy and positive rent growth in our portfolio.  We carry good momentum into 2021 and continue to believe that we are early in a multiyear recovery cycle. 

Calendar year 2020 demonstrated, once again, the full-cycle and resilient performance profile of our strategy.  Our team delivered exceptional service, results and support to our residents, associates and shareholders, while also supporting over 8,000 households impacted by COVID job loss with interest free rent deferral, waived fees and lease termination options."    

Fourth Quarter 2020 Highlights

• Property revenues from the Same Store Portfolio increased 1.8% during the fourth quarter of 2020 as compared to the same period in the prior year.  Results were driven by a 1.3% growth in Average Effective Rent per Unit for the Same Store Portfolio.
• Property operating expenses for the Same Store Portfolio increased 6.9% during the fourth quarter of 2020 as compared to the same period in the prior year.  Growth in real estate taxes, utility costs, insurance expenses, and personnel costs drove the majority of the increase. 
• Net Operating Income, or NOI, from the Same Store Portfolio decreased 0.9% during the fourth 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 fourth quarter of 2020 was 46.1% on a rolling twelve month basis.
• MAA completed redevelopment of 911 apartment homes during the fourth quarter of 2020, bringing the total units redeveloped during the year ended December 31, 2020 to 4,211 homes, capturing average rental rate increases of approximately 9.5% above non-renovated units. 
• The company's initiative focused on installation of new Smart Home technology at select apartment communities continued in the fourth quarter of 2020 with 23,950 unit installations completed during the year ended December 31, 2020.
• During the fourth quarter of 2020, MAA closed on the pre-purchase of a 317-unit multifamily apartment community development, Novel Val Vista, located in the Phoenix, Arizona market and began development of the property.
• In addition, MAA started development of MAA Windmill Hill, a new 350-unit apartment community located in Austin, TX, during the fourth quarter of 2020.
• As of the end of the fourth quarter of 2020, MAA had eight properties under development, representing 2,607 units once complete, with a total projected cost of $595.0 million and an estimated $259.4 million remaining to be funded.
• During the fourth quarter of 2020, MAA completed the initial lease-up of The Greene in the Greenville, South Carolina market.
• As of the end of the fourth quarter of 2020, MAA had one property in its initial lease-up with physical occupancy of 79.8%.  That property is expected to stabilize in the second quarter of 2021.

COVID-19 Developments
MAA believes the best way it can continue to help its residents is to work with those who have lost wages or compensation due to the COVID-19 pandemic so that they can remain in their homes. During 2020, MAA supported our impacted residents in need of assistance by:

• Providing interest-free rent deferral (assisting over 8,000 households)
• Waiving late payment fees
• Waiving lease termination fees

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

MAA continues to support its associates with enhanced leave and sick time policies, enhanced flextime arrangements and additional COVID-19 paid time off, among other benefits. MAA continues to monitor and comply with the various federal, state and local laws, orders and directives issued in response to the COVID-19 pandemic that affect apartment owners and operators.

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 1.8% during the fourth quarter of 2020 was primarily a result of a 1.3% increase in Average Effective Rent per Unit, as compared to the same period in the prior year. Average Physical Occupancy for the Same Store Portfolio was 95.7% for the fourth quarter of 2020, as compared to 95.6% in the same period in the prior year.  Property operating expenses for the Same Store Portfolio increased 6.9% for the fourth quarter of 2020 as compared to the same period in the prior year.  Growth in real estate taxes, utility costs, insurance expenses, and personnel costs drove the majority of the increase. The rollout of the new high-speed bulk cable internet package contributed 0.6% in revenue growth and 1.3% in expense growth for the Same Store Portfolio during the fourth quarter of 2020.  The expense associated with the high-speed bulk cable internet package is reflected in Utilities in Same Store Portfolio Property Operating Expenses presented on page S-3 of the supplemental data schedules. These changes resulted in a Same Store NOI decrease of 0.9% for the fourth quarter of 2020 as compared to the same period in the prior year.  Through February 1, 2021, Same Store Portfolio rent cash collections, represented 99.2% of billed residential rent for the fourth quarter of 2020.  Same Store Portfolio lease pricing for leases effective during the fourth quarter of 2020 as compared to the prior lease decreased 2.5% for new leases, increased 5.2% for renewing leases and increased 0.8% for both new and renewing leases on a combined basis.

The Same Store Portfolio revenue growth of 2.5% during the year ended December 31, 2020 was primarily a result of a 2.6% increase in Average Effective Rent per Unit, as compared to the prior year.  Lease pricing 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 1.3% during the year ended December 31, 2020.  Average Physical Occupancy for the Same Store Portfolio was 95.6% for the year ended December 31, 2020, as compared to 95.9% for the prior year.  Property operating expenses for the Same Store Portfolio increased 4.9% for the year ended December 31, 2020 as compared to the prior year. The rollout of the new high-speed bulk cable internet package contributed 0.6% in revenue growth and 0.4% in expense growth for the Same Store Portfolio during the year ended December 31, 2020. These changes resulted in Same Store NOI growth of 1.2% for the year ended December 31, 2020 as compared to 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 fourth quarter of 2020, MAA had eight development communities under construction.  MAA expects to complete construction of five of these development communities in 2021, two in 2022 and one in 2023.  Total development costs for the eight communities are projected to be $595.0 million, of which an estimated $259.4 million remained to be funded as of the end of the fourth quarter of 2020.  The expected average stabilized NOI yield on these communities is 6.1%. During the fourth quarter of 2020, MAA funded $103.9 million of costs for current and future projects, including the purchase of a land parcel located in the Denver, Colorado market and a pre-purchase development located in the Phoenix, Arizona market, both of which are referenced below.

As of the end of the fourth quarter of 2020, MAA had one apartment community, with 168 units, remaining in initial lease-up: Copper Ridge II, located in Ft. Worth, Texas.  Physical occupancy for this lease-up project was 79.8% at the end of the fourth quarter of 2020.

Acquisition and Disposition Activity
In November 2020, MAA acquired a 27-acre land parcel located in the Denver, Colorado market for future development.

In December 2020, MAA closed on a pre-purchase of a 317-unit multifamily apartment community development located in the Phoenix, Arizona market. 

Property Redevelopment and Repositioning Activity
MAA continued its interior redevelopment program at select apartment communities throughout the portfolio.  During the fourth quarter of 2020, MAA redeveloped the interior of 911 units, bringing the total units renovated during the year ended December 31, 2020 to 4,211 at an average cost of $6,201 per unit, achieving average rental rate increases of approximately 9.5% above non-renovated units.

MAA continued its Smart Home technology initiative (mobile control of lights, thermostat and security, as well as leak monitoring) at select apartment communities.  During the fourth quarter of 2020, 2,066 units were installed, bringing the total units installed during the year ended December 31, 2020 to 23,950 at an average cost of $1,376 per unit, achieving an average rental rate increase of approximately $25 per unit. 

During the fourth 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 fourth quarter of 2020, repositioning work continued at eight of these properties.  For the year ended December 31, 2020, MAA spent $13.0 million on this program.

Capital Expenditures
Recurring capital expenditures totaled $21.0 million for the fourth quarter of 2020, or approximately $0.18 per Share, as compared to $14.3 million, or $0.12 per Share, for the same period in the prior year.  These expenditures led to Core Adjusted Funds from Operations, or Core AFFO, of $1.47 per Share for the fourth quarter of 2020, compared to $1.54 per Share for the same period in the prior year.

Redevelopment, revenue enhancing, commercial and other capital expenditures during the fourth quarter of 2020 were $65.6 million, as compared to $27.8 million for the same period in the prior year. These expenditures led to Funds Available for Distribution, or FAD, of $108.9 million for the fourth quarter of 2020, compared to $153.9 million for the same period in the prior year.

Recurring capital expenditures totaled $80.4 million for the year ended December 31, 2020, or approximately $0.68 per Share, as compared to $72.8 million, or $0.62 per Share, for the prior year.  These expenditures led to Core AFFO of $5.75 per Share for the year ended December 31, 2020, compared to $5.64 per Share for the prior year.

Redevelopment, revenue enhancing, commercial and other capital expenditures during the year ended December 31, 2020 were $145.1 million, as compared to $117.4 million for the prior year. These expenditures led to FAD of $535.8 million for the year ended December 31, 2020, compared to $549.0 million for 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 December 31, 2020, MAA had $849.8 million of combined cash and available capacity under MAA's operating partnership's (Mid-America Apartments, L.P., referred to as MAALP or the Operating Partnership) unsecured revolving credit facility, net of commercial paper borrowings.

Dividends and distributions paid on shares of common stock and noncontrolling interests during the fourth quarter of 2020 were $118.6 million, as compared to $113.6 million for the same period in the prior year.

Balance Sheet
As of December 31, 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 $4.6 billion with an average effective interest rate of approximately 3.6%;
• 96.2% of total debt was fixed against rising interest rates for an average of approximately 7.7 years; and
• Unencumbered NOI was 93.4% of total NOI.

108th Consecutive Quarterly Common Dividend Declared
MAA declared its 108th consecutive quarterly common dividend, which was paid on January 29, 2021 to holders of record on January 15, 2021.  The current annual dividend rate is $4.10 per common share, an increase of 2.5% from the prior year's annual rate of $4.00.      

2021 Net Income per Diluted Common Share, Core FFO per Share and Core AFFO per Share Guidance
MAA is providing initial 2021 guidance for Net income per diluted common share, as well as Core FFO per Share, and Core AFFO per Share.  MAA expects to update its 2021 Net income per diluted common share, Core FFO per Share and Core AFFO per Share guidance on a quarterly basis.

FFO, Core FFO and Core AFFO are non-GAAP measures. Acquisition and disposition activity materially affects depreciation and capital gains or losses, which combined, generally represent the majority of the difference between Net income available for common shareholders and FFO. As discussed in the definitions of non-GAAP measures found later in this release, MAA's definition of FFO is in accordance with the National Association of Real Estate Investment Trusts', or NAREIT's, definition, and Core FFO represents FFO further adjusted for items that are not considered part of MAA's core business operations.  MAA believes that Core FFO is helpful in understanding operating performance in that Core FFO excludes not only depreciation expense of real estate assets and certain other non-routine items, but it also excludes certain items that by their nature are not comparable over periods and therefore tend to obscure actual operating performance.

MAA expects Core FFO for the first quarter of 2021 to be in the range of $1.51 to $1.67 per Share, or $1.59 per Share at the midpoint. MAA does not forecast Net income per diluted share on a quarterly basis as MAA cannot accurately predict the timing of forecasted acquisition and disposition activity within a particular quarter (rather than during the course of the full year).

Supplemental Material and Conference Call
Supplemental data to this release can be found on the "For Investors" page of our website at www.maac.com.  MAA will host a conference call to further discuss fourth quarter results on Thursday, February 4, 2021, at 9:00 AM Central Time.  The conference call-in number is 877-830-2598.  You may also join the live webcast of the conference call by accessing the "For Investors" page of 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 December 31, 2020, MAA had ownership interest in 102,772 apartment units, including communities currently in development, across 16 states and the District of Columbia. For further details, please visit the MAA website at www.maac.com or contact Investor Relations at investor.relations@maac.com, or via mail at MAA, 6815 Poplar Ave., Suite 500, Germantown, TN 38138, Attn: Investor Relations.

Forward-Looking Statements
Sections of this release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future.  Such forward-looking statements include, without limitation, statements regarding the potential impact of the ongoing 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," "budget," "target," "outlook," "guidance" and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, as described below, which may cause our actual results, performance or achievements to be materially different from the results of operations, financial conditions or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such forward-looking statements included in this release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

The following factors, among others, could cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements:

• the COVID-19 pandemic and measures taken or that may be taken by federal, state and local governmental authorities to combat the spread of the disease; 
• inability to generate sufficient cash flows due to unfavorable economic and market conditions, changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws, or other factors;
• exposure to risks inherent in investments in a single industry and sector;
• adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets which we may seek to enter in the future, limitations on our ability to increase or collect rental rates, competition, our ability to identify and consummate attractive acquisitions or development projects on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns;
• failure of development communities to be completed within budget and on a timely basis, if at all, to lease-up as anticipated or to achieve anticipated results;
• unexpected capital needs;
• material changes in operating costs, including real estate taxes, utilities and insurance costs;
• inability to obtain appropriate insurance coverage at reasonable rates, or at all, or losses from catastrophes in excess of our insurance coverage;
• ability to obtain financing at favorable rates, if at all, or refinance existing debt as it matures;
• level and volatility of interest or capitalization rates or capital market conditions;
• the effect of any rating agency actions on the cost and availability of new debt financing;
• 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 change in the mortgage financing market or other factors that would cause single-family housing or other alternative housing options, either as an owned or rental product, to become a more significant competitive product;
• 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 other public health events;
• legal proceedings or class action lawsuits;
• impact of reputational harm caused by negative press of MAA's actions or policies, whether or not warranted;
• compliance costs associated with numerous federal, state and local laws and regulations; and 
• other risks identified in this release and in reports we file with the SEC or in other documents that we publicly disseminate.

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