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/2019 Acquisition Activity & Disposition Activity (Through September 30, 2019)

S-8

Investments in Unconsolidated Real Estate Entities

S-9

Debt and Debt Covenants as of September 30, 2019

S-10

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

S-12

Credit Ratings/Common Stock/Investor Relations Data

S-13

 

 

 


 

OVERVIEW

 

MAA REPORTS THIRD QUARTER RESULTS

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

 

Net Income Available for Common Shareholders

For the quarter ended September 30, 2019, net income available for MAA common shareholders was $77.7 million, or $0.68 per diluted common share, compared to $51.9 million, or $0.46 per diluted common share, for the quarter ended September 30, 2018. Results for the quarter ended September 30, 2019 included $15.5 million, or $0.14 per diluted common share, of non-cash income related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares and $3.5 million, or $0.03 per diluted common share, of non-cash income, net of tax, related to an unrealized gain recognized by an unconsolidated affiliate.  Results for the quarter ended September 30, 2018 included negligible non-cash expense related to the embedded derivative in the preferred shares and the unconsolidated affiliate.

 

For the nine months ended September 30, 2019, net income available for MAA common shareholders was $201.5 million, or $1.77 per diluted common share, compared to $158.9 million, or $1.40 per diluted common share, for the nine months ended September 30, 2018. Results for the nine months ended September 30, 2019 included $19.6 million, or $0.17 per diluted common share, of non-cash income related to the embedded derivative in the preferred shares, $10.2 million, or $0.09 per diluted common share, of gains related to the sale of real estate assets and $3.2 million, or $0.03 per diluted common share, of non-cash income, net of tax, related to an unrealized gain recognized by an unconsolidated affiliate. Results for the nine months ended September 30, 2018 included $4.4 million, or $0.04 per diluted common share, of income related to the settlement of an executive life insurance policy claim and $3.8 million, or $0.03 per diluted common share, of gains related to the sale of real estate assets. Non-cash expense related to the embedded derivative in the preferred shares and the unconsolidated affiliate was negligible for the nine months ended September 30, 2018.

 

Funds from Operations (FFO)

For the quarter ended September 30, 2019, FFO was $202.9 million, or $1.72 per diluted common share and unit, or per Share, compared to $177.2 million, or $1.50 per Share, for the quarter ended September 30, 2018. Results for the quarter ended September 30, 2019 included $15.5 million, or $0.13 per Share, of non-cash income related to the embedded derivative in the preferred shares and $3.5 million, or $0.03 per Share, of non-cash income, net of tax, related to an unrealized gain recognized by an unconsolidated affiliate.   The impact to FFO for the three months ended September 30, 2019 relating to the non-cash income items totaled $0.16 per Share.  Results for the quarter ended September 30, 2018 included negligible non-cash expense related to the embedded derivative in the preferred shares and the unconsolidated affiliate.

 

For the nine months ended September 30, 2019, FFO was $575.0 million, or $4.87 per Share, compared to $529.7 million, or $4.49 per Share, for the nine months ended September 30, 2018.  Results for the nine months ended September 30, 2019 included $19.6 million, or $0.17 per Share, of non-cash income related to the embedded derivative in the preferred shares, $9.3 million, or $0.08 per Share, of gains related to the sale of non-depreciable real estate assets and $3.2 million, or $0.03 per Share, of non-cash income, net of tax, related to an unrealized gain recognized by an unconsolidated affiliate. Results for the nine months ended September 30, 2018 included $4.4 million, or $0.04 per Share, of income related to the settlement of an executive life insurance policy claim and $3.8 million, or $0.03 per Share, of gains related to the sale of real estate assets. Non-cash expense related to the embedded derivative in the preferred shares and the unconsolidated affiliate was negligible for the nine months ended September 30, 2018.

 

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

 

Eric Bolton, Chairman and Chief Executive Officer, said, “Improving trends in rent growth and solid occupancy reflect continued favorable leasing conditions across our well-diversified Sunbelt portfolio.  Better than expected results in the third quarter support our ability to again increase performance expectations for the year.  We are encouraged with the leasing activity and results captured over the busy summer leasing season and the momentum being carried into next year.”

 

Highlights

 

Property revenues from the Same Store Portfolio increased 4.0% during the third quarter of 2019 as compared to the same period in the prior year, which was an 80 basis point improvement from the performance in the second quarter of 2019.  Results were driven by a 3.9% growth in Average Effective Rent per Unit for the Same Store Portfolio and continued strong Average Physical Occupancy for the Same Store Portfolio of 96.1%.

 

Property operating expenses for the Same Store Portfolio increased 3.2% during the third quarter of 2019 as compared to the same period in the prior year.

1


 

Net Operating Income, or NOI, from the Same Store Portfolio increased 4.5% during the third quarter of 2019 as compared to the same period in the prior year.

 

Strong demand for apartment housing continues to support low resident turnover as resident move outs for the Same Store Portfolio for the third quarter of 2019 remained low at 47.4% on a rolling twelve month basis.

 

As of the end of the third quarter of 2019, MAA had six development projects under construction, containing 1,686 units, with a total projected cost of $389.5 million and an estimated $282.8 million remaining to be funded.

 

As of the end of the third quarter of 2019, MAA had three properties in their initial lease-up, and physical occupancy for the lease-up portfolio averaged 82.8%.  One property is expected to stabilize in the fourth quarter of 2019, and the other two properties are expected to stabilize over the first half of 2020.

 

During the nine months ended September 30, 2019, MAA completed renovation of 6,596 units under its redevelopment program, achieving average rental rate increases of 9.8% above non-renovated units.  

 

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 4.0% during the third quarter of 2019 was primarily a result of a 3.9% 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 4.9% during the third quarter of 2019, a 190 basis point improvement over the performance from the same period in the prior year.  Average Physical Occupancy for the Same Store Portfolio was strong at 96.1% for the third quarter of 2019, a slight increase from the 96.0% in the same period in the prior year.  Property operating expenses increased 3.2% for the third quarter of 2019 as compared to the same period in the prior year, primarily driven by a 4.3% increase in real estate property taxes and a 6.6% increase in building repair and maintenance expense. This resulted in Same Store NOI growth of 4.5% for the third quarter of 2019 as compared to the same period in the prior year.

 

The Same Store Portfolio revenue growth of 3.2% during the nine months ended September 30, 2019 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.  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 4.7% during the nine months ended September 30, 2019, a 200 basis point improvement over the performance from the same period in the prior year.  Average Physical Occupancy for the Same Store Portfolio was strong at 96.0% for the nine months ended September 30, 2019, a slight decrease from 96.1% in the same period in the prior year.  Property operating expenses increased 3.0% for the nine months ended September 30, 2019 as compared to the same period in the prior year, primarily driven by a 5.0% increase in real estate property taxes. This resulted in Same Store NOI growth of 3.4% for the nine months ended September 30, 2019 as compared to the same period in the prior year.

 

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

 

Development and Lease-up Activity

As of the end of the third quarter of 2019, MAA had six development communities under construction.  Total development costs for the six communities are projected to be $389.5 million, of which an estimated $282.8 million remained to be funded as of the end of the third quarter of 2019.  The expected average stabilized NOI yield on these communities is 6.2%. During the third quarter of 2019, MAA funded $30.9 million of construction costs on current and completed development projects.  MAA expects to complete one of these developments in the fourth quarter of 2019, one development in the first half of 2020, one in the second half of 2020, one in the first half of 2021 and two in the second half of 2021.

 

As of the end of the third quarter of 2019, MAA had three apartment communities, containing a total of 657 units, remaining in initial lease-up: Post Centennial Park, located in Atlanta, Georgia; 1201 Midtown II, located in Charleston, South Carolina and Sync 36 II, located in Denver, Colorado.  Physical occupancy for these lease-up projects averaged 82.8% at the end of the third quarter of 2019.

 

Acquisition and Disposition Activity

In August 2019, MAA acquired 14,941 square feet of multi-tenant retail space located at MAA’s 220 Riverside apartment community in Jacksonville, Florida.

 

In October 2019, a consolidated real estate entity owned by MAA and a private real estate company acquired a 25 acre land parcel located in Orlando, Florida.   Predevelopment work is underway with a development start date expected during the fourth quarter of 2019.

 

In October 2019, MAA closed on the disposition of a 45 acre land parcel located in the Gulf Shores, Alabama market for net proceeds of $5.5 million, resulting in an expected gain on sale of non-depreciable real estate assets of approximately $3 million that will be recorded in the fourth quarter of 2019.

2


 

In October 2019, MAA closed on the disposition of Ridge at Chenal Valley, a 312 unit apartment community located in the Little Rock, Arkansas market resulting in an expected net gain on sale of approximately $20 million that will be recorded in the fourth quarter of 2019.

 

Redevelopment Activity

MAA continues its redevelopment program at select apartment communities throughout the portfolio.  During the third quarter of 2019, MAA redeveloped the interiors of 2,732 units at an average cost of $5,631 per unit, bringing the total units renovated during the nine months ended September 30, 2019 to 6,596 at an average cost of $5,748 per unit.  MAA expects a total of 7,500 to 8,500 units to be redeveloped in 2019, achieving average rental rate increases of approximately 9% to 10% above non-renovated units.

 

Capital Expenditures

Recurring capital expenditures totaled $21.5 million for the third quarter of 2019, or approximately $0.19 per Share, as compared to $21.7 million, or $0.18 per Share, for the same period in the prior year.  These expenditures led to Adjusted Funds from Operations, or AFFO, of $1.53 per Share for the third quarter of 2019, compared to $1.32 per Share for the same period in the prior year.

 

Redevelopment, revenue enhancing, commercial and other capital expenditures during the third quarter of 2019 were $33.9 million, as compared to $31.6 million for the same period in the prior year. These expenditures led to Funds Available for Distribution, or FAD, of $147.4 million for the third quarter of 2019, compared to $124.0 million for the same period in the prior year.

 

Recurring capital expenditures totaled $58.5 million for the nine months ended September 30, 2019, or approximately $0.50 per Share, as compared to $56.1 million, or $0.47 per Share, for the same period in the prior year.  These expenditures led to AFFO of $4.37 per Share for the nine months ended September 30, 2019, compared to $4.02 per Share for the same period in the prior year.

 

Redevelopment, revenue enhancing, commercial and other capital expenditures during the nine months ended September 30, 2019 were $89.6 million, as compared to $93.9 million for the same period in the prior year. These expenditures led to FAD of $426.9 million for the nine months ended September 30, 2019, compared to $379.8 million for the same period in the prior year.

 

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

 

Financing Activities

In August 2019, MAA's operating partnership, Mid-America Apartments, L.P. (referred to as MAALP or the Operating Partnership), issued $250.0 million of 3.950% senior unsecured notes due in 2029 with a reoffer yield of 2.985%.  These senior unsecured notes were issued as additional notes under the same indenture and supplemental indenture pursuant to which MAALP issued $300.0 million of 3.950% senior unsecured notes due in 2029 in the first quarter of 2019. The additional senior unsecured notes issued during the third quarter of 2019 will be treated as a single series of securities and will have the same CUSIP number as the notes issued in the first quarter of 2019.

 

In August 2019, the Company retired a $150.0 million unsecured term loan and a $13.2 million secured property mortgage before maturity.

 

As of September 30, 2019, MAA had approximately $823.0 million of combined cash and available capacity under MAALP's unsecured revolving credit facility, net of commercial paper borrowings.

 

Dividends and distributions paid on shares of common stock and noncontrolling interests during the third quarter of 2019 were $113.4 million, as compared to $108.6 million for the same period in the prior year.

 

Balance Sheet

As of September 30, 2019:

 

Total debt to adjusted total assets (as defined in the covenants for the bonds issued by MAALP) was 31.6%;

 

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

 

92.2% of total debt was fixed or hedged against rising interest rates for an average of approximately 7.6 years; and

 

Unencumbered NOI was 90.6% of total NOI, as compared to 92.6% as of December 31, 2018.

 

103rd Consecutive Quarterly Common Dividend Declared

MAA declared its 103rd consecutive quarterly common dividend, which will be paid on October 31, 2019 to holders of record on October 15, 2019.  The current annual dividend rate is $3.84 per common share.  

3


 

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

MAA is updating and increasing prior 2019 guidance for Net income per diluted common share, as well as FFO per Share and AFFO per Share.  FFO and AFFO are non-GAAP measures.  Acquisition and disposition activity materially affects depreciation and capital gains or losses, which combined, generally represent the majority of the difference between Net income available for common shareholders and FFO.  As outlined in the definitions of non-GAAP measures accompanying this release, MAA's definition of FFO is in accordance with the National Association of Real Estate Investment Trusts', or NAREIT's, definition. MAA believes that FFO is helpful in understanding operating performance in that FFO excludes depreciation expense of real estate assets and certain other non-routine items.

 

Net income per diluted common share is expected to be in the range of $2.97 to $3.05 per diluted common share, or $3.01 per diluted common share at the midpoint, for the full year of 2019.  FFO per Share for the year is expected to be in the range of $6.46 to $6.54 per Share, or $6.50 per Share at the midpoint.  AFFO per Share for the year is expected to be in the range of $5.82 to $5.90 per Share, or $5.86 per Share at the midpoint.  MAA expects FFO for the fourth quarter of 2019 to be in the range of $1.59 to $1.67 per Share, or $1.63 per Share at the midpoint, excluding any impact of the fair value adjustment of the embedded derivative in the preferred shares or any gain or loss recognized by unconsolidated affiliates, which MAA does not forecast.  MAA does not forecast Net income per diluted share on a quarterly basis as it is not reasonable to accurately predict the timing of forecasted acquisition and disposition activity within a particular quarter (rather than during the course of the full year).

 

Supplemental Material and Conference Call

Supplemental data to this release can be found under the "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 third quarter results Thursday, October 31, 2019, at 9:00 AM Central Time.  The conference call-in number is 877-830-2596.  You may also join the live webcast of the conference call by accessing the "For Investors" page of our website at www.maac.com.  MAA's filings with the Securities and Exchange Commission, or SEC, are filed under the registrant names of Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P.

 

About MAA

MAA, an S&P 500 company, is a real estate investment trust, or REIT, focused on delivering full-cycle and superior investment performance for shareholders through the ownership, management, acquisition, development and redevelopment of quality apartment communities in the Southeast, Southwest, and Mid-Atlantic regions of the United States.  As of September 30, 2019, MAA had ownership interest in 102,629 apartment units, including communities currently in development, across 17 states and the District of Columbia. For further details, please visit the MAA website at www.maac.com or contact Investor Relations at 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 concerning forecasted operating performance and results, property acquisitions and dispositions, joint venture activity, development and renovation activity as well as other capital expenditures, capital raising activities, rent and expense growth, occupancy, financing activities, and interest rate and other economic expectations. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, as described below, which may cause our actual results, performance or achievements to be materially different from the results of operations, financial conditions or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such forward-looking statements included in this release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

 

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

 

inability to generate sufficient cash flows due to market conditions, changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws, or other factors;

 

exposure, as a multifamily focused REIT, to risks inherent in investments in a single industry and sector;

 

adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets which we may seek to enter in the future, limitations on

4


 

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 purposes, the ability of our taxable REIT subsidiaries to maintain their status as such for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;

 

inability to attract and retain qualified personnel;

 

cyber liability or potential liability for breaches of our privacy or information security systems, or business operations disruptions;

 

potential liability for environmental contamination;

 

adverse legislative or regulatory tax changes;

 

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

 

compliance costs associated with laws requiring access for disabled persons or similar regulatory requirements; and

 

other risks identified in this press release and, from time to time, in reports we file with the SEC or in other documents that we publicly disseminate.

 

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

 

 

5


FINANCIAL HIGHLIGHTS

 

Dollars in thousands, except per share data

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

 

 

2018

 

Rental and other property revenues

 

$

415,632

 

 

$

397,108

 

 

$

1,224,200

 

 

 

 

$

1,173,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for MAA common shareholders

 

$

77,723

 

 

$

51,869

 

 

$

201,456

 

 

 

 

$

158,851

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total NOI (1)

 

$

256,093

 

 

$

242,368

 

 

$

761,142

 

 

 

 

$

725,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.68

 

 

$

0.46

 

 

$

1.77

 

 

 

 

$

1.40

 

Diluted

 

$

0.68

 

 

$

0.46

 

 

$

1.77

 

 

 

 

$

1.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from operations per Share - diluted: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO (1)(3)

 

$

1.72

 

 

$

1.50

 

 

$

4.87

 

 

 

 

$

4.49

 

AFFO (1)(3)

 

$

1.53

 

 

$

1.32

 

 

$

4.37

 

 

 

 

$

4.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.9600

 

 

$

0.9225

 

 

$

2.8800

 

 

 

 

$

2.7675

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends/ FFO (diluted) payout ratio

 

 

55.8

%

 

 

61.5

%

 

 

59.1

%

 

 

 

 

61.6

%

Dividends/ AFFO (diluted) payout ratio

 

 

62.7

%

 

 

69.9

%

 

 

65.9

%

 

 

 

 

68.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated interest expense

 

$

44,513

 

 

$

44,650

 

 

$

136,149

 

 

 

 

$

129,140

 

Mark-to-market debt adjustment

 

 

51

 

 

 

2,815

 

 

 

222

 

 

 

 

 

8,667

 

Debt discount and debt issuance cost amortization

 

 

(1,288

)

 

 

(1,467

)

 

 

(4,928

)

 

 

 

 

(4,351

)

Capitalized interest

 

 

754

 

 

 

357

 

 

 

1,847

 

 

 

 

 

1,640

 

Total interest incurred

 

$

44,030

 

 

$

46,355

 

 

$

133,290

 

 

 

 

$

135,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of principal on notes payable

 

$

1,796

 

 

$

2,617

 

 

$

5,468

 

 

 

 

$

7,907

 

 

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

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

(3) Results for the three and nine months ended September 30, 2019 included a total of $0.16 per Share and $0.20 per Share, respectively, of non-cash income related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares and an unrealized gain, net of tax, recognized by an unconsolidated affiliate.  Results for the three and nine months ended September 30, 2018 included negligible non-cash expense related to both the embedded derivative in the preferred shares and the unconsolidated affiliate.

 

 

6


FINANCIAL HIGHLIGHTS (CONTINUED)

 

Dollars in thousands, except share price

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Gross Assets (1)

 

$

14,162,984

 

 

$

13,873,068

 

Gross Real Estate Assets (1)

 

$

13,967,776

 

 

$

13,735,247

 

Total debt

 

$

4,476,114

 

 

$

4,528,328

 

Common shares and units outstanding

 

 

118,140,136

 

 

 

117,955,568

 

Share price

 

$

130.01

 

 

$

95.70

 

Book equity value

 

$

6,250,266

 

 

$

6,381,603

 

Market equity value

 

$

15,359,399

 

 

$

11,288,348

 

Net Debt/Recurring Adjusted EBITDAre (2) (3)

 

4.73x

 

 

4.99x

 

 

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

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

(3) Recurring Adjusted EBITDAre for the trailing twelve months ended September 30, 2019 included the impact of the non-cash income related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares and an unrealized gain, net of tax, recognized by an unconsolidated affiliate.  The inclusion of the non-cash income items lowered Net Debt/Recurring Adjusted EBITDAre by 11 basis points for the trailing twelve months ended September 30, 2019.  The non-cash expense related to the embedded derivative in the preferred shares and the unconsolidated affiliate for the trailing twelve months ended December 31, 2018 had a negligible impact to Net Debt/Recurring Adjusted EBITDAre.

 

 

 

 

7


 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

Dollars in thousands, except per share data

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

415,632

 

 

$

397,108

 

 

$

1,224,200

 

 

$

1,173,198

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expense, excluding real estate taxes and insurance

 

 

100,319

 

 

 

97,703

 

 

 

286,284

 

 

 

279,831

 

Real estate taxes and insurance

 

 

59,220

 

 

 

57,037

 

 

 

176,774

 

 

 

168,043

 

Depreciation and amortization

 

 

124,684

 

 

 

124,549

 

 

 

371,417

 

 

 

368,218

 

Total property operating expenses

 

 

284,223

 

 

 

279,289

 

 

 

834,475

 

 

 

816,092

 

Property management expenses

 

 

13,899

 

 

 

11,303

 

 

 

41,195

 

 

 

35,579

 

General and administrative expenses

 

 

11,485

 

 

 

6,380

 

 

 

35,236

 

 

 

25,723

 

Merger and integration related expenses

 

 

 

 

 

1,878

 

 

 

 

 

 

8,503

 

Interest expense

 

 

44,513

 

 

 

44,650

 

 

 

136,149

 

 

 

129,140

 

(Gain) loss on sale of depreciable real estate assets

 

 

(1,000

)

 

 

23

 

 

 

(987

)

 

 

21

 

Gain on sale of non-depreciable real estate assets

 

 

 

 

 

(959

)

 

 

(9,260

)

 

 

(3,870

)

Other non-operating income

 

 

(20,060

)

 

 

(374

)

 

 

(25,770

)

 

 

(6,065

)

Income before income tax expense

 

 

82,572

 

 

 

54,918

 

 

 

213,162

 

 

 

168,075

 

Income tax expense

 

 

(1,491

)

 

 

(616

)

 

 

(2,814

)

 

 

(1,826

)

Income from continuing operations before real estate joint venture         activity

 

 

81,081

 

 

 

54,302

 

 

 

210,348

 

 

 

166,249

 

Income from real estate joint venture

 

 

378

 

 

 

402

 

 

 

1,210

 

 

 

1,256

 

Net income

 

 

81,459

 

 

 

54,704

 

 

 

211,558

 

 

 

167,505

 

Net income attributable to noncontrolling interests

 

 

2,814

 

 

 

1,913

 

 

 

7,336

 

 

 

5,888

 

Net income available for shareholders

 

 

78,645

 

 

 

52,791

 

 

 

204,222

 

 

 

161,617

 

Dividends to MAA Series I preferred shareholders

 

 

922

 

 

 

922

 

 

 

2,766

 

 

 

2,766

 

Net income available for MAA common shareholders

 

$

77,723

 

 

$

51,869

 

 

$

201,456

 

 

$

158,851

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.68

 

 

$

0.46

 

 

$

1.77

 

 

$

1.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.68

 

 

$

0.46

 

 

$

1.77

 

 

$

1.40

 

 

 

 

8


 

SHARE AND UNIT DATA

 

Shares and units in thousands

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net Income Shares (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - basic

 

 

113,877

 

 

 

113,671

 

 

 

113,814

 

 

 

113,620

 

Effect of dilutive securities

 

 

260

 

 

 

239

 

 

 

238

 

 

 

201

 

Weighted average common shares - diluted

 

 

114,137

 

 

 

113,910

 

 

 

114,052

 

 

 

113,821

 

Funds From Operations Shares And Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares and units - basic

 

 

117,958

 

 

 

117,795

 

 

 

117,910

 

 

 

117,768

 

Weighted average common shares and units - diluted

 

 

118,151

 

 

 

117,970

 

 

 

118,104

 

 

 

117,939

 

Period End Shares And Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common shares at September 30,

 

 

114,066

 

 

 

113,838

 

 

 

114,066

 

 

 

113,838

 

Operating Partnership units at September 30,

 

 

4,074

 

 

 

4,114

 

 

 

4,074

 

 

 

4,114

 

Total common shares and units at September 30,

 

 

118,140

 

 

 

117,952

 

 

 

118,140

 

 

 

117,952

 

 

(1) For additional information on the calculation of diluted common shares and earnings per common share, please refer to the Notes to Condensed Consolidated Financial Statements in MAA's Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019, expected to be filed with the SEC on or about October 31, 2019.

 

 

9


 

CONSOLIDATED BALANCE SHEETS

 

Dollars in thousands

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

1,898,509

 

 

$

1,868,828

 

Buildings and improvements and other

 

 

11,825,934

 

 

 

11,670,216

 

Development and capital improvements in progress

 

 

101,469

 

 

 

59,506

 

 

 

 

13,825,912

 

 

 

13,598,550

 

Less: Accumulated depreciation

 

 

(2,906,677

)

 

 

(2,549,287

)

 

 

 

10,919,235

 

 

 

11,049,263

 

Undeveloped land

 

 

41,149

 

 

 

58,257

 

Investment in real estate joint venture

 

 

43,816

 

 

 

44,181

 

Real estate assets, net

 

 

11,004,200

 

 

 

11,151,701

 

Cash and cash equivalents

 

 

25,826

 

 

 

34,259

 

Restricted cash

 

 

16,856

 

 

 

17,414

 

Other assets

 

 

178,352

 

 

 

120,407

 

Assets held for sale

 

 

22,520

 

 

 

 

Total assets

 

$

11,247,754

 

 

$

11,323,781

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Unsecured notes payable

 

$

3,830,708

 

 

$

4,053,302

 

Secured notes payable

 

 

645,406

 

 

 

475,026

 

Accrued expenses and other liabilities

 

 

521,374

 

 

 

413,850

 

Total liabilities

 

 

4,997,488

 

 

 

4,942,178

 

Redeemable common stock

 

 

13,656

 

 

 

9,414

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock

 

 

9

 

 

 

9

 

Common stock

 

 

1,138

 

 

 

1,136

 

Additional paid-in capital

 

 

7,149,889

 

 

 

7,138,170

 

Accumulated distributions in excess of net income

 

 

(1,119,714

)

 

 

(989,263

)

Accumulated other comprehensive loss

 

 

(14,870

)

 

 

(212

)

Total MAA shareholders' equity

 

 

6,016,452

 

 

 

6,149,840

 

Noncontrolling interests - Operating Partnership units

 

 

213,547

 

 

 

220,043

 

Total Company's shareholders' equity

 

 

6,229,999

 

 

 

6,369,883

 

Noncontrolling interest - consolidated real estate entities

 

 

6,611

 

 

 

2,306

 

Total equity

 

 

6,236,610

 

 

 

6,372,189

 

Total liabilities and equity

 

$

11,247,754

 

 

$

11,323,781

 

 

 

 

10


 

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

 

Amounts in thousands, except per share and unit data

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income available for MAA common shareholders

 

$

77,723

 

 

$

51,869

 

 

$

201,456

 

 

$

158,851

 

Depreciation and amortization of real estate assets

 

 

123,171

 

 

 

123,230

 

 

 

366,704

 

 

 

364,541

 

(Gain) loss on sale of depreciable real estate assets

 

 

(1,000

)

 

 

23

 

 

 

(987

)

 

 

21

 

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

 

 

154

 

 

 

154

 

 

 

465

 

 

 

443

 

Net income attributable to noncontrolling interests

 

 

2,814

 

 

 

1,913

 

 

 

7,336

 

 

 

5,888

 

Funds from operations attributable to the Company (1)

 

 

202,862

 

 

 

177,189

 

 

 

574,974

 

 

 

529,744

 

Recurring capital expenditures

 

 

(21,543

)

 

 

(21,671

)

 

 

(58,461

)

 

 

(56,073

)

Adjusted funds from operations (1)

 

 

181,319

 

 

 

155,518

 

 

 

516,513

 

 

 

473,671

 

Redevelopment capital expenditures

 

 

(17,789

)

 

 

(16,718

)

 

 

(45,060

)

 

 

(41,147

)

Revenue enhancing capital expenditures

 

 

(8,215

)

 

 

(7,997

)

 

 

(26,067

)

 

 

(22,005

)

Commercial capital expenditures

 

 

(2,563

)

 

 

(2,236

)

 

 

(5,019

)

 

 

(6,575

)

Other capital expenditures

 

 

(5,330

)

 

 

(4,617

)

 

 

(13,494

)

 

 

(24,129

)

Funds available for distribution (1)

 

$

147,422

 

 

$

123,950

 

 

$

426,873

 

 

$

379,815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends and distributions paid

 

$

113,408

 

 

$

108,592

 

 

$

340,052

 

 

$

326,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - diluted

 

 

114,137

 

 

 

113,910

 

 

 

114,052

 

 

 

113,821

 

FFO weighted average common shares and units - diluted

 

 

118,151

 

 

 

117,970

 

 

 

118,104

 

 

 

117,939

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for common shareholders

 

$

0.68

 

 

$

0.46

 

 

$

1.77

 

 

$

1.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds from operations per Share - diluted (2)

 

$

1.72

 

 

$

1.50

 

 

$

4.87

 

 

$

4.49

 

Adjusted funds from operations per Share - diluted (2)

 

$

1.53

 

 

$

1.32

 

 

$

4.37

 

 

$

4.02

 

 

 

(1)

Results for the three and nine months ended September 30, 2019 included a total of $19.0 million and $22.8 million, respectively, of non-cash income related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares and an unrealized gain, net of tax, recognized by an unconsolidated affiliate.  Results for the three and nine months ended September 30, 2018 included negligible non-cash expense related to both the embedded derivative in the preferred shares and the unconsolidated affiliate.

 

 

(2)

Results for the three and nine months ended September 30, 2019 included a total of $0.16 per Share and $0.20 per Share, respectively, of non-cash income related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares and an unrealized gain, net of tax, recognized by an unconsolidated affiliate.  Results for the three and nine months ended September 30, 2018 included negligible non-cash expense related to both the embedded derivative in the preferred shares and the unconsolidated affiliate.  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11


 

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

 

Dollars in thousands

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

2019

 

 

June 30,

2019

 

 

September 30,

2018

 

 

September 30,

2019

 

 

September 30,

2018

 

Net Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store NOI

 

$

238,137

 

 

$

235,070

 

 

$

227,861

 

 

$

708,336

 

 

$

685,274

 

Non-Same Store NOI

 

 

17,956

 

 

 

18,178

 

 

 

14,507

 

 

 

52,806

 

 

 

40,050

 

Total NOI

 

 

256,093

 

 

 

253,248

 

 

 

242,368

 

 

 

761,142

 

 

 

725,324

 

Depreciation and amortization

 

 

(124,684

)

 

 

(123,944

)

 

 

(124,549

)

 

 

(371,417

)

 

 

(368,218

)

Property management expenses

 

 

(13,899

)

 

 

(13,454

)

 

 

(11,303

)

 

 

(41,195

)

 

 

(35,579

)

General and administrative expenses

 

 

(11,485

)

 

 

(10,598

)

 

 

(6,380

)

 

 

(35,236

)

 

 

(25,723

)

Merger and integration expenses

 

 

 

 

 

 

 

 

(1,878

)

 

 

 

 

 

(8,503

)

Interest expense