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MAA REPORTS THIRD QUARTER 2022 RESULTS

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Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), announced operating results for the quarter ended September 30, 2022.

Third Quarter 2022 Operating Results Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Earnings per common share – diluted $ 1.05 $ 0.73 $ 3.82 $ 3.01
Funds from operations (FFO) per Share – diluted $ 2.19 $ 1.85 $ 6.08 $ 5.19
Core FFO per Share – diluted $ 2.19 $ 1.78 $ 6.18 $ 5.11

A reconciliation of FFO and Core FFO to Net income available for MAA common shareholders, and discussion of the components of FFO and Core FFO, can be found later in this release. FFO per Share – diluted and Core FFO per Share – diluted include diluted common shares and units.

Eric Bolton, Chairman and Chief Executive Officer, said, “We continue to see strong demand for apartment housing across our Sunbelt markets as steady growth in jobs and wages, along with positive new household formations and migration trends across our markets, fuels a growing need for housing.  Our new development pipeline continues to expand as we work to respond to this growing demand. As evidenced by affordable rent-to-income ratios, strong rent payment performance, low resident turnover and strong occupancy, MAA is well-positioned as we head into the new calendar year.”

Highlights

Same Store Portfolio Operating Results
To ensure comparable reporting with prior periods, the Same Store Portfolio includes properties that were owned by MAA and stabilized at the beginning of the previous year.

Same Store Portfolio results for the three and nine months ended September 30, 2022 as compared to the same periods in the prior year are summarized below:

Three months ended September 30, 2022 vs. 2021 Nine months ended September 30, 2022 vs. 2021
Revenues Expenses (1) NOI Average
Effective Rent
per Unit
Revenues Expenses (1) NOI Average
Effective Rent
per Unit
Same Store Operating Growth 14.6 % 10.1 % 17.4 % 16.7 % 13.5 % 7.6 % 17.2 % 14.5 %
(1) Excludes $1.6 million in storm-related expenses related to Hurricane Ian that are recorded in Non-Same Store operating expenses.

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

Same Store Portfolio operating statistics for the three and nine months ended September 30, 2022 are summarized below:

Three months ended September 30, 2022 Nine months ended September 30, 2022 September 30, 2022
Average Effective Rent per
Unit
Average
Physical
Occupancy
Average Effective
Rent per Unit
Average Physical
Occupancy
Resident Turnover
Same Store Operating Statistics $ 1,614 95.8 % $ 1,537 95.8 % 45.6 %

Same Store Portfolio lease pricing for leases effective during the third quarter of 2022, as compared to the prior lease, increased 13.7% for leases to new move-in residents and increased 14.0% for renewing leases, which produced an increase of 13.9% for both new and renewing leases on a blended basis. The rent-to-resident-income relationship for new leases signed during the third quarter of 2022 remained consistent with recent trends in the range of 22%.

Same Store Portfolio lease pricing for leases effective during the nine months ended September 30, 2022, as compared to the prior lease, increased 15.7% for both leases to new move-in residents and renewing leases.

Acquisition and Disposition Activity
In July 2022, MAA acquired a stabilized 196-unit multifamily community located in the Tampa, Florida market for $73.0 million. In September 2022, MAA acquired a 344-unit multifamily community located in the Charlotte, North Carolina market for $140.0 million and expects the property to stabilize during the first quarter of 2023.

During the third quarter of 2022, MAA also acquired a six acre land parcel in the Denver, Colorado market for approximately $23 million.  MAA expects to begin multifamily development projects on four to six land parcels currently owned or under contract over the next 18 to 24 months.

During the third quarter of 2022, MAA closed on the disposition of a three acre land parcel located in the Huntsville, Alabama market.

In October 2022, MAA closed on the disposition of a 396-unit multifamily community in Maryland. MAA received gross proceeds of $103.5 million.

Development and Lease-up Activity
A summary of MAA’s development communities under construction as of the end of the third quarter of 2022 is set forth below (dollars in thousands):

Units as of Development Costs as of Expected Project
Total September 30, 2022 September 30, 2022 Completions By Year
Development Expected Spend Expected
Projects Total Delivered Leased Total to Date Remaining 2022 2023 2024
5 1,759 323 213 $ 444,000 $ 266,127 $ 177,873 1 3 1

The expected average stabilized NOI yield on these communities is 5.7%. During the third quarter of 2022, MAA funded $62.6 million of costs for current and planned projects, including predevelopment activities related to land parcels located in the Denver, Colorado market, the Tampa, Florida market and the Orlando, Florida market.

A summary of the total units, cost and the average physical occupancy of MAA’s lease-up communities as of the end of the third quarter of 2022 is set forth below (dollars in thousands):

Total As of September 30, 2022 Expected Project Stabilizations By Year
Lease-Up Total Physical Spend
Projects Units Occupancy to Date 2022 2023
4 1,327 89.5 % $ 372,930 2 2

Property Redevelopment and Repositioning Activity
A summary of MAA’s interior redevelopment program and Smart Home technology initiative as of the end of the third quarter of 2022 is set forth below:

As of September 30, 2022
Units Units Average Cost Increase in Average Remaining Units
Completed Completed per Unit Effective Rent per Unit Expected to be Completed
QTD YTD YTD YTD Through December 31, 2022
Redevelopment 2,305 5,247 $ 5,700 $ 138 800 – 1,100
Smart Home 652 21,108 $ 1,358 $ 25 (1) 1,900 – 3,000
(1) Projected increase upon lease renewal, opt in or unit turnover.

As of September 30, 2022, MAA had completed installation of the Smart Home technology (unit entry locks, mobile control of lights and thermostat and leak monitoring) in over 68,000 units across its apartment community portfolio since the initiative began during the first quarter of 2019.

During the third quarter of 2022, MAA continued its property repositioning program to upgrade and reposition the amenity and common areas at select apartment communities. 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%. During the nine months ended September 30, 2022, work continued on properties selected for this program in 2021. For the nine months ended September 30, 2022, MAA spent $13.1 million on this program.

Capital Expenditures
A summary of MAA’s capital expenditures and Funds Available for Distribution (FAD) for the three and nine months ended September 30, 2022 and 2021 is set forth below (dollars in millions, except per Share data):

Three months ended
September 30,
Nine months ended
September 30,
2022 2021 2022 2021
Core FFO $ 259.5 $ 211.3 $ 733.5 $ 605.5
Recurring capital expenditures (38.7) (26.4) (84.3) (61.8)
Core adjusted FFO (Core AFFO) 220.8 184.9 649.2 543.7
Redevelopment, revenue enhancing, commercial and other capital expenditures (47.7) (39.3) (134.9) (118.5)
FAD $ 173.1 $ 145.6 $ 514.3 $ 425.2
Core FFO per Share – diluted $ 2.19 $ 1.78 $ 6.18 $ 5.11
Core AFFO per Share – diluted $ 1.86 $ 1.56 $ 5.47 $ 4.59

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

Balance Sheet and Financing Activities
As of September 30, 2022, MAA had $1.2 billion of combined cash and available capacity under MAALP’s unsecured revolving credit facility.

In July 2022, MAALP amended its unsecured revolving credit facility, increasing borrowing capacity to $1.25 billion with an option to expand to $2.0 billion. The amended facility has a maturity date of October 2026 with two six-month extension options, and bears interest at an adjusted Secured Overnight Financing Rate plus a spread based on an investment ratings grid, currently at 0.725%.

In September 2022, MAALP amended its unsecured commercial paper program, increasing the maximum aggregate principal amount of notes that may be outstanding from time to time under the program from $500.0 million to $625.0 million.

In September 2022, MAALP retired the remaining $125.0 million portion of the $250.0 million in aggregate principal amount of publicly issued unsecured senior notes due in December 2022.

Dividends and distributions paid on shares of common stock and noncontrolling interests during the third quarter of 2022 were $148.3 million, as compared to $121.5 million for the same period in the prior year.

Balance sheet highlights as of September 30, 2022 are summarized below (dollars in billions):

Total debt to adjusted
total assets
(1)
Net Debt/Adjusted
EBITDAre
(2)
Total debt
outstanding
Average effective
interest rate
Fixed rate debt as a %
of total debt
Total debt average
years to maturity
29.1 % 3.97x $ 4.5 3.4 % 97.2 % 8.0
(1) As defined in the covenants for the bonds issued by MAALP.
(2) Adjusted EBITDAre is calculated for the trailing twelve month period ended September 30, 2022.

A reconciliation of Net Debt to Unsecured notes payable and Secured notes payable and a reconciliation of Adjusted EBITDAre to Net income, along with discussion of the components of Net Debt and Adjusted EBITDAre, can be found later in this release.

115th Consecutive Quarterly Common Dividend Declared
MAA declared its 115th consecutive quarterly common dividend, which will be paid on October 31, 2022 to holders of record on October 14, 2022. The current annual dividend rate is $5.00 per common share. The timing and amount of future dividends will depend on actual cash flows from operations, MAA’s financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986 and other factors as MAA’s Board of Directors deems relevant. MAA’s Board of Directors may modify the dividend policy from time to time.

2022 Earnings and Same Store Portfolio Guidance
MAA is updating its prior 2022 guidance for Net income per diluted common share, Core FFO per Share and Core AFFO per Share, along with its expectations for growth of Property revenue, Property operating expense and NOI for the Same Store Portfolio in 2022.

FFO, Core FFO and Core AFFO are non-GAAP financial 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 financial 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.

2022 Guidance Previous Range Previous Midpoint Revised Range Revised Midpoint
Earnings: Full Year 2022 Full Year 2022 Full Year 2022 Full Year 2022
Earnings per common share – diluted $5.65 to $5.89 $5.77 $5.59 to $5.75 $5.67
Core FFO per Share – diluted $8.13 to $8.37 $8.25 $8.37 to $8.53 $8.45
Core AFFO per Share – diluted $7.34 to $7.58 $7.46 $7.59 to $7.75 $7.67
MAA Same Store Portfolio:
Property revenue growth 11.5% to 12.5% 12.0 % 13.0% to 14.0% 13.5 %
Property operating expense growth 6.5% to 7.5% 7.0 % 7.0% to 7.5% 7.25 %
NOI growth 14.0% to 16.0% 15.0 % 16.0% to 18.0% 17.0 %

MAA expects Core FFO for the fourth quarter of 2022 to be in the range of $2.19 to $2.35 per Share, or $2.27 per Share at the midpoint. MAA does not forecast Net income per diluted common share on a quarterly basis as MAA generally cannot predict the timing of forecasted acquisition and disposition activity within a particular quarter (rather than during the course of the full year). Additional details and guidance items are provided in the Supplemental Data to this release.

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