Mid-America Apartment Communities, Inc. — Q1 2021 Form 10-Q
Business context and period. The filing covers the three months ended March 31, 2021 and combines MAA and its operating partnership, MAALP. MAA is a multifamily REIT operating 299 apartment communities across 16 states and the District of Columbia, with seven developments under construction totaling 2,259 planned units.
Financial performance and position
- Revenue: Rental and other property revenue was $425.0 million, up 1.7% year over year. Same Store revenue rose 1.4%; average effective rent per unit increased 1.3%, while average physical occupancy remained 95.7%.
- Profit: Net income was $48.9 million versus $38.0 million. Net income available to MAA common shareholders was $46.3 million, or $0.40 per diluted share, compared with $35.7 million, or $0.31, in Q1 2020.
- Operating performance: Same Store NOI was $252.7 million, down 0.9% from $255.0 million. Total NOI was $262.5 million versus $264.9 million; as a share of property revenue, total NOI was approximately 61.8%, down from 63.4%.
- FFO: FFO attributable to the Company was $177.8 million versus $162.1 million; Core FFO was $194.4 million versus $191.2 million. These are non-GAAP measures and may not be comparable with other REITs.
- Cash flow: Operating cash flow was $148.1 million, down from $160.6 million. Investing used $112.5 million, mainly for $113.5 million of capital improvements and development. Financing used $27.9 million. Cash, cash equivalents and restricted cash totaled $43.4 million at quarter-end, including $32.6 million unrestricted cash.
- Debt and liquidity: Total debt was $4.66 billion, with a 3.4% weighted average effective rate; 91.7% of debt was fixed-rate. The $1.0 billion revolver had no borrowings (with $3.4 million of capacity supporting letters of credit); commercial paper outstanding was $385 million. Total assets were $11.19 billion and total equity was $6.02 billion.
Changes, outlook and material items
- Property revenue growth was outpaced by a 6.1% increase in property operating expenses excluding depreciation, including higher insurance, utilities and real estate taxes. Same Store expenses increased 5.4%.
- Interest expense declined $3.8 million to $39.7 million, primarily reflecting a 33-basis-point decrease in the effective interest rate. Lower noncash expense from the preferred-share embedded derivative also contributed to year-over-year earnings growth: $15.1 million in Q1 2021 versus $27.6 million in Q1 2020.
- Winter Storm Uri caused $16.9 million of casualty losses; management expected the majority to be reimbursed by insurance and recorded a receivable for expected recoveries.
- Development projects had expected total costs of $528.0 million, of which $334.3 million had been incurred. Management expected four projects to complete in 2021, two in 2022 and one in 2023. No specific earnings or revenue guidance is provided in the filing.
- Management said rent collections improved from Q4 2020 but warned that pandemic-related economic disruption, elevated supply—particularly in urban submarkets—and weaker demand could constrain rent growth and collections. It also cited financing-market access, interest rates, development costs and operating-cost inflation as risks.
- Two Texas late-fee class actions had estimated maximum exposures of $54.6 million and $8.4 million, excluding possible prejudgment interest; the Company stated it would continue to defend the cases. Aggregate accruals for unresolved legal matters were $5.2 million. These figures do not establish the accrual attributable to either lawsuit.
Important facts for investors to verify
- Track Same Store rent, occupancy and NOI trends against expense growth, especially insurance, utilities and property taxes.
- Review commercial-paper refinancing and maturity exposure: $385 million was classified as maturing in 2021, with no revolver borrowings at quarter-end.
- Monitor insurance recovery of Uri losses and the status, estimated exposure and accrual treatment of the Texas class actions.
- Assess development budgets, completion timing and lease-up progress for the seven projects under construction.