Mid-America Apartment Communities, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; it does not provide a separate fourth-quarter financial results summary. MAA is a multifamily REIT operating primarily in the Southeast, Southwest and Mid-Atlantic. At year-end, it owned or held interests in 297 communities with 100,002 units, including communities in development.
Financial and operating results
| Metric | 2021 | 2020 |
|---|---|---|
| Property revenue | $1.778 billion | $1.678 billion |
| Net income available to MAA common shareholders | $530.1 million | $251.3 million |
| Diluted earnings per common share | $4.61 | $2.19 |
| Core FFO, non-GAAP | $830.6 million | $761.4 million |
| Net cash from operating activities | $895.0 million | $823.9 million |
| Capital improvements and development spending | $511.3 million | $426.9 million |
- Revenue increased 6.0%; Same Store revenue grew 5.5%. Same Store average effective rent per unit increased 5.2%, and average physical occupancy rose to 96.1% from 95.6%.
- Same Store NOI was $1.064 billion, up 6.2%; total NOI was $1.107 billion, up 6.7%. Total NOI as a share of property revenue was approximately 62.2%, versus 61.8% in 2020.
- Property operating expenses, excluding depreciation and amortization, increased 4.8% to $671.2 million. Depreciation and amortization was $533.4 million, up $22.6 million. Interest expense decreased $10.7 million to $156.9 million.
- GAAP earnings included a $220.4 million gain on sales of depreciable real estate and $40.9 million of after-tax gains from unconsolidated limited partnerships. Core FFO rose 9.1% to $830.6 million; it is a non-GAAP measure and should not be treated as a substitute for GAAP earnings or cash flow.
- Year-end total debt was $4.517 billion: $4.151 billion unsecured and $365.3 million secured, with a 3.4% weighted effective rate and 8.7 years average remaining maturity. All outstanding debt was fixed-rate. Debt was approximately 29.8% of adjusted total assets; management’s target range is 30%–36%.
- Management reported $1.1 billion of unrestricted cash and available revolving-credit capacity. There were no year-end borrowings under the $1.0 billion revolving facility or $500 million commercial-paper program. Cash and cash equivalents on the balance sheet were $54.3 million; restricted cash was $76.3 million.
- MAA paid $4.10 per common share in 2021 and expected an annualized $4.35 per share in 2022, subject to Board approval.
Material changes versus 2020
- Net income available to common shareholders more than doubled, largely reflecting real estate sale gains and higher gains from unconsolidated limited partnerships, alongside stronger property operations. The 2020 comparison included only $1.0 million of real estate sale gains and $4.8 million of after-tax partnership gains.
- Same Store revenue growth and occupancy strengthened. Expense growth was below revenue growth, though taxes, insurance, repairs and maintenance, personnel and utilities all increased.
- Operating cash flow increased $71.0 million. Investing cash outflow narrowed to $253.6 million, primarily as disposition proceeds increased to $307.9 million; financing cash outflow increased to $546.4 million.
- MAA issued $600 million of unsecured notes in 2021, including five-year notes at a 1.10% coupon and 30-year notes at 2.875%, and retired debt including $118.6 million of mortgages. Debt extinguishment costs were $13.4 million.
Outlook, commentary, risks and contingencies
- Management described apartment demand, rent growth and rent collections as strong in 2021. It cautioned that supply-chain constraints, inflation and higher labor and maintenance costs could pressure expenses; weaker conditions could also reduce rent growth, collections and demand. Elevated apartment supply may weigh more on urban submarkets.
- For 2022, management expected total capital expenditures for development, redevelopment, repositioning and recurring replacements to be in line with 2021. Six developments totaling 2,021 units were under construction; expected total cost was $460.5 million, with $273.7 million incurred at year-end. Three projects were expected to complete in 2022 and three in 2023.
- Key risks include COVID-19 and related regulation, regional and multifamily-sector concentration, competition and new supply, inflation in operating costs, development delays or overruns, financing and refinancing conditions, rising rates on future borrowing, extreme weather and climate risks, cyber incidents, REIT qualification, and potential rent-control or tenant-protection rules.
- Two Texas putative class actions challenge late-fee practices. Following a 2021 appellate ruling, the cases were remanded for the district court to reconsider class certification. If classes are recertified, management estimated maximum exposure of $63.0 million, excluding possible prejudgment interest; the aggregate recorded accrual for unresolved legal matters was $5.2 million.
- Winter Storm Uri caused $26.0 million of casualty losses, primarily repairs, landscaping and asset write-offs. MAA expected most to be reimbursed by insurance. COVID-19-related costs were $1.3 million in 2021 versus $3.5 million in 2020.
- Ernst & Young issued unqualified opinions on the financial statements and MAA’s internal control over financial reporting. Management also concluded disclosure controls and internal control were effective at year-end.
Important facts for investors to verify
- How much 2021 earnings growth was recurring: distinguish property-level growth from the $220.4 million property-sale gain and partnership valuation gains.
- Whether Same Store rent growth and occupancy remain durable as new apartment supply, inflation and operating expenses evolve.
- Progress on the six development projects, remaining funding needs, completion timing and lease-up performance.
- Resolution and potential exposure of the Texas late-fee cases, including any class-certification decisions, settlement or revised accrual.
- Availability and cost of liquidity and refinancing as debt maturities approach, including the 2022 maturity amount and LIBOR transition terms for the revolving facility.
- Whether the expected 2022 dividend and capital-spending plans remain supported by operating cash flow and REIT distribution requirements.