Mid-America Apartment Communities, Inc. (MAA) — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021; comparisons are with the corresponding 2020 periods. Amounts are in U.S. dollars. MAA is a multifamily REIT operating primarily in the Southeast, Southwest, and Mid-Atlantic; at quarter-end it owned and operated 296 apartment communities.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Property revenue | $452.6 million | $423.2 million | $1,314.5 million | $1,254.3 million |
| Net income available to MAA common shareholders | $83.6 million | $59.0 million | $345.4 million | $168.9 million |
| Diluted EPS | $0.73 | $0.52 | $3.01 | $1.47 |
| Core FFO, non-GAAP | $211.3 million | $185.9 million | $605.5 million | $565.9 million |
| Cash provided by operating activities | Not stated for quarter | Not stated for quarter | $678.3 million | $643.9 million |
- Q3 revenue grew 6.9%; same-store revenue increased 6.7% and same-store NOI rose 10.2% to $269.4 million. Total NOI was $279.7 million, approximately 61.8% of property revenue, versus $253.4 million, or approximately 59.9%, a year earlier.
- Q3 same-store effective rent per unit increased 6.3% year over year, and average physical occupancy was 96.4%, compared with 95.5%. For the first nine months, same-store revenue and property operating expenses each increased 4.3%.
- Q3 property operating expenses excluding depreciation increased 1.8%; interest expense fell $1.8 million to $39.2 million. Nine-month interest expense fell $8.8 million to $117.8 million.
- At September 30, total assets were $11.25 billion and total debt was $4.54 billion. Debt consisted primarily of $4.18 billion in unsecured notes and $365.6 million in secured notes, net of specified costs and adjustments. The weighted average effective rate was 3.4%; 99.4% of debt was fixed-rate.
- Cash, cash equivalents, and restricted cash totaled $41.5 million. The $1.0 billion revolving credit facility had no borrowings outstanding; $3.4 million of capacity supported letters of credit. The company reported $25 million of commercial paper outstanding.
- Investing activities used $269.7 million in the first nine months, including $388.4 million for capital improvements, development, and other spending; financing activities used $402.7 million. Common dividends paid were $352.4 million.
Material changes and unusual items
- Q3 net income available to common shareholders increased 41.7%; nine-month net income more than doubled. These comparisons include significant non-operating items and should not be read as equivalent to growth in recurring property operations.
- Four apartment-community sales generated a $134.5 million gain in the first nine months of 2021; there were no apartment-community sales in the comparable 2020 period. Sale proceeds were $166.2 million.
- Q3 results included $13.4 million of non-cash income from a fair-value adjustment to the embedded derivative in Series I preferred shares, $10.1 million of non-cash income from unconsolidated limited partnerships, and $13.4 million of debt-extinguishment costs. Nine-month results also included $13.4 million of debt-extinguishment costs.
- In August, the company issued $300 million of notes due 2026 at a 1.100% coupon and $300 million due 2051 at a 2.875% coupon. It also retired several debt tranches in the third quarter, incurring prepayment penalties and write-offs. These actions contributed to lower interest expense.
- MAA entered into forward sale agreements covering 1.1 million common shares at an initial forward price of $190.56 per share; no shares had been settled by quarter-end. Proceeds were expected to support development and redevelopment, among other uses.
- Eight developments totaling 2,654 planned units were under construction. Expected total project costs were $627.5 million, of which $383.8 million had been incurred; completion was expected across 2021–2023.
Outlook, risks, and contingencies
- No specific numerical earnings or operating guidance is provided in the supplied filing text. Management described third-quarter apartment demand and rent growth as strong, but cautioned that pandemic-related uncertainty, elevated supply—particularly in urban submarkets—and the typically slower fall and winter leasing season could weigh on future rent growth and collections.
- Management said access to capital markets remained strong, while warning that market disruption or weaker credit conditions could impair financing access or refinancing. Identified risks also include interest rates, inflation in taxes, insurance and other operating costs, development delays or cost overruns, weather events, regulatory changes, and the transition away from LIBOR.
- Winter Storm Uri caused $21.4 million of casualty losses during the first nine months; management expected most to be reimbursed by insurance and recorded a receivable for expected recoveries. COVID-19-related expenses were $0.9 million, versus $3.0 million in the comparable 2020 period.
- Two Texas class-action late-fee cases had adverse class-certification and partial-summary-judgment rulings; MAA said it would continue to defend and appeal. Estimated maximum exposures were $54.6 million and $8.4 million, excluding possible prejudgment interest. Accrued loss contingencies for unresolved legal matters totaled $5.2 million.
- The filing identifies possible adverse effects from rent-control or tenant-protection rules, eviction-related policies, and compliance requirements. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Separate recurring same-store operating growth from gains on property sales and non-cash derivative and partnership valuation changes; review the company’s Core FFO reconciliation and its non-GAAP limitations.
- Check lease pricing, occupancy, collections, and new supply trends, particularly in urban markets and through the slower leasing season.
- Review debt maturities, commercial-paper usage, refinancing needs, and access to the revolving facility; assess planned development spending against project costs and completion schedules.
- Monitor outcomes and potential exposure in the Texas late-fee litigation, insurance recoveries for Winter Storm Uri, and evolving rental and eviction regulations.