Business Context and Reporting Period
Company: Mid-America Apartment Communities, Inc. (MAAC)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 1997
Business Overview: MAAC is a real estate investment trust (REIT) owning and operating apartment communities. As of March 31, 1997, the company owned 20,394 units across 77 communities, an increase from 18,660 units in 71 communities the prior year. The company reported an overall occupancy rate of 94.3%.
Key Financial Metrics
| Metric | Q1 1997 | Q1 1996 |
|---|---|---|
| Total Revenues | $29,839,000 | $27,151,000 |
| Net Income | $3,862,000 | $2,968,000 |
| Net Income Available to Common Shareholders | $2,675,000 | $2,968,000 |
| Earnings Per Share (Basic) | $0.23 | $0.27 |
| Funds From Operations (FFO) | $0.68 per share | $0.65 per share |
| Cash Flow from Operations | $7,936,000 | $4,566,000 |
| Total Assets | $656,328,000 | $611,199,000 |
| Total Liabilities | $316,777,000 | $330,577,000 |
| Notes Payable (Debt) | $304,180,000 | $315,239,000 |
| Cash and Cash Equivalents | $3,194,000 | $4,053,000 |
Debt Profile: Weighted average interest rate was 7.9% with a weighted average maturity of 10 years. The company maintained an unsecured $90 million credit line with approximately $6.1 million outstanding at period end.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by approximately $2.7 million (10%) driven by acquisitions in 1996 and 1997, offset by dispositions in 1996.
- Net Income Decline for Common Shareholders: While consolidated net income rose to $3.86 million, net income available to common shareholders decreased to $2.68 million from $2.97 million. This was primarily due to $1.19 million in dividends paid on 9.5% Series A Cumulative Preferred Stock issued in October 1996.
- FFO Increase: Funds From Operations increased 8% year-over-year, with per-share FFO rising 5% to $0.68.
- Operating Expenses: Property operating expenses increased by $796,000, largely due to the expanded portfolio. Utility costs as a percentage of revenue decreased from 6.1% to 4.9% due to the installation of individual unit metering.
- Capital Expenditures: Investing cash outflows nearly doubled to $38.0 million, primarily for the acquisition of 1,114 units for $31.7 million and construction in progress for new developments.
Guidance, Outlook, and Risks
- Capital Plan: The company plans total capital expenditures of approximately $29.8 million for 1997, including $11.6 million for new unit development and $2.7 million for recently acquired properties.
- Liquidity: Management believes cash from operations is adequate to meet operating requirements and REIT distribution obligations. Future liquidity needs will be met through borrowings, equity issuances, and the credit line.
- Recent Acquisitions: Subsequent to the reporting period, the company acquired two additional communities (Woodhollow in Jacksonville, FL, and The Woods in Austin, TX) totaling $26.7 million, funded by the credit line.
- Risks: The filing includes standard forward-looking statement disclaimers regarding assumptions on capital expenditures and rehabilitation costs. Inflation risk is mitigated by short-term leases allowing for rent adjustments.
Investor Verification Checklist
- Preferred Stock Impact: Verify the impact of the $1.19 million preferred dividend on future common shareholder returns.
- Acquisition Integration: Monitor the performance of the 1,114 units acquired in Q1 1997 and the two subsequent acquisitions to ensure they meet revenue projections.
- Occupancy Trends: Track occupancy rates, which dipped to 94.3% from 95.4% in the prior year, to ensure stabilization.
- Debt Maturity: Review the schedule for the $304 million in notes payable, noting the 10-year average maturity and 7.9% interest rate.
- Capital Expenditure Budget: Confirm adherence to the $29.8 million 1997 capital expenditure budget, particularly the $11.6 million allocated for new development.