10-Q 1 maa-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-12762 (Mid-America Apartment Communities, Inc.)

Commission File Number: 333-190028-01 (Mid-America Apartments, L.P.)

MID-AMERICA APARTMENT COMMUNITIES, INC.

MID-AMERICA APARTMENTS, L.P.

(Exact name of registrant as specified in its charter)

 

Tennessee (Mid-America Apartment Communities, Inc.)

62-1543819

Tennessee (Mid-America Apartments, L.P.)

62-1543816

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

6815 Poplar Ave., Suite 500, Germantown, TN 38138

(Address of principal executive offices) (Zip Code)

(901) 682-6600

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share (Mid-America Apartment Communities, Inc.)

MAA

New York Stock Exchange

8.50% Series I Cumulative Redeemable Preferred Stock, $.01 par value per share (Mid-America Apartment Communities, Inc.)

MAA*I

New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Mid-America Apartment Communities, Inc.

Yes ☒

No ☐

Mid-America Apartments, L.P.

Yes ☒

No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Mid-America Apartment Communities, Inc.

Yes ☒

No ☐

Mid-America Apartments, L.P.

Yes ☒

No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Mid-America Apartment Communities, Inc.

 

 

 

Large accelerated filer

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company

 

Mid-America Apartments, L.P.

 

 

 

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Mid-America Apartment Communities, Inc. ☐

Mid-America Apartments, L.P. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Mid-America Apartment Communities, Inc.

Yes ☐

No

Mid-America Apartments, L.P.

Yes ☐

No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

Mid-America Apartment Communities, Inc.

Number of Shares Outstanding at

Class

April 29, 2024

Common Stock, $0.01 par value

116,826,006

 

 


 

MID-AMERICA APARTMENT COMMUNITIES, INC.

MID-AMERICA APARTMENTS, L.P.

 

TABLE OF CONTENTS

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

5

 

Mid-America Apartment Communities, Inc.

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023.

5

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023.

6

 

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023.

7

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023.

8

 

Mid-America Apartments, L.P.

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023.

9

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023.

10

 

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2024 and 2023.

11

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023.

12

 

Notes to Condensed Consolidated Financial Statements.

13

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

35

Item 4.

Controls and Procedures.

36

 

 

 

 

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings.

36

Item 1A.

Risk Factors.

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

37

Item 3.

Defaults Upon Senior Securities.

37

Item 4.

Mine Safety Disclosures.

37

Item 5.

Other Information.

38

Item 6.

Exhibits.

39

 

Signatures.

40

 

2


 

Explanatory Note

This report combines the Quarterly Reports on Form 10-Q for the quarter ended March 31, 2024 of Mid-America Apartment Communities, Inc., a Tennessee corporation, and Mid-America Apartments, L.P., a Tennessee limited partnership, of which Mid-America Apartment Communities, Inc. is the sole general partner. Mid-America Apartment Communities, Inc. and its 97.4% owned subsidiary, Mid-America Apartments, L.P., are both required to file quarterly reports under the Securities Exchange Act of 1934, as amended.

Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “MAA” refer only to Mid-America Apartment Communities, Inc., and not any of its consolidated subsidiaries. Unless the context otherwise requires, all references in this report to “we,” “us,” “our,” or the “Company” refer collectively to Mid-America Apartment Communities, Inc., together with its consolidated subsidiaries, including Mid-America Apartments, L.P. Unless the context otherwise requires, all references in this report to the “Operating Partnership” or “MAALP” refer to Mid-America Apartments, L.P. together with its consolidated subsidiaries. “Common stock” refers to the common stock of MAA, “preferred stock” refers to the preferred stock of MAA, and “shareholders” refers to the holders of shares of MAA’s common stock or preferred stock, as applicable. The common units of limited partnership interest in the Operating Partnership are referred to as “OP Units” and the holders of the OP Units are referred to as “common unitholders.”

As of March 31, 2024, MAA owned 116,728,052 OP Units (97.4% of the total number of OP Units). MAA conducts substantially all of its business and holds substantially all of its assets, directly or indirectly, through the Operating Partnership, and by virtue of its ownership of the OP Units and being the Operating Partnership’s sole general partner, MAA has the ability to control all of the day-to-day operations of the Operating Partnership.

We believe combining the periodic reports of MAA and the Operating Partnership, including the notes to the condensed consolidated financial statements, into this report results in the following benefits:

 

enhances investors’ understanding of MAA and the Operating Partnership by enabling investors to view the business as a whole in the same manner that management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this report applies to both MAA and the Operating Partnership; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

MAA, an S&P 500 company, is a multifamily-focused, self-administered and self-managed real estate investment trust, or REIT. Management operates MAA and the Operating Partnership as one business. The management of the Company is comprised of individuals who are officers of MAA and employees of the Operating Partnership. We believe it is important to understand the few differences between MAA and the Operating Partnership in the context of how MAA and the Operating Partnership operate as a consolidated company. MAA and the Operating Partnership are structured as an umbrella partnership REIT, or UPREIT. MAA’s interest in the Operating Partnership entitles MAA to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to MAA’s percentage interest therein and entitles MAA to vote on substantially all matters requiring a vote of the partners. MAA’s only material asset is its ownership of limited partnership interests in the Operating Partnership (other than cash held by MAA from time to time); therefore, MAA’s primary function is acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership from time to time. The Operating Partnership holds, directly or indirectly, all of the real estate assets. Except for net proceeds from public equity issuances by MAA, which are contributed to the Operating Partnership in exchange for limited partnership interests, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, direct or indirect incurrence of indebtedness and issuance of OP Units.

The presentation of MAA’s shareholders’ equity and the Operating Partnership’s capital are the principal areas of difference between the condensed consolidated financial statements of MAA and those of the Operating Partnership. MAA’s shareholders’ equity may include shares of preferred stock, shares of common stock, additional paid-in capital, cumulative earnings, cumulative distributions, noncontrolling interests, treasury shares, accumulated other comprehensive income or loss and redeemable common stock. The Operating Partnership’s capital may include common capital and preferred capital of the general partner (MAA), limited partners’ common capital and preferred capital, noncontrolling interests, accumulated other comprehensive income or loss and redeemable common units. Holders of OP Units (other than MAA) may require the Operating Partnership to redeem their OP Units from time to time, in which case the Operating Partnership may, at its option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of MAA’s common stock on the New York Stock Exchange, or NYSE, over a specified period prior to the redemption date) or by delivering one share of MAA’s common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.

3


 

In order to highlight the material differences between MAA and the Operating Partnership, this Quarterly Report on Form 10-Q includes sections that separately present and discuss areas that are materially different between MAA and the Operating Partnership, including:

the condensed consolidated financial statements in Part 1, Item 1 of this report;
certain accompanying notes to the condensed consolidated financial statements, including Note 2 - Earnings per Common Share of MAA and Note 3 - Earnings per OP Unit of MAALP; Note 4 - MAA Equity and Note 5 - MAALP Capital; and Note 8 - Shareholders’ Equity of MAA and Note 9 - Partners’ Capital of MAALP;
the controls and procedures in Part 1, Item 4 of this report; and
the certifications included as Exhibits 31 and 32 to this report.

In the sections that combine disclosures for MAA and the Operating Partnership, this Quarterly Report on Form 10-Q refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership (directly or indirectly through one of its subsidiaries) is generally the entity that enters into contracts, holds assets and issues debt, management believes this presentation is appropriate for the reasons set forth above and because we operate the business through the Operating Partnership. MAA, the Operating Partnership and its subsidiaries operate as one consolidated business, but MAA, the Operating Partnership and each of its subsidiaries are separate, distinct legal entities.

4


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Mid-America Apartment Communities, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except per share data)

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

Land

 

$

2,031,406

 

 

$

2,031,403

 

Buildings and improvements and other

 

 

13,623,207

 

 

 

13,515,949

 

Development and capital improvements in progress

 

 

380,087

 

 

 

385,405

 

 

 

16,034,700

 

 

 

15,932,757

 

Less: Accumulated depreciation

 

 

(5,006,226

)

 

 

(4,864,690

)

 

 

11,028,474

 

 

 

11,068,067

 

Undeveloped land

 

 

73,861

 

 

 

73,861

 

Investment in real estate joint venture

 

 

41,877

 

 

 

41,977

 

Real estate assets, net

 

 

11,144,212

 

 

 

11,183,905

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

54,601

 

 

 

41,314

 

Restricted cash

 

 

13,475

 

 

 

13,777

 

Other assets

 

 

258,444

 

 

 

245,507

 

Total assets

 

$

11,470,732

 

 

$

11,484,503

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Unsecured notes payable

 

$

4,264,290

 

 

$

4,180,084

 

Secured notes payable

 

 

360,173

 

 

 

360,141

 

Accrued expenses and other liabilities

 

 

569,790

 

 

 

645,156

 

Total liabilities

 

 

5,194,253

 

 

 

5,185,381

 

 

 

 

 

 

 

 

Redeemable common stock

 

 

19,089

 

 

 

19,167

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value per share, 20,000,000 shares authorized;
   
8.50% Series I Cumulative Redeemable Shares, liquidation preference $50.00
   per share,
867,846 shares issued and outstanding as of March 31, 2024
   and December 31, 2023, respectively

 

 

9

 

 

 

9

 

Common stock, $0.01 par value per share, 145,000,000 shares authorized;
   
116,728,052 and 116,694,124 shares issued and outstanding as of
   March 31, 2024 and December 31, 2023, respectively
(1)

 

 

1,168

 

 

 

1,168

 

Additional paid-in capital

 

 

7,406,189

 

 

 

7,399,921

 

Accumulated distributions in excess of net income

 

 

(1,326,654

)

 

 

(1,298,263

)

Accumulated other comprehensive loss

 

 

(8,263

)

 

 

(8,764

)

Total MAA shareholders’ equity

 

 

6,072,449

 

 

 

6,094,071

 

Noncontrolling interests - OP Units

 

 

161,909

 

 

 

163,128

 

Total Company’s shareholders’ equity

 

 

6,234,358

 

 

 

6,257,199

 

Noncontrolling interests - consolidated real estate entities

 

 

23,032

 

 

 

22,756

 

Total equity

 

 

6,257,390

 

 

 

6,279,955

 

Total liabilities and equity

 

$

11,470,732

 

 

$

11,484,503

 

(1)
Number of shares issued and outstanding represents total shares of common stock regardless of classification on the Condensed Consolidated Balance Sheets. The number of shares classified as redeemable common stock on the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 are 145,073 and 142,546, respectively.

See accompanying notes to condensed consolidated financial statements.

5


 

Mid-America Apartment Communities, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except per share data)

 

 

 

Three months ended March 31,

 

 

 

 

2024

 

 

2023

 

 

Revenues:

 

 

 

 

 

 

 

Rental and other property revenues

 

$

543,622

 

 

$

529,033

 

 

Expenses:

 

 

 

 

 

 

 

Operating expenses, excluding real estate taxes and insurance

 

 

118,199

 

 

 

108,604

 

 

Real estate taxes and insurance

 

 

79,603

 

 

 

74,199

 

 

Depreciation and amortization

 

 

143,020

 

 

 

138,501

 

 

Total property operating expenses

 

 

340,822

 

 

 

321,304

 

 

Property management expenses

 

 

19,995

 

 

 

17,928

 

 

General and administrative expenses

 

 

17,045

 

 

 

15,923

 

 

Interest expense

 

 

40,361

 

 

 

37,281

 

 

Loss (gain) on sale of depreciable real estate assets

 

 

2

 

 

 

(15

)

 

Gain on sale of non-depreciable real estate assets

 

 

 

 

 

(54

)

 

Other non-operating income

 

 

(23,526

)

 

 

(3,467

)

 

Income before income tax expense

 

 

148,923

 

 

 

140,133

 

 

Income tax expense

 

 

(1,795

)

 

 

(944

)

 

Income from continuing operations before real estate joint venture activity

 

 

147,128

 

 

 

139,189

 

 

Income from real estate joint venture

 

 

482

 

 

 

385

 

 

Net income

 

 

147,610

 

 

 

139,574

 

 

Net income attributable to noncontrolling interests

 

 

3,861

 

 

 

3,664

 

 

Net income available for shareholders

 

 

143,749

 

 

 

135,910

 

 

Dividends to MAA Series I preferred shareholders

 

 

922

 

 

 

922

 

 

Net income available for MAA common shareholders

 

$

142,827

 

 

$

134,988

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic:

 

 

 

 

 

 

 

Net income available for MAA common shareholders

 

$

1.22

 

 

$

1.16

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

Net income available for MAA common shareholders

 

$

1.22

 

 

$

1.16

 

 

 

See accompanying notes to condensed consolidated financial statements.

6


 

Mid-America Apartment Communities, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in thousands)

 

 

 

Three months ended March 31,

 

 

 

 

2024

 

 

2023

 

 

Net income

 

$

147,610

 

 

$

139,574

 

 

Other comprehensive income:

 

 

 

 

 

 

 

Adjustment for net losses reclassified to net income from
   derivative instruments

 

 

517

 

 

 

278

 

 

Total comprehensive income

 

 

148,127

 

 

 

139,852

 

 

Less: Comprehensive income attributable to
   noncontrolling interests

 

 

(3,877

)

 

 

(3,681

)

 

Comprehensive income attributable to MAA

 

$

144,250

 

 

$

136,171

 

 

 

See accompanying notes to condensed consolidated financial statements.

7


 

Mid-America Apartment Communities, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

 

 

Three months ended March 31,

 

Cash flows from operating activities:

 

2024

 

 

2023

 

Net income

 

$

147,610

 

 

$

139,574

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

143,258

 

 

 

138,758

 

Loss (gain) on sale of depreciable real estate assets

 

 

2

 

 

 

(15

)

Gain on sale of non-depreciable real estate assets

 

 

 

 

 

(54

)

Gain on embedded derivative in preferred shares

 

 

(13,092

)

 

 

(4,435

)

Stock compensation expense

 

 

5,869

 

 

 

5,578

 

Amortization of debt issuance costs, discounts and premiums

 

 

1,529

 

 

 

1,517

 

(Gain) loss on investments

 

 

(5,172

)

 

 

1,024

 

Net change in operating accounts and other operating activities

 

 

(79,747

)

 

 

(63,637

)

Net cash provided by operating activities

 

 

200,257

 

 

 

218,310

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of real estate and other assets

 

 

(20

)

 

 

(12,450

)

Capital improvements and other

 

 

(52,101

)

 

 

(75,622

)

Development costs

 

 

(45,512

)

 

 

(52,851

)

Distributions from real estate joint venture

 

 

100

 

 

 

 

Contributions to affiliates

 

 

(750

)

 

 

(1,250

)

Proceeds from real estate asset dispositions

 

 

 

 

 

3,024

 

Net proceeds from insurance recoveries

 

 

5,271

 

 

 

764

 

Net cash used in investing activities

 

 

(93,012

)

 

 

(138,385

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Net payments of commercial paper

 

 

(260,000

)

 

 

(20,000

)

Proceeds from notes payable

 

 

346,567

 

 

 

 

Principal payments on notes payable

 

 

 

 

 

(362

)

Payment of deferred financing costs

 

 

(3,450

)

 

 

 

Distributions to noncontrolling interests

 

 

(4,621

)

 

 

(4,429

)

Dividends paid on common shares

 

 

(171,570

)

 

 

(161,683

)

Dividends paid on preferred shares

 

 

(922

)

 

 

(922

)

Proceeds from issuances of common shares

 

 

303

 

 

 

204,077

 

Net change in other financing activities

 

 

(567

)

 

 

(1,660

)

Net cash (used in) provided by financing activities

 

 

(94,260

)

 

 

15,021

 

 

 

 

 

 

 

 

Net increase in cash, cash equivalents and restricted cash

 

 

12,985

 

 

 

94,946

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

55,091

 

 

 

61,071

 

Cash, cash equivalents and restricted cash, end of period

 

$

68,076

 

 

$

156,017

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets:

Reconciliation of cash, cash equivalents and restricted cash at period end:

 

 

 

 

 

 

Cash and cash equivalents

 

$

54,601

 

 

$

142,411

 

Restricted cash

 

 

13,475

 

 

 

13,606

 

Total cash, cash equivalents and restricted cash

 

$

68,076

 

 

$

156,017

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

Interest paid

 

$

32,785

 

 

$

29,516

 

Income taxes paid

 

 

 

 

 

25

 

Non-cash transactions:

 

 

 

 

 

 

Distributions on common shares/units declared and accrued

 

$

176,195

 

 

$

167,659

 

Accrued construction in progress

 

 

28,643

 

 

 

31,492

 

Interest capitalized

 

 

3,416

 

 

 

2,746

 

Conversion of OP Units to shares of common stock

 

 

594

 

 

 

479

 

See accompanying notes to condensed consolidated financial statements.

8


 

Mid-America Apartments, L.P.

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands)

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

Land

 

$

2,031,406

 

 

$

2,031,403

 

Buildings and improvements and other

 

 

13,623,207

 

 

 

13,515,949

 

Development and capital improvements in progress

 

 

380,087

 

 

 

385,405

 

 

 

16,034,700

 

 

 

15,932,757

 

Less: Accumulated depreciation

 

 

(5,006,226

)

 

 

(4,864,690

)

 

 

11,028,474

 

 

 

11,068,067

 

Undeveloped land

 

 

73,861

 

 

 

73,861

 

Investment in real estate joint venture

 

 

41,877

 

 

 

41,977

 

Real estate assets, net

 

 

11,144,212

 

 

 

11,183,905

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

54,601

 

 

 

41,314

 

Restricted cash

 

 

13,475

 

 

 

13,777

 

Other assets

 

 

258,444

 

 

 

245,507

 

Total assets

 

$

11,470,732

 

 

$

11,484,503

 

 

 

 

 

 

 

 

Liabilities and capital

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Unsecured notes payable

 

$

4,264,290

 

 

$

4,180,084

 

Secured notes payable

 

 

360,173

 

 

 

360,141

 

Accrued expenses and other liabilities

 

 

569,790

 

 

 

645,156

 

Due to general partner

 

 

19

 

 

 

19

 

Total liabilities

 

 

5,194,272

 

 

 

5,185,400

 

 

 

 

 

 

 

 

Redeemable common units

 

 

19,089

 

 

 

19,167

 

 

 

 

 

 

 

 

Operating Partnership capital:

 

 

 

 

 

 

Preferred units, 8.50% Series I Cumulative Redeemable Units, 867,846 preferred units
   outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

66,840

 

 

 

66,840

 

General partner, 116,728,052 and 116,694,124 OP Units outstanding as of March 31,
   2024 and December 31, 2023, respectively
(1)

 

 

6,014,015

 

 

 

6,036,154

 

Limited partners, 3,132,552 and 3,143,972 OP Units outstanding as of March 31, 2024
   and December 31, 2023, respectively
(1)

 

 

161,909

 

 

 

163,128

 

Accumulated other comprehensive loss

 

 

(8,425

)

 

 

(8,942

)

Total operating partners’ capital

 

 

6,234,339

 

 

 

6,257,180

 

Noncontrolling interests - consolidated real estate entities

 

 

23,032

 

 

 

22,756

 

Total equity

 

 

6,257,371

 

 

 

6,279,936

 

Total liabilities and equity

 

$

11,470,732

 

 

$

11,484,503

 

(1) Number of units outstanding represents total OP Units regardless of classification on the Condensed Consolidated Balance Sheets. The number of units classified as redeemable common units on the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 are 145,073 and 142,546, respectively.

See accompanying notes to condensed consolidated financial statements.

9


 

Mid-America Apartments, L.P.

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except per unit data)

 

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

Rental and other property revenues

 

$

543,622

 

 

$

529,033

 

Expenses:

 

 

 

 

 

 

Operating expenses, excluding real estate taxes and insurance

 

 

118,199

 

 

 

108,604

 

Real estate taxes and insurance

 

 

79,603

 

 

 

74,199

 

Depreciation and amortization

 

 

143,020

 

 

 

138,501

 

Total property operating expenses

 

 

340,822

 

 

 

321,304

 

Property management expenses

 

 

19,995

 

 

 

17,928

 

General and administrative expenses

 

 

17,045

 

 

 

15,923

 

Interest expense

 

 

40,361

 

 

 

37,281

 

Loss (gain) on sale of depreciable real estate assets

 

 

2

 

 

 

(15

)

Gain on sale of non-depreciable real estate assets

 

 

 

 

 

(54

)

Other non-operating income

 

 

(23,526

)

 

 

(3,467

)

Income before income tax expense

 

 

148,923

 

 

 

140,133

 

Income tax expense

 

 

(1,795

)

 

 

(944

)

Income from continuing operations before real estate joint venture activity

 

 

147,128

 

 

 

139,189

 

Income from real estate joint venture

 

 

482

 

 

 

385

 

Net income

 

 

147,610

 

 

 

139,574

 

Distributions to MAALP Series I preferred unitholders

 

 

922

 

 

 

922

 

Net income available for MAALP common unitholders

 

$

146,688

 

 

$

138,652

 

 

 

 

 

 

 

 

Earnings per common unit - basic:

 

 

 

 

 

 

Net income available for MAALP common unitholders

 

$

1.22

 

 

$

1.16

 

 

 

 

 

 

 

 

Earnings per common unit - diluted:

 

 

 

 

 

 

Net income available for MAALP common unitholders

 

$

1.22

 

 

$

1.16

 

 

See accompanying notes to condensed consolidated financial statements.

10


 

Mid-America Apartments, L.P.

 

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in thousands)

 

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

Net income

 

$

147,610

 

 

$

139,574

 

Other comprehensive income:

 

 

 

 

 

 

Adjustment for net losses reclassified to net income from
   derivative instruments

 

 

517

 

 

 

278

 

Comprehensive income attributable to MAALP

 

$

148,127

 

 

$

139,852

 

 

See accompanying notes to condensed consolidated financial statements.

11


 

Mid-America Apartments, L.P.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

 

 

Three months ended March 31,

 

Cash flows from operating activities:

 

2024

 

 

2023

 

Net income

 

$

147,610

 

 

$

139,574

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

143,258

 

 

 

138,758

 

Loss (gain) on sale of depreciable real estate assets

 

 

2

 

 

 

(15

)

Gain on sale of non-depreciable real estate assets

 

 

 

 

 

(54

)

Gain on embedded derivative in preferred shares

 

 

(13,092

)

 

 

(4,435

)

Stock compensation expense

 

 

5,869

 

 

 

5,578

 

Amortization of debt issuance costs, discounts and premiums

 

 

1,529

 

 

 

1,517

 

(Gain) loss on investments

 

 

(5,172

)

 

 

1,024

 

Net change in operating accounts and other operating activities

 

 

(79,747

)

 

 

(63,637

)

Net cash provided by operating activities

 

 

200,257

 

 

 

218,310

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of real estate and other assets

 

 

(20

)

 

 

(12,450

)

Capital improvements and other

 

 

(52,101

)

 

 

(75,622

)

Development costs

 

 

(45,512

)

 

 

(52,851

)

Distributions from real estate joint venture

 

 

100

 

 

 

 

Contributions to affiliates

 

 

(750

)

 

 

(1,250

)

Proceeds from real estate asset dispositions

 

 

 

 

 

3,024

 

Net proceeds from insurance recoveries

 

 

5,271

 

 

 

764

 

Net cash used in investing activities

 

 

(93,012

)

 

 

(138,385

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Net payments of commercial paper

 

 

(260,000

)

 

 

(20,000

)

Proceeds from notes payable

 

 

346,567

 

 

 

 

Principal payments on notes payable

 

 

 

 

 

(362

)

Payment of deferred financing costs

 

 

(3,450

)

 

 

 

Distributions paid on common units

 

 

(176,191

)

 

 

(166,112

)

Distributions paid on preferred units

 

 

(922

)

 

 

(922

)

Proceeds from issuances of common units

 

 

303

 

 

 

204,077

 

Net change in other financing activities

 

 

(567

)

 

 

(1,660

)

Net cash (used in) provided by financing activities

 

 

(94,260

)

 

 

15,021

 

 

 

 

 

 

 

 

Net increase in cash, cash equivalents and restricted cash

 

 

12,985

 

 

 

94,946

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

55,091

 

 

 

61,071

 

Cash, cash equivalents and restricted cash, end of period

 

$

68,076

 

 

$

156,017

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets:

Reconciliation of cash, cash equivalents and restricted cash at period end:

 

 

 

 

 

 

Cash and cash equivalents

 

$

54,601

 

 

$

142,411

 

Restricted cash

 

 

13,475

 

 

 

13,606

 

Total cash, cash equivalents and restricted cash

 

$

68,076

 

 

$

156,017

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

Interest paid

 

$

32,785

 

 

$

29,516

 

Income taxes paid

 

 

 

 

 

25

 

Non-cash transactions:

 

 

 

 

 

 

 Distributions on common units declared and accrued

 

$

176,195

 

 

$

167,659

 

 Accrued construction in progress

 

 

28,643

 

 

 

31,492

 

 Interest capitalized

 

 

3,416

 

 

 

2,746

 

See accompanying notes to condensed consolidated financial statements.

12


 

Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Summary of Significant Accounting Policies

Unless the context otherwise requires, all references to the “Company” refer collectively to Mid-America Apartment Communities, Inc., together with its consolidated subsidiaries, including Mid-America Apartments, L.P. Unless the context otherwise requires, all references to “MAA” refer only to Mid-America Apartment Communities, Inc., and not any of its consolidated subsidiaries. Unless the context otherwise requires, the references to the “Operating Partnership” or “MAALP” refer to Mid-America Apartments, L.P., together with its consolidated subsidiaries. “Common stock” refers to the common stock of MAA, “preferred stock” refers to the preferred stock of MAA, and “shareholders” refers to the holders of shares of MAA’s common stock or preferred stock, as applicable. The common units of limited partnership interests in the Operating Partnership are referred to as “OP Units,” and the holders of the OP Units are referred to as “common unitholders.”

As of March 31, 2024, MAA owned 116,728,052 OP Units (or 97.4% of the total number of OP Units). MAA conducts substantially all of its business and holds substantially all of its assets, directly or indirectly, through the Operating Partnership, and by virtue of its ownership of the OP Units and being the Operating Partnership’s sole general partner, MAA has the ability to control all of the day-to-day operations of the Operating Partnership.

Management believes combining the notes to the condensed consolidated financial statements of MAA and the Operating Partnership results in the following benefits:

enhances a readers’ understanding of MAA and the Operating Partnership by enabling the reader to view the business as a whole in the same manner that management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both MAA and the Operating Partnership; and
creates time and cost efficiencies through the preparation of one combined set of notes instead of two separate sets.

MAA, an S&P 500 company, is a multifamily-focused, self-administered and self-managed real estate investment trust, or REIT. Management operates MAA and the Operating Partnership as one business. The management of the Company is comprised of individuals who are officers of MAA and employees of the Operating Partnership. Management believes it is important to understand the few differences between MAA and the Operating Partnership in the context of how MAA and the Operating Partnership operate as a consolidated company. MAA and the Operating Partnership are structured as an umbrella partnership REIT, or UPREIT. MAA’s interest in the Operating Partnership entitles MAA to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to MAA’s percentage interest therein and entitles MAA to vote on substantially all matters requiring a vote of the partners. MAA’s only material asset is its ownership of limited partnership interests in the Operating Partnership (other than cash held by MAA from time to time); therefore, MAA’s primary function is acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership from time to time. The Operating Partnership holds, directly or indirectly, all of the Company’s real estate assets. Except for net proceeds from public equity issuances by MAA, which are contributed to the Operating Partnership in exchange for limited partnership interests, the Operating Partnership generates the capital required by the business through the Operating Partnership’s operations, direct or indirect incurrence of indebtedness and issuance of OP Units.

The presentations of MAA’s shareholders’ equity and the Operating Partnership’s capital are the principal areas of difference between the condensed consolidated financial statements of MAA and those of the Operating Partnership. MAA’s shareholders’ equity may include shares of preferred stock, shares of common stock, additional paid-in capital, cumulative earnings, cumulative distributions, noncontrolling interests, treasury shares, accumulated other comprehensive income or loss and redeemable common stock. The Operating Partnership’s capital may include common capital and preferred capital of the general partner (MAA), limited partners’ common capital and preferred capital, noncontrolling interests, accumulated other comprehensive income or loss and redeemable common units. Holders of OP Units (other than MAA) may require the Operating Partnership to redeem their OP Units from time to time, in which case the Operating Partnership may, at its option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of MAA’s common stock on the New York Stock Exchange, or NYSE, over a specified period prior to the redemption date) or by delivering one share of MAA’s common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.

13


 

Organization of Mid-America Apartment Communities, Inc.

The Company owns, operates, acquires and selectively develops apartment communities primarily located in the Southeast, Southwest and Mid-Atlantic regions of the U.S. As of March 31, 2024, the Company owned and operated 290 apartment communities (which does not include development communities under construction) through the Operating Partnership and its subsidiaries and had an ownership interest in one apartment community through an unconsolidated real estate joint venture. As of March 31, 2024, the Company also had five development communities under construction, totaling 1,970 apartment units once complete, and development costs of $445.6 million had been incurred through March 31, 2024. The Company expects to complete three developments in 2024 and two developments in 2025. As of March 31, 2024, 34 of the Company’s apartment communities included retail components. The Company’s apartment communities, including development communities under construction, were located across 16 states and the District of Columbia as of March 31, 2024.

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared by the Company’s management in accordance with U.S. generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC. The condensed consolidated financial statements of MAA presented herein include the accounts of MAA, the Operating Partnership and all other subsidiaries in which MAA has a controlling financial interest. MAA owns, directly or indirectly, approximately 80% to 100% of all consolidated subsidiaries, including the Operating Partnership. In management’s opinion, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included, and all such adjustments were of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company invests in entities that may qualify as variable interest entities, or VIEs, and MAALP is considered a VIE. A VIE is a legal entity in which the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of the equity investment at risk lack the power to direct the activities of a legal entity as well as the obligation to absorb its expected losses or the right to receive its expected residual returns. The Company consolidates all VIEs for which it is the primary beneficiary and uses the equity method to account for investments that qualify as VIEs but for which it is not the primary beneficiary. In determining whether the Company is the primary beneficiary of a VIE, management considers both qualitative and quantitative factors, including, but not limited to, those activities that most significantly impact the VIE’s economic performance and which party controls such activities. MAALP is classified as a VIE because the limited partners lack substantive kick-out rights and substantive participating rights, and the Company has concluded it is the primary beneficiary of MAALP. The Company uses the equity method of accounting for its investments in entities for which the Company exercises significant influence, but does not have the ability to exercise control. The factors considered in determining whether the Company has the ability to exercise significant influence or control include ownership of voting interests and participatory rights of investors (see “Investments in Unconsolidated Affiliates” below).

Noncontrolling Interests

As of March 31, 2024, the Company had two types of noncontrolling interests with respect to its consolidated subsidiaries: (1) noncontrolling interests related to the common unitholders of its Operating Partnership; and (2) noncontrolling interests related to its consolidated real estate entities. The noncontrolling interests relating to the limited partnership interests in the Operating Partnership are owned by the holders of the Class A OP Units. MAA is the sole general partner of the Operating Partnership and holds all of the outstanding Class B OP Units. Net income (after allocations to preferred ownership interests) is allocated to MAA and the noncontrolling interests based on their respective ownership percentages of the Operating Partnership. Issuance of additional Class A OP Units or Class B OP Units changes the ownership percentage of both the noncontrolling interests and MAA. The issuance of Class B OP Units generally occurs when MAA issues common stock and the issuance proceeds are contributed to the Operating Partnership in exchange for Class B OP Units equal to the number of shares of MAA’s common stock issued. At each reporting period, the allocation between total MAA shareholders’ equity and noncontrolling interests is adjusted to account for the change in the respective percentage ownership of the underlying equity of the Operating Partnership. MAA’s Board of Directors established economic rights in respect to each Class A OP Unit that were equivalent to the economic rights in respect to each share of MAA common stock. See Note 9 for additional details.

The noncontrolling interests relating to the Company’s consolidated real estate entities are owned by private real estate companies that are generally responsible for the development, construction and lease-up of the apartment communities that are owned through the consolidated real estate entities with a noncontrolling interest. The entities were determined to be VIE’s with the Company designated as the primary beneficiary. As a result, the accounts of the entities are consolidated by the Company. As of March 31, 2024, the consolidated assets of the Company’s consolidated real estate entities with a noncontrolling interest were $303.1 million, and consolidated liabilities were $9.6 million, net of eliminations. As of December 31, 2023, the consolidated assets of the Company’s consolidated real estate entities with a noncontrolling interest were $265.1 million, and consolidated liabilities were $12.9 million, net of eliminations.

14


 

Investments in Unconsolidated Affiliates

The Company uses the equity method to account for its investments in a real estate joint venture and six technology-focused limited partnerships that each qualify as a VIE. Management determined the Company is not the primary beneficiary in any of these investments but does have the ability to exert significant influence over the operations and financial policies of the real estate joint venture and considers its investments in the limited partnerships to be more than minor. The Company’s investment in the real estate joint venture was $41.9 million and $42.0 million as of March 31, 2024 and December 31, 2023, respectively, and is included in “Investment in real estate joint venture” in the accompanying Condensed Consolidated Balance Sheets.

The Company accounts for its investments in the technology-focused limited partnerships on a three month lag due to the timing the limited partnerships’ financial information is made available to the Company. As of March 31, 2024 and December 31, 2023, the Company’s investments in the limited partnerships were $55.1 million and $46.5 million, respectively, and are included in “Other assets” in the accompanying Condensed Consolidated Balance Sheets with any related earnings, including unrealized gains and losses on the underlying investments of the limited partnerships which are recorded at the estimated fair value, recognized in “Other non-operating income” in the accompanying Condensed Consolidated Statements of Operations. During the three months ended March 31, 2024 and 2023, the Company recognized $8.1 million of income and $0.1 million of expense, respectively, from its investments in the limited partnerships. As of March 31, 2024, the Company was committed to make additional capital contributions totaling $32.8 million if and when called by the general partners of the limited partnerships.

Marketable Equity Securities

Two of the technology-focused limited partnerships that are accounted for as investments in unconsolidated affiliates distributed publicly traded marketable equity securities to the Company and the other limited partners. During the three months ended March 31, 2024, the Company did not receive any marketable equity securities. During the three months ended March 31, 2023, the Company received marketable equity securities totaling $7.7 million, which are noncash investing activities. The Company’s investment in marketable equity securities is measured at fair value based on the quoted share price of the securities and is included in “Other assets” in the accompanying Condensed Consolidated Balance Sheets, with any related gains and losses, including unrealized gains and losses, recognized in “Other non-operating income” in the accompanying Condensed Consolidated Statements of Operations. As of March 31, 2024 and December 31, 2023, the Company’s investment in the marketable equity securities was $15.6 million and $18.6 million, respectively. During the three months ended March 31, 2024 and 2023, the Company recognized $3.0 million and $0.9 million of expense, respectively, from its investment in marketable equity securities.

Revenue Recognition

The Company primarily leases multifamily residential apartments to residents under operating leases generally due on a monthly basis with terms of approximately one year or less. Rental revenues are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 842, Leases, using a method that represents a straight-line basis over the term of the lease. In addition, in circumstances where a lease incentive is provided to residents, the incentive is recognized as a reduction of rental revenues on a straight-line basis over the reasonably assured lease term. Rental revenues represent approximately 94% of the Company’s total revenues and include gross rents charged less adjustments for concessions and bad debt. Approximately 5% of the Company’s total revenues represent non-lease reimbursable property revenues from its residents for utility reimbursements, which are generally recognized and due on a monthly basis as residents obtain control of the service over the term of the lease. The remaining 1% of the Company’s total revenues represents other non-lease property revenues primarily driven by nonrefundable fees and commissions, which are recognized when earned.

In accordance with ASC Topic 842, rental revenues and non-lease reimbursable property revenues meet the criteria to be aggregated into a single lease component and are reported on a combined basis in the line item “Rental revenues,” as presented in the disaggregation of the Company’s revenues in Note 11. Other non-lease property revenues are accounted for in accordance with ASC Topic 606, Revenue from Contracts with Customers, which requires revenue recognized outside of the scope of ASC Topic 842 to be recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. Other non-lease property revenues are reported in the line item “Other property revenues,” as presented in the disaggregation of the Company’s revenues in Note 11.

15


 

Leases

The Company is the lessee under certain ground, office, equipment and other operational leases, all of which are accounted for as operating leases in accordance with ASC Topic 842. The Company recognizes a right-of-use asset for the right to use the underlying asset for all leases where the Company is the lessee with terms of more than 12 months, and a related lease liability for the obligation to make lease payments. Expenses related to leases determined to be operating leases are recognized on a straight-line basis. As of March 31, 2024 and December 31, 2023, right-of-use assets recorded within “Other assets” totaled $41.9 million and $42.5 million, respectively, and related lease liabilities recorded within “Accrued expenses and other liabilities” totaled $26.9 million and $27.3 million, respectively, in the Condensed Consolidated Balance Sheets. Lease expense recognized for the three months ended March 31, 2024 and 2023 was immaterial to the Company. Cash paid for amounts included in the measurement of operating lease liabilities during the three months ended March 31, 2024 and 2023 was also immaterial. See Note 10 for additional disclosures regarding leases.

Fair Value Measurements

The Company applies the guidance in ASC Topic 820, Fair Value Measurements and Disclosures, to the valuation of acquired real estate assets recorded at fair value, to its impairment valuation analysis of real estate assets and to its valuation and disclosure of the fair value of financial instruments, which primarily consists of marketable equity securities, indebtedness and derivative instruments. Fair value disclosures required under ASC Topic 820 as well as the Company’s derivative accounting policies are summarized in Note 7 utilizing the following hierarchy:

Level 1 - Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2 - Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs for the assets or liability.

2. Earnings per Common Share of MAA

Basic earnings per share is computed using the two-class method by dividing net income available to MAA common shareholders by the weighted average number of common shares outstanding during the period. All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share. Both the unvested restricted shares and other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis with diluted earnings per share being the more dilutive of the treasury stock or two-class methods. OP Units are included in dilutive earnings per share calculations when the units are dilutive to earnings per share.

For the three months ended March 31, 2024 and 2023, MAA’s diluted earnings per share was computed using the treasury stock method as presented below (dollars and shares in thousands, except per share amounts):

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

Calculation of Earnings per common share - basic

 

 

 

 

 

 

Net income

 

$

147,610

 

 

$

139,574

 

Net income attributable to noncontrolling interests

 

 

(3,861

)

 

 

(3,664

)

Unvested restricted shares (allocation of earnings)

 

 

(62

)

 

 

(60

)

Dividends to MAA Series I preferred shareholders

 

 

(922

)

 

 

(922

)

Net income available for MAA common shareholders, adjusted

 

$

142,765

 

 

$

134,928

 

 

 

 

 

 

 

 

Weighted average common shares - basic

 

 

116,668

 

 

 

116,182

 

Earnings per common share - basic

 

$

1.22

 

 

$

1.16

 

 

 

 

 

 

 

 

Calculation of Earnings per common share - diluted

 

 

 

 

 

 

Net income

 

$

147,610

 

 

$

139,574

 

Net income attributable to noncontrolling interests (1)

 

 

(3,861

)

 

 

(3,664

)

Dividends to MAA Series I preferred shareholders

 

 

(922

)

 

 

(922

)

Net income available for MAA common shareholders, adjusted

 

$

142,827

 

 

$

134,988

 

 

 

 

 

 

 

 

Weighted average common shares - basic

 

 

116,668

 

 

 

116,182

 

Effect of dilutive securities

 

 

112

 

 

 

220

 

Weighted average common shares - diluted

 

 

116,780

 

 

 

116,402

 

Earnings per common share - diluted

 

$

1.22

 

 

$

1.16

 

(1)
For the three months ended March 31, 2024 and 2023,