Mid-america Apartment Communities, Inc. · NYSE:MAA
Mid-america Apartment Communities — NAREIT REIT World 2017 Annual Convention
48 slides from Mid-america Apartment Communities's conference presentation, Nov 14, 2017
Slide 1: Building Strength - NAREIT REIT World 2017 Annual Convention
Exhibit 99.1 BUILDINGSTRENGTH NAREIT REIT WORLD 2017 ANNUAL CONVENTION November 14-16, 2017 1
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, as Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, which are based on current expectations,
Slide 3: Portfolio Changes Have Strengthened MAA
PORTFOLIO Changes Have Strengthened MAA—Enhancing Full Cycle Performance Profile • Younger and high quality portfolio • More efficient operation • Enhanced margin growth • More robust AFFO growth 3Overview
Slide 4: Portfolio Changes Have Strengthened MAA: 2012 vs 2017
PORTFOLIO Changes Have Strengthened MAA 2012 2017 MARKETS AVERAGE AGE MARKETS AVERAGE AGE 50 15 37 15 SAME STORE NOI SAME STORE NOI AVERAGE RENT1,2 MARGIN2 AVERAGE RENT1,2 MARGIN2,3 $859 58.2% $1,184 62.4% 1 Average Rent is Average Effective Rent per Unit as defined in the Appendix 2 Values as of 9/
Slide 5: Portfolio Changes Have Strengthened MAA: Top Markets
PORTFOLIO Changes Have Strengthened MAA TOP 20 MARKETS1 % OF NOI2 3Q 2017 Atlanta, GA 13.3% Dallas, TX 9.6% Charlotte, NC 7.5% Tampa, FL 6.5% Austin, TX 6.1% Washington, DC 5.9% Orlando, FL 5.6% Raleigh/Durham, NC 4.7% Nashville, TN 4.7% Fort Worth, TX 4.2% Houston, TX 3.6% Multifamily Markets Jacks
Slide 6: Balance Sheet Changes Have Strengthened MAA
BALANCE SHEET Changes Have Strengthened MAA 2012 2017 Total Debt/Total Assets1 44% Earnings Growth Total Debt/Total Assets1 33% Fixed Charge Coverage2 4.4x Fixed Charge Coverage2 4.9x Equity Issuance Annual Dividend/Share $2.64 Annual Dividend/Share $3.48 Dividend/AFFO 67% Refinancings Dividend/AFFO
Slide 7: Performance Changes Have Strengthened MAA
PERFORMANCE Changes Have Strengthened MAA—Enhancing Full Cycle Performance Profile • Enhanced Scale & Operating Efficiencies • New Technologies • Expanded Capital Deployment Opportunity • Enhanced Asset Management Programs • More Efficient Portfolio/Market Mix • Lower Cost of Capital 7Overview
Slide 8: Operating Platform: Dividends and Dividend to AFFO Ratio
OPERATING PLATFORM Consistent Strategy With Stronger Platform and Enhanced Execution MAA Dividends and Dividend to AFFO Ratio1 $3.48 2006-2017F $3.28 91.9% $3.08 85.4% 83.7% $2.92 82.3% $2.78 79.9% 76.1% $2.64 74.3% 72.9% $2.51 $2.46 $2.46 $2.46 Sector $2.42 $2.38 Average 66.7% 66.7% 66.1% 65.9% 62.
Slide 9: Operating Platform: Sector FFO Multiple
OPERATING PLATFORM Consistent Strategy With Stronger Platform and Enhanced Execution Average sector1 FFO multiple2 is equivalent to a $126 MAA share price, or 23% higher than 10/31/2017 share price Sector1 MAA FFO Multiple2 21.2 17.2 Source: Company Data; S&P Global 1 Sector constituents include AIV
Slide 10: Management Team
MANAGEMENT TEAM • Experienced, strengthened, and broadened Human Finance management team Resources enhances execution capabilities Al Campbell Melanie Carpenter EVP, Chief 19 years Financial with MAA Officer EVP, Chief17 Human years with Resources MAA Officer • Team of 19 Senior VPs with wide range
Slide 11: Balance Sheet Transformation: Increased Strength and Flexibility
BALANCE SHEET TRANSFORMATION Increased Strength and Flexibility $7.50 65.6% 70% 64.2% 63.8% 64.0% 64.6% 63.9% 59.4% 59.0% 56.3% 55.8% $6.00 49.2% 53% Assets 47.0% Share 44.0% 43.4% 42.8% 41.1% $4.50 Gross 34.2% 33.5% FFO/ 35% $3.00 Preferred/ Annual + 18% $1.50 Debt $0.00 0% 2000 2001 2002 2003 2004
Slide 12: Balance Sheet Transformation: Growing Cost Advantage
BALANCE SHEET TRANSFORMATION Growing Cost Advantage Credit Ratings Timeline Fitch BBB+ Outlook Stable S&P Fitch August 2016 S&P BBB BBB+ BBB Outlook Positive Outlook Stable Outlook Stable June 2014 December 2016 S&P June 2013 Moody’s BBB- Baa1 Outlook Positive Outlook Stable Moody’s January 2013 Fin
Slide 13: Balance Sheet Transformation: Improved Credit Spreads
BALANCE SHEET TRANSFORMATION Growing Cost Advantage Improved Credit Spreads 225 BBB+ Rated Peer 10-Year RS* MAA 10-Year RS* 200 A- Rated Peer 10-Year RS* 175 31 bps 150 higher than A- rated peer 125 57 bps higher than 100 A- rated peer 75 Nov-15 Feb-16 Jun-16 Sep-16 Jan-17 May-17 Aug-17 Source: Citi
Slide 14: Merger Status: PPS Merger Strengthens Platform
MERGER STATUS PPS Merger Strengthens Platform and Provides Compelling Value FFO ANNUAL SYNERGY AND NOI IDENTIFIED AT COMMENTS UPSIDE OPPORTUNITY IMPACT IN 2018 2019 AND BEYOND MERGER NOI Margin $13-$15 million $13-$15 million $13-$15 million PPS margin currently lower than MAA margin Stabilize PPS D
Slide 15: Technology Landscape
TECHNOLOGY LANDSCAPE External Reporting Operational Reporting Business Intelligence Budget/Planning Applicant Screening HR/Personnel Utility Management/Billing MAArtheus Pricing YARDI Leases 7S MERLIN Resident Management | Resident Portals | Maintenance | Vendor Portals | GL & AP | Job Cost 15 Finan
Slide 16: 2018 Considerations
2018 Considerations Same Store Revenue: • We expect the leasing conditions in the first half of 2018 to continue the trends posted in the back half of 2017 • Blended (renewals and new leases) lease over lease pricing similar to 2017, in the 2.0% to 2.5% range • Occupancy in line with 2017 Funds From
Slide 17: Market Update: Portfolio Balanced and Diversified
MARKET UPDATE Portfolio Balanced and Diversified in Key Growth Markets Diversified in Markets1 9% 41% 50% Job Growth 2.2% 2.2% Suburban Inner Loop Downtown/CBD 1.4% 1.5% Diversified in Price Points1,2 1 Based on 9/30/2017 total multifamily portfolio gross asset value 2 Average effective rent/unit fo
Slide 18: Market Update: Strong Fundamentals Across Markets
MARKET UPDATE Strong Fundamentals Across Markets Jobs to Completions Jobs Growth Completions Ratio Markets 2017 2018 2017 2018 2017 2018 Atlanta 8,625 6,782  2.5% 1.7% 7.8:1 6.9:1 • 5:1 Jobs to Austin 6,680 7,278 2.1% 2.4% 3.2:1 3.4:1 Completions Ratio Charleston 1,403 1,260 1.5% 1.9%
Slide 19: 2017 Market Update: Combined Adjusted Same Store Pricing
2017 MARKET UPDATE Combined Adjusted Same Store Pricing LEASE OVER LEASE Jan Feb Mar Apr May Jun Jul Aug Sep Oct 8.0% 6.3% 6.0% 6.0% 6.3% 6.3% 6.3% 6.2% 5.7% 5.1% 5.5% 4.0% 2.6% 2.8% 3.0% 2.5% 1.7% 2.2% 2.0% 1.0% 1.1% 1.4% 0.2% 0.0% -0.5% -0.2% -0.4% -1.7% -1.2% -4.0% -2.4% -2.5% -3.9% -3.5% New Lea
Slide 20: Merger Update: NOI Lift Opportunities from PPS Merger
MERGER UPDATE NOI Lift Opportunities from PPS Merger Reconcile Revenue Management Practices | 2017-2018 Utility Expense Management and Billing Practices | 4Q 2017-2018 Online Search Engine Optimization/Lead Generation | 4Q 2017 Property and Casualty Insurance | 3Q 2017-2018 Redevelopment and Unit In
Slide 21: Operational Strength: Closing the Gap
OPERATIONAL STRENGTH Revenue Management Practices and Programs Closing the Gap Blended Pricing LEASE OVER LEASE Average Physical Occupancy 330bps 300bps 130bps 100bps 90bps 50bps gap gap gap gap gap gap 4.0% 3.4% 97.0% 2.9% 3.0% 96.2% 96.3% 96.2% 2.2% 2.0% 1.6% 96.0% 95.7% 95.4% 1.0% 0.4% 95.2% 0.0%
Slide 22: Operational Strength: Disciplined Approach to Expense Management
OPERATIONAL STRENGTH Disciplined Approach To Expense Management MAA’s established expense management practice stands out among peers Property Operating Expenses How do we do this? REPORTED SAME STORE PEER GROUP1: 3.0% 2012-2017F • Focus on total maintenance cost or price Expense CAGR per unit per mo
Slide 23: Operational Strength: Same Store NOI Margin Improvement
OPERATIONAL STRENGTH Same Store NOI Margin Improvement MAA NOI Margin1 • MAA platform applied to CLP and PPS portfolios yields margin 64.0% 62.3% 62.8% 61.6% improvements within a year of 62.0% 59.8% 60.5% each merger 60.0% 58.8% 58.5% 58.0% 57.9% • PPS margin improvement to 56.0% date has been expe
Slide 24: Disciplined Approach: New Development Fuels Steady Value Growth
DISCIPLINED APPROACH Disciplined New Development Fuels Steady New Value Growth Disciplined Approach Strong Execution Capability Consistent Opportunity Flow • Limited to 3%—4% • 25 years average multifamily • Extensive 20+ year focus of Enterprise Value development and construction on Sunbelt markets
Slide 25: Development Pipeline 2017
DEVELOPMENT PIPELINE 2017 Current and Recently Completed Development Completion Stabilization Total Property Market Units Date Date Cost Post Parkside™ at Wade II Raleigh, NC 406 2Q17 3Q17 $58,900 Proven Current Cycle Results 388 Since 2013… Post Afton Oaks™ Houston, TX 2Q17 2Q18 $79,900 • $956 mill
Slide 26: Future Opportunity: Manage Development Risk
Post Midtown – Atlanta, GA FUTURE OPPORTUNITY Manage Development Risk While Achieving Significant Value Creation Profile of Opportunities Sought • Focus on MAA core markets • Submarket focused site selection • Seek out “retail” locations • Phased development opportunities • JV/Fee development with c
Slide 27: Development Projects
Post Centennial Park Atlanta, GA DEVELOPMENT PROJECTS Post River North Post South Lamar II Denver, CO Austin, TX Cherry Creek Concept Denver, CO 27 Development
Slide 28: Transactions: Introduction
TRANSACTIONS Introduction Yale at 6th – Houston, TX Residences at Fountainhead -Phoenix, AZ The Apartments at Cobblestone Square—Fredericksburg, VA 28 Transactions
Slide 29: Transactions: Effective Buyer and Seller
TRANSACTIONS Effective Buyer and Seller Since 2012: • Sold just under 17k units in mostly one-off full retail priced transactions, totaling $1.1B • Achieved an average IRR of 15.1% on dispositions • Redeployed the capital into just under 10k units, totaling $1.6B in acquisitions Significant Value Cr
Slide 30: Transactions: How We Execute
TRANSACTIONS How We Execute • Significant scale and focus in region 1 Greater Market Share • Extensive industry relationships • High deal flow • Quick execution with 20/10 close • All cash – no finance contingency 2 Proven Execution Capabilities • Ability to undertake complex deals • Flexible deal s
Slide 31: Case Study: 1201 Midtown, Charleston
CASE STUDY 1201 Midtown | Charleston Pursued off market and provided flexible closing timing • 4th transaction with this seller • Very supply constrained submarket with 2 year multifamily moratorium • Purchased existing Phase I in lease-up as well as fully entitled Phase II site with plans complete
Slide 32: Case Study: Charlotte at Midtown, Nashville
CASE STUDY Charlotte at Midtown | Nashville Fell out of contract and seller was motivated • MAA stepped in at $62.5M ($224k per unit) and closed 1 day after the PSA was executed • MAA Estimated Stabilized Cap Rate: 5.65% • Market Cap Rate Range: 4.75%—5.00% • Estimated Value Created: $8M—$12M • Esti
Slide 33: Case Study: Yale at 6th, Houston
CASE STUDY Yale at 6th | Houston Below replacement cost and other qualified offers • 4th transaction with this seller • Located in very supply constrained submarket • Purchase Price of $217k per unit • Estimated Replacement Cost: $220k per unit—$233k per unit • Average Rent: $1,806 per unit ($2.11/s
Slide 34: Transactions: Future Outlook
TRANSACTIONS Future Outlook Elevated level of supply should lead to growing acquisition opportunities. Focus on pre-stabilized opportunities that have less competition due to lower loan proceeds available for leveraged buyers. Pre-stabilized opportunities should increase as absorption is likely to s
Slide 35: Appendix: Reconciliation of Non-GAAP Financial Measures
APPENDIX Reconciliation of Non-GAAP Financial Measures Definitions of Non-GAAP Financial Measures
Slide 36: Reconciliation of FFO, AFFO, and FAD to Net Income
Reconciliation of Non-GAAP Financial Measures Reconciliation of FFO, AFFO, and FAD to Net Income Available for MAA Common Shareholders Amounts in thousands, except per share and unit data Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Net income available for MA
Slide 37: Reconciliation of Net Operating Income to Net Income
Reconciliation of Non-GAAP Financial Measures Reconciliation of Net Operating Income to Net Income Available for MAA Common Shareholders Dollars in thousands Three Months Ended Nine Months Ended September 30, 2017 June 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016 NOI Combined Ad
Slide 38: Reconciliation of EBITDA, Adjusted EBITDA, and Recurring Adjusted EBITDA
Reconciliation of Non-GAAP Financial Measures Reconciliation of EBITDA, Adjusted EBITDA, and Recurring Adjusted EBITDA to Net Income Dollars in thousands Three Months Ended Twelve Months Ended September 30, September 30, September 30, December 31, 2017 2016 2017 2016 Net income $ 118,958 $ 88,906 $
Slide 39: Reconciliation of Net Debt
Reconciliation of Non-GAAP Financial Measures Reconciliation of Net Debt to Unsecured Notes Payable and Secured Notes Payable Dollars in thousands As of September 30, December 31, September 30, June 30, March 31, 2017 2016 2016 2016 2016 Unsecured notes payable $ 3,382,861 $ 3,180,624 $ 2,195,989 $
Slide 40: Reconciliation of Gross Assets to Total Assets
Reconciliation of Non-GAAP Financial Measures Reconciliation of Gross Assets to Total Assets Dollars in thousands As of September 30, December 31, 2017 2016 Total assets $ 11,532,801 $ 11,604,491 Accumulated depreciation 1,967,481 1,656,071 Accumulated depreciation for corporate property(1) 20,638 1
Slide 41: Reconciliation of Gross Real Estate Assets
Reconciliation of Non-GAAP Financial Measures Reconciliation of Gross Real Estate Assets to Real Estate Assets, Net Dollars in thousands As of September 30, December 31, 2017 2016 Real estate assets, net $ 11,279,059 $ 11,341,862 Accumulated depreciation 1,967,481 1,656,071 Accumulated depreciation
Slide 42: Definitions of Non-GAAP Financial Measures: Adjusted EBITDA
Definitions of Non-GAAP Financial Measures Adjusted EBITDA Forpurposesofcalculationsin thisrelease, AdjustedEarningsBeforeInterest, Income Taxes, Depreciation and Amortization, or Adjusted EBITDA, is composed of EBITDA adjusted for net gain or loss on asset sales and insurance and other settlement p
Slide 43: Definitions of Non-GAAP Financial Measures: EBITDA and FAD
Definitions of Non-GAAP Financial Measures EBITDA For purposes of calculations in this release, Earnings Before Interest, Income Taxes, Depreciation and Amortization, or EBITDA, is composed of net income plus depreciation and amortization, interest expense, and income taxes. As an owner and operator
Slide 44: Definitions of Non-GAAP Financial Measures: FFO
Definitions of Non-GAAP Financial Measures Funds From Operations (FFO) FFO represents net income available for MAA common shareholders (computed in accordance with U.S. generally accepted accounting principles, or GAAP) excluding extraordinary items, asset impairment, gains or losses on disposition
Slide 45: Definitions of Non-GAAP Financial Measures: Gross Real Estate Assets
Definitions of Non-GAAP Financial Measures Gross Real Estate Assets Gross Real Estate Assets represents Real estate assets, net plus Accumulated depreciation, the accumulated depreciation for corporate properties, which is included in Corporate property, net on the Consolidated Balance Sheets, and a
Slide 46: Definitions of Non-GAAP Financial Measures: Recurring Adjusted EBITDA
Definitions of Non-GAAP Financial Measures Recurring Adjusted EBITDA Recurring Adjusted EBITDA represents Adjusted EBITDA further adjusted to exclude certain items that are not considered part of MAA’s core business operations such as acquisition and merger and integration expenses. MAA believes Rec
Slide 47: Definitions of Non-GAAP Financial Measures: Portfolio Definitions
Definitions of Non-GAAP Financial Measures Development Portfolio Communities remain identified as development until certificates of occupancy are obtained for all units under development. Once all units are delivered and available for occupancy, the community moves into the Lease-up Portfolio. Lease
Slide 48: Definitions of Non-GAAP Financial Measures: Post Adjusted Same Store Portfolio
Definitions of Non-GAAP Financial Measures Post Adjusted Same Store Portfolio Post Adjusted Same Store Portfolio represents the Post Properties same store portfolio that would have been in effect had the properties been owned by MAA since January 1, 2016. Prior year results have been adjusted for co
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