Mid-america Apartment Communities, Inc. · NYSE:MAA
Mid-america Apartment Communities — Investor Presentation (October 2006)
57 slides from Mid-america Apartment Communities's investor presentation, Oct 16, 2006
Slide 1: Come inside and see the difference
Come inside and see the difference
Slide 2: What We Do
What We Do Generate sector leading shareholder total investment returns through the acquisition, repositioning and aggressive operation of multifamily real estate Sunbelt Region Focus Three-Tier Market Allocation Moderate to Upper End Product Focus Disciplined Investment Hurdles Growth Through Acqui
Slide 3: Competitive Edge
Competitive Edge provides investment capital a number of unique attributes and capabilities for creating value Sunbelt Region Only Focus Apartment Only Focus Extensive Multi-Tier Market Knowledge Full Range of Experience in Repositioning and Operating to Full Value Extensive Deal Flow Sourcing Disci
Slide 4: Management Team Introduction
Management Team Introduction Finance & Accounting Human Resources Asset Management Transactions Property Management Shareholder Value Leasing Resident Service Unit Turn Mgmt On Site Execution Process Development Marketing & Advertising Training Capital Improvements Landscape Operations Utility Progr
Slide 5: Internal Growth Prospects
Internal Growth Prospects is well positioned for continued strong same store NOI growth. We expect to remain very competitive within the multifamily REIT sector. Repositioned Portfolio Enhanced Performance Profile Pricing Recovery Underway Aggressive Inventory Management Practices Enhancement to Pri
Slide 6: External or New Growth Prospects
External or New Growth Prospects Well positioned to capture increasing levels of new FFO growth as market conditions evolve and capacity for growth expands Primarily Acquisitions; Minimal New Development Acquisitions Environment Opportunities: Lease-up, Reposition and Institutional Holdings Three Ti
Slide 7: Key Takeaways
Key Takeaways Re-affirm our strategy and plans Depth of our management team Continued strong operating conditions in 2007 Meaningful internal earnings growth opportunity Improving external growth prospects Plans for execution An attractive investment opportunity within the Apartment REIT sector
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Slide 9: Highlights
Highlights
Slide 10: Proven Performance
Proven Performance Shareholder Returns Returns out-performed the sector Solid 18.6% annual return since IPO Rising FFO and Dividends Sound, conservative business plan High quality earnings Produced steady and growing FFO and dividends Stronger Balance Sheet Dividend payout below sector median Covera
Slide 11: Ability to Create Value
Ability to Create Value Coral Square, Ft. Lauderdale Using All Aspects of Business Portfolio Diversification Balanced allocation High quality assets Stable and growing cash flow Operating Platform Intense focus on property operations Increased Technology (MRI, LRO, etc.) Acquisitions/Repositioning M
Slide 12: Portfolio Diversification
Portfolio Diversification Large Markets - Dallas, Atlanta, Tampa, Houston... Mid Markets - Jacksonville, Austin, Nashville, Memphis... Small Markets - Charleston, Savannah, Melbourne, Augusta... 30% Large Tier Markets Increased Allocation Higher Growth Characteristics 38% Mid Tier Markets Jacksonvil
Slide 13: Creating Value: Case Study
Creating Value: Case Study 1 Lighthouse Court Developed early in cycle Struggling lease-up (70% occupied) brought: Ability to carry asset with negative cash flow Marketing expertise Operating strength Stabilized asset in 9 months Year Built/Acquired: Gross Investment: $40.9M Units: Current Market Va
Slide 14: Creating Value: Case Study
Creating Value: Case Study 2 St. Augustine at the Lake Year Built: Gross Investment: $12.4M Year Acquired: Current Market Value (6.5% Cap Rate): $31.4M Units: Value Created: $19.0M Purchase Price: $9.3M Leveraged Return (Cash on Cash IRR): 33% Capex-to-Date: $3.1M Portfolio acquisition Underperformi
Slide 15: Jacksonville
Jacksonville
Slide 16: Why Jacksonville?
Why Jacksonville? Good example of our Mid-Tier markets Ability to see a representative range of MAA’s product type from mid-80’s built early acquisition to new construction Jacksonville represents 8.3% of our gross assets and is our largest market in terms of NOI contribution (11%) Our same store gr
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Slide 18: St. Augustine at the Lake
St. Augustine at the Lake Property Statistics Built Bought from AFR units Annual compounded NOI growth of 5.2% since purchase Current ARU $679 Rent per sft $.89 Q3 occupancy 93.8% Located in the Mandarin submarket Acquired in the America First Merger At close to 20 years old it is one our older asse
Slide 19: The Paddock Club Mandarin
The Paddock Club Mandarin Property Statistics Built units Annual compounded NOI growth of 4.3% since stabilization Current ARU $883 Rent per sft $.77 Q3 occupancy 96.5% Located in Mandarin submarket Built by Flournoy Development Company (MAA subsidiary at the time) Approximately 12,000 MAA units are
Slide 20: Lighthouse Court
Lighthouse Court Property Statistics • Built • Bought • units • Annual compounded NOI growth of 9.6% since stabilization • Current ARU $943 • Rent per sft $.85 • Q3 occupancy 97.6% Location in rapidly growing Fleming Island submarket Purchased from developer, distressed lease opportunity 70% leased
Slide 21: Hunter's Ridge at Deerwood
Hunter’s Ridge at Deerwood Property Statistics • Built • Bought from Met-Life • units • Annual compounded NOI growth of 5.15% since purchase • Current ARU $783 • Rent per sft $.89 • Q3 occupancy 93.8% Location adjacent to the prestigious Deerwood County Club development Serves both JTB and Southside
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Slide 23: Development
Development
Slide 24: Developments (as of October 2006)
Developments (as of October 2006) development strategy and objectives Current projects – overview Project details
Slide 25: MAA Expansion
MAA Expansion Development Strategy Overview Superior Investment Return Development in familiar, high growth markets Look for opportunities with clear cost advantages Partner with experts Limited Risk Limited overhead commitment Manageable number of projects “Fix” as much construction cost as able
Slide 26: Development Pipeline (as of October 2006)
Development Pipeline (as of October 2006) Project Units Location Budget Contract Developer Brier Creek II Raleigh, NC $24.0M Fixed Price Cannon Partners Copper Ridge I Dallas, TX $20.3M TBD Barnes Development St. Augustine II Jacksonville, FL $12.2M TBD Flournoy Development Total $56.5M Proforma sta
Slide 27: Brier Creek Phase II
Brier Creek Phase II units Located in Research Triangle area of Raleigh, NC The Cannon Company Developers Total budget - $24M Construction started – June 2006 Estimated initial occupancy – 2Q07 Estimated construction completion – 4Q07 Estimated stable operations – 2Q08
Slide 28: Copper Ridge Phase I
Copper Ridge Phase I units initially with a potential of 400 Located in Roanoke growth corridor area of Dallas, TX Alpha-Barnes Development Total budget - $20.3M Architectural planning underway Estimated construction start date – 2Q07 Estimated initial occupancy – 1Q08 Estimated construction complet
Slide 29: St. Augustine Phase II
St. Augustine Phase II units Located in Jacksonville, FL contiguous to St. Augustine and Woodbridge properties Flournoy Development & Construction Total budget - $12.2M Engineered drawings complete – Bidding the project Estimated construction start date - 1Q07 Estimated initial occupancy – 4Q07 Esti
Slide 30: Lease Rent Options
Lease Rent Options
Slide 31: Yield Management Software
Yield Management Software Based on airline pricing software In use (or being tested) by a number of other large apartment companies including: Archstone/Smith Equity Residential Post Properties Simpson Camden Interfaces with property operating software and examines Availability and lease expirations
Slide 32: MAA Yield Management Evolution
MAA Yield Management Evolution MRI – Web-based platform in 2003 Internal Pricing Process in 2004/2005 LRO - Yield Management rollout in 2006
Slide 33: MAA Project Team
MAA Project Team Project Role Title Shelton Barron Project Director VP, Director of MIS Chris Lynn Project Team Manager Director of Pricing James Maclin Implementation Project Team VP, Director of Corporate Support Melintha Ogle Implementation Project Team VP, Director of Marketing Sr. VP, Director
Slide 34: Yield Management – Internal Review
Yield Management – Internal Review Metric YieldStar LRO Functionality: Robust Robust Compatibility with MRI: No – requires development Yes Year Project Cost: $5.0M $4.8M Time in Use: n/a 3-5 Years Initial Investment – $1.9M Annual Staff and Maintenance Expense - $550k
Slide 35: Initial LRO Pilot Group
Initial LRO Pilot Group Property City, State Region Market Size Property Size Hamilton Pointe Chattanooga, TN North Small Large Calais Forrest Little Rock, AR Central Small Medium Celery Stalk Dallas, TX West Large Large Boulder Ridge Dallas, TX West Large Large Huntington Chase Atlanta, GA South La
Slide 36: LRO – Huge Potential
LRO – Huge Potential Industry Gross Revenue Impact 4% to 8% *Based on early results and long-term expectations. Source: Multifamily Executive, 10/2005, p.80. Airlines Hotels Rental Cars Advertising Multifamily* LRO Potential at MAA 4% to 8% 3% to 6% 2% to 5% 2% to 5% 2% to 4% Revenue Lift FFO Full F
Slide 37: How It Works
How It Works
Slide 38: How It Works
How It Works Four Step Process 1. Market Composite Calculation 2. Reference Rent Calculation 3. Forecast & Optimization 4. Pricing Presentation
Slide 39: 1007) Gow Pam am ane ween
1007) Gow Pam am ane ween
Slide 40: Competitor Positions
Competitor Positions
Slide 41: Competitor Rents
Competitor Rents
Slide 42: Reference Rent
Reference Rent Uses market information, exposure and leasing data Updates weekly Calculates a basis for LRO to “Price Around”
Slide 43: Forecast & Optimization
Forecast & Optimization Optimizes revenue by using price to leverage supply and demand Updates daily Uses transactions from MRI to forecast supply and demand
Slide 44: New Lease Rates For Boulder Ridge
: Wednestlay, Sepomhar 27, 2006, 02:58 PM New Lease Rates For Boulder Ridge 18 1 Bedrooms $640 ($640 eft) to $1190 ($1190 ef) (18) 10-1014: Vacant Lat Vacate Dee: Vacare Price Lease Monthly «Total Etontve vata: Now yeisie = Tem © Rant © Cantestion Ben ‘anenti (535% epi 12 $128 30 5 sas 10 $30 30 $73
Slide 45: LRO in Action: Hamilton Pointe Efficiency
LRO in Action: Hamilton Pointe Efficiency Week 2 3 4 5 6 7 8 9 10 Reference Rent Market Composite Medium Exposure Low Exposure High Exposure Day Exposure
Slide 46: Benefits
Benefits Corporate Enhanced control of pricing strategy at the corporate level Consistent pricing strategy through associate turnover Associate Greater confidence in presenting pricing…disciplined approach Daily price updates creates urgency…encourages prospect commitment Customer We can say “yes” t
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Slide 48: Renovations
Renovations
Slide 49: Great Remakes: Renovations That Work
Great Remakes Renovations That Work
Slide 50: Interior Renovations – Objectives
Interior Renovations – Objectives Our goal is to: Capture superior investment returns Enhance property values Accelerate our pricing in strong markets These goals are achieved by: Approving only after careful evaluation and testing in each market Implementing with standardized products that allow fo
Slide 51: Interior Renovations - Overview
Interior Renovations - Overview By the end of 2006 we’re projected to have: Upgraded 1,100 homes Increased revenues by 16.8% per home Spent an average of $4,900 per home Returned an un-leveraged 13% IRR In 2007 we plan to: Upgrade between 1,500 and 3,000 homes Spend an average of $3,800 per home Con
Slide 52: Managing the Program
Managing the Program 2) Analyze 3) Implement 4) Monitor 1) Evaluate Decision matrix Market surveys Resident feedback Test upgrades Decide on full or light scope renovation Leasing velocity Renovate during turn process Control labor costs by including internal team Web-based system links daily to pro
Slide 53: Monitor
Monitor Web-based data updated daily on production, leasing and pricing: Days to start, complete and lease unit 24% Pricing increase for renovation
Slide 54: Hunters Ridge – Jacksonville, FL
Hunters Ridge – Jacksonville, FL Built in 1987, purchased by MAA in 1997 Full scope renovation nearing end of year 1 of 3 to completion units Rehab price increase has been 17% above normal rents
Slide 55: Hunters Ridge – Jacksonville, FL
Hunters Ridge – Jacksonville, FL Full Scope Rehab New Formica countertops in kitchen and bath(s) New kitchen appliances Wood plank vinyl flooring in kitchen, entry court and bath(s) Light fixtures upgraded in all rooms Plumbing fixtures upgraded in kitchen and bath(s) Ceiling fans added to all bedro
Slide 56: Hunters Ridge - Proven Results in 2006
Hunters Ridge - Proven Results in 2006 Hunters Ridge: Jacksonville, FL Budget Monthly Units YTD Units units completed YTD units leased YTD units budgeted YTD
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