Mid-america Apartment Communities, Inc. · NYSE:MAA
Mid-america Apartment Communities — Investor Presentation (February 2018)
36 slides from Mid-america Apartment Communities's investor presentation, Feb 7, 2018
Slide 1: Capital Markets Update February 2018
CAPITAL MARKETS UPDATE FEBRUARY 2018 ATLANTA / BUCKHEAD PHOENIX / TEMPE DALLAS / FRISCO
Slide 2: Forward Looking Statements
CAPITAL MARKETS UPDATE 2 FORWARD LOOKING STATEMENTS This presentation contains forward - looking statements within the meaning of Section 27 A of the Securities Act of 1933 , as amended, as Section 21 E of the Securities Exchange Act of 1934 , as amended . These forward - looking statements, which a
Slide 3: A Differentiated Strategy for Creating Value
A DIFFERENTIATED STRATEGY FOR CREATING VALUE CAPITAL MARKETS UPDATE 3 CAPTURING FULL CYCLE PERFORMANCE THROUGH… FOCUS ON HIGH - GROWTH REGION OF U.S. • MAA focuses exclusively on the high - growth Southeast, Southwest and Mid - Atlantic states DIVERSIFIED AND BALANCED EARNINGS STREAM WITH HIGH - REC
Slide 4: Focus on High Growth Region of the U.S.
FOCUS ON HIGH GROWTH REGION OF THE U.S. CAPITAL MARKETS UPDATE 4 65% SECTOR 40% SECTOR 3% MAA 0% MAA % APARTMENT SECTOR NOI FROM 10 GATEWAY MARKETS % APARTMENT SECTOR NOI FROM CALIFORNIA SOURCE: Green Street Advisors, US Apartment Outlook, January 16, 2018 • More favorable MIGRATION TRENDS • Superio
Slide 5: Active Diversification and Balance Across High Growth Region
48% 52% Diversified in Price Points 1,3 A to A+ B to B+ Multifamily Markets Regional Office Corporate Office ACTIVE DIVERSIFICATION AND BALANCE ACROSS HIGH GROWTH REGION CAPITAL MARKETS UPDATE 5 50% 22% 18% 9% Diversified in Markets 1 Inner Loop Suburban Satellite City Downtown/CBD TOP 20 MARKETS 1
Slide 6: Focus on High Growth Region and Markets
FOCUS ON HIGH GROWTH REGION AND MARKETS CAPITAL MARKETS UPDATE 6 Source: Company 4Q 2017 Filings; Moody’s economy.com; Axiometrics 1 Combined Adjusted Same Store Y TD NOI at 12/31/2017 MARKETS COMPLETIONS JOB GROWTH 2017 2018F Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total 2017 2018F Atlanta 2,885 2,631 3,388
Slide 7: Active Diversification Positions Portfolio to Serve Largest Renter Segments
ACTIVE DIVERSIFICATION AND BALANCE POSITIONS THE PORTFOLIO TO SE RVE THE LARGEST SEGMENTS OF RENTER MARKET…BETTER FULL CYCLE PERFORMANCE CAPITAL MARKETS UPDATE 7 0.9% 12.5% 44.0% 28.9% 9.4% 0.5% 3.7% 0.1% 0.0% 4.4% 15.8% 23.7% 20.9% 13.8% 7.6% 5.6% 4.6% 3.6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 3
Slide 8: Opportunistically Recycle and Deploy Capital
OPPORTUNISTICALLY RECYCLE AND DEPLOY CAPITAL CAPITAL MARKETS UPDATE 8 Since 2012: Opportunistically Recycle Capital • Sold just under 18k units in mostly one - off full retail priced transactions, totaling $1.3B • Average age 26 years; mix of markets: Large 29%; Secondary 38%; Tertiary 33% • Achieve
Slide 9: Case Study: 1201 Midtown, Charleston
OPPORTUNISTICALLY DEPLOY CAPITAL CAPITAL MARKETS UPDATE 9 CASE STUDY 1201 MIDTOWN | CHARLESTON Pursued off market and provided flexible closing timing to seller • Purchased December 2016 • 4 th transaction with this seller • Very supply constrained submarket with 2 year multifamily moratorium • Purc
Slide 10: Case Study: Yale at 6th, Houston
OPPORTUNISTICALLY DEPLOY CAPITAL CAPITAL MARKETS UPDATE 10 CASE STUDY YALE AT 6TH | HOUSTON Below replacement cost and other qualified offers • Purchased September 2016 • 4th transaction with this seller • Located in very supply constrained submarket • Purchase Price of $217k per unit • Estimated Re
Slide 11: Case Study: Charlotte at Midtown, Nashville
OPPORTUNISTICALLY DEPLOY CAPITAL CAPITAL MARKETS UPDATE 11 CASE STUDY CHARLOTTE AT MIDTOWN | NASHVILLE Fell out of contract and seller was motivated • Purchased March 2017 • MAA stepped in at $62.5M ($224k per unit) and closed 1 day after the PSA was executed • MAA Estimated Stabilized Cap Rate: 5.6
Slide 12: Opportunistically Deploy Capital: Future Opportunity
OPPORTUNISTICALLY DEPLOY CAPITAL CAPITAL MARKETS UPDATE 12 Manage Development Risk While Achieving Significant Value Creation FUTURE OPPORTUNITY Profile of Opportunities Sought • Focus on MAA core markets • Submarket focused site selection • Execute with third - party contractors; MAA does not serve
Slide 13: Development Pipeline and Lease-ups Poised to Deliver Value
• Established history and success of disciplined capital deployment will govern growth through new development • Manage the design and investment from an owner / operator perspective; optimize long - term margins • Additional pipeline opportunities in pre - development: Dallas/McKinney, TX, Raleigh,
Slide 14: Development Projects
OPPORTUNISTICALLY DEPLOY CAPITAL CAPITAL MARKETS UPDATE 14 DEVELOPMENT PROJECTS Post River North Denver, CO Post Centennial Park Atlanta, GA Post South Lamar II Austin, TX Cherry Creek (concept) Denver, CO
Slide 15: Operational Advantages Drive Value
MAA’s established expense management practice stands out among peers OPERATIONAL ADVANTAGES DRIVE VALUE CAPITAL MARKETS UPDATE 15 DISCIPLINED APPROACH TO EXPENSE MANAGEMENT 2012 2013 2014 2015 2016 2017F MAA Peer Group MAA: 2.5% 2012 - 2017 Expense CAGR PEER GROUP 1 : 3.0% 2012 - 2017F Expense CAGR
Slide 16: Operational Strength: Same Store NOI Margin Improvement
OPERATIONAL STRENGTH CAPITAL MARKETS UPDATE 16 SAME STORE NOI MARGIN IMPROVEMENT • MAA platform capabilities applied to CLP and PPS portfolios drive meaningful margin expansion • PPS margin improvement to date has been expense driven; benefits of revenue improvement and further expense improvement a
Slide 17: Operating Platform: Redevelopment = Strong Value Creation
• Redevelopments are performed on turn at select communities, minimizing down time and allowing us to evaluate the effectiveness of the program for real - time improvements • Standard program includes kitchen and bath upgrades • Stainless appliances • Counter top replacement • U pdated cabinetry • P
Slide 18: Operating Platform: Future Opportunity to Capture
OPERATING PLATFORM: FUTURE OPPORTUNITY TO CAPTURE CAPITAL MARKETS UPDATE 18 Robust Pipeline of Units Yet to be Redeveloped MAA REDEVELOPMENT PIPELINE Remaining Identified Redevelopment Opportunity Future Value Opportunity Revenue At 5.3% Cap Rate Net Value Creation $35.1M $668.3M $500.6M Legacy MAA
Slide 19: PPS Merger Strengthens Platform and Provides Compelling Value
PPS MERGER STRENGTHENS PLATFORM AND PROVIDES COMPELLING VALUE CAPITAL MARKETS UPDATE 19 SYNERGY AND NOI UPSIDE OPPORTUNITY FFO COMMENTS IDENTIFIED AT MERGER IMPACT IN 2018 2019 AND BEYOND NOI Margin $13 - $15 million $ 8 - $ 9 million $ 1 3 - $15 million Expense synergies captured in 2017 - 2018; re
Slide 20: Enhanced Investment Grade Balance Sheet and Debt Maturity Profile
ENHANCED INVESTMENT GRADE BALANCE SHEET AND MANAGEABLE DEBT MATU RITY PROFILE CAPITAL MARKETS UPDATE 20 CREDIT METRICS AT 12/31/2017 MAA SECTOR AVG 3 Total debt / total assets 1 33.2% 33.1% Total secured debt / total assets 1 7.2% 10.6% Unencumbered NOI / total NOI 84.8% 78.5% Net d ebt / recurring
Slide 21: Solid Investment Grade Balance Sheet
SOLID INVESTMENT GRADE BALANCE SHEET CAPITAL MARKETS UPDATE 21 DEBT SUMMARY ($ IN MILLIONS) AT 12/31/2017 Unsecured Bonds $2,266 50.3% Unsecured Term Loans 850 18.9% Unsecured Credit Facility 410 9.1% Total Unsecured Debt $3,526 78.3% Total Secured Debt $976 21.7% TOTAL DEBT $4,502 Note : Total Mark
Slide 22: Differentiated Strategy and Superior Execution Drives Long-Term Value Creation
DIFFERENTIATED STRATEGY AND SUPERIOR EXECUTION DRIVES LONG - TERM VALUE CREATION CAPITAL MARKETS UPDATE 22 $2.38 $2.42 $2.46 $2.46 $2.46 $2.51 $2.64 $2.78 $2.92 $3.08 $3.28 $3.48 91.9% 83.7% 82.3% 79.9% 85.4% 76.1% 66.7% 74.3% 66.7% 62.0% 66.1% 65.7% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Slide 23: Summary
CAPITAL MARKETS UPDATE 23 • Focused on driving growing cash flows with lower levels of volatility through the cycle • B alanced capital allocation across the high - growth Southeast, Southwest and Mid - Atlantic regions • Largest owner/operator focused on high - growth Southeast, Southwest and Mid -
Slide 24: Appendix: Reconciliation and Definitions of Non-GAAP Financial Measures
CAPITAL MARKETS UPDATE 24 AT DECEMBER 31, 2017 APPENDIX Reconciliation of Non - GAAP Financial Measures Definitions of Non - GAAP Financial Measures
Slide 25: Reconciliation of FFO, AFFO and FAD to Net Income
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 25 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 Year Ended December 31, December 31, 2017 2016 2017 2016 Net incom
Slide 26: Reconciliation of Net Operating Income to Net Income
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 26 RECONCILIATION OF NET OPERATING INCOME TO NET INCOME AVAILABLE FOR MAA COMMON SHAREHOLDERS Dollars in thousands Three Months Ended Year Ended December 31, 2017 September 30, 2017 December 31, 2016 December 31, 2017 December 31
Slide 27: Reconciliation of EBITDA, Adjusted EBITDA and Recurring Adjusted EBITDA
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 27 RECONCILIATION OF EBITDA, ADJUSTED EBITDA AND RECURRING ADJUSTED EBITDA TO NET INCOME Dollars in thousands Three Months Ended Year Ended December 31, December 31, December 31, December 31, 2017 2016 2017 2016 Net income $ 128,
Slide 28: Reconciliation of Net Debt and Gross Assets
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 28 RECONCILIATION OF NET DEBT TO UNSECURED NOTES PAYABLE AND SECURED NOTES PAYABLE Dollars in thousands As of December 31, December 31, September 30, June 30, March 31, 2017 2016 2016 2016 2016 Unsecured notes payable $ 3,525,765
Slide 29: Reconciliation of Gross Real Estate Assets
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 29 RECONCILIATION OF GROSS REAL ESTATE ASSETS TO REAL ESTATE ASSETS, NET Dollars in thousands As of December 31, December 31, 2017 2016 Real estate assets, net $ 11,261,924 $ 11,341,862 Accumulated depreciation 2,075,071 1,674,80
Slide 30: Definitions of Non-GAAP Financial Measures: Adjusted EBITDA
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 30 Adjusted EBITDA For purposes of calculations in this release, Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization, or Adjusted EBITDA, is composed of EBITDA adjusted for net gain or loss on asset sales
Slide 31: Definitions of Non-GAAP Financial Measures: EBITDA and FAD
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 31 EBITDA For purposes of calculations in this release, Earnings Before Interest, Income Taxes, Depreciation and Amortization, or EBITDA, i s composed of net income plus depreciation and amortization, interest expense, and income ta
Slide 32: Definitions of Non-GAAP Financial Measures: FFO
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 32 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, gai
Slide 33: Definitions of Non-GAAP Financial Measures: Gross Real Estate Assets
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 33 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 Consol
Slide 34: Definitions: Recurring Adjusted EBITDA, Average Effective Rent
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 34 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 integratio
Slide 35: Definitions: Development, Lease-up, Same Store Portfolios
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 35 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 t
Slide 36: Definitions: Post Adjusted Same Store Portfolio
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES CAPITAL MARKETS UPDATE 36 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 resul
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