Mid-america Apartment Communities, Inc. · NYSE:MAA
Mid-america Apartment Communities — Investor Presentation (April 2006)
25 slides from Mid-america Apartment Communities's investor presentation, Apr 5, 2006
Slide 1: Mid-America Apartment Communities Investor Update
Mid-America Apartment Communities Investor Update April, 2006
Slide 2: Safe Harbor Statement
Safe Harbor Statement Statements contained in this presentation, which are not historical facts, are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which can cause actu
Slide 3: Focused, Stable, High Performing
Focused, Stable, High Performing Ø Southeast-Sunbelt Regional Focus • Higher and more stable demand characteristics; strong long-term growth prospects Ø Three Market Tier Strategy • Diversified investment platform; delivers superior performance through full market cycle Ø High Quality Apartment Hous
Slide 4: Southeast Focus: Growth & Stability
Southeast Focus: Growth & Stability Ø Five Year Projected Population Growth • MAA Region Combined 5.6% • Other States Combined 4.4% • 40% of investments are in significant growth states of FL and TX Ø Manage Supply Side Exposure • Disciplined investment • Aggressive operations
Slide 5: Portfolio Shift Over Last 3 Years
Portfolio Shift Over Last 3 Years Ø Better positioned for recovering market cycle Ø New profile will drive more robust internal earnings performance Ø Continues to offer high degree of stability and value protection Ø Regional strength; solid diversification Former Today Large Tier – Dallas, Houston
Slide 6: Portfolio Shift Over Last 3 Years
Portfolio Shift Over Last 3 Years Significantly improved portfolio quality through capital recycling and new capital deployment Ø Acquired $449MM and sold $115MM (incl. JV properties) Ø Average age of properties acquired were 5 years, versus 17 years for properties sold Ø Average investment of $75K
Slide 7: Q4 Results…A Turning Point
Q4 Results…A Turning Point Very strong results achieved in early phase of market recovery Ø Same Store Q4 NOI increase of 8.1% over prior year (before impact of straight-line concessions); highest since Q1 1996 Ø FFO results of $0.81/share; record Q4 Ø Same Store occupancy of 94.7%; highest Q4 resul
Slide 8: Strong Value Growth Prospects
Strong Value Growth Prospects Improving Leasing Cycle: Significantly Strengthened Property Repositioning and Operating Platform: Asset Enhancement: - Homeownership peaking. - Home prices have increased - New web-based operating - Kitchen and bath up-grade much faster than incomes. system installed e
Slide 9: Strong Internal Growth Prospects
Strong Internal Growth Prospects Significant FFO upside to capture from same store portfolio as market conditions improve…earnings potential protected and enhanced Ø Same Store portfolio generated 35 cents/share in higher FFO in 2002, as compared to 2005, from lower concessions; representing signifi
Slide 10: Strong Internal Growth Prospects
Strong Internal Growth Prospects Implementation of a new operating system and enhancements made to an expanded asset management platform Ø Successful implementation of a new web-based property management system; strong productivity and pricing platform Ø New reporting and management tools just now b
Slide 11: Strong Internal Growth Prospects
Strong Internal Growth Prospects Opportunity for repositioning and significant re-pricing upside at a number of properties through unit interior upgrades Ø Unit interior renovation program will drive higher rent growth performance over the next 5 years Ø 17 properties initially targeted; 13% of port
Slide 12: Proven External Growth Program
Proven External Growth Program A record of disciplined growth; extensive network in place and local knowledge of markets…very active deal flow to capture new growth Ø Proven investment track record Ø Established network; high deal flow Ø In-depth local knowledge, “Preferred Buyer” • Very familiar wi
Slide 13: Proven External Growth Program
Proven External Growth Program Investment decisions are governed by conservative underwriting, a minimum IRR investment hurdle and a requirement to ensure that meaningful accretion to existing shareholder value is captured Ø Underwriting assumptions • Realistic • Growth rates primarily driven by thi
Slide 14: Proven External Growth Program
Proven External Growth Program Ø Average cap rate of properties acquired ($449MM) over last three years is 6.3…off of weak operating results Ø 3rd year NOI yields on new acquisitions are expected to be 7.5% - 8%...offering significant FFO growth upside over the next few years Ø Average 14.4% forecas
Slide 15: Favorable External Growth Rate
Favorable External Growth Rate MAA’s external growth can be highly competitive within the sector, while retaining a high level of discipline in capital deployment Ø $150 to $400 MM of new growth has a more significant impact on MAA due to our size Ø Deal flow is very high Ø Ability to execute is str
Slide 16: Additional External Growth
Additional External Growth Ø Disciplined “value added” development opportunities • Leverage existing assets and operating costs • Raleigh, Jacksonville, Dallas Ø Expect 8%+ stabilized yields Ø 4 potential projects totaling 738 units; est. $65 MM cost Ø In 2006, 3 to break ground • $49MM total invest
Slide 17: Positioned to Perform
Positioned to Perform Ø ‘06 forecast FFO of $3.18 to $3.32 Ø 6% growth in FFO versus ’05 adjusted for non-routine events Ø $3.25 mid-point is based on 4.0% increase in same-store NOI (vs. average of 4.6% for 2005) Ø Same store revenue growth forecast • Physical occupancy expected to average 95.0%...
Slide 18: Strong Balance Sheet
Strong Balance Sheet Flexibility, coverage ratios and cost of debt have all materially improved over the last three years; balance sheet positioned to support growth Ø Balance sheet materially strengthened Ø 2006 refinancing rate risk minimized: only $60MM of fixed rate maturities Ø Leverage (debt +
Slide 19: Strong Balance Sheet
Strong Balance Sheet Ø Leverage has been reduced, but still runs a little higher than most apartment REITs but… – Fixed charge coverage of 2.1 compares to sector median of 2.2 – Business strategy is less risky than most • Very low development risks • Less cyclical markets • No condo activity • Prove
Slide 20: Strong Balance Sheet
Strong Balance Sheet MAA dividend payout ratio better than sector performance Ø Dividend increase 10-31-05 from $2.34 to $2.38 annual rate reflects confidence in balance sheet strength Ø Dividend as % of FFO and AFFO are well below apartment sector median:
Slide 21: Solid Public Company Discipline
Solid Public Company Discipline Ø ISS score outperforms 82% of Russell 3000 and 71% of real estate companies Ø Shareholder Rights Plan (“poison pill”) eliminated Ø E & Y appointed in 2005 for “fresh look”; audit results indicate no material issues Ø Strong, independent board Ø Material inside owners
Slide 22: Evolving Shareholder Profile
Evolving Shareholder Profile Ø In last two years liquidity and market interest have significantly increased Ø Institutional ownership has doubled; currently 65% of total shares Ø Significant increase from many REIT dedicated investors Ø Average daily volume trebles to over 100,000 shares Ø Insiders
Slide 23: Attractive Buy Opportunity
Attractive Buy Opportunity Ø MAA is trading at a 18% discount to the average sector FFO multiple Ø MAA priced at the apartment REIT sector weighted average FFO multiple implies a price of $67 per share…a 22% discount to current pricing MAA Apt REIT MAA Priced Average at Average 2006 FFO Multiple 17.
Slide 24: Recap
Recap Significant internal earnings growth upside + steady and disciplined new growth prospects + secure dividend + pricing upside relative to sector and underlying value ü Lower-risk business strategy & operation ü Minimal exposure to an “over-heated condo market correction” ü Significant earnings
Slide 25: Slide 25
Mid-America Apartment Communities — Investor Presentation (April 2006) on 6ix