Mid-america Apartment Communities, Inc. · NYSE:MAA
Mid-america Apartment Communities — Nareit REITweek: REITworld 2018
31 slides from Mid-america Apartment Communities's conference presentation, Nov 6, 2018
Slide 1: Nareit REITworld | November 7-9, 2018
NAREIT REITWORLD | NOVEMBER 7 - 9, 2018
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, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, which are based on current expectations,
Slide 3: A Strategy Focused on Creating Value Through the Full Market Cycle
A STRATEGY FOCUSED ON CREATING VALUE THROUGH THE FULL MARKET CYCLE FOCUSED ON HIGH - GROWTH REGION OF THE U.S. MAA focuses exclusively on the high - growth Southeast, Southwest and Mid - Atlantic regions; high household formation driving consistently strong demand UNIQUELY DIVERSIFIED AND BALANCED E
Slide 4: Focus on High Growth Region of the U.S.
FOCUS ON HIGH GROWTH REGION OF THE U.S. 64% SECTOR 39% SECTOR 4% MAA 0% MAA • Superior JOB GROWTH VS. NATIONAL AVERAGES • Favorable MIGRATION TRENDS and HOUSEHOLD FORMATIONS • FAVORABLE TAX ENVIRONMENT attracts employers and drives job growth • BUSINESS - FRIENDLY infrastructure attracts employers •
Slide 5: Active Market Diversification and Submarket Balance Across the High Growth Region
ACTIVE MARKET DIVERSIFICATION AND SUBMARKET BALANCE ACROSS THE HIGH GROWTH REGION TOP 20 MARKETS 1 % OF Q3 2018 NOI 2 Atlanta, GA 13.5% Dallas, TX 9.4% Charlotte, NC 7.1% Washington, DC 6.8% Tampa, FL 6.6% Austin, TX 5.8% Orlando, FL 5.7% Raleigh/Durham, NC 4.5% Nashville, TN 4.2% Houston, TX 4.1% F
Slide 6: Portfolio Balanced to Serve the Largest Segments of the Apartment Rental Market
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% 35.0% 40.0% 45.0% 50.0% Spread of Rents in MAA Portfolio Spread of Rents Paid by Apartment Renters • Provides downside protection • Helps mitigate new supply press
Slide 7: Supply outlook by market
Elevated Steady Improving Charleston Fort Worth Jacksonville Orlando Phoenix Raleigh Tampa Atlanta Dallas Houston Nashville Austin Charlotte Washington D.C. Third party data suggests that the supply outlook for our markets will show modest improvement with market level supply expected to decline sli
Slide 8: Same Store Leasing Update as of October 31, 2018
AVERAGE DAILY OCCUPANCY SEPTEMBER YTD OCTOBER 2018 96.1% 96.1% 2017 96.0% 95.9% SAME STORE LEASING UPDATE – AS OF OCTOBER 31, 2018 LEASE OVER LEASE PRICING LEGACY POST SAME STORE BLENDED LEASE OVER LEASE PRICING (2018 VS. 2017) BLENDED LEASE OVER LEASE PRICING (2018 VS. 2017) FORECAST FOR THE REMAIN
Slide 9: 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 DEVELOPMENT PIPELINE AND LEASE - UPS POISED TO DELIVER VALUE PROPERTY MSA TOTAL UNITS T
Slide 10: Operational Advantages Drive Value
2012 2013 2014 2015 2016 2017 2018F MAA Peer Group MAA: 2.4% 2012 - 2018F Expense CAGR PEER GROUP 1 : 3.1% 2012 - 2018F Expense CAGR MAA’s established expense management practice stands out among peers OPERATIONAL ADVANTAGES DRIVE VALUE 1. Unique shop stocking program drives down maintenance and tur
Slide 11: Same Store NOI Margin Improvement
62.3% 63.3% 65.8% 60.0% 61.0% 62.0% 63.0% 64.0% 65.0% 66.0% 67.0% 2016 Actual 9/30/2018 YTD Full Synergy Capture PPS NOI Margin 3 5 Same Store NOI Margin Improvement • MAA platform capabilities applied to CLP and PPS portfolios drive meaningful margin expansion • PPS margin improvement to date has b
Slide 12: Operating Platform: Redevelopment = Strong Value Creation
OPERATING PLATFORM: REDEVELOPMENT = STRONG VALUE CREATION Over 28,000 units redeveloped during past 5 years 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 incl
Slide 13: Operating Platform: Future Opportunity to Capture
OPERATING PLATFORM: FUTURE OPPORTUNITY TO CAPTURE Robust Pipeline of Units Yet to be Redeveloped MAA REDEVELOPMENT PIPELINE Remaining Identified Redevelopment Opportunity Future Value Opportunity Revenue At 5.6% Cap Rate Net Value Creation $26.1M $466.1M $343.1M Legacy MAA Legacy CLP Legacy PPS Tota
Slide 14: Synergy and NOI Upside Opportunity
SYNERGY AND NOI UPSIDE OPPORTUNITY FFO COMMENTS IDENTIFIED AT MERGER IMPACT IN 2018 TOTAL SYNERGY OPPORTUNITY NOI Margin $13 - $15 million $ 8 - $ 9 million $ 1 3 - $15 million Expense synergies captured in 2017 - 2018; revenue opportunities in 2018 and beyond Stabilize PPS Development Pipeline $15
Slide 15: Credit Metrics and Debt Maturity Profile
CREDIT METRICS AT 9/30/2018 MAA SECTOR AVG 3 Total debt / total assets 1 32.5% 32.7% Total secured debt / total assets 1 6.6% 9.1% Unencumbered NOI / total NOI 85.3% 80.7% Net d ebt / recurring adjusted EBITDA re 2 4.98x 5.09x Consolidated income available for debt service to total annual debt servi
Slide 16: Solid Investment Grade Balance Sheet
SOLID INVESTMENT GRADE BALANCE SHEET DEBT SUMMARY ($ IN MILLIONS) AT 9/30/2018 Unsecured Bonds $2,614 58.0% Unsecured Term Loans 599 13.3% Unsecured Credit Facility 370 8.2% Total Unsecured Debt $3,583 79.5% Total Secured Debt $921 20.5% TOTAL DEBT $4,504 Note : Total Enterprise Value equals common
Slide 17: Dividends, AFFO Payout Ratio and Total Shareholder Return
$2.46 $2.46 $2.46 $2.51 $2.64 $2.78 $2.92 $3.08 $3.28 $3.48 $3.69 82.3% 79.9% 79.6% 76.1% 66.7% 74.3% 66.7% 62.0% 66.1% 65.7% 67.8% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% $- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F Di
Slide 18: 2019 FFO Considerations
2019 FFO CONSIDERATIONS Our current 2018 FFO guidance includes several non - core or non - recurring items, detailed below: • Debt mark to market credit adjustment of $9.5M to $10.5M (credit to FFO) • Life insurance settlement of $4.4M (credit to FFO) • Land sale gains of $3.9M (credit to FFO) • Deb
Slide 19: Sustainability: Conserving Resources and Empowering Associates
CONSERVING RESOURCES • Low - flow plumbing fixtures • Irrigation efficiencies, rainwater harvesting, reclaimed water and well water usage • Community landscaping to minimize turf and include drought tolerant plant material REDUCING WASTE • On - site trash recycling options for residents • Online lea
Slide 20: • Focused on driving growing cash flow with lower levels of volatility through the
• Focused on driving growing cash flow with lower levels of volatility through the cycle • Balanced capital allocation across the high - growth Southeast, Southwest and Mid - Atlantic regions • Largest owner/operator focused on high - growth Southeast, Southwest and Mid - Atlantic regions; competiti
Slide 21: Appendix
21 AT SEPTEMBER 30, 2018 APPENDIX • Reconciliation of Non - GAAP Financial Measures • Definitions of Non - GAAP Financial Measures and Other Key Terms
Slide 22: Reconciliation of FFO, AFFO and FAD to Net Income
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES 22 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 September 30, Nine months ended September 30, 2018 2017 2018 2017 Net income available fo
Slide 23: Reconciliation of Net Operating Income to Net Income
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES 23 RECONCILIATION OF NET OPERATING INCOME TO NET INCOME AVAILABLE FOR MAA COMMON SHAREHOLDERS Dollars in thousands Three Months Ended Nine Months Ended September 30, 2018 June 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017 Net Operat
Slide 24: Reconciliation of EBITDA and Adjusted EBITDAre to Net Income
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES (1) Included in Other non - operating income on the Consolidated Statements of Operations 24 RECONCILIATION OF EBITDA, EBITDA re , ADJUSTED EBITDA re AND RECURRING ADJUSTED EBITDA re TO NET INCOME Dollars in thousands Three Months Ended Twelve Months E
Slide 25: Reconciliation of Net Debt and Gross Assets
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES 25 RECONCILIATION OF NET DEBT TO UNSECURED NOTES PAYABLE AND SECURED NOTES PAYABLE Dollars in thousands As of September 30, December 31, 2018 2017 Unsecured notes payable $ 3,582,624 $ 3,525,765 Secured notes payable 921,399 976,292 Total debt 4,504,02
Slide 26: Reconciliation of Gross Real Estate Assets
RECONCILIATION OF NON - GAAP FINANCIAL MEASURES 26 RECONCILIATION OF GROSS REAL ESTATE ASSETS TO REAL ESTATE ASSETS, NET Dollars in thousands As of September 30, December 31, 2018 2017 Real estate assets, net $ 11,196,041 $ 11,261,924 Accumulated depreciation 2,439,418 2,075,071 Cash and cash equiva
Slide 27: Definitions of Non-GAAP Financial Measures
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES Adjusted EBITDAre For purposes of calculations in this release, Adjusted Earnings Before Interest, Income Taxes, Depreciation and Amortization for real estate, or Adjusted EBITDAre , is composed of EBITDAre adjusted for net gain or loss on non - depreciab
Slide 28: Definitions of Non-GAAP Financial Measures
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES Funds Available for Distribution (FAD) FAD is composed of FFO less total capital expenditures, excluding development spending and property acquisitions. FAD should not be considered as an alternative to Net income available for MAA common shareholders. As
Slide 29: Definitions of Non-GAAP Financial Measures
DEFINITIONS OF NON - GAAP FINANCIAL MEASURES Net Debt Net Debt represents Unsecured notes payable and Secured notes payable less Cash and cash equivalents and 1031(b) proceeds inc lud ed in "Restricted cash" on the Consolidated Balance Sheets. MAA believes Net Debt is a helpful tool in evaluating it
Slide 30: Definitions of Other Key Terms
DEFINITIONS OF OTHER KEY TERMS Average Effective Rent per Unit Average Effective Rent per Unit represents the average of gross rent amounts after the effect of leasing concessions for occupied uni ts plus prevalent market rates asked for unoccupied units, divided by the total number of units. Leasin
Slide 31: Definitions of Other Key Terms
DEFINITIONS OF OTHER KEY TERMS Total Market Capitalization Total Market Capitalization equals the number of shares of common stock plus units not held by MAA at period end multiplied b y t he closing stock price at period end, plus total debt outstanding . Unencumbered NOI Unencumbered NOI represent
Mid-America Apartment Communities — Nareit REITweek: REITworld 2018 on 6ix