MAA Reports Fourth Quarter And Year End Results

GERMANTOWN, Tenn., Jan. 30, 2019 /PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), today announced operating results for the quarter and year ended December 31, 2018.

Net Income Available for Common Shareholders

For the quarter ended December 31, 2018, net income available for MAA common shareholders was $60.4 million, or $0.53 per diluted common share, compared to $122.5 million, or $1.08 per diluted common share, for the quarter ended December 31, 2017.  In connection with the December 2016 merger between MAA and Post Properties, Inc., or Post Properties, MAA was required to issue its preferred stock in exchange for Post Properties' preferred stock. Results for the quarter ended December 31, 2018 included $2.3 million, or $0.02 per diluted common share, of non-cash expense related to the mark-to-market adjustment of the embedded derivative in the preferred shares issued in the Post Properties merger, and $0.6 million, or $0.01 per diluted common share, of gains related to the sale of real estate assets.  Results for the quarter ended December 31, 2017 included $3.0 million, or $0.03 per diluted common share, of non-cash income related to the embedded derivative in the preferred shares and $68.3 million, or $0.60 per diluted common share, of gains related to the sale of real estate assets.

For the year ended December 31, 2018, net income available for MAA common shareholders was $219.2 million, or $1.93 per diluted common share, compared to $324.7 million, or $2.86 per diluted common share, for the year ended December 31, 2017. Results for the year ended December 31, 2018 included $2.6 million, or $0.02 per diluted common share, of non-cash expense related to the embedded derivative in the preferred shares and $4.5 million, or $0.04 per diluted common share, of gains related to the sale of real estate assets. Results for the year ended December 31, 2017 included $8.8 million, or $0.08 per diluted common share, of non-cash income related to the embedded derivative in the preferred shares and $127.4 million, or $1.12 per diluted common share, of gains related to the sale of real estate assets.

Funds from Operations (FFO)

For the quarter ended December 31, 2018, FFO was $182.9 million, or $1.55 per diluted common share and unit, or per Share, compared to $177.2 million, or $1.50 per Share, for the quarter ended December 31, 2017.  Results for the quarter ended December 31, 2018 included $2.3 million, or $0.02 per Share, of non-cash expense related to the embedded derivative in the preferred shares.  Results for the quarter ended December 31, 2017 included $3.0 million, or $0.03 per Share, of non-cash income related to the embedded derivative in the preferred shares.

For the year ended December 31, 2018, FFO was $712.7 million, or $6.04 per Share, compared to $699.6 million, or $5.94 per Share, for the year ended December 31, 2017. Results for the year ended December 31, 2018 included $2.6 million, or $0.02 per Share, of non-cash expense related to the embedded derivative in the preferred shares.  Results for the year ended December 31, 2017 included $8.8 million, or $0.07 per Share, of non-cash income related to the embedded derivative in the preferred shares.

A reconciliation of FFO to net income available for MAA common shareholders, and an expanded discussion of the components of FFO, can be found later in this release.

Eric Bolton, Chairman and Chief Executive Officer, said, "We continue to capture solid demand for apartment housing across our portfolio.  Despite elevated levels of new supply in a number of markets, rent growth trends continue to improve reflecting the superior job growth and household formation trends associated with our Sunbelt-focused strategy.  Integration efforts associated with our merger with Post Properties are now complete, and we look forward to fully capturing the opportunities associated with redevelopment of this portfolio.  Our balance sheet is strong with solid coverage ratios and significant capacity for executing on new opportunities that will emerge as we work through the current supply cycle."

Highlights

• Property revenues from the Same Store Portfolio increased 2.3% during the fourth quarter of 2018 as compared to the same period in the prior year, the strongest performance over the past four quarters. Results were driven by a 2.3% growth in Average Effective Rent per Unit, which was a 20 basis point improvement from the performance in the third quarter of 2018, and continued strong Average Physical Occupancy of 96.1%.
• Property operating expenses for the Same Store Portfolio increased 3.0% during the fourth quarter of 2018 as compared to the same period in the prior year, driven primarily by a 5.8% increase in real estate property taxes. Net Operating Income, or NOI, from the Same Store Portfolio increased by 2.0% during the fourth quarter of 2018 as compared to the same period in the prior year.
• Strong demand for apartment housing continues to support low resident turnover as resident move outs for the Same Store Portfolio for the fourth quarter of 2018 remained historically low at 48.5% on a rolling twelve month basis.
• During the fourth quarter of 2018, MAA completed development of an expansion project on an apartment community located in Charleston, South Carolina. As of the end of the fourth quarter, MAA had three development projects under construction, which included 577 units, with a total projected cost of $118.5 million and an estimated $87.6 million remaining to be funded as of December 31, 2018.
• As of the end of the fourth quarter of 2018, MAA had four properties in their initial lease-up, including the expansion project completed during the quarter. At quarter-end, average physical occupancy for this lease-up portfolio was 62.4%. These properties are expected to stabilize and become fully productive over the coming year.
• During the year ended December 31, 2018, MAA completed renovation of 8,155 units under its redevelopment program, achieving average rental rate increases of 10.5% above non-renovated units.

Same Store Portfolio Operating Results

To ensure comparable reporting with prior periods, the Same Store Portfolio includes properties that were stabilized and owned by MAA at the beginning of the previous year. Post Properties communities became eligible to enter the Same Store Portfolio on January 1, 2018.

The Same Store Portfolio revenue growth of 2.3% during the fourth quarter of 2018 was primarily a result of a 2.3% increase in Average Effective Rent per Unit, as compared to the same period in the prior year.  Average Physical Occupancy for the Same Store Portfolio was strong at 96.1% for the fourth quarter of 2018, a slight decrease from 96.2% in the same period in the prior year.  Property operating expenses increased 3.0% for the fourth quarter of 2018, primarily driven by a 5.8% increase in real estate property taxes as compared to the same period in the prior year. This resulted in Same Store Portfolio NOI growth of 2.0% for the fourth quarter of 2018 as compared to the same period in the prior year.

Same Store Portfolio revenue increased 1.9% during the year ended December 31, 2018, primarily as a result of a 1.9% increase in Average Effective Rent per Unit, as compared to the prior year.  Rent growth for both new and renewing leases, as compared to the prior lease, on a combined basis increased an average of 2.5% during the year ended December 31, 2018, an 80 basis point improvement over the performance from the prior year.  Average Physical Occupancy for the Same Store Portfolio remained strong at 96.1% for the year ended December 31, 2018.  Property operating expenses increased 2.0% for the year ended December 31, 2018, primarily driven by a 4.2% increase in real estate property taxes as compared to the prior year. This resulted in Same Store Portfolio NOI growth of 1.9% for the year ended December 31, 2018 as compared to the prior year.

A reconciliation of NOI, including Same Store NOI, to net income available for MAA common shareholders, and an expanded discussion of the components of NOI, can be found later in this release.

Acquisition and Disposition Activity

During the fourth quarter of 2018, MAA acquired a 10 acre land parcel located in the Denver, Colorado market and a 9 acre land parcel located in the Houston, Texas market.  MAA is currently performing pre-development work with a development start date expected during 2019 at both locations.

During the fourth quarter of 2018, MAA closed on the disposition of a 3 acre land parcel located in the Atlanta, Georgia market for proceeds of $0.7 million.

Development and Lease-up Activity

During the fourth quarter of 2018, MAA completed development of an expansion project at its 1201 Midtown II community located in Charleston, South Carolina, which is now included in MAA's lease-up portfolio.  As of the end of the fourth quarter of 2018, MAA had three development communities under construction.  Total development costs for the three communities are projected to be $118.5 million, of which an estimated $87.6 million remained to be funded as of the end of the fourth quarter.  The expected average stabilized NOI yield on these communities is 6.3%. During the fourth quarter of 2018, MAA funded $14.5 million of construction costs on both current and completed development projects.  MAA expects to complete two developments in the second half of 2019 and one development in the second half of 2020.

During the fourth quarter of 2018, MAA had two apartment communities, The Denton II, located in Kansas City, Missouri and Post Midtown, located in Atlanta, Georgia, complete their initial lease-up and move into MAA's stabilized portfolio.  MAA had four apartment communities, containing a total of 1,311 units, remaining in initial lease-up as of the end of the fourth quarter of 2018: Sync 36 I, located in Denver, Colorado; Post River North, located in Denver, Colorado; Post Centennial Park, located in Atlanta, Georgia; and 1201 Midtown II, located in Charleston, South Carolina.  Physical occupancy for the four lease-up projects averaged 62.4% at the end of the fourth quarter of 2018.

Redevelopment Activity

MAA continues its interior redevelopment program at select apartment communities throughout the portfolio.  During the fourth quarter of 2018, MAA redeveloped a total of 1,606 units at an average cost of $7,800 per unit, bringing the total units renovated during the year ended December 31, 2018 to 8,155 at an average cost of $6,138 per unit, achieving average rental rate increases of 10.5% above non-renovated units.

Capital Expenditures

Recurring capital expenditures totaled $16.5 million for the fourth quarter of 2018, or approximately $0.14 per Share, as compared to $18.5 million, or $0.15 per Share, for the same period in 2017.  These expenditures led to Adjusted Funds from Operations, or AFFO, of $1.41 per Share for the fourth quarter of 2018, compared to $1.35 per Share for the same period in 2017.

Redevelopment, revenue enhancing and other capital expenditures during the fourth quarter of 2018 were $31.2 million, as compared to $29.4 million for the same period in 2017. These expenditures led to Funds Available for Distribution, or FAD, of $135.3 million for the fourth quarter of 2018, compared to $129.3 million for the same period in 2017.  Dividends and distributions paid on shares of common stock and noncontrolling interests during the fourth quarter of 2018 were $108.8 million, as compared to $102.5 million for the same period in 2017.

Recurring capital expenditures totaled $74.7 million for the year ended December 31, 2018, or approximately $0.63 per Share, as compared to $71.6 million, or $0.61 per Share, for the year ended December 31, 2017.  These expenditures led to AFFO of $5.41 per Share for the year ended December 31, 2018, compared to $5.33 per Share for the year ended December 31, 2017.

Redevelopment, revenue enhancing and other capital expenditures during the year ended December 31, 2018 were $122.9 million, as compared to $102.1 million for the year ended December 31, 2017. These expenditures led to FAD of $515.1 million for the year ended December 31, 2018, compared to $525.8 million for the year ended December 31, 2017.  Dividends and distributions paid on shares of common stock and noncontrolling interests during the year ended December 31, 2018 were $434.9 million, as compared to $409.9 million for the year ended December 31, 2017.

A reconciliation of FFO, AFFO and FAD to net income available for MAA common shareholders and an expanded discussion of the components of FFO, AFFO and FAD can be found later in this release.

Financing Activities

During the fourth quarter of 2018, MAA's primary operating partnership, Mid-America Apartments, L.P. (referred to as MAALP or the Operating Partnership), retired $529.6 million of secured property mortgages before maturity and an $80.0 million secured credit facility at maturity. In December 2018, MAALP entered into a fixed rate $172.0 million 30 year secured property mortgage associated with five of its apartment communities and a variable rate $300.0 million unsecured six month term loan.  As of December 31, 2018, MAA had approximately $490.1 million combined cash and available capacity under MAALP's unsecured revolving credit facility.

In December 2018, MAALP also entered into a fixed interest rate lock agreement relating to a $191.3 million 30 year secured mortgage associated with seven of its apartment communities that is expected to close in February 2019.

Balance Sheet

As of December 31, 2018:

• Total debt to total assets (as defined in the covenants for the bonds issued by MAALP) was 32.6%, compared to 33.2% as of December 31, 2017;
• Total debt outstanding was $4.5 billion at an average effective interest rate of 3.8%;
• 74.8% of total debt was fixed or hedged against rising interest rates for an average of 6.8 years; and
• Unencumbered NOI was 92.6% of total NOI, as compared to 84.8% as of December 31, 2017.

Merger Related Activities

MAA completed its integrations efforts associated with the Post Properties merger during the fourth quarter of 2018.  In connection with the Post Properties merger, MAA incurred $0.6 million, or $0.01 per Share, and $9.1 million, or $0.08 per Share, of merger and integration costs during the fourth quarter of 2018 and the year ended December 31, 2018, respectively.  Merger and integration costs incurred during the year were primarily related to temporary systems, staffing, facilities and consulting costs necessary for the integration of the companies' business platforms.

100th Consecutive Quarterly Common Dividend Declared

MAA declared its 100th consecutive quarterly common dividend at an annual rate of $3.84 per common share, an increase from the prior year's annual rate of $3.69.  The quarterly common dividend will be paid on January 31, 2019 to holders of record on January 15, 2019.  For 25 years, MAA has consistently paid a quarterly cash dividend and has never reduced or suspended the quarterly dividend.

2019 Net Income per Diluted Common Share and FFO and AFFO per Share Guidance

MAA is providing initial 2019 guidance for Net income per diluted common share, as well as FFO per Share, and AFFO per Share.  FFO and AFFO are non-GAAP measures.  Acquisition and disposition activity materially affects depreciation and capital gains or losses, which combined, generally represent the majority of the difference between Net income available for common shareholders and FFO.  As outlined in the definitions of non-GAAP measures accompanying this release, MAA's definition of FFO is in accordance with the National Association of Real Estate Investment Trusts', or NAREIT's, definition. MAA believes that FFO is helpful in understanding operating performance in that FFO excludes depreciation expense of real estate assets and certain other non-routine items.  MAA intends to update Net income per diluted common share, FFO per Share, and AFFO per Share guidance on a quarterly basis.

Net income per diluted common share is expected to be in the range of $2.11 to $2.35 per diluted common share, or $2.23 per diluted common share at the midpoint, for the full year of 2019.  FFO per Share for the year is expected to be in the range of $6.03 to $6.27 per Share, or $6.15 per Share at the midpoint. This initial guidance is based on projections of Same Store Portfolio property revenue growth of 1.80% to 2.80% for the full year based on continued strong occupancy, modestly improved leasing conditions and normal seasonal pricing trends, while Same Store Portfolio operating expense growth is expected to be in the range of 2.60% to 3.60% for the full year.  The primary driver of the operating expense growth range is the expectation of continued increases in property real estate taxes. As a result, Same Store NOI growth for the full year is expected to be 1.30% to 2.30%.  FFO guidance for 2019 includes an effective interest rate range of 3.9% to 4.1%. MAA expects FFO for the first quarter of 2019 to be in the range of $1.41 to $1.53 per Share, or $1.47 per Share at the midpoint.  MAA does not forecast Net income per diluted share on a quarterly basis as it is not reasonable to accurately predict the timing of forecasted acquisition and disposition activity within a particular quarter (rather than during the course of the full year).

MAA expects total recurring capital expenditures for the full year of 2019 to be approximately $75.4 million, which would produce expected AFFO per Share of $5.39 to $5.63 for the full year 2019.

Supplemental Material and Conference Call

Supplemental data to this release can be found under the "Financial Results" navigation tab on the "For Investors" page of our website at www.maac.com. MAA will host a conference call to further discuss fourth quarter and year end results on Thursday, January 31, 2019, at 9:00 AM Central Time.  The conference call-in number is 877-830-2596.  You may also join the live webcast of the conference call by accessing the "For Investors" page of our website at www.maac.com.  MAA's filings with the Securities and Exchange Commission, or SEC, are filed under the registrant names of Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P.

About MAA

MAA, an S&P 500 company, is a real estate investment trust, or REIT, focused on delivering full-cycle and superior investment performance for shareholders through the ownership, management, acquisition, development and redevelopment of quality apartment communities in the Southeast, Southwest, and Mid-Atlantic regions of the United States.  As of December 31, 2018, MAA had ownership interest in 101,441 apartment units, including communities currently in development, across 17 states and the District of Columbia. For further details, please visit the MAA website at www.maac.com or contact Investor Relations at [email protected], or via mail at MAA, 6815 Poplar Ave., Suite 500, Germantown, TN 38138, Attn: Investor Relations.

Forward-Looking Statements

Sections of this release contain 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, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Such forward-looking statements include, without limitation, statements concerning forecasted operating performance and results, property acquisitions and dispositions, joint venture activity, development and renovation activity as well as other capital expenditures, capital raising activities, rent and expense growth, occupancy, financing activities, and interest rate and other economic expectations. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, as described below, which may cause our actual results, performance or achievements to be materially different from the results of operations, financial conditions or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such forward-looking statements included in this release may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.

The following factors, among others, could cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements:

• inability to generate sufficient cash flows due to market conditions, changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws, or other factors;
• exposure, as a multifamily focused REIT, to risks inherent in investments in a single industry and sector;
• adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets which we may seek to enter in the future, limitations on our ability to increase rental rates, competition, our ability to identify and consummate attractive acquisitions or development projects on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns;
• failure of new acquisitions to achieve anticipated results or be efficiently integrated;
• failure of development communities to be completed, if at all, within budget and on a timely basis or to lease-up as anticipated;
• unexpected capital needs;
• changes in operating costs, including real estate taxes, utilities and insurance costs;
• losses from catastrophes in excess of our insurance coverage;
• ability to obtain financing at favorable rates, if at all, and refinance existing debt as it matures;
• level and volatility of interest or capitalization rates or capital market conditions;
• loss of hedge accounting treatment for interest rate swaps;
• the continuation of the good credit of our interest rate swap providers;
• price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on financing;
• the effect of any rating agency actions on the cost and availability of new debt financing;
• significant decline in market value of real estate serving as collateral for mortgage obligations;
• significant change in the mortgage financing market that would cause single-family housing, either as an owned or rental product, to become a more significant competitive product;
• our ability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, the ability of MAALP to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of our taxable REIT subsidiaries to maintain their status as such for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;
• inability to attract and retain qualified personnel;
• cyberliability or potential liability for breaches of our privacy or information security systems;
• potential liability for environmental contamination;
• adverse legislative or regulatory tax changes;
• legal proceedings relating to various issues, which, among other things, could result in a class action lawsuit;
• compliance costs associated with laws requiring access for disabled persons; and
• other risks identified in this press release and, from time to time, in other reports we file with the SEC or in other documents that we publicly disseminate.

New factors may also emerge from time to time that could have a material adverse effect on our business.  Except as required by law, we undertake no obligation to publicly update or revise forward-looking statements contained in this release to reflect events, circumstances or changes in expectations after the date of this release.

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-depreciable asset sales, insurance and other settlement proceeds, and gain or loss on debt extinguishment.  As an owner and operator of real estate, MAA considers Adjusted EBITDAre to be an important measure of performance from core operations because Adjusted EBITDAre does not include various income and expense items that are not indicative of operating performance.  MAA's computation of Adjusted EBITDAre may differ from the methodology utilized by other companies to calculate Adjusted EBITDAre.  Adjusted EBITDAre should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of financial performance.

Adjusted Funds From Operations (AFFO)

AFFO is composed of FFO less recurring capital expenditures. In order to better align the classification of capital expenditures with business goals, certain capital expenditures related to commercial properties have been reclassified out of recurring capital expenditures for comparative purposes. AFFO should not be considered as an alternative to Net income available for MAA common shareholders.  As an owner and operator of real estate, MAA considers AFFO to be an important measure of performance from operations because AFFO measures the ability to control revenues, expenses and recurring capital expenditures.

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 of real estate, MAA considers EBITDA to be an important measure of performance from core operations because EBITDA does not include various expense items that are not indicative of operating performance. EBITDA should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of financial performance.

EBITDAre

For purposes of calculations in this release, Earnings Before Interest, Income Taxes, Depreciation and Amortization for real estate, or EBITDAre, is composed of EBITDA, as defined above, excluding the gain or loss on sale of depreciable asset sales and plus adjustments to reflect MAA's share of EBITDAre of unconsolidated affiliates.  As an owner and operator of real estate, MAA considers EBITDAre to be an important measure of performance from core operations because EBITDAre does not include various expense items that are not indicative of operating performance. While MAA's definition of EBITDAre is in accordance with NAREIT's definition, it may differ from the methodology utilized by other companies to calculate EBITDAre. EBITDAre should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of financial performance.

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 an owner and operator of real estate, MAA considers FAD to be an important measure of performance from core operations because FAD measures the ability to control revenues, expenses and total capital expenditures.

Funds From Operations (FFO)

FFO represents net income available for MAA common shareholders (computed in accordance with GAAP) excluding extraordinary items, asset impairment and gains or losses on disposition of operating properties, plus net income attributable to noncontrolling interest, depreciation and amortization of real estate assets, and adjustments for joint ventures to reflect FFO on the same basis.  Because noncontrolling interest is added back, FFO, when used in this document, represents FFO attributable to the Company.  While MAA's definition of FFO is in accordance with the NAREIT's definition, it may differ from the methodology for calculating FFO utilized by other companies and, accordingly, may not be comparable to such other companies.  FFO should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of operating performance.  MAA believes that FFO is helpful in understanding operating performance in that FFO excludes depreciation and amortization of real estate assets.  MAA believes that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies.

NON-GAAP FINANCIAL MEASURES (CONTINUED)

Gross Assets

Gross Assets represents Total assets plus Accumulated depreciation and accumulated depreciation for Assets held for sale, which is included in "Assets held for sale" on the Consolidated Balance Sheets.  MAA believes that Gross Assets can be used as a helpful tool in evaluating its balance sheet positions.  MAA believes that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies.

Gross Real Estate Assets

Gross Real Estate Assets represents Real estate assets, net plus Accumulated depreciation and accumulated depreciation for Assets held for sale, which is included in "Assets held for sale" on the Consolidated Balance Sheets, plus Cash and cash equivalents plus 1031(b) exchange proceeds included in "Restricted cash" on the Consolidated Balance Sheets.  MAA believes that Gross Real Estate Assets can be used as a helpful tool in evaluating its balance sheet positions.  MAA believes that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies.

Net Debt

Net Debt represents Unsecured notes payable and Secured notes payable less Cash and cash equivalents and 1031(b) proceeds included in "Restricted cash" on the Consolidated Balance Sheets.  MAA believes Net Debt is a helpful tool in evaluating its debt position.

Net Operating Income (NOI)

Net Operating Income represents Rental and other property revenues less Total property operating expenses, excluding depreciation, for all properties held during the period, regardless of their status as held for sale. NOI should not be considered as an alternative to Net income available for MAA common shareholders.  MAA believes NOI by market is a helpful tool in evaluating the operating performance within MAA's markets because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance.

Recurring Adjusted EBITDAre

Recurring Adjusted EBITDAre represents Adjusted EBITDAre 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 Recurring Adjusted EBITDAre is an important performance measure as it adjusts for certain items that by their nature are not comparable over periods and therefore tend to obscure actual operating performance.  MAA's definition of Recurring Adjusted EBITDAre may differ from the methodology utilized by other companies to calculate Recurring Adjusted EBITDAre. Recurring Adjusted EBITDAre should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of operating performance.

Same Store NOI

Same Store NOI represents total operating revenues less total property operating expenses, excluding depreciation, for all properties classified within the Same Store Portfolio during the period. Same Store NOI should not be considered as an alternative to Net income available for MAA common shareholders.  MAA believes Same Store NOI is a helpful tool in evaluating the operating performance within MAA's markets because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance.

OTHER KEY DEFINITIONS

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 units plus prevalent market rates asked for unoccupied units, divided by the total number of units. Leasing concessions represent discounts to the current market rate. MAA believes average effective rent is a helpful measurement in evaluating average pricing. It does not represent actual rental revenue collected per unit.

Average Physical Occupancy

Average Physical Occupancy represents the average of the daily physical occupancy for the quarter.

OTHER KEY DEFINITIONS (CONTINUED)

Development Communities

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 Communities portfolio.

Lease-up Communities

New acquisitions acquired during lease-up and newly developed communities remain in the Lease-up Communities portfolio until stabilized.  Communities are considered stabilized after achieving at least 90% occupancy for 90 days.

Non-Same Store Portfolio

Non-Same Store Portfolio includes recent acquisitions, communities that have been identified for disposition, and communities that have undergone a significant casualty loss.

Same Store Portfolio

MAA reviews its Same Store Portfolio at the beginning of each calendar year, or as significant transactions warrant. Communities are generally added into the Same Store Portfolio if they were owned and stabilized at the beginning of the previous year.  Communities are considered stabilized after achieving at least 90% occupancy for 90 days. Communities that have been approved by MAA's Board of Directors for disposition are excluded from the Same Store Portfolio.  Communities that have undergone a significant casualty loss are also excluded from the Same Store Portfolio.

Total Market Capitalization

Total Market Capitalization equals the number of shares of common stock plus units not held by MAA at period end multiplied by the closing stock price at period end, plus total debt outstanding.

Unencumbered NOI

Unencumbered NOI represents NOI generated by unencumbered assets (as defined in MAALP's bond covenants).

SOURCE MAA

Related Links

http://www.maac.com

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