Basis of Presentation and Principles of Consolidation and Significant Accounting Policies

Unless the context otherwise requires, all references to "we," "us," "our," or the "Company" refer collectively to Mid-America Apartment Communities, Inc., together with its consolidated subsidiaries, including Mid-America Apartments, L.P. Unless the context otherwise requires, all references to "MAA" refer only to Mid-America Apartment Communities, Inc. and not any of its consolidated subsidiaries. Unless the context otherwise requires, the references to the "Operating Partnership" or "MAALP" refer to Mid-America Apartments, L.P. together with its consolidated subsidiaries. "Common stock" refers to the common stock of MAA and "shareholders" means the holders of shares of MAA’s common stock. The limited partnership interests of the Operating Partnership are referred to as "OP Units" or "common units," and the holders of the OP Units are referred to as "unitholders".

As of September 30, 2016, MAA owned 75,542,583 units (or approximately 94.8%) of the limited partnership interests of the Operating Partnership. MAA conducts substantially all of its business and holds substantially all of its assets through the Operating Partnership, and by virtue of its ownership of the OP Units and being the Operating Partnership's sole general partner, MAA has the ability to control all of the day-to-day operations of the Operating Partnership.

We believe combining the notes to the condensed consolidated financial statements of MAA and MAALP results in the following benefits:


•	enhances a readers' understanding of MAA and the Operating Partnership by enabling the reader to view the business as a whole in the same manner that management views and operates the business; and


•	eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both MAA and the Operating Partnership.

Management operates MAA and the Operating Partnership as one business. The management of the Company is comprised of individuals who are officers of MAA and employees of the Operating Partnership. We believe it is important to understand the few differences between MAA and the Operating Partnership in the context of how MAA and the Operating Partnership operate as a consolidated company. MAA and the Operating Partnership are structured as an "umbrella partnership REIT," or UPREIT. MAA's interest in the Operating Partnership entitles MAA to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to MAA's percentage interest therein, and entitles MAA to vote on substantially all matters requiring a vote of the partners. MAA's only material asset is its ownership of limited partner interests in the Operating Partnership; therefore, MAA does not conduct business itself, other than acting as the sole general partner of the Operating Partnership, issuing public equity from time to time, and guaranteeing certain debt of the Operating Partnership. The Operating Partnership holds, directly or indirectly, all of our real estate assets. Except for net proceeds from public equity issuances by MAA, which are contributed to the Operating Partnership in exchange for OP Units, the Operating Partnership generates the capital required by our business through the Operating Partnership's operations, direct or indirect incurrence of indebtedness, and issuance of OP units.

The presentation of MAA's shareholders' equity and the Operating Partnership's capital is the principal area of difference between the condensed consolidated financial statements of MAA and those of the Operating Partnership. MAA's shareholders' equity may include shares of preferred stock, shares of common stock, additional paid-in capital, cumulative earnings, cumulative distributions, noncontrolling interests, preferred units, treasury shares, accumulated other comprehensive income and redeemable common units. The Operating Partnership's capital may include common capital and preferred capital of the general partner (MAA), limited partners' preferred capital, limited partners' noncontrolling interests, accumulated other comprehensive income and redeemable common units. Redeemable common units represent the number of outstanding OP Units as of the date of the applicable balance sheet, valued at the greater of the closing market price of MAA's common stock or the aggregate value of the individual partners' capital balances. Holders of OP Units (other than MAA and its corporate affiliates) may require us to redeem their OP Units from time to time, in which case we may, at our option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of MAA's common stock on the New York Stock Exchange over a specified period prior to the redemption date) or by delivering one share of our common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.

As of September 30, 2016, we owned and operated 251 apartment communities comprising 79,170 apartments located in 15 states principally through the Operating Partnership.

As of September 30, 2016, we had three development communities under construction totaling 550 units. Total expected costs for the development projects are $81.8 million, of which $48.6 million has been incurred through September 30, 2016. We expect to complete construction on two projects by the second quarter of 2017 and one project by the fourth quarter of 2017. Six of our multifamily properties include retail components with approximately 194,000 square feet of gross leasable area.

On August 15, 2016, we entered into an agreement and plan of merger with Post Properties, Inc., which we refer to as “Post Properties,” an Atlanta, Georgia-based REIT operating in the multifamily sector, pursuant to which MAA and Post Properties will combine through a merger of Post Properties with and into MAA, with MAA surviving the merger, which we refer to as the “parent merger.” If the parent merger is completed pursuant to the merger agreement, each issued and outstanding share of Post Properties’ common stock will be converted into the right to receive 0.71 shares of MAA common stock, with cash paid for fractional shares of Post Properties common stock. In addition, in the parent merger, each outstanding share of Post Properties’ 8 1/2% Series A Cumulative Redeemable Preferred Shares, which we refer to as “Post Properties Series A preferred stock,” will be automatically converted into the right to receive one newly-issued share of MAA’s 8.50% Series I Cumulative Redeemable Preferred Stock, which we refer to as “MAA Series I preferred stock,” which will have the same rights, preferences, privileges and voting powers as those of the Post Properties Series A preferred stock. We anticipate that MAA will issue approximately 38 million shares of MAA’s common stock and approximately 868,000 shares of MAA Series I preferred stock in connection with the parent merger. Pursuant to the merger agreement, and prior to the parent merger, Post Apartment Homes, L.P., Post Properties’ operating partnership, which we refer to as “Post LP,” will merge with and into MAALP, with MAALP continuing as the surviving entity, which we refer to as the “partnership merger.” As a result of the partnership merger, each limited partnership interest in Post LP designated as a “Partnership Unit” under Post LP’s limited partnership agreement that is issued and outstanding immediately prior to the effectiveness of the partnership merger will be converted into the right to receive 0.71 OP Units, which we anticipate will result in the issuance of approximately 80,000 additional new OP Units.

The closing of the partnership merger and the parent merger, which we refer to collectively as the “mergers,” is conditioned, among other things, upon requisite approval of the parent merger by the holders of Post Properties’ common stock and the holders of MAA’s common stock. In addition to those shareholder approvals, the closing of the mergers is subject to other customary closing conditions. Accordingly, there is no assurance that the mergers will occur on the terms described herein, or at all. Shareholder meetings for each of MAA and Post Properties are scheduled for November 10, 2016. All costs related to the mergers are being expensed in the period they are incurred and are included in “Merger-related expenses” in our Condensed Consolidated Statements of Operations. In connection with these activities, we incurred approximately

$3.9 million in expenses for both the three and nine months ended September 30, 2016.

Subject to satisfaction of all of the conditions to closing, including receipt of the separate approvals of the MAA and Post Properties shareholders, the transactions contemplated by the merger agreement, including the mergers, are expected to close on or about December 1, 2016. The combined company will retain the name "Mid-America Apartment Communities, Inc." and the executive officers of MAA immediately prior to the effective of the mergers will continue as the executive officers of the combined company following the effective time of the mergers.

For additional details regarding the terms and conditions of the proposed business combination with Post Properties and related matters, please refer to our other filings with the SEC that were made in connection with the proposed mergers, including the Joint Proxy Statement/Prospectus filed with the SEC pursuant to Rule 424(b)(3) on September 30, 2016 and the Current Report on Form 8-K filed with the SEC on August 15, 2016.

Reclassifications

In order to present comparative financial statements, certain reclassifications have been made to prior period numbers. As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015, we early adopted Accounting Standards Update ("ASU") 2015-03, Interest - Imputation of Interest (Subtopic 835-30): "Simplifying the Presentation of Debt Issuance Costs", which requires debt issuance costs to be presented in the balance sheet as a reduction of the related debt liability rather than an asset. As a result of this adoption and to improve comparability, we reclassified certain costs from "Amortization of deferred financing costs" to "Interest Expense." Thus, the $0.9 million and $2.7 million of "Amortization of deferred financing costs" previously reported in our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2015, respectively, have been reclassified to "Interest expense" for the three months and nine months ended September 30, 2015 in the Condensed Consolidated Statements of Operations included in this Report. As a result of this income statement reclassification, $2.7 million of amortization of deferred financing costs for the nine months ended September 30, 2015, initially reported in the "Depreciation and amortization" line of the Condensed Consolidated Statements of Cash Flows in the 2015 Form 10-Q for the nine months ended September 30, 2015, have been reclassified to "Amortization of debt premium and debt issuance costs," presented in the Condensed Consolidated Statements of Cash Flows included in this Report.

Basis of Presentation and Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements have been prepared by our management in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC. The condensed consolidated financial statements of MAA presented herein include the accounts of MAA, the Operating Partnership, and all other subsidiaries in which MAA has a controlling financial interest. MAA owns approximately 95% to 100% of all consolidated subsidiaries, including the Operating Partnership. The condensed consolidated financial statements of MAALP presented herein include the accounts of MAALP and all other subsidiaries in which MAALP has a controlling financial interest. MAALP owns, directly or indirectly, 100% of all consolidated subsidiaries. In our opinion, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included, and all such adjustments were of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation.

We invest in entities which may qualify as variable interest entities, or VIEs. A VIE is a legal entity in which the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of the equity investment at risk lack the power to direct the activities of a legal entity as well as the obligation to absorb its expected losses or the right to receive its expected residual returns. We consolidate all VIEs for which we are the primary beneficiary and use the equity method to account for investments that qualify as VIEs but for which we are not the primary beneficiary. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including but not limited to, those activities that most significantly impact the VIE's economic performance and which party controls such activities.

Effective January 1, 2016, we adopted ASU 2015-02, Consolidation: Topic 810, which resulted in the Operating Partnership now being classified as a VIE, since the limited partners of both entities lack substantive kick-out rights and substantive participating rights. The adoption of the new standard did not result in the consolidation of entities not previously consolidated or the de-consolidation of any entities previously consolidated. We are the primary beneficiary of, and continue to consolidate, both entities, and there was no material effect on our financial position or results of operations as a result of this adoption. See Footnote 14, Recent Accounting Pronouncements, for further details on the adoption of this standard.

We use the equity method of accounting for our investments in entities for which we exercise significant influence, but do not have the ability to exercise control. These entities are not VIEs. The factors considered in determining that we do not have the ability to exercise control include ownership of voting interests and participatory rights of investors.