BUSINESS COMBINATIONS

Merger of MAA and POST

On December 1, 2016, we completed the Merger with Post Properties and Post LP , resulting in 100% of the outstanding common shares and voting interest of Post being converted into MAA ownership shares and units. Under the terms of the Merger Agreement, each Post Properties common share and Post Apartment Homes, L.P., or Post LP, unit was converted automatically into the right to receive 0.71 of a newly issued share of MAA common stock, including the right , if any, to receive cash in lieu of fractional shares of MAA common stock, or MAA LP OP unit, respectively, and each of Post Properties’ 8.50% Series A Cumulative Redeemable Preferred Shares, which we refer to as Post Properties preferred stock, converted automatically into the right to receive one newly issued share of 8.50% Series I Cumulative Redeemable Preferred Stock of MAA, which has the same rights, preferences, privileges and voting powers as the Post Properties preferred stock. Following the parent merger, continuing MAA common shareholders held approximately 68 percent of the issued and outstanding shares of common stock of the Combined Corporation and former Post Properties common shareholders held approximately 32 percent.

As part of the Merger, we acquired 61 wholly owned apartment communities encompassing 24,138 units, including 261 apartment units in one community held in an unconsolidated entity, and 2,266 apartment units in six communities currently under development. Post Properties had operations in ten markets across the United States. In addition to the apartment communities, we also acquired four commercial properties totaling approximately 269,000 square feet. The consolidated net assets and results of operations of Post Properties are included in our consolidated financial statements from the closing date, December 1, 2016, going forward.

The total purchase price of approximately $4.0 billion was determined based on the number of Post Properties common shares, Post Properties’ 8.50% Series A Cumulative Redeemable Preferred shares, and Post LP partnership interests outstanding as of December 1, 2016, in addition to cash consideration provided by MAA immediately prior to the Merger to pay off a Post Properties $300 million Post unsecured term loan and a $162 million Post Properties line of credit, both outstanding from Wells Fargo. In all cases in which MAA’s common stock price was a determining factor in arriving at final consideration for the Merger, the stock price used to determine the purchase price was the opening price of MAA’s common stock on December 1, 2016 ($91.41 per share). The preferred shares consideration was valued at $74.69 per share, which excludes a $12.42 per share bifurcated call option (See Notes 7 & 8). The total purchase price also includes $2.0 million of other consideration, a majority of which relates to assumed stock compensation plans. As a result of the Merger, we issued approximately 38.0 million shares of MAA common stock, approximately 80,000 OP units, and approximately 868,000 newly issued shares of MAA’s 8.50% Series I Cumulative Redeemable Preferred Stock.

The Merger has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair values. For larger, portfolio style acquisitions, like the Merger, management engages a third party valuation specialist to assist with the fair value assessment, which includes an allocation of the purchase price. Similar to management's methods, the third party generally uses cash flow analysis as well as an income approach and a market approach to determine the fair value of assets acquired. The third party uses stabilized NOI and market specific capitalization and discount rates. Management reviews the inputs used by the third party specialist as well as the allocation of the purchase price provided by the third party to ensure reasonableness and that the procedures are performed in accordance with management's policy. The allocation of the purchase price is based on management’s assessment, which may differ as more information becomes available. Subsequent adjustments made to the purchase price allocation, if any, are made within the allocation period, which typically does not exceed one year.

The allocation of the purchase price described above requires a significant amount of judgment and represents management's best estimate of the fair value as of the acquisition date. The following preliminary purchase price allocation was based on our valuation as well as estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed.

The following table summarizes the preliminary purchase price allocation (in thousands):



Land	$	875,737
Buildings and improvements	3,401,983
Furniture, fixtures and equipment	81,389
Development and capital improvements in progress	184,044
Undeveloped land	24,200
Commercial properties, net	3,610
Investment in real estate joint venture	44,435
Lease intangible assets	53,192
Cash and cash equivalents	34,292
Restricted cash	3,608
Deferred costs and other assets, excluding lease intangible assets	40,473
Total assets acquired	4,746,963

Notes payable	(595,609)
Fair market value of interest rate swaps	(2,118)
Lease intangible liabilities	(1,661)
Accounts payable, accrued expenses, and other liabilities	(138,683)
Total liabilities assumed, including debt	(738,071		)

Noncontrolling interests - consolidated real estate entity	(2,306		)

Total purchase price	$	4,006,586

The purchase price accounting reflected in the accompanying financial statements is based upon estimates and assumptions that are subject to change within the measurement period, pursuant to ASC 805. See Note 13, for commitments and contingencies identified, measured, and included in "Accounts payable, accrued expenses, and other liabilities" in the allocation above. We have preliminarily completed our valuation procedures. Adjustments may still occur as the valuation and revised preliminary purchase allocation is finalized in areas such as, real estate related assets and liabilities, equity investments, litigation reserves, debt and debt related instruments, and certain other acquired assets and liabilities assumed.

The Merger accounts for $33.5 million of consolidated revenue as reported and a $1.0 million consolidated net income as reported for 2016.

We incurred total merger and integration related expenses of $40.8 million and $0.0 million for the years ended December 31, 2016 and 2015, respectively. These amounts were expensed as incurred and are included in the Consolidated Statement of Operations in the items titled "Merger related expenses", primarily consisting of severance, legal, and professional costs, and "Integration related expenses", primarily consisting of temporary systems, staffing, and facilities costs. We also recognized $1.1 million costs associated with issuing and registering the shares issued as consideration in the business combination. Those costs were deducted from the recognized proceeds of issuance within stockholders' equity.

Pro forma information

The unaudited pro forma information set forth below is based on MAA’s historical Consolidated Statements of Operations for the years ended December 31, 2016 and 2015, adjusted to give effect to the Merger in 2016 as though it occurred on January 1, 2015, the beginning of the comparable prior annual period. The pro forma adjustments primarily relate to the depreciation expense on stepped up fixed assets, amortization of acquired intangibles, Merger and Integration related expenses and estimated interest expense related to new financings. The pro forma information is provided for illustrative purposes only and does not necessarily reflect the actual results of operations had the transactions been consummated at the beginning of the earliest year presented nor is it necessarily indicative of future operating results. The pro forma information does not give effect to any cost synergies or other operating efficiencies that could result or have resulted from the Merger.



	Pro forma (Unaudited)
	Period Ended December 31, (in thousands, except per share data)
	2016		2015
Total revenue	$	1,494,298	$	1,426,785
Net income available to common shareholders	$	296,084	$	330,886
Earnings per share, diluted	$	2.61	$	2.90

The pro forma results are based on estimates and assumptions, which we believe are reasonable. During 2016, we acquired five properties, other than through the Merger, totaling 1,626 units for a total purchase price of $339.2 million, paid in cash. The financial results of these acquired properties are included in the Non-Same Store and Other segment from their respective date of acquisition. Further, the financial results of these acquired properties were not material, individually or in the aggregate, to our results of operations and therefore, pro forma financial information has not been presented. See Note 17 for a discussion of acquisitions and dispositions not related to the Merger.