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OVERVIEW | ||||
MAA REPORTS FIRST QUARTER RESULTS
GERMANTOWN, TN, May 1, 2019 /PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA (NYSE: MAA), today announced operating results for the quarter ended March 31, 2019.
Net Income Available for Common Shareholders
For the quarter ended March 31, 2019, net income available for MAA common shareholders was $62.7 million, or $0.55 per diluted common share, compared to $48.1 million, or $0.42 per diluted common share, for the quarter ended March 31, 2018. Results for the quarter ended March 31, 2019 included $0.5 million of non-cash expense related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares and $9.0 million, or $0.08 per diluted common share, of gains related to the sale of real estate assets. Results for the quarter ended March 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.
Funds from Operations (FFO)
For the quarter ended March 31, 2019, FFO was $186.4 million, or $1.58 per diluted common share and unit, or per Share, compared to $169.6 million, or $1.44 per Share, for the quarter ended March 31, 2018. Results for the quarter ended March 31, 2019 included $0.5 million of non-cash expense related to the embedded derivative in the preferred shares and $9.0 million, or $0.08 per Share, of gains related to the sale of non-depreciable real estate assets. Results for the quarter ended March 31, 2018 included $2.6 million, or $0.02 per Share, of non-cash expense 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, “Demand for apartment housing remains strong across our high-growth Sunbelt markets. We continue to capture high resident retention and strong occupancy, with the first quarter also generating the highest year over year rent growth that we have captured over the past two years. We are encouraged with the strong start to the year and the pricing trends as we head into the busy summer leasing season.”
Highlights
• | Property revenues from the Same Store Portfolio increased 2.3% during the first quarter of 2019 as compared to the same period in the prior year. Results were driven by a 3.1% growth in Average Effective Rent per Unit, which was a 80 basis point improvement from the performance in the fourth quarter of 2018, and continued strong Average Physical Occupancy of 95.9%. |
• | Property operating expenses for the Same Store Portfolio increased 2.1% during the first quarter of 2019 as compared to the same period in the prior year. |
• | Net Operating Income, or NOI, from the Same Store Portfolio increased by 2.5% during the first quarter of 2019 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 first quarter of 2019 remained low at 47.5% on a rolling twelve month basis. |
• | As of the end of the first quarter, MAA had five development projects under construction, which included 1,090 units, with a total projected cost of $230.5 million and an estimated $171.0 million remaining to be funded as of March 31, 2019. |
• | As of the end of the first quarter of 2019, MAA had four properties in their initial lease-up. At quarter-end, average physical occupancy for the lease-up portfolio was 70.3%. These properties are expected to stabilize over the remainder of the current year. |
• | During the first quarter of 2019, MAA closed on a pre-purchase of a 345-unit multifamily apartment community development, Novel Midtown, located in the Phoenix, Arizona market. In addition, the company began development of a 168-unit expansion of its Copper Ridge multifamily apartment community located in Fort Worth, Texas. |
• | During the three months ended March 31, 2019, MAA completed renovation of 1,679 units under its interior redevelopment program, achieving average rental rate increases of 10.9% 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.
The Same Store Portfolio revenue growth of 2.3% during the first quarter of 2019 was primarily a result of a 3.1% increase in Average Effective Rent per Unit, as compared to the same period in the prior year. Rent growth for both new and renewing
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leases, as compared to the prior lease, on a combined basis increased an average of 3.9% during the first quarter of 2019, a 240 basis point improvement over the performance from same period in the prior year. Average Physical Occupancy for the Same Store Portfolio was strong at 95.9% for the first quarter of 2019, a slight decrease from 96.2% in the same period in the prior year. Property operating expenses increased 2.1% for the first quarter of 2019 as compared to the same period in the prior year, primarily driven by a 6.0% increase in real estate property taxes. This resulted in Same Store Portfolio NOI growth of 2.5% for the first quarter of 2019 as compared to the same period in 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.
Development and Lease-up Activity
As of the end of the first quarter of 2019, MAA had five development communities under construction. Total development costs for the five communities are projected to be $230.5 million, of which an estimated $171.0 million remained to be funded as of the end of the first quarter of 2019. The expected average stabilized NOI yield on these communities is 6.2%. During the first quarter of 2019, MAA funded $14.8 million of construction costs on development projects. MAA expects to complete two developments in the second half of 2019, one development in the first half of 2020, one development in the second half of 2020 and one development in the first half of 2021.
MAA had four apartment communities, containing a total of 1,311 units, remaining in initial lease-up as of the end of the first quarter of 2019: Sync 36 I, located in Denver, Colorado; Post River North, located in Denver, Colorado; 1201 Midtown II, located in Charleston, South Carolina; and Post Centennial Park, located in Atlanta, Georgia. Physical occupancy for the four lease-up projects averaged 70.3% at the end of the first quarter of 2019.
Acquisition and Disposition Activity
During February 2019, MAA closed on a pre-purchase of a 345-unit multifamily apartment community development, Novel Midtown, located in the Phoenix, Arizona market. The community is being developed in a joint venture with a local developer. MAA holds an 80% interest in the joint venture. MAA expects the development to be completed in the first half of 2021. MAA will provide leasing and management services to the community and expects to ultimately acquire a 100% interest in the apartment community.
In April 2019, MAA acquired a two acre parcel of land located in the Orlando, Florida market and is currently performing pre-development work with a development start expected in late 2019.
In February 2019, MAA closed on the disposition of a one acre land parcel located in the Atlanta, Georgia market resulting in a net gain of $9.0 million on the sale of non-depreciable real estate assets. Due to uncertainty in the likelihood and timing of closing on the sale of the parcel at the time of MAA's fourth quarter and year end 2018 earnings release, the gain on sale of non-depreciable real estate assets was not reflected in MAA's initial guidance for the first quarter of 2019 or the full year of 2019.
In March 2019, MAA closed on the disposition of a 42,000 square foot commercial office property located in Memphis, Tennessee, which was previously used as the MAA corporate office, for proceeds totaling $3.3 million, resulting in a negligible loss recognized on the sale of depreciable real estate assets.
Interior Redevelopment Activity
MAA continues its interior redevelopment program at select apartment communities throughout the portfolio. During the first quarter of 2019, MAA redeveloped a total of 1,679 units at an average cost of $6,131 per unit, achieving average rental rate increases of 10.9% above non-renovated units. MAA expects a total of 7,500 to 8,500 units to be redeveloped in 2019.
Capital Expenditures
Recurring capital expenditures totaled $12.6 million for the first quarter of 2019, or approximately $0.11 per Share, as compared to $9.5 million, or $0.08 per Share, for the same period in the prior year. These expenditures led to Adjusted Funds from Operations, or AFFO, of $1.47 per Share for the first quarter of 2019, compared to $1.36 per Share for the same period in the prior year.
Redevelopment, revenue enhancing, commercial and other capital expenditures during the first quarter of 2019 were $25.9 million, as compared to $26.1 million for the same period in the prior year. These expenditures led to Funds Available for Distribution, or FAD, of $148.0 million for the first quarter of 2019, compared to $134.0 million for the same period in the prior year.
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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 first quarter of 2019, MAA's primary operating partnership, Mid-America Apartments, L.P. (referred to as MAALP or the Operating Partnership), completed a public bond offering. MAALP issued $300 million of 3.950% senior unsecured notes due in 2029, at an issue price of 99.720%. In connection with the bond transaction, the company cash-settled $300 million in forward interest rate swap agreements entered into during 2018 to effectively lock the interest rate on the planned bond issuance, which produced an effective interest rate of 4.24% over the term of the bonds.
In February 2019, MAALP entered into a 4.43% fixed rate 30 year secured property mortgage totaling $191.3 million associated with seven of its apartment communities.
As of March 31, 2019, MAA had approximately $967.2 million combined cash and available capacity under MAALP's unsecured revolving credit facility.
Dividends and distributions paid on shares of common stock and noncontrolling interests during the first quarter of 2019 were $113.3 million, as compared to $108.7 million for the same period in the prior year.
Balance Sheet
As of March 31, 2019:
• | Total debt to adjusted total assets (as defined in the covenants for the bonds issued by MAALP) was 32.6%; |
• | Total debt outstanding was $4.5 billion at an average effective interest rate of 3.9%; |
• | 85.2% of total debt was fixed or hedged against rising interest rates for an average of 8.0 years; and |
• | Unencumbered NOI was 90.2% of total NOI, as compared to 92.6% as of December 31, 2018. |
101st Consecutive Quarterly Common Dividend Declared
MAA declared its 101st consecutive quarterly common dividend at an annual rate of $3.84 per common share, which was paid on April 30, 2019 to holders of record on April 15, 2019.
2019 Net Income per Diluted Common Share and FFO and AFFO per Share Guidance
MAA is updating and increasing prior 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.
Net income per diluted common share is expected to be in the range of $2.19 to $2.43 per diluted common share, or $2.31 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 $6.11 to $6.35 per Share, or $6.23 per Share at the midpoint. MAA expects FFO for the second quarter of 2019 to be in the range of $1.45 to $1.57 per Share, or $1.51 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).
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 first quarter results on Thursday, May 2, 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 March 31, 2019, MAA had ownership interest in 101,954 apartment units, including communities currently in development, across 17 states and
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the District of Columbia. For further details, please visit the MAA website at www.maac.com or contact Investor Relations at investor.relations@maac.com, 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, to lease-up as anticipated or to achieve anticipated results; |
• | 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; |
• | the effect of the phase-out of the London Interbank Offered Rate, or LIBOR, as a variable rate debt benchmark by the end of 2021 and the transition to a different benchmark interest rate could have adverse effects on our interest expense and our cash flow for general corporate requirements; |
• | 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; |
• | cyber liability 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; |
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• | compliance costs associated with laws requiring access for disabled persons; and |
• | other risks identified in this press release and, from time to time, in 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.
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FINANCIAL HIGHLIGHTS | |||||||
Dollars in thousands, except per share data | Three months ended March 31, | ||||||
2019 | 2018 | ||||||
Rental and other property revenues | $ | 401,178 | $ | 386,017 | |||
Net income available for MAA common shareholders | $ | 62,738 | $ | 48,097 | |||
Total NOI(1) | $ | 251,801 | $ | 241,613 | |||
Earnings per common share:(2) | |||||||
Basic | $ | 0.55 | $ | 0.42 | |||
Diluted | $ | 0.55 | $ | 0.42 | |||
Funds from operations per Share - diluted:(2) | |||||||
FFO(1) | $ | 1.58 | $ | 1.44 | |||
AFFO(1) | $ | 1.47 | $ | 1.36 | |||
Dividends declared per common share | $ | 0.9600 | $ | 0.9225 | |||
Dividends/ FFO (diluted) payout ratio | 60.8 | % | 64.1 | % | |||
Dividends/ AFFO (diluted) payout ratio | 65.3 | % | 67.8 | % | |||
Consolidated interest expense | $ | 45,700 | $ | 40,905 | |||
Mark-to-market debt adjustment | 85 | 2,951 | |||||
Debt discount and debt issuance cost amortization | (1,805 | ) | (1,383 | ) | |||
Capitalized interest | 388 | 795 | |||||
Total interest incurred | $ | 44,368 | $ | 43,268 | |||
Amortization of principal on notes payable | $ | 1,847 | $ | 2,710 | |||
(1) A reconciliation of the following items and an expanded discussion of their respective components can be found later in this release: (i) NOI to Net income available for MAA common shareholders; and (ii) FFO and AFFO to Net income available for MAA common shareholders.
(2) See the "Share and Unit Data" section for additional information.
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FINANCIAL HIGHLIGHTS (CONTINUED) | |||||||
Dollars in thousands, except share price | |||||||
March 31, 2019 | December 31, 2018 | ||||||
Gross Assets(1) | $ | 13,972,470 | $ | 13,873,068 | |||
Gross Real Estate Assets(1) | $ | 13,813,328 | $ | 13,735,247 | |||
Total debt | $ | 4,548,098 | $ | 4,528,328 | |||
Common shares and units outstanding | 118,021,379 | 117,955,568 | |||||
Share price | $ | 109.33 | $ | 95.70 | |||
Book equity value | $ | 6,336,344 | $ | 6,381,603 | |||
Market equity value | $ | 12,903,277 | $ | 11,288,348 | |||
Net Debt/Recurring Adjusted EBITDAre (2) | 4.96x | 4.99x | |||||
(1) A reconciliation of Gross Assets to Total assets and Gross Real Estate Assets to Real estate assets, net, along with an expanded discussion of their components, can be found later in this release.
(2) Recurring Adjusted EBITDAre in this calculation represents the trailing twelve month period for each date presented. A reconciliation of the following items and an expanded discussion of their respective components can be found later in this release: (i) EBITDA, EBITDAre, Adjusted EBITDAre and Recurring Adjusted EBITDAre to Net income; and (ii) Net Debt to Unsecured notes payable and Secured notes payable.
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CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
Dollars in thousands, except per share data | Three months ended March 31, | ||||||
2019 | 2018 | ||||||
Revenues: | |||||||
Rental and other property revenues | $ | 401,178 | $ | 386,017 | |||
Expenses: | |||||||
Operating expense, excluding real estate taxes and insurance | 89,793 | 89,148 | |||||
Real estate taxes and insurance | 59,584 | 55,256 | |||||
Depreciation and amortization | 122,789 | 120,744 | |||||
Total property operating expenses | 272,166 | 265,148 | |||||
Property management expenses | 13,842 | 12,880 | |||||
General and administrative expenses | 13,153 | 10,132 | |||||
Merger and integration related expenses | — | 3,799 | |||||
Interest expense | 45,700 | 40,905 | |||||
Loss on sale of depreciable real estate assets | 13 | — | |||||
Gain on sale of non-depreciable real estate assets | (8,963 | ) | (150 | ) | |||
Other non-operating (income) expense | (935 | ) | 2,341 | ||||
Income before income tax expense | 66,202 | 50,962 | |||||
Income tax expense | (641 | ) | (640 | ) | |||
Income from continuing operations before real estate joint venture activity | 65,561 | 50,322 | |||||
Income from real estate joint venture | 397 | 498 | |||||
Net income | 65,958 | 50,820 | |||||
Net income attributable to noncontrolling interests | 2,298 | 1,801 | |||||
Net income available for shareholders | 63,660 | 49,019 | |||||
Dividends to MAA Series I preferred shareholders | 922 | 922 | |||||
Net income available for MAA common shareholders | $ | 62,738 | $ | 48,097 | |||
Earnings per common share - basic: | |||||||
Net income available for common shareholders | $ | 0.55 | $ | 0.42 | |||
Earnings per common share - diluted: | |||||||
Net income available for common shareholders | $ | 0.55 | $ | 0.42 | |||
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SHARE AND UNIT DATA | |||||
Shares and units in thousands | Three months ended March 31, | ||||
2019 | 2018 | ||||
Net Income Shares (1) | |||||
Weighted average common shares - basic | 113,726 | 113,507 | |||
Effect of dilutive securities | 207 | — | |||
Weighted average common shares - diluted | 113,933 | 113,507 | |||
Funds From Operations Shares And Units | |||||
Weighted average common shares and units - basic | 117,837 | 117,689 | |||
Weighted average common shares and units - diluted | 118,018 | 117,893 | |||
Period End Shares And Units | |||||
Common shares at March 31, | 113,916 | 113,745 | |||
Operating Partnership units at March 31, | 4,105 | 4,142 | |||
Total common shares and units at March 31, | 118,021 | 117,887 | |||
(1) | For additional information on the calculation of diluted common shares and earnings per common share, please refer to the Notes to Condensed Consolidated Financial Statements in MAA's Quarterly Report on Form 10-Q for the three months ended March 31, 2019, expected to be filed with the SEC on or about May 2, 2019. |
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CONSOLIDATED BALANCE SHEETS | |||||||
Dollars in thousands | |||||||
March 31, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Real estate assets: | |||||||
Land | $ | 1,878,209 | $ | 1,868,828 | |||
Buildings and improvements and other | 11,730,705 | 11,670,216 | |||||
Development and capital improvements in progress | 57,396 | 59,506 | |||||
13,666,310 | 13,598,550 | ||||||
Less: Accumulated depreciation | (2,668,708 | ) | (2,549,287 | ) | |||
10,997,602 | 11,049,263 | ||||||
Undeveloped land | 58,257 | 58,257 | |||||
Investment in real estate joint venture | 44,138 | 44,181 | |||||
Real estate assets, net | 11,099,997 | 11,151,701 | |||||
Cash and cash equivalents | 44,623 | 34,259 | |||||
Restricted cash | 14,764 | 17,414 | |||||
Other assets | 144,378 | 120,407 | |||||
Total assets | $ | 11,303,762 | $ | 11,323,781 | |||
Liabilities and equity | |||||||
Liabilities: | |||||||
Unsecured notes payable | $ | 3,886,236 | $ | 4,053,302 | |||
Secured notes payable | 661,862 | 475,026 | |||||
Accrued expenses and other liabilities | 419,320 | 413,850 | |||||
Total liabilities | 4,967,418 | 4,942,178 | |||||
Redeemable common stock | 11,045 | 9,414 | |||||
Shareholders' equity: | |||||||
Preferred stock | 9 | 9 | |||||
Common stock | 1,137 | 1,136 | |||||
Additional paid-in capital | 7,141,544 | 7,138,170 | |||||
Accumulated distributions in excess of net income | (1,037,268 | ) | (989,263 | ) | |||
Accumulated other comprehensive loss | (3,300 | ) | (212 | ) | |||
Total MAA shareholders' equity | 6,102,122 | 6,149,840 | |||||
Noncontrolling interests - Operating Partnership units | 218,011 | 220,043 | |||||
Total Company's shareholders' equity | 6,320,133 | 6,369,883 | |||||
Noncontrolling interest - consolidated real estate entities | 5,166 | 2,306 | |||||
Total equity | 6,325,299 | 6,372,189 | |||||
Total liabilities and equity | $ | 11,303,762 | $ | 11,323,781 | |||
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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 March 31, | ||||||
2019 | 2018 | ||||||
Net income available for MAA common shareholders | $ | 62,738 | $ | 48,097 | |||
Depreciation and amortization of real estate assets | 121,210 | 119,566 | |||||
Loss on sale of depreciable real estate assets | 13 | — | |||||
Depreciation and amortization of real estate assets of real estate joint venture | 145 | 145 | |||||
Net income attributable to noncontrolling interests | 2,298 | 1,801 | |||||
Funds from operations attributable to the Company | 186,404 | 169,609 | |||||
Recurring capital expenditures | (12,560 | ) | (9,477 | ) | |||
Adjusted funds from operations | 173,844 | 160,132 | |||||
Redevelopment capital expenditures | (12,445 | ) | (10,784 | ) | |||
Revenue enhancing capital expenditures | (8,039 | ) | (4,663 | ) | |||
Commercial capital expenditures | (1,419 | ) | (1,051 | ) | |||
Other capital expenditures | (3,977 | ) | (9,627 | ) | |||
Funds available for distribution | $ | 147,964 | $ | 134,007 | |||
Dividends and distributions paid | $ | 113,271 | $ | 108,741 | |||
Weighted average common shares - diluted | 113,933 | 113,507 | |||||
FFO weighted average common shares and units - diluted | 118,018 | 117,893 | |||||
Earnings per common share - diluted: | |||||||
Net income available for common shareholders | $ | 0.55 | $ | 0.42 | |||
Funds from operations per Share - diluted | $ | 1.58 | $ | 1.44 | |||
Adjusted funds from operations per Share - diluted | $ | 1.47 | $ | 1.36 | |||
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RECONCILIATION OF NET OPERATING INCOME TO NET INCOME AVAILABLE FOR MAA COMMON SHAREHOLDERS | |||||||||||
Dollars in thousands | Three Months Ended | ||||||||||
March 31, 2019 | December 31, 2018 | March 31, 2018 | |||||||||
Net Operating Income | |||||||||||
Same Store NOI | $ | 237,439 | $ | 238,258 | $ | 231,655 | |||||
Non-Same Store NOI | 14,362 | 13,176 | 9,958 | ||||||||
Total NOI | 251,801 | 251,434 | 241,613 | ||||||||
Depreciation and amortization | (122,789 | ) | (121,541 | ) | (120,744 | ) | |||||
Property management expenses | (13,842 | ) | (12,054 | ) | (12,880 | ) | |||||
General and administrative expenses | (13,153 | ) | (9,063 | ) | (10,132 | ) | |||||
Merger and integration expenses | — | (609 | ) | (3,799 | ) | ||||||
Interest expense | (45,700 | ) | (44,454 | ) | (40,905 | ) | |||||
Loss on sale of depreciable real estate assets | (13 | ) | (18 | ) | — | ||||||
Gain on sale of non-depreciable real estate assets | 8,963 | 662 | 150 | ||||||||
Other non-operating income (expense) | 935 | (631 | ) | (2,341 | ) | ||||||
Income tax expense | (641 | ) | (785 | ) | (640 | ) | |||||
Income from real estate joint venture | 397 | 576 | 498 | ||||||||
Net income attributable to noncontrolling interests | (2,298 | ) | (2,235 | ) | (1,801 | ) | |||||
Dividends to MAA Series I preferred shareholders | (922 | ) | (922 | ) | (922 | ) | |||||
Net income available for MAA common shareholders | $ | 62,738 | $ | 60,360 | $ | 48,097 | |||||
RECONCILIATION OF EBITDA, EBITDAre, ADJUSTED EBITDAre AND RECURRING ADJUSTED EBITDAre TO NET INCOME | |||||||||||||||
Dollars in thousands | Three Months Ended | Twelve Months Ended | |||||||||||||
March 31, 2019 | March 31, 2018 | March 31, 2019 | December 31, 2018 | ||||||||||||
Net income | $ | 65,958 | $ | 50,820 | $ | 246,160 | $ | 231,022 | |||||||
Depreciation and amortization | 122,789 | 120,744 | 491,804 | 489,759 | |||||||||||
Interest expense | 45,700 | 40,905 | 178,389 | 173,594 | |||||||||||
Income tax expense | 641 | 640 | 2,612 | 2,611 | |||||||||||
EBITDA | 235,088 | 213,109 | 918,965 | 896,986 | |||||||||||
Loss on sale of depreciable real estate assets | 13 | — | 52 | 39 | |||||||||||
Adjustments to reflect the Company's share of EBITDAre of unconsolidated affiliates | 338 | 305 | 1,275 | 1,242 | |||||||||||
EBITDAre | 235,439 | 213,414 | 920,292 | 898,267 | |||||||||||
Loss (gain) on debt extinguishment (1) | 8 | (219 | ) | (1,952 | ) | (2,179 | ) | ||||||||
Net casualty gain and other settlement proceeds (1) | (1,544 | ) | (9 | ) | (2,259 | ) | (724 | ) | |||||||
Gain on sale of non-depreciable assets | (8,963 | ) | (150 | ) | (13,345 | ) | (4,532 | ) | |||||||
Adjusted EBITDAre | 224,940 | 213,036 | 902,736 | 890,832 | |||||||||||
Merger and integration expenses | — | 3,799 | 5,313 | 9,112 | |||||||||||
Recurring Adjusted EBITDAre | $ | 224,940 | $ | 216,835 | $ | 908,049 | $ | 899,944 | |||||||
(1) | Included in Other non-operating (income) expense in the Consolidated Statements of Operations |
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RECONCILIATION OF NET DEBT TO UNSECURED NOTES PAYABLE AND SECURED NOTES PAYABLE | |||||||
Dollars in thousands | |||||||
March 31, 2019 | December 31, 2018 | ||||||
Unsecured notes payable | $ | 3,886,236 | $ | 4,053,302 | |||
Secured notes payable | 661,862 | 475,026 | |||||
Total debt | 4,548,098 | 4,528,328 | |||||
Cash and cash equivalents | (44,623 | ) | (34,259 | ) | |||
Net Debt | $ | 4,503,475 | $ | 4,494,069 | |||
RECONCILIATION OF GROSS ASSETS TO TOTAL ASSETS | |||||||
Dollars in thousands | |||||||
March 31, 2019 | December 31, 2018 | ||||||
Total assets | $ | 11,303,762 | $ | 11,323,781 | |||
Accumulated depreciation | 2,668,708 | 2,549,287 | |||||
Gross Assets | $ | 13,972,470 | $ | 13,873,068 | |||
RECONCILIATION OF GROSS REAL ESTATE ASSETS TO REAL ESTATE ASSETS, NET | |||||||
Dollars in thousands | |||||||
March 31, 2019 | December 31, 2018 | ||||||
Real estate assets, net | $ | 11,099,997 | $ | 11,151,701 | |||
Accumulated depreciation | 2,668,708 | 2,549,287 | |||||
Cash and cash equivalents | 44,623 | 34,259 | |||||
Gross Real Estate Assets | $ | 13,813,328 | $ | 13,735,247 | |||
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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 and revenue enhancing 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 (calculated in accordance with GAAP) excluding gains or losses on disposition of operating properties and asset impairment, plus depreciation and amortization of real estate assets, net income attributable to noncontrolling interests, and adjustments for joint ventures. 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 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.
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NON-GAAP FINANCIAL MEASURES (CONTINUED) | |||
Gross Assets
Gross Assets represents Total assets plus Accumulated depreciation. 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 Cash and cash equivalents. 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. 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.
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.
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OTHER KEY DEFINITIONS (CONTINUED) | |||
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).
CONTACT: Investor Relations of MAA, 866-576-9689 (toll free), investor.relations@maac.com
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