10-K 1 v300889_10k.htm FORM 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

 

FORM 10-K

___________________________

 

SANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2011.

or

 

£TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______ to ______

Commission File Number: 1-12762

 

MID-AMERICA APARTMENT COMMUNITIES, INC.

(Exact name of registrant as specified in its charter)

 

TENNESSEE 62-1543819
(State or other jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)

 

6584 POPLAR AVENUE 38138
MEMPHIS, TENNESSEE (Zip Code)
(Address of principal executive offices)  

 

(901) 682-6600

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Name of each exchange on which registered
Common Stock, par value $.01 per share New York Stock Exchange

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes ¨ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

 

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act

 

Large accelerated filer x Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller Reporting Company ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

As of June 30, 2011, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $2,480,831,418, based on the closing sale price as reported on the New York Stock Exchange.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

 

Class Outstanding at February 3, 2012
Common Stock, $.01 par value per share 38,968,730 shares

DOCUMENTS INCORPORATED BY REFERENCE

 

Document Parts Into Which Incorporated
Certain portions of the Proxy Statement for the Annual Meeting of Shareholders to be held May 24, 2012 to be filed with the Securities and Exchange Commission pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. Part III
 

 

 

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MID-AMERICA APARTMENT COMMUNITIES, INC.

 

     

TABLE OF CONTENTS

 

Item   Page
 

PART I

 

 
1. Business. 5
1A. Risk Factors. 14
1B. Unresolved Staff Comments. 27
2. Properties. 27
3. Legal Proceedings. 29
4. Mine Safety Disclosures 29
     
 

PART II

 
     
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. 29
6. Selected Financial Data. 32

7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations. 34
7A. Quantitative and Qualitative Disclosures About Market Risk. 50
8. Financial Statements and Supplementary Data. 51
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. 51
9A. Controls and Procedures. 51
9B. Other Information. 51
     
 

PART III

 
     
10. Directors, Executive Officers and Corporate Governance. 52
11. Executive Compensation. 52
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 52
13. Certain Relationships and Related Transactions, and Director Independence. 52
14. Principal Accounting Fees and Services. 52
     
 

PART IV

 
     
15. Exhibits, Financial Statement Schedules. 53

 

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PART I

 

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS

 

Mid-America Apartment Communities, Inc. considers this and other sections of this Annual Report on Form 10-K to contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, 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 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 statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. Such factors include, among other things, unanticipated adverse business developments affecting us, or our properties, adverse changes in the real estate markets and general and local economies and business conditions. 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 report 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 future results to differ materially from those expressed 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;
·failure of new acquisitions to achieve anticipated results or be efficiently integrated into us;
·failure of development communities to be completed, if at all, on a timely basis;
·failure of development communities to lease-up as anticipated;
·inability of a joint venture to perform as expected;
·inability to acquire additional or dispose of existing apartment units on favorable economic terms;
·unexpected capital needs;
·increasing real estate taxes and insurance costs;
·losses from catastrophes in excess of our insurance coverage;
·inability to acquire funding through the capital markets;
·the availability of credit, including mortgage financing, and the liquidity of the debt markets, including a material deterioration of the financial condition of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation;

 

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·inability to replace financing with the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation should their investment in the multifamily industry shrink or cease to exist;
·changes in interest rate levels, including that of variable rate debt, such as extensively used by us;
·loss of hedge accounting treatment for interest rate swaps and interest rate caps;
·the continuation of the good credit of our interest rate swap and cap providers;
·inability to meet loan covenants;
·significant decline in market value of real estate serving as collateral for mortgage obligations;
·inability to pay required distributions to maintain REIT status due to required debt payments;
·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;
·imposition of federal taxes if we fail to qualify as a REIT under the Internal Revenue Code in any taxable year or foregone opportunities to ensure REIT status;
·inability to attract and retain qualified personnel;
·potential liability for environmental contamination;
·adverse legislative or regulatory tax changes; and
·litigation and compliance costs associated with laws requiring access for disabled persons.

 

ITEM 1. BUSINESS

 

OVERVIEW

 

Founded in 1994, Mid-America Apartment Communities, Inc. is a Memphis, Tennessee-based self-administered and self-managed real estate investment trust, or REIT, that focuses on acquiring, owning and operating apartment communities in the Sunbelt region of the United States. As of December 31, 2011, we owned 100% of 160 properties representing 46,872 apartment units. Three properties include retail components with approximately 93,000 square feet of gross leasable area. As of December 31, 2011, we also had 33.33% ownership interests in Mid-America Multifamily Fund I, LLC, or Fund I, and Mid-America Multifamily Fund II, LLC, or Fund II, which owned two properties containing 626 apartment units and five properties containing 1,635 apartment units, respectively. These apartment communities were located across 13 states.

 

Our business is conducted principally through Mid-America Apartments, L.P., which we refer to as our operating partnership. We are the sole general partner of the operating partnership, holding 36,602,619 common units of partnership interest, or common units, comprising a 95.0% general partnership interest in the operating partnership as of December 31, 2011. Unless the context otherwise requires, all references in this Annual Report on Form 10-K to “we,” “us,” “our,” “the company,” or “MAA” refer collectively to Mid-America Apartment Communities, Inc. and its subsidiaries.

 

Our corporate offices are located at 6584 Poplar Avenue, Memphis, Tennessee 38138 and our telephone number is (901) 682-6600. As of December 31, 2011, we had 1,399 full time employees and 67 part time employees.

 

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FINANCIAL INFORMATION ABOUT SEGMENTS

 

As of December 31, 2011, we owned or had an ownership interest in 167 multifamily apartment communities in 13 different states from which we derived all significant sources of earnings and operating cash flows. Senior management evaluates performance and determines resource allocations by reviewing apartment communities individually and in the following reportable operating segments:

 

·Large market same store communities are generally communities in markets with a population of at least 1 million and at least 1% of the total public multifamily REIT units that we have owned and that have been stabilized for at least a full 12 months and have not been classified as held for sale. Communities are considered stabilized after achieving and maintaining at least 90% occupancy for 90 days.

 

·Secondary market same store communities are generally communities in markets with populations of more than 1 million but less than 1% of the total public multifamily REIT units or markets with populations of less than 1 million that we have owned and that have been stabilized for at least a full 12 months and have not been classified as held for sale. Communities are considered stabilized after achieving and maintaining at least 90% occupancy for 90 days.

 

·Non same store communities and other includes recent acquisitions, communities in development or lease-up and communities that have been classified as held for sale. Also included in non same store communities are non multifamily activities which represent less than 1% of our portfolio. .

 

On the first day of each calendar year, we determine the composition of our same store operating segments for that year, which allows us to evaluate full period-over-period operating comparisons. We utilize net operating income, or NOI, in evaluating the performance. Total NOI represents total property revenues less total property operating expenses, excluding depreciation and amortization, for all properties held during the period regardless of their status as held for sale. We believe NOI is a helpful tool in evaluating the operating performance of our segments because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance.

 

A summary of segment operating results for 2011, 2010 and 2009 is included in Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements, Note 13. Additionally, segment operating performance for such years is discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.

 

BUSINESS OBJECTIVES

 

Our primary business objectives are to protect and grow existing property values, to maintain a stable and increasing cash flow that will fund our dividend through all parts of the real estate investment cycle, and to create new shareholder value by growing in a disciplined manner. To achieve these objectives, we intend to continue to pursue the following goals and strategies:

 

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·effectively and efficiently operate our existing properties with an intense property and asset management focus and a decentralized structure;
·when accretive to long-term shareholder value, acquire or develop additional high-quality properties throughout the Sunbelt region of the United States;
·selectively dispose of properties that no longer meet our ownership guidelines;
·develop, renovate and reposition existing properties;
·diversify investment capital across both large and secondary markets to achieve a growing and less volatile operating performance profile to better support dividend funding across the full real estate and economic market cycle;
·enter into joint ventures to acquire and reposition properties; and
·actively manage our capital structure.


OPERATION STRATEGY

 

Our goal is to maximize our return on investment collectively and in each apartment community by increasing revenues, tightly controlling operating expenses, maintaining high occupancy levels and reinvesting as appropriate. The steps taken to meet these objectives include:

 

·diversifying portfolio investments across both large and secondary markets;
·providing management information and improved customer services through technology innovations;
·utilizing systems to enhance property managers’ ability to optimize revenue by adjusting rents in response to local market conditions and individual unit amenities;
·developing new ancillary income programs aimed at offering new services to residents, including, among others, cable and internet access, on which we generate revenue;
·implementing programs to control expenses through investment in cost-saving initiatives, including measuring and passing on to residents the cost of various expenses, including water and other utility costs;
·analyzing individual asset productivity performances to identify best practices and improvement areas;
·proactively maintaining the physical condition of each property through ongoing capital investments;
·improving the “curb appeal” of the apartment communities through extensive landscaping and exterior improvements, and repositioning apartment communities from time-to-time to maintain market leadership positions;
·aggressively managing lease expirations to align with peak leasing traffic patterns and to maximize productivity of property staffing;
·allocating additional capital, including capital for selective interior and exterior improvements, where the investment will generate the highest returns;
·compensating employees through performance-based compensation and stock ownership programs;
·maintaining a hands-on management style and “flat” organizational structure that emphasizes senior management's continued close contact with the market and employees;
·selling or exchanging underperforming assets;
·issuing or repurchasing shares of common or preferred stock when cost of capital and asset values permit;
·acquiring and from time to time developing properties when expected returns exceed our investment hurdle rate; and
·maintaining disciplined investment and capital allocation practices.

 

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Decentralized Operational Structure

 

We operate in a decentralized manner. We believe that our decentralized operating structure capitalizes on specific market knowledge, provides greater personal accountability than a centralized structure and is beneficial in the acquisition and redevelopment processes. To support this decentralized operational structure, senior and executive management, along with various asset management functions, are proactively involved in supporting and reviewing property management through extensive reporting processes and frequent on-site visitations. To maximize the amount of information shared between senior and executive management and the properties on a real time basis, we utilize a web-based property management system. The system contains property and accounting modules which allow for operating efficiencies, continued expense control, provide for various expanded revenue management practices, and improve the support provided to on-site property operations. We use a “yield management” pricing program that helps our property managers optimize rental revenues, and we also utilize purchase order and accounts payable software to provide improved controls and management information. We have also implemented revised utility billing processes, rolled out new web-sites enabling on-line lease applications and improved web-based marketing programs.

 

Intensive Property and Asset Management Focus

 

We have traditionally emphasized property management, and over the past several years, we have deepened our asset management functions to provide additional support in marketing, training, ancillary income and revenue management. A majority of our property managers are Certified Apartment Managers, a designation established by the National Apartment Association, which provides training for on-site manager professionals. We also provide our own in-house leadership development program consisting of an 18-month, three-module program followed by two comprehensive case studies, which was developed with the assistance of U.S. Learning, Inc.

 

ACQUISITION AND JOINT VENTURE STRATEGY

 

One of our growth strategies is to acquire and redevelop apartment communities for our wholly-owned portfolio that are diversified over both large and secondary markets throughout the Sunbelt region of the United States and that meet our investment criteria of expected leveraged returns exceeding our investment hurdle rate, generally defined as our estimated cost of equity plus 20%. We have extensive experience and research-based skills in the acquisition and repositioning of multifamily communities. In addition, we will acquire newly built and developed communities that can be purchased on a favorable pricing basis. We will continue to evaluate opportunities that arise, and will utilize this strategy to increase the number of apartment communities in strong and growing markets.

 

Another of our growth strategies is to co-invest with partners in joint venture opportunities to the extent we believe that a joint venture will enable us to obtain a higher return on our investment through management and other fees, which leverage our skills in acquiring, repositioning, redeveloping and managing multifamily investments. In addition, the joint venture investment strategy can provide a platform for creating more capital diversification and lower investment risk for us. At present, we have focused our joint venture investment strategy on properties seven years old or older, with younger acquisitions becoming part of the wholly-owned portfolio.

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As of December 31, 2011, we were partners in two joint ventures: Mid-America Multifamily Fund I, LLC, or Fund I, and Mid-America Multifamily Fund II, LLC, or Fund II.

 

The following apartment communities were acquired during the year ended December 31, 2011:

 

          Number    
Property   Location   of Units   Date Purchased
100% Owned Properties:            
  Village Oaks (1)   Temple Terrace (Tampa), FL                2   Various
  Alamo Ranch   San Antonio, TX            340   January 12, 2011
  Magnolia Parke   Gainesville, FL            204   April 20, 2011
  Atlantic Crossing   Jacksonville, FL            200   April 29, 2011
  Hamptons at Hunton Park   Glen Allen (Richmond), VA            300   June 1, 2011
  Avala at Savannah Quarters   Pooler (Savannah), GA            256   June 13, 2011
  Tattersall at Tapestry Park   Jacksonville, FL            279   June 23, 2011
  Birchall at Ross Bridge   Hoover (Birmingham), AL            240   August 25, 2011
  Legends at Lowe's Farm   Mansfield (Dallas), TX            456   September 19, 2011
  Aventura at Indian Lake   Hendersonville (Nashville), TN            300   October 18, 2011
  Palisades at Chenal Valley   Chenal Valley (Little Rock), AR            248   November 30, 2011
  Seasons at Celebrate Virginia   Fredericksburg, VA            232   December 8, 2011
                3,057    
33.33% Owned Properties Through Joint Ventures:        
  The Verandas at SouthWood   Tallahassee, FL            300   March 29, 2011

 

(1)On August 27, 2008, we purchased 215 units of the 234-unit Village Oaks apartments located in Temple Terrace, Florida, a suburb of Tampa. The remaining 19 units had previously been sold as condominiums and it is our intent to acquire these units if and when they become available, and operate them as apartment rentals with the rest of the community. During the remainder of 2008, we acquired four of the remaining 19 units and in 2009 we acquired an additional seven units and in 2010 we acquired an additional 3 units.

 

 

DISPOSITION STRATEGY

 

At 16 years average age, we have one of the younger portfolios in the multifamily REIT sector, and strive to maintain a young portfolio of our assets in excellent condition, believing that continuous capital replacement and maintenance will lead to higher long-run returns on investment. From time-to-time, we dispose of mature assets, defined as those apartment communities that no longer meet our investment criteria and long-term strategic objectives, to ensure that our portfolio consists primarily of high quality, well-located properties within our market area. Typically, we select assets for disposition that do not meet our present investment criteria, including estimated future return on investment, location, market, potential for growth and capital needs. From time-to-time we also may dispose of assets for which we receive an offer meeting or exceeding our return on investment criteria even though those assets may not meet the disposition criteria disclosed above. During 2011, we disposed of two properties totaling 534 units.

 

 

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DEVELOPMENT, RENOVATION, AND REPOSITIONING STRATEGY

 

Periodically, we invest in limited expansion development projects through fee based development agreements using fixed price construction contracts. These contracts can have variability to cover any project cost overruns that may occur. Some development agreements require that cost overruns are contractually shared with the developer up to a specified level, while other development agreements stipulate that cost overruns are the responsibility of the developer. In October 2010, we purchased land in Franklin (Nashville), Tennessee and entered into an agreement to develop a 428-unit apartment community on the site. Construction began in late 2010, but no units were completed by the end of the 2011. During 2011, we also began developing a phase II to the 1225 South Church apartments in Charlotte, North Carolina that were purchased in December 2010. In addition, we purchased land in Little Rock, Arkansas during 2011 and entered into a development agreement to develop a 312-unit apartment community on the site. We are also under contract to purchase 10.7 acres of land and begin construction on a new 270-unit community located in the Charleston, South Carolina metropolitan area. Closing on the land and initial construction is expected to occur in the first quarter of 2012.While we seek opportunistic new development investments offering superior locations with attractive long-term investment returns, we do not currently intend to maintain a dedicated development staff or to expand into development in a significant way. We expect our investment in new development will remain a smaller component of overall growth as compared to growth through acquiring existing properties.

 

Beginning in 2005, we began an initiative of upgrading a significant number of our existing apartment communities in key markets across our portfolio. We focus on both interior unit upgrades and shared exterior amenities above and beyond routine capital upkeep in markets that we believe continue to have growth potential and can support the increased rent. During the year ended December 31, 2011, we renovated 3,118 units achieving a combined 9.6% rent increase above the normal renewal rate.

 

CAPITAL STRUCTURE STRATEGY

 

We use a combination of debt and equity sources to fund our portfolio of assets, focused on producing the overall lowest cost and most flexible capital structure. We focus on improving the net present value of each share of our common stock by generating cash flows from our portfolio of investments above the estimated total cost of debt and equity capital. We routinely make new investments when we believe it can add to value per share. In the past, we have sold assets to fund share repurchases when, in management’s view, shareholder value would be enhanced.

 

At December 31, 2011, 39% of our total capitalization consisted of borrowings, including 36% for secured borrowings and 3% for unsecured borrowings. We currently intend to target our total debt to a range of approximately 45% to 55% of the undepreciated book value of our assets, although our charter and bylaws do not limit our debt levels; however, our net-debt (total debt less excess cash on hand) to undepreciated book value is limited to 60% by our debt covenants. We may issue new equity to maintain our debt within this target range. As of December 31, 2011, our ratio of net-debt to undepreciated book value was approximately 46%. Our Board of Directors can modify this policy at any time, which could allow us to become more highly leveraged but may decrease our ability to make distributions to our shareholders.

 

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We continuously review opportunities for lowering our cost of capital, and increasing net present value per share. Recently we received a BBB credit rating from Fitch as part of our strategy to access a broader financing market. This rating supported our issuance of $135 million in senior unsecured notes and the opening of a $250 million unsecured credit facility. We evaluate opportunities to repurchase stock when we believe that our stock price is below our net present value. We also look for opportunities where we can acquire or develop apartment communities, selectively funded or partially funded by stock sales, when the investment return is projected to substantially exceed our cost of capital. We will also opportunistically seek to lower our cost of capital through issuing, refinancing or redeeming preferred stock as we did in 2010.

 

We have entered into sales agreements with Cantor Fitzgerald & Co., Raymond James & Associates, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated to sell shares of our common stock, from time-to-time in at-the-market offerings or negotiated transactions through controlled equity offering programs, or ATMs.

 

The following are the issuances of common stock which have been made through these agreements through December 31, 2011:

 

           Net 
   Number of   Net   Average 
   Shares Sold   Proceeds   Sales Price 
2006   194,000   $11,481,292   $59.18 
2007   323,700   $18,773,485   $58.00 
2008   1,955,300   $103,588,759   $52.98 
2009   763,000   $32,774,757   $42.96 
2010   5,077,201   $274,576,677   $54.08 
2011   3,303,273   $204,534,677   $61.92 
Total   11,616,474   $645,729,647   $55.59 

 

We also have a direct stock purchase plan, which allows for the optional cash purchase of common stock of at least $250, but not more than $5,000 in any given month, free of brokerage commissions and charges. We, in our absolute discretion, may grant waivers to allow for optional cash payments in excess of $5,000. During the year ended December 31, 2011, we issued a total of 495,645 shares through the optional cash purchase feature of our direct stock purchase plan, resulting in net proceeds of $30.0 million.

 

 

SHARE REPURCHASE PROGRAM

 

In 1999, our Board of Directors approved an increase in the number of shares of our common stock authorized to be repurchased to 4 million shares. As of December 31, 2011, we had repurchased a total of approximately 1.86 million shares (8% of the shares of common stock and common units outstanding as of the beginning of the repurchase program). From time-to-time, we intend to repurchase shares when we believe that shareholder value is enhanced. Factors affecting this determination include, among others, the share price, financing agreements and rates of return. No shares were repurchased from 2002 through 2011 under this plan.

 

 

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COMPETITION

 

All of our apartment communities are located in areas that include other apartment communities. Occupancy and rental rates are affected by the number of competitive apartment communities in a particular area. The owners of competing apartment communities may have greater resources than us, and the managers of these apartment communities may have more experience than our management. Moreover, single-family rental housing, manufactured housing, condominiums and the new and existing home markets provide housing alternatives to potential residents of apartment communities.

 

Apartment communities compete on the basis of monthly rent, discounts and facilities offered, such as apartment size and amenities, and apartment community amenities, including recreational facilities, resident services and physical property condition. We make capital improvements to both our apartment communities and individual apartments on a regular basis in order to maintain a competitive position in each individual market.

 

ENVIRONMENTAL MATTERS

 

As part of the acquisition process, we obtain environmental studies on all of our apartment communities from various outside environmental engineering firms. The purpose of these studies is to identify potential sources of contamination at the apartment communities and to assess the status of environmental regulatory compliance. These studies generally include historical reviews of the apartment communities, reviews of certain public records, preliminary investigations of the sites and surrounding properties, inspection for the presence of asbestos, poly-chlorinated biphenyls, or PCBs, and underground storage tanks and the preparation and issuance of written reports. Depending on the results of these studies, more invasive procedures, such as soil sampling or ground water analysis, will be performed to investigate potential sources of contamination. These studies must be satisfactorily completed before we take ownership of an acquisition community; however, no assurance can be given that the studies identify all significant environmental problems.

 

Under various federal, state and local laws and regulations, an owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on properties. Such laws often impose such liability without regard to whether the owner caused or knew of the presence of hazardous or toxic substances and whether the storage of such substances was in violation of a resident’s lease. Furthermore, the cost of remediation and removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner’s ability to sell such real estate or to borrow using such real estate as collateral.

 

We are aware of environmental concerns specifically relating to potential issues resulting from mold in residential properties and have in place an active management and preventive maintenance program that includes procedures specifically related to mold. We have established a policy requiring residents to sign a mold addendum to lease. We also have a $5 million insurance policy that covers remediation and exposure to mold. Therefore, we believe that our exposure to this issue is limited and controlled.

 

The environmental studies we received have not revealed any material environmental liabilities. We are not aware of any existing conditions that would currently be considered a material environmental liability. Nevertheless, it is possible that the studies do not reveal all environmental liabilities or that there are material environmental liabilities of which we are not aware. Moreover, no assurance can be given concerning future laws, ordinances or regulations, or the potential introduction of hazardous or toxic substances by neighboring properties or residents.

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We believe that our apartment communities are in compliance in all material respects with all applicable federal, state and local ordinances and regulations regarding hazardous or toxic substances and other environmental matters.

 

WEBSITE ACCESS TO REGISTRANT’S REPORTS

 

We file annual and periodic reports with the Securities and Exchange Commission. All filings made by us with the SEC may be copied or read at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC as we do. The website is http://www.sec.gov.

 

Additionally, a copy of this Annual Report on Form 10-K, along with our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to the aforementioned filings, are available on our website free of charge. The filings can be found on the For Investors page under SEC Filings. Our website also contains our Corporate Governance Guidelines, Code of Business Conduct and Ethics and the charters of the committees of the Board of Directors. These items can be found on the For Investors page under Governance Documents. Our website address is http://www.maac.com. Reference to our website does not constitute incorporation by reference of the information contained on the site and should not be considered part of this document. All of the aforementioned materials may also be obtained free of charge by contacting the Investor Relations Department at MAA, 6584 Poplar Avenue, Memphis, TN 38138.

 

QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST

 

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code. To continue to qualify as a REIT, we must continue to meet certain tests which, among other things, generally require that our assets consist primarily of real estate assets, our income be derived primarily from real estate assets, and that we distribute at least 90% of our REIT taxable income (other than our net capital gain) to our shareholders annually. As a qualified REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on our net income to the extent we distribute such net income to our shareholders annually. Even if we continue to qualify as a REIT, we will continue to be subject to certain federal, state and local taxes on our income and our property. In 2011, we paid total distributions of $2.51 per common share to our shareholders, which was above the 90% REIT distribution requirement.

 

RECENT DEVELOPMENTS

 

Dispositions

 

On January 12, 2012, we closed on the sale of the 320-unit Kenwood Club at the Park apartment community located in Katy (Houston), Texas, resulting in a gain of approximately $9.6 million.

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On February 9, 2012, we closed on the sale of the 276-unit Cedar Mill apartment community located in Memphis, Tennessee, resulting in no material gain or loss.

 

ITEM 1A. RISK FACTORS

 

In addition to the other information contained in this Annual Report on Form 10-K, We have identified the following additional risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations. Investors should carefully consider the risks described below before making an investment decision. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may also significantly impair our business operations. If any of these risks occur, our business, results of operations or financial condition could suffer, the market price of our common stock could decline and you could lose all or part of your investment in our common stock.

 

RISKS RELATED TO OUR REAL ESTATE INVESTMENTS AND OUR OPERATIONS

 

Economic slowdown in the United States and downturns in the housing and real estate markets may adversely affect our financial condition and results of operations

 

There have been significant declines in economic growth, both in the United States and globally. Both the real estate industry and the broader United States economy have experienced unfavorable conditions which adversely affected our revenues. Although our industry and the United States economy showed signs of improvement in 2010 and 2011, we cannot accurately predict that market conditions will continue to improve in the near future or that our financial condition and results of operations will not continue to be adversely affected. Factors such as weakened economies and related reduction in spending, falling home prices and job losses, price volatility, and/or dislocations and liquidity disruptions in the financial and credit markets could, among other things, impede the ability of our tenants and other parties with which we conduct business to perform their contractual obligations, which could lead to an increase in defaults by our tenants and other contracting parties, which could adversely affect our revenues. Furthermore, our ability to lease our properties at favorable rates, or at all, is adversely affected by increases in supply and deterioration in multifamily markets and is dependent upon the overall level of spending in the economy, which is adversely affected by, among other things, job losses and unemployment levels, recession, personal debt levels, downturns in the housing market, stock market volatility and uncertainty about the future. With regard to our ability to lease our multifamily properties, the increasing rental of excess for-sale condominiums and single family homes, which increases the supply of multifamily units and housing alternatives, may reduce our ability to lease our multifamily units and depress rental rates in certain markets. When we experience a downturn, we cannot predict how long demand and other factors in the real estate market will remain unfavorable, but if the markets remain weak over extended periods of time or deteriorate significantly, our ability to lease our properties or our ability to increase or maintain rental rates in certain markets may weaken.

 

Failure to generate sufficient cash flows could limit our ability to pay distributions to shareholders

 

Our ability to generate sufficient cash flow in order to pay distributions to our shareholders depends on our ability to generate funds from operations in excess of capital expenditure requirements and/or to have access to the markets for debt and equity financing. Funds from operations and the value of our apartment communities may be insufficient because of factors which are beyond our control. Such events or conditions could include:

 

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·competition from other apartment communities;
·overbuilding of new apartment units or oversupply of available apartment units in our markets, which might adversely affect apartment occupancy or rental rates and/or require rent concessions in order to lease apartment units;
·conversion of condominiums and single family houses to rental use;
·weakness in the overall economy which lowers job growth and the associated demand for apartment housing;
·increases in operating costs (including real estate taxes and insurance premiums) due to inflation and other factors, which may not be offset by increased rents;
·inability to initially, or subsequently after lease terminations, rent apartments on favorable economic terms;
·inability to complete or lease-up development communities on a timely basis, if at all;
·changes in governmental regulations and the related costs of compliance;
·changes in laws including, but not limited to, tax laws and housing laws including the enactment of rent control laws or other laws regulating multifamily housing;
·withdrawal of government support of apartment financing through its financial backing of the Federal National Mortgage Association, or FNMA, or the Federal Home Loan Mortgage Corporation, or Freddie Mac;
·an uninsured loss, including those resulting from a catastrophic storm, earthquake, or act of terrorism;
·changes in interest rate levels and the availability of financing, borrower credit standards, and down-payment requirements which could lead renters to purchase homes (if interest rates decrease and home loans are more readily available) or increase our acquisition and operating costs (if interest rates increase and financing is less readily available); and
·the relative illiquidity of real estate investments.

 

At times, we rely on external funding sources to fully fund the payment of distributions to shareholders and our capital investment program (including our existing property expansion developments). While we have sufficient liquidity to permit distributions at current rates through additional borrowings if necessary, any significant and sustained deterioration in operations could result in our financial resources being insufficient to pay distributions to shareholders at the current rate, in which event we would be required to reduce the distribution rate. Any decline in our funds from operations could adversely affect our ability to make distributions to our shareholders or to meet our loan covenants and could have a material adverse effect on our stock price.

 

We may be adversely affected by new laws and regulations

 

The current United States administration and Congress have enacted, or called for consideration of, proposals relating to a variety of issues, including with respect to health care, financial regulation reform, climate control, executive compensation and others. We believe that these and other potential proposals could have varying degrees of impact on us ranging from minimal to material. At this time, we are unable to predict with certainty what level of impact specific proposals could have on us.

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Certain rulemaking and administrative efforts that may have an impact on us focus principally on the areas perceived as contributing to the global financial crisis and the continuing economic downturn. These initiatives have created a degree of uncertainty regarding the basic rules governing the real estate industry and many other businesses that is unprecedented in the United States at least since the wave of lawmaking and regulatory reform that followed in the wake of the Great Depression. The federal legislative response in this area has culminated most recently in the enactment on July 21, 2010 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act. Many of the provisions of the Dodd-Frank Act have extended implementation periods and delayed effective dates and will require extensive rulemaking by regulatory authorities; thus, the impact on us may not be known for an extended period of time. The Dodd-Frank Act, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals that are proposed or pending in the United States Congress, may limit our revenues, impose fees or taxes on us, and/or intensify the regulatory framework in which we operate in ways that are not currently identifiable.

 

Changing laws, regulations and standards relating to corporate governance and public disclosure in particular, including certain provisions of the Dodd-Frank Act and the rules and regulations promulgated thereunder, have created uncertainty for public companies like ours and could significantly increase the costs and risks associated with accessing the United States public markets. Because we are committed to maintaining high standards of internal control over financial reporting, corporate governance and public disclosure, our management team will need to devote significant time and financial resources to comply with these evolving standards for public companies. We intend to continue to invest appropriate resources to comply with both existing and evolving standards, and this investment has resulted and will likely continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

 

We are dependent on key personnel

 

Our success depends in part on our ability to attract and retain the services of executive officers and other personnel. There is substantial competition for qualified personnel in the real estate industry, and the loss of several of our key personnel could have an adverse effect on us.

 

New acquisitions may fail to perform as expected, and failure to integrate acquired communities and new personnel could create inefficiencies

 

We intend to actively acquire and improve multifamily communities for rental operations. We may underestimate the costs necessary to bring an acquired community up to standards established for our intended market position. Additionally, to grow successfully, we must be able to apply our experience in managing our existing portfolio of apartment communities to a larger number of properties. We must also be able to integrate new management and operations personnel as our organization grows in size and complexity. Failures in either area will result in inefficiencies that could adversely affect our overall profitability.

 

We may not be able to sell communities when appropriate

 

Real estate investments are relatively illiquid and generally cannot be sold quickly. We may not be able to change our portfolio promptly in response to economic or other conditions. Further, we own seven communities, which are subject to restrictions on sale and are required to be exchanged through a 1031b tax-free exchange, unless we pay the tax liability of the contributing partners. This inability to respond promptly to changes in the performance of our investments could adversely affect our financial condition and ability to make distributions to our security holders.

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Environmental problems are possible and can be costly

 

Federal, state and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or petroleum product releases at such community. The owner or operator may have to pay a governmental entity or third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with the contamination. These laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site. All of our communities have been the subject of environmental assessments completed by qualified independent environmental consultant companies. These environmental assessments have not revealed, nor are we aware of, any environmental liability that we believe would have a material adverse effect on our business, results of operations, financial condition or liquidity.

 

Over the past several years, there have been an increasing number of lawsuits against owners and managers of multifamily properties alleging personal injury and property damage caused by the presence of mold in residential real estate. Some of these lawsuits have resulted in substantial monetary judgments or settlements. We cannot be assured that existing environmental assessments of our communities reveal all environmental liabilities, that any prior owner of any of our properties did not create a material environmental condition not known to us, or that a material environmental condition does not otherwise exist.

 

Changes in the system for establishing United States accounting standards may materially and adversely affect our reported results of operations

 

Accounting for public companies in the United States has historically been conducted in accordance with generally accepted accounting principles as in effect in the United States, or GAAP. GAAP is established by the Financial Accounting Standards Board, or FASB, an independent body whose standards are recognized by the SEC as authoritative for publicly held companies. The International Accounting Standards Board, or IASB, is a London-based independent board established in 2001 and charged with the development of International Financial Reporting Standards, or IFRS. IFRS generally reflects accounting practices that prevail in Europe and in developed nations around the world.

 

IFRS differs in material respects from GAAP. Among other things, IFRS has historically relied more on “fair value” models of accounting for assets and liabilities than GAAP. “Fair value” models are based on periodic revaluation of assets and liabilities, often resulting in fluctuations in such values as compared to GAAP, which relies more frequently on historical cost as the basis for asset and liability valuation.

 

The SEC has proposed the mandatory adoption of IFRS by United States public companies possibly starting in 2015. It is unclear at this time how the SEC will propose that GAAP and IFRS be harmonized if the proposed change is adopted. In addition, switching to a new method of accounting and adopting IFRS will be a complex undertaking. We may need to develop new systems and controls based on the principles of IFRS. Since these are new endeavors, and the precise requirements of the pronouncements ultimately adopted are not now known, the magnitude of costs associated with this conversion are uncertain.

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We are currently evaluating the impact of the adoption of IFRS on our financial position and results of operations. Such evaluation cannot be completed, however, without more clarity regarding the specific IFRS standards that will be adopted. Until there is more certainty with respect to the IFRS standards to be adopted, prospective investors should consider that our conversion to IFRS could have a material adverse impact on our reported results of operations.

 

Losses from catastrophes may exceed our insurance coverage

 

We carry comprehensive liability and property insurance on our communities and intend to obtain similar coverage for communities we acquire in the future. Some losses, generally of a catastrophic nature, such as losses from floods, hurricanes or earthquakes, are subject to limitations, and thus may be uninsured. We exercise our discretion in determining amounts, coverage limits and deductibility provisions of insurance, with a view to maintaining appropriate insurance on our investments at a reasonable cost and on suitable terms. If we suffer a substantial loss, our insurance coverage may not be sufficient to pay the full current market value or current replacement value of our lost investment. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it infeasible to use insurance proceeds to replace a property after it has been damaged or destroyed.

 

Increasing real estate taxes and insurance costs may negatively impact financial condition

 

As a result of our substantial real estate holdings, the cost of real estate taxes and insuring our apartment communities is a significant component of expense. Real estate taxes and insurance premiums are subject to significant increases and fluctuations, which can be widely outside of our control. If the costs associated with real estate taxes and insurance should significantly rise, our financial condition could be negatively impacted, and our ability to pay our dividend could be affected.

 

We may experience increased costs arising from health care reform

 

In March 2010, the United States government enacted comprehensive health care reform legislation which, among other things, includes guaranteed coverage requirements, eliminates pre-existing condition exclusions and annual and lifetime maximum limits, restricts the extent to which policies can be rescinded and imposes new and significant taxes on health insurers and health care benefits. The legislation imposes implementation effective dates beginning in 2010 and extending through 2020, and many of the changes require additional guidance from government agencies or federal regulations. Several states have challenged the constitutionality of certain provisions of the health care reform legislation, and many of these challenges are still pending final adjudication in several jurisdictions, including the United States Supreme Court. Therefore, due to the phased-in nature of the implementation, the lack of interpretive guidance, and the pending court challenges to this legislation, it is difficult to determine at this time what impact the health care reform legislation will have on our financial results. Possible adverse effects of the health reform legislation include increased costs, exposure to expanded liability and requirements for us to revise ways in which we provide healthcare and other benefits to our employees. In addition, our results of operations, financial position and cash flows could be materially adversely affected.

 

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Property insurance limits may be inadequate, and deductibles may be excessive in the event of a catastrophic loss or a series of major losses, which may cause a breach of loan covenants

 

We have a significant proportion of our assets in areas exposed to windstorms and to the New Madrid seismic zone. A major wind or earthquake loss, or series of losses, could require that we pay significant deductibles as well as additional amounts above the per occurrence limit of our insurance for these risks. We may then be judged to have breached one or more of our loan covenants, and any of the foregoing events could have a material adverse effect on our assets, financial condition, and results of operation.

 

Compliance or failure to comply with laws requiring access to our properties by disabled persons could result in substantial cost

 

The Americans with Disabilities Act, the Fair Housing Act of 1988 and other federal, state and local laws generally require that public accommodations be made accessible to disabled persons. Noncompliance could result in the imposition of fines by the government or the award of damages to private litigants. These laws may require us to modify our existing communities. These laws may also restrict renovations by requiring improved access to such buildings by disabled persons or may require us to add other structural features that increase our construction costs. Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons. We cannot ascertain the costs of compliance with these laws, which may be substantial.

 

Development and construction risks could impact our profitability

 

Currently, we have two development communities and a second phase to an existing community under construction totaling 950 units as of December 31, 2011. No units for the development projects were completed as of December 31, 2011. Our development and construction activities are subject to the following risks:

 

·we may be unable to obtain, or face delays in obtaining, necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations, which could result in increased development costs, could delay initial occupancy dates for all or a portion of a development community, and could require us to abandon our activities entirely with respect to a project for which we are unable to obtain permits or authorizations;
·yields may be less than anticipated as a result of delays in completing projects, costs that exceed budget and/or higher than expected concessions for lease up and lower rents than pro forma;
·bankruptcy of developers in our development projects could impose delays and costs on us with respect to the development of our communities and may adversely affect our financial condition and results of operations;
·we may abandon development opportunities that we have already begun to explore, and we may fail to recover expenses already incurred in connection with exploring such opportunities;

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·we may be unable to complete construction and lease-up of a community on schedule, or incur development or construction costs that exceed our original estimates, and we may be unable to charge rents that would compensate for any increase in such costs;
·occupancy rates and rents at a newly developed community may fluctuate depending on a number of factors, including market and economic conditions, preventing us from meeting our profitability goals for that community; and
·when we sell to third parties communities or properties that we developed or renovated, we may be subject to warranty or construction defect that are uninsured or exceed the limit of our insurance.

 

RISKS RELATED TO OUR INDEBTEDNESS AND FINANCING ACTIVITIES

 

A change in United States government policy with regard to FNMA and Freddie Mac could seriously impact our financial condition

 

On February 11, 2011, the Obama Administration released a report to Congress which included options, among others, to gradually shrink and eventually shut down FNMA and Freddie Mac. In August 2011, Standard & Poor’s Rating Services downgraded the credit ratings of FNMA and Freddie Mac from AAA to AA+. We do not know when or if FNMA or Freddie Mac will restrict their support of lending to the multifamily industry or to us in particular. As of December 31, 2011, 69% of our outstanding debt was borrowed through credit facilities provided by or credit-enhanced by FNMA or Freddie Mac with agency rate-based maturities ranging from 2012 through 2018. While the report to Congress recognized the critically important role that FNMA and Freddie Mac play in the housing finance market and committed to ensuring they have sufficient capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations, should they be unable to meet their obligations it would have a material adverse effect on both us and the multifamily industry, and we would seek alternative sources of funding. This could jeopardize the effectiveness of our interest rate swaps, require us to post collateral up to the market value of the interest rate swaps, and either of these occurrences could potentially cause a breach in one or more of our loan covenants, and through reduced loan availability, impact the value of multifamily assets, which could impair the value of our properties.

 

Our financing could be impacted by negative capital market conditions

 

Over the past three and a half years, domestic financial markets have experienced unusual volatility and uncertainty. Liquidity tightened in financial markets, including the investment grade debt, the CMBS, commercial paper, and equity capital markets. A large majority of apartment financing, and as of December 31, 2011, 69% of our outstanding debt, was borrowed through credit facilities provided by or credit-enhanced by FNMA and Freddie Mac, which are now under the conservatorship of the United States government, but for which, on February 11, 2011, the Obama Administration released a report to Congress which included options to gradually shrink and eventually shut down FNMA and Freddie Mac. We have seen an increase in the volatility of short term interest rates and changes in historic relationships between LIBOR (which is the basis for the majority of the payments to us by our swap counterparties) and the actual interest rate we pay through the FNMA Discount Mortgage Backed Security, or DMBS, and the Freddie Mac Reference Bill programs. This creates a risk that our interest expense will fluctuate to a greater extent than it has in the past, and it makes forecasting more difficult. Were our credit arrangements with Prudential Mortgage Capital, credit-enhanced by FNMA, or with Financial Federal, credit-enhanced by Freddie Mac, to fail, or their ability to lend money to finance apartment communities to become impaired or cease, we would have to seek alternative sources of capital, which might not be available on terms acceptable to us, if at all. In addition, any such event would most likely cause our interest costs to rise. This could also cause our interest rate swaps and caps to become ineffective, triggering a default in one or more of our credit agreements. If any of the foregoing events were to occur, it could have a material adverse effect on our business, financial condition and prospects.

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Various agency rate-based traunches of our credit facilities with FNMA and Freddie Mac mature from 2012 through 2018, and we anticipate that replacement financing, whether with FNMA, Freddie Mac, or other options in the financial markets, will be at a higher cost.

 

A change in the value of our assets could cause us to experience a cash shortfall, to be in default of our loan covenants, or to incur a charge for the impairment of assets

 

We borrow on a secured basis from FNMA, Freddie Mac, and on an unsecured basis from a syndicate of banks led by Key Bank. A significant reduction in the value of our assets could require us to post additional collateral. While we believe that we have significant excess collateral and capacity, future asset values are uncertain. If we were unable to meet a request to add collateral to a credit facility, this would have a material adverse effect on our liquidity and our ability to meet our loan covenants. We may determine that the value of an individual asset, or group of assets, was irrevocably impaired, and that we may need to record a charge to write-down the value of the asset to reflect its current value.

 

Debt level, refinancing and loan covenant risk may adversely affect our financial condition and operating results and our ability to maintain our status as a REIT

 

At December 31, 2011, we had total debt outstanding of $1.65 billion. Payments of principal and interest on borrowings may leave us with insufficient cash resources to operate the apartment communities or to pay distributions that are required to be paid in order for us to maintain our qualification as a REIT. We currently intend to limit our total debt to a range of approximately 45% to 55% of the undepreciated book value of our assets, although our charter and bylaws do not limit our debt levels. Our net-debt to undepreciated book value is limited to 60% by our debt covenants. As of December 31, 2011, our ratio of net-debt to undepreciated book value was approximately 46%. Our Board of Directors can modify this policy at any time, which could allow us to become more highly leveraged and decrease our ability to make distributions to our shareholders. In addition, we must repay our debt upon maturity, and the inability to access debt or equity capital at attractive rates could adversely affect our financial condition and/or our funds from operations. We rely on FNMA and Freddie Mac, which we refer to as the Agencies, for the majority of our debt financing and have agreements with the Agencies and with other lenders that require us to comply with certain covenants, including maintaining adequate collateral that is subject to revaluation annually. The breach of any one of these covenants would place us in default with our lenders and may have serious consequences on our operations.

 

Interest rate hedging may be ineffective

 

We rely on the financial markets to refinance debt maturities, and also rely on the Agencies, which provided credit or credit enhancement for the majority of our outstanding debt as of December 31, 2011. The debt is provided under the terms of credit facilities with Prudential Mortgage Capital (credit-enhanced by FNMA) and Financial Federal (credit-enhanced by Freddie Mac). We pay fees to the credit facility providers and the Agencies plus interest which is based on the FNMA DMBS rate, and the Freddie Mac Reference Bill Rate.

 

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The interest rate market for the FNMA DMBS rate and the Freddie Mac Reference Bill Rate, both of which have been highly correlated with LIBOR interest rates, are also an important component of our liquidity and interest rate swap and cap effectiveness. In our experience, the FNMA DMBS rate has historically averaged 16 basis points below three-month LIBOR, and the Freddie Mac Reference Bill rate has averaged 32 basis points below the associated LIBOR rate, but in the past 3 years the spreads increased significantly and have been more volatile than we have historically seen. We cannot forecast when or if the uncertainty and volatility in the market may change. Continued unusual volatility over a period of time could cause us to lose hedge accounting treatment for our interest rate swaps and caps, resulting in material changes to our consolidated statements of operations and balance sheet, and potentially cause a breach with one of our debt covenants.

 

Fluctuations in interest rate spreads between the DMBS and Reference Bill rates and three-month LIBOR causes ineffectiveness to flow through interest expense in the current period if we are in an overhedged position, and together with the unrecognized ineffectiveness, reduces the effectiveness of the swaps and caps.

 

We also rely on the credit of the counterparties that provide swaps and caps to hedge the interest rate risk on our credit facilities. We use four major banks to provide approximately 98% of our derivative fair value, all of which have investment grade ratings from Moody’s and S&P. In the event that one of our derivative providers should suffer a significant downgrade of its credit rating or fail, our swaps or caps may become not effective, in which case the value of the swap or cap would be recorded in earnings, possibly causing a substantial loss sufficient to cause a breach of one of our debt covenants.

 

One or more interest rate swap or cap counterparties could default, causing us significant financial exposure

 

We enter into interest rate swap and interest rate cap agreements only with counterparties that are highly rated (A or above by Standard & Poors, or Aa3 or above by Moody’s). We also try to diversify our risk amongst several counterparties. In the event one or more of these counterparties were to go into liquidation or to experience a significant rating downgrade, this could cause us to liquidate the interest rate swap or to lose the interest rate protection of an interest rate cap. Liquidation of an interest rate swap could cause us to be required to pay the swap counter party the net present value of the swap, which may represent a significant current period cash charge, possibly sufficient to cause us to breach one or more loan covenants.

 

Variable interest rates may adversely affect funds from operations

 

At December 31, 2011, effectively $249 million of our debt bore interest at a variable rate and was not hedged by interest rate swaps or caps. We may incur additional debt in the future that also bears interest at variable rates. Variable rate debt creates higher debt service requirements if market interest rates increase, which would adversely affect our funds from operations and the amount of cash available to pay distributions to shareholders. Our $964 million secured credit facilities with Prudential Mortgage Capital, credit enhanced by FNMA, are predominately floating rate facilities. We also have credit facilities with Freddie Mac totaling $200 million that are variable rate facilities. At December 31, 2011, a total of $1.1 billion was outstanding under these facilities. These facilities represent the majority of the variable interest rates we were exposed to at December 31, 2011. Large portions of the interest rates on these facilities have been hedged by means of a number of interest rate swaps and caps. Upon the termination of these swaps and caps, we will be exposed to the risks of varying interest rates unless acceptable replacement swaps or caps are obtainable.

 

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Issuances of additional debt or equity may adversely impact our financial condition

 

Our capital requirements depend on numerous factors, including the occupancy and turnover rates of our apartment communities, development and capital expenditures, costs of operations and potential acquisitions. We cannot accurately predict the timing and amount of our capital requirements. If our capital requirements vary materially from our plans, we may require additional financing sooner than anticipated. Accordingly, we could become more leveraged, resulting in increased risk of default on our obligations and in an increase in our debt service requirements, both of which could adversely affect our financial condition and ability to access debt and equity capital markets in the future. If we issue additional equity securities to obtain additional financing, the interest of our existing shareholders could be diluted.

 

RISKS RELATED TO OUR ORGANIZATION AND OWNERSHIP OF OUR STOCK

 

Our ownership limit restricts the transferability of our capital stock

 

Our charter limits ownership of our capital stock by any single shareholder to 9.9% of the value of all outstanding shares of our capital stock, both common and preferred. The charter also prohibits anyone from buying shares if the purchase would result in our losing REIT status. This could happen if a share transaction results in fewer than 100 persons owning all of our shares or in five or fewer persons, applying certain broad attribution rules of the Code, owning 50% or more of our shares. If you acquire shares in excess of the ownership limit or in violation of the ownership requirements of the Code for REITs, we:

 

·will consider the transfer to be null and void;
·will not reflect the transaction on our books;
·may institute legal action to enjoin the transaction;
·will not pay dividends or other distributions with respect to those shares;
·will not recognize any voting rights for those shares;
·will consider the shares held in trust for our benefit; and
·will either direct you to sell the shares and turn over any profit to us, or we will redeem the shares. If we redeem the shares, you will be paid a price equal to the lesser of the price you paid for the shares; or the average of the last reported sales prices on the New York Stock Exchange on the ten trading days immediately preceding the date fixed for redemption by our Board of Directors.

 

If you acquire shares in violation of the limits on ownership described above:

 

·you may lose your power to dispose of the shares;
·you may not recognize profit from the sale of such shares if the market price of the shares increases; and
·you may be required to recognize a loss from the sale of such shares if the market price decreases.

 

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Provisions of our charter and Tennessee law may limit the ability of a third party to acquire control of us

 

Ownership Limit

 

The 9.9% ownership limit discussed above may have the effect of precluding acquisition of control of us by a third party without the consent of our Board of Directors.

 

Preferred Stock

 

Our charter authorizes our Board of Directors to issue up to 20,000,000 shares of preferred stock. The Board of Directors may establish the preferences and rights of any preferred shares issued. The issuance of preferred stock could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our shareholders’ best interests. As of December 31, 2011, no shares of preferred stock were issued and outstanding.

 

Tennessee Anti-Takeover Statutes

 

As a Tennessee corporation, we are subject to various legislative acts, which impose restrictions on and require compliance with procedures designed to protect shareholders against unfair or coercive mergers and acquisitions. These statutes may delay or prevent offers to acquire us and increase the difficulty of consummating any such offers, even if our acquisition would be in our shareholders’ best interests.

 

Our investments in joint ventures may involve risks

 

Investments in joint ventures may involve risks that may not otherwise be present in our direct investments such as:

 

·the potential inability of our joint venture partner to perform;
·the joint venture partner may have economic or business interests or goals which are inconsistent with or adverse to ours;
·the joint venture partner may take actions contrary to our requests or instructions or contrary to our objectives or policies; and
·the joint venturers may not be able to agree on matters relating to the property they jointly own.

 

Although each joint owner will have a right of first refusal to purchase the other owner’s interest, in the event a sale is desired, the joint owner may not have sufficient resources to exercise such right of first refusal.

 

Market interest rates and low trading volume may have an adverse effect on the market value of our common shares

 

The market price of shares of a REIT may be affected by the distribution rate on those shares, as a percentage of the price of the shares, relative to market interest rates. If market interest rates increase, prospective purchasers of our shares may expect a higher annual distribution rate. Higher interest rates would not, however, result in more funds for us to distribute and, in fact, would likely increase our borrowing costs and potentially decrease funds available for distribution. This could cause the market price of our common shares to go down. In addition, although our common shares are listed on The New York Stock Exchange, or The NYSE, the daily trading volume of our shares may be lower than the trading volume for other industries. As a result, our investors who desire to liquidate substantial holdings may find that they are unable to dispose of their shares in the market without causing a substantial decline in the market value of the shares.

 

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Changes in market conditions or a failure to meet the market’s expectations with regard to our earnings and cash distributions could adversely affect the market price of our common shares

 

We believe that the market value of a REIT’s equity securities is based primarily upon the market’s perception of the REIT’s growth potential and its current and potential future cash distributions, and is secondarily based upon the real estate market value of the underlying assets. For that reason, our shares may trade at prices that are higher or lower than the net asset value per share. To the extent we retain operating cash flow for investment purposes, working capital reserves or other purposes, these retained funds, while increasing the value of our underlying assets, may not correspondingly increase the market price of our common shares. In addition, we are subject to the risk that our cash flow will be insufficient to pay distributions to our shareholders. Our failure to meet the market’s expectations with regard to future earnings and cash distributions would likely adversely affect the market price of our shares.

 

The stock markets, including The NYSE, on which we list our common shares, have experienced significant price and volume fluctuations. As a result, the market price of our common shares could be similarly volatile, and investors in our common shares may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. Among the market conditions that may affect the market price of our publicly traded securities are the following:

 

·our financial condition and operating performance and the performance of other similar companies;
·actual or anticipated differences in our quarterly and annual operating results;
·changes in our revenues or earnings estimates or recommendations by securities analysts;
·publication of research reports about us or our industry by securities analysts;
·additions and departures of key personnel;
·inability to access the capital markets;
·strategic decisions by us or our competitors, such as acquisitions, dispositions, spin-offs, joint ventures, strategic investments or changes in business strategy;
·the issuance of additional shares of our common stock, or the perception that such sales may occur, including under our at-the-market controlled equity offering programs;
·the reputation of REITs generally and the reputation of REITs with portfolios similar to ours;
·the attractiveness of the securities of REITs in comparison to securities issued by other entities (including securities issued by other real estate companies);
·an increase in market interest rates, which may lead prospective investors to demand a higher distribution rate in relation to the price paid for our shares;
·the passage of legislation or other regulatory developments that adversely affect us or our industry;
·speculation in the press or investment community;

 

25
 

 

·actions by institutional shareholders or hedge funds;
·changes in accounting principles;
·terrorist acts; and
·general market conditions, including factors unrelated to our performance.

 

In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.

 

RISKS RELATED TO TAX LAWS

 

Failure to qualify as a REIT would cause us to be taxed as a corporation

 

If we failed to qualify as a REIT for federal income tax purposes, we would be taxed as a corporation. The Internal Revenue Service may challenge our qualification as a REIT for prior years, and new legislation, regulations, administrative interpretations or court decisions may change the tax laws with respect to qualification as a REIT or the federal tax consequences of such qualification. For any taxable year that we fail to qualify as a REIT, we would be subject to federal income tax on our taxable income at corporate rates, plus any applicable alternative minimum tax. In addition, unless entitled to relief under applicable statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification is lost. This treatment would reduce our net earnings available for investment or distribution to shareholders because of the additional tax liability for the year or years involved. In addition, distributions would no longer qualify for the dividends paid deduction nor be required to be made in order to preserve REIT status. We might be required to borrow funds or to liquidate some of our investments to pay any applicable tax resulting from our failure to qualify as a REIT.

 

Failure to make required distributions would subject us to income taxation

 

In order to qualify as a REIT, each year we must distribute to stockholders at least 90% of our taxable income (determined without regard to the dividend paid deduction and by excluding net capital gains). To the extent that we satisfy the distribution requirement, but distribute less than 100% of taxable income, we will be subject to federal corporate income tax on the undistributed income. In addition, we would incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum of:

 

·85% of ordinary income for that year;
·95% of capital gain net income for that year; and
·100% of undistributed taxable income from prior years.

 

Differences in timing between the recognition of income and the related cash receipts or the effect of required debt amortization payments could require us to borrow money or sell assets to pay out enough of the taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4% nondeductible excise tax in a particular year.

 

26
 

 

Complying with REIT requirements may cause us to forgo otherwise attractive opportunities or engage in marginal investment opportunities

 

To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of income, the nature and diversification of assets, the amounts distributed to shareholders and the ownership of our stock. In order to meet these tests, we may be required to forgo attractive business or investment opportunities or engage in marginal investment opportunities. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS.

 

None.

 

ITEM 2. PROPERTIES.

 

We seek to acquire newer apartment communities and those with opportunities for repositioning through capital additions and management improvement located in the Sunbelt region of the United States that are primarily appealing to middle income residents with the potential for above average growth and return on investment. Approximately 75% of our apartment units are located in Georgia, Florida, Tennessee, and Texas markets. Our strategic focus is to provide our residents high quality apartment units in attractive community settings, characterized by extensive landscaping and attention to aesthetic detail. We utilize our experience and expertise in maintenance, landscaping, marketing and management to effectively reposition many of the apartment communities we acquire to raise occupancy levels and per unit average rents.

27
 

 

 

The following table sets forth certain historical information for the apartment communities we owned at December 31, 2011:

 

 

                                     
                        Approximate   Average   Monthly
Average
Rent
  Average
Occupancy
  Monthly
Effective Rent
  Encumbrances at
December 31, 2011
   
                      Rentable   Unit   per Unit at   Percent at   per Unit at   Mortgage                    
        Year   Year
Management
  Reportable    Number    Area
(Square
  Size
(Square
  December
31,
  December
31,
  December
31,
  /Bond
Principal
      Interest       Maturity    
 Property   Location   Completed   Commenced   Segment    of Units    Footage)   Footage)   2011 (19)   2011 (20)   2011 (21)   (000's)       Rate       Date    
                                                                 
 100% Owned                                                                
Birchall at Ross Bridge   Birmingham, AL   2009   2011   (24)     240     283,680   1,182   $  1,190.47   95.83%   $  1,177.83   $  -                     
Eagle Ridge   Birmingham, AL   1986   1998   (23)     200     181,600   908   $  714.83   97.50%   $  709.86   $  -    (1)       (1)       (1)
Abbington Place   Huntsville, AL   1987   1998   (23)     152     162,792   1,071   $  626.92   89.47%   $  611.46   $  -    (1)       (1)       (1)
Paddock Club Huntsville   Huntsville, AL   1989/98   1997   (23)     392     441,000   1,125   $  737.37   94.13%   $  704.86   $  -    (1)       (1)       (1)
Paddock Club Montgomery   Montgomery, AL   1999   1998   (23)     208     246,272     1,184   $  768.17   98.56%   $  767.45   $  -    (1)       (1)       (1)
                      1,192     1,315,344     1,103   $  816.11   95.22%   $  799.94                        
Calais Forest   Little Rock, AR   1987   1994   (23)     260     195,000     750   $  721.15   97.31%   $  720.38   $  -    (1)       (1)       (1)
Napa Valley   Little Rock, AR   1984   1996   (23)     240     183,120     763   $  683.61   95.42%   $  667.36   $  -    (1)       (1)       (1)
Palisades at Chenal Valley, 232   Little Rock, AR   2006   2011   (24)     248     292,888     1,181   $  1,063.30   95.97%   $  1,063.30   $  -                     
Westside Creek I & II   Little Rock, AR   1984/86   1997   (23)     308     304,612     989   $  754.65   96.43%   $  754.04   $  -    (1)       (1)       (1)
                      1,056     975,620     924   $  802.74   96.31%   $  798.68                        
Talus Ranch   Phoenix, AZ   2005   2006   (22)     480     437,280     911   $  713.67   87.29%   $  701.94   $  -                     
The Edge at Lyon's Gate   Phoenix, AZ   2007   2008   (22)     312     299,208     959   $  821.68   97.76%   $  807.96   $  -                     
Sky View Ranch   Gilbert, AZ   2007   2009   (22)     232     225,272     971   $  818.10   97.41%   $  812.55   $  -                     
                      1,024     961,760     939   $  770.24   92.77%   $  759.30                        
Tiffany Oaks   Altamonte Springs, FL   1985   1996   (22)     288     232,704     808   $  736.90   97.57%   $  735.60   $  -    (1)       (1)       (1)
Marsh Oaks    Atlantic Beach, FL   1986   1995   (22)     120     93,240     777   $  664.31   100.00%   $  660.89   $  -    (1)       (1)       (1)
Indigo Point    Brandon, FL   1989   2000   (23)     240     194,640     811   $  794.71   92.08%   $  784.21   $  -    (1)       (1)       (1)
Paddock Club Brandon    Brandon, FL   1997/99   1997   (22)     440     528,440     1,201   $  917.18   96.59%   $  909.64   $  -                     
Preserve at Coral Square   Coral Springs, FL   1996   2004   (23)     480     570,720     1,189   $  1,332.05   94.38%   $  1,328.24   $  -    (4)       (4)       (4)
Anatole   Daytona Beach, FL   1986   1995   (23)     208     150,384     723   $  680.61   98.08%   $  680.61   $  7,000   (7)   1.026%   (7)   10/15/2032   (7)
Paddock Club Gainesville   Gainesville, FL   1999   1998   (23)     264     326,304     1,236   $  839.58   95.83%   $  830.26   $  -    (2)       (2)       (2)
The Retreat at Magnolia Parke, 204   Gainesville, FL   2009   2011   (24)     204     206,040     1,010   $  958.09   96.57%   $  950.99   $  -                     
Atlantic Crossing   Jacksonville, FL   2008   2011   (24)     200     248,200     1,241   $  1,102.23   94.50%   $  1,097.96   $  -                     
Cooper's Hawk    Jacksonville, FL   1987   1995   (22)     208     218,400     1,050   $  790.50   97.12%   $  786.94   $  -    (2)       (2)       (2)
Hunter's Ridge at Deerwood    Jacksonville, FL   1987   1997   (22)     336     295,008     878   $  769.21   96.73%   $  764.99   $  -                     
Lakeside   Jacksonville, FL   1985   1996   (22)     416     346,112     832   $  716.32   95.67%   $  715.08   $  -    (1)       (1)       (1)
Lighthouse at Fleming Island   Jacksonville, FL   2003   2003   (22)     501     556,110     1,110   $  876.77   97.41%   $  871.54   $  -    (1)       (1)       (1)
Paddock Club Jacksonville   Jacksonville, FL   1989/96   1997   (22)     440     478,720     1,088   $  808.88   92.27%   $  804.36   $  -    (1)       (1)       (1)
Paddock Club Mandarin    Jacksonville, FL   1998   1998   (22)     288     334,656     1,162   $  882.18   95.14%   $  876.64   $  -    (2)       (2)       (2)
St. Augustine I    Jacksonville, FL   1987   1995   (22)     400     319,600     799   $  682.41   95.00%   $  680.65   $  13,235   (17)
(18) 
      (17)
(18) 
      (17)
(18) 
St. Augustine II   Jacksonville, FL   2008   1995   (22)     124     118,544     956   $  908.77   97.58%   $  905.83   $  -    (1)       (1)       (1)
Tattersall at Tapestry Park, 279   Jacksonville, FL   2009   2011   (24)     279     307,458     1,102   $  1,215.64   97.13%   $  1,213.16   $  -                     
Woodbridge at the Lake   Jacksonville, FL   1985   1994   (22)     188     166,004     883   $  702.99   95.74%   $  691.96   $  -    (2)       (2)       (2)
Woodhollow    Jacksonville, FL   1986   1997   (22)     450     379,350     843   $  696.17   97.33%   $  692.33   $  -    (1)       (1)       (1)
Paddock Club Lakeland   Lakeland, FL   1988/90   1997   (23)     464     502,048     1,082   $  724.91   95.26%   $  719.16   $  -    (1)       (1)       (1)
Savannahs at James Landing    Melbourne, FL   1990   1995   (23)     256     243,200     950   $  723.31   94.92%   $  718.29   $  -    (2)       (2)       (2)
Paddock Park Ocala   Ocala, FL   1986/88   1997   (23)     480     493,440     1,028   $  662.67   92.29%   $  646.51   $  6,805   (2)
(3) 
      (2)
(3) 
      (2)
(3) 
The Club at Panama Beach   Panama City, FL   2000   1998   (23)     254     283,718     1,117   $  891.06   98.43%   $  879.04   $  -    (2)       (2)       (2)
Paddock Club Tallahassee   Tallahassee, FL   1990/95   1997   (23)     304     329,536     1,084   $  818.55   95.07%   $  810.17   $  -    (2)       (2)       (2)
Belmere    Tampa, FL   1984   1994   (22)     210     202,440     964   $  812.94   97.62%   $  810.08   $  -    (1)       (1)       (1)
Links at Carrollwood    Tampa, FL   1980   1998   (22)     230     213,210     927   $  857.55   96.52%   $  848.14   $  -    (1)       (1)       (1)
Village Oaks   Tampa, FL   2005   2008   (24)     234     279,630     1,195   $  1,053.31   97.01%   $  1,048.46   $  -                     
Park Crest at Innisbrook   Palm Harbor, FL   2000   2009   (22)     432     461,808     1,069   $  939.88   97.22%   $  934.71   $  30,627       4.430%       10/1/2020    
                      8,938     9,079,664     1,016   $  848.10   95.85%   $  842.38                        
High Ridge   Athens, GA   1987   1997   (23)     160     186,560     1,166   $  719.42   99.38%   $  715.89   $  -    (1)       (1)       (1)
Sanctuary at Oglethorpe   Atlanta, GA   1994   2008   (22)     250     287,500     1,150   $  1,277.21   98.40%   $  1,257.74   $  23,500       6.210%       11/5/2015    
Bradford Pointe   Augusta, GA   1986   1997   (23)     192     156,288     814   $  697.99   94.27%   $  692.14   $  -                     
Shenandoah Ridge    Augusta, GA   1982   1994   (23)     272     222,768     819   $  617.67   92.65%   $  599.32   $  -    (1)       (1)       (1)
Westbury Creek    Augusta, GA   1984   1997   (23)     120     107,160     893   $  651.56   95.00%   $  651.56   $  3,480   (12)       (12)   5/15/2033   (12)
Fountain Lake    Brunswick, GA   1983   1997   (23)     113     129,159     1,143   $  751.58   92.92%   $  749.81                        
Park Walk    College Park, GA   1985   1997   (22)     124     112,716     909   $  573.64   95.16%   $  573.64   $  -    (1)       (1)       (1)
Whisperwood    Columbus, GA   80/82/84/86/98   1997   (23)     1,008     1,188,432     1,179   $  835.21   91.87%   $  810.54   $  -    (1)       (1)       (1)
Willow Creek    Columbus, GA   1971/77   1997   (23)     285     246,810     866   $  587.31   97.54%   $  578.86   $  -    (1)       (1)       (1)
Terraces at Fieldstone   Conyers, GA   1999   1998   (22)     316     375,092     1,187   $  811.02   96.20%   $  807.83   $  -    (1)       (1)       (1)
Prescott    Duluth, GA   2001   2004   (22)     384     411,648     1,072   $  797.03   97.66%   $  794.95   $  -    (5)       (5)       (5)
Lanier   Gainesville, GA   1998   2005   (22)     344     396,288     1,152   $  790.60   90.12%   $  786.60   $  17,029       5.300%       3/1/2014    
Lake Club   Gainesville, GA   2001   2005   (22)     313     359,950     1,150   $  739.86   89.78%   $  738.30   $  -    (5)       (5)       (5)
Whispering Pines   LaGrange, GA   1982/84   1997   (23)     216     222,480     1,030   $  638.17   98.61%   $  636.57   $  -                     
Westbury Springs    Lilburn, GA   1983   1997   (23)     150     163,350     1,089   $  633.84   98.00%   $  627.70   $  -    (1)       (1)       (1)
Austin Chase    Macon, GA   1996   1997   (23)     256     293,120     1,145   $  754.91   91.41%   $  744.42   $  -                     
The Vistas    Macon, GA   1985   1997   (23)     144     153,792     1,068   $  681.03   90.97%   $  666.02   $  -    (1)       (1)       (1)
Walden Run    McDonough, GA   1997   1998   (22)     240     280,560     1,169   $  675.69   97.92%   $  673.72   $  -    (1)       (1)       (1)
Avala at Savannah Quarters   Savannah, GA   2009   2011   (24)     256     244,992     957   $  924.63   90.63%   $  910.26   $  -                     
Georgetown Grove   Savannah, GA   1997   1998   (23)     220     239,800     1,090   $  863.15   95.45%   $  860.12   $  -    (4)       (4)       (4)
Oaks at Wilmington Island   Savannah, GA   1999   2006   (23)     306     333,846     1,091   $  883.84   97.06%   $  872.49   $  -    (4)       (4)       (4)
Wildwood   Thomasville, GA   1980/84   1997   (23)     216     225,072     1,042   $  642.55   99.54%   $  642.33   $  -    (1)       (1)       (1)
Hidden Lake   Union City, GA   1985/87   1997   (22)     320     325,120     1,016   $  636.60   96.88%   $  635.86   $  -    (1)       (1)       (1)
Three Oaks   Valdosta, GA   1983/84   1997   (23)     240     253,200     1,055   $  685.06   97.08%   $  684.57   $  -    (1)       (1)       (1)
Huntington Chase    Warner Robins, GA   1997   2000   (23)     200     221,400     1,107   $  756.15   98.50%   $  738.98   $  -    (4)       (4)       (4)
Southland Station    Warner Robins, GA   1987/90   1997   (23)     304     355,984     1,171   $  729.10   93.75%   $  703.20   $  -    (1)       (1)       (1)
Terraces at Townelake    Woodstock, GA   1999   1998   (22)     502     568,264     1,132   $  740.43   92.83%   $  722.69   $  -    (1)       (1)       (1)
                      7,451     8,061,351     1,082   $  762.42   94.67%   $  751.99                        
Fairways at Hartland    Bowling Green, KY   1996   1997   (23)     240     251,040     1,046   $  772.39   95.42%   $  771.56   $  -    (1)       (1)       (1)
Paddock Club Florence    Florence, KY   1994   1997   (23)     200     231,600     1,158   $  773.12   95.00%   $  744.76   $  9,114       5.875%       1/1/2044    
Grand Reserve Lexington   Lexington, KY   2000   1999   (23)     370     432,900     1,170   $  882.17   95.41%   $  874.72   $  -    (1)       (1)       (1)
Lakepointe   Lexington, KY   1986   1994   (23)     118     90,742     769   $  629.12   98.31%   $  628.28   $  -    (1)       (1)       (1)
Mansion, The   Lexington, KY   1989   1994   (23)     184     138,736     754   $  662.78   96.74%   $  637.36   $  -    (1)       (1)       (1)
Village, The   Lexington, KY   1989   1994   (23)     252     182,700     725   $  643.93   95.63%   $  643.33   $  -    (1)       (1)       (1)
Stonemill Village    Louisville, KY   1985   1994   (23)     384     324,864     846   $  686.18   96.09%   $  667.15   $  -    (1)       (1)       (1)
                      1,748     1,652,582     945   $  737.04   95.88%   $  725.11                        
Crosswinds   Jackson, MS   1988/90   1996   (23)     360     443,160     1,231   $  781.60   94.17%   $  777.75   $  -    (1)       (1)       (1)
Pear Orchard    Jackson, MS   1985   1994   (23)     389     337,263     867   $  766.93   95.12%   $  751.11   $  -    (1)       (1)       (1)
Reflection Pointe   Jackson, MS   1986   1988   (23)     296     248,344     839   $  779.90   95.61%   $  778.42   $  5,880   (8)   0.886%   (8)   5/15/2031   (8)
Lakeshore Landing    Ridgeland, MS   1974   1994   (23)     196     174,244     889   $  710.47   96.43%   $  705.17   $  -    (1)       (1)       (1)
Savannah Creek    Southaven, MS   1989   1996   (23)     204     237,252     1,163   $  773.38   96.08%   $  773.38   $  -    (1)       (1)       (1)
Sutton Place   Southaven, MS   1991   1996   (23)     253     268,180     1,060   $  746.05   94.47%   $  744.40   $  -    (1)       (1)       (1)
                      1,698     1,708,443     1,006   $  763.45   95.17%   $  757.89                        
Hermitage at Beechtree   Cary, NC   1988   1997   (22)     194     169,750     875   $  736.68   92.27%   $  730.85   $  -    (1)       (1)       (1)
Waterford Forest   Cary, NC   1996   2005   (22)     384     377,472     983   $  703.91   94.79%   $  701.53   $  -    (5)       (5)       (5)
1225 South Church   Charlotte, NC   2009   2010   (24)     196     162,680     830   $  1,992.31   96.43%   $  1,099.97   $  -                     
Hue   Raleigh, NC   2009   2010   (24)     208     185,744     893   $  1,290.07   95.19%   $  1,228.32   $  -                     
The Preserve at Brier Creek   Raleigh, NC   2002/07   2006   (22)     450     519,300     1,154   $  933.98   95.56%   $  933.87   $  -    (1)       (1)       (1)
Providence at Brier Creek   Raleigh, NC   2007   2008   (22)     313     297,037     949   $  859.95   95.85%   $  857.07   $  -                     
Corners, The   Winston-Salem, NC   1982   1993   (23)     240     173,520     723   $  576.36   95.83%   $  576.22   $  -    (2)       (2)       (2)
                      1,985     1,885,503     950   $  957.09   95.21%   $  860.99                        
Fairways at Royal Oak   Cincinnati, OH   1988   1994   (23)     214     214,428     1,002   $  676.68   91.59%   $  653.55   $  -    (1)       (1)       (1)
                      214     214,428     1,002   $  676.68   91.59%   $  653.55                        
Colony at South Park   Aiken, SC   1989/91   1997   (23)     184     174,800     950   $  756.19   96.74%   $  733.79   $  -    (1)       (1)       (1)
Woodwinds    Aiken, SC   1988   1997   (23)     144     165,168     1,147   $  756.47   97.22%   $  739.46   $  -    (1)       (1)       (1)
Tanglewood   Anderson, SC   1980   1994   (23)     168     146,664     873   $  615.41   98.81%   $  614.33   $  -    (1)       (1)       (1)
Fairways, The   Columbia, SC   1992   1994   (23)     240     213,840     891   $  651.63   95.00%   $  646.70   $  7,735   (9)   0.922%   (9)   5/15/2031   (9)
Paddock Club Columbia    Columbia, SC   1989/95   1997   (23)     336     378,672     1,127   $  758.57   95.24%   $  736.17   $  -    (1)       (1)       (1)
Highland Ridge   Greenville, SC   1984   1995   (23)     168     134,904     803   $  552.53   94.64%   $  559.06   $  -    (1)       (1)       (1)
Howell Commons   Greenville, SC   1986/88   1997   (23)     348     275,616     792   $  602.97   92.53%   $  585.30   $  -    (1)       (1)       (1)
Paddock Club Greenville   Greenville, SC   1996   1997   (23)     208     231,504     1,113   $  723.19   96.63%   $  717.56   $  -    (1)       (1)       (1)
Park Haywood    Greenville, SC   1983   1993   (23)     208     158,704     763   $  578.85   96.63%   $  576.83   $  -    (1)       (1)       (1)
Spring Creek   Greenville, SC   1985   1995   (23)     208     179,504     863   $  616.66   99.52%   $  613.51   $  -    (1)       (1)       (1)
Runaway Bay   Mt. Pleasant, SC   1988   1995   (23)     208     177,840     855   $  1,045.28   96.63%   $  1,038.24   $  8,365   (6)   0.886%   (6)   11/15/2035   (6)
535 Brookwood   Simpsonville, SC   2008   2010   (23)     256     254,464     994   $  820.66   94.14%   $  809.11   $  13,890       4.430%       10/1/2020    
Park Place   Spartanburg, SC   1987   1997   (23)     184     195,224     1,061   $  669.25   90.22%   $  649.61   $  -    (1)       (1)       (1)
Farmington Village   Summerville, SC   2007   2007   (23)     280     309,120     1,104   $  908.50   93.57%   $  904.29   $  15,200       3.520%       12/10/2015    
                      3,140     2,996,024     954   $  722.77   95.29%   $  712.59                        
Hamilton Pointe   Chattanooga, TN   1989   1992   (23)     361     256,310     710   $  629.96   95.57%   $  628.97   $  -    (1)       (1)       (1)
Hidden Creek   Chattanooga, TN   1987   1988   (23)     300     260,400     868   $  631.34   93.00%   $  628.42   $  -    (1)       (1)       (1)
Steeplechase   Chattanooga, TN   1986   1991   (23)     108     98,712     914   $  733.44   93.52%   $  729.74   $  -    (1)       (1)       (1)
Windridge   Chattanooga, TN   1984   1997   (23)     174     238,728     1,372   $  932.03   93.68%   $  930.94   $  5,465   (13)       (13)   5/15/2033   (13)
Bradford Chase   Jackson, TN   1987   1994   (23)     148     121,360     820   $  633.03   91.22%   $  629.78   $  -    (1)       (1)       (1)
Oaks, The   Jackson, TN   1978   1993   (23)     100     87,500     875   $  592.86   95.00%   $  589.57   $  -    (1)       (1)       (1)
Post House Jackson   Jackson, TN   1987   1989   (23)     150     161,700     1,078   $  669.39   98.00%   $  669.39   $  5,095       0.886%       10/15/2032    
Post House North    Jackson, TN   1987   1989   (23)     145     141,375     975   $  671.43   93.10%   $  652.30   $  3,375   (10)   0.886%   (10)   5/15/2031   (10)
Woods at Post House    Jackson, TN   1997   1995   (23)     122     118,706     973   $  696.20   95.90%   $  696.02   $  4,565       6.070%       9/1/2035    
Cedar Mill   Memphis, TN   1973/86   1982/94   (23)     276     297,804     1,079   $  602.49   94.57%   $  578.27   $  -                     
Greenbrook   Memphis, TN   1974/78/83/86   1988   (23)     1,037     944,707     911   $  632.34   96.24%   $  630.28   $  28,910       4.110%       9/1/2017    
Kirby Station   Memphis, TN   1978   1994   (23)     371     309,043     833   $  745.98   95.42%   $  736.36   $  -    (1)       (1)       (1)
Lincoln on the Green   Memphis, TN   1988/98   1994   (23)     618     540,132     874   $  754.03   95.63%   $  746.85   $  -    (1)       (1)       (1)
Park Estate   Memphis, TN   1974   1977   (23)     82     106,764     1,302   $  1,071.54   89.02%   $  1,066.32   $  -                     
Reserve at Dexter Lake   Memphis, TN   1999/01   1998   (23)     740     807,340     1,091   $  879.93   92.84%   $  862.26   $  -                     
Paddock Club Murfreesboro   Murfreesboro, TN   1999   1998   (22)     240     281,760     1,174   $  885.68   92.08%   $  876.93   $  -    (1)       (1)       (1)
Aventura at Indian Lake Village   Nashville, TN   2010   2011   (24)     300     291,000     970   $  951.13   94.67%   $  934.55   $  -                     
Avondale at Kennesaw   Nashville, TN   2008   2010   (22)     288     283,392     984   $  855.71   96.88%   $  852.23   $  19,142       4.430%       10/1/2020    
Brentwood Downs    Nashville, TN   1986   1994   (22)     286     220,220     770   $  820.32   98.25%   $  819.79   $  -    (1)       (1)       (1)
Grand View Nashville   Nashville, TN   2001   1999   (22)     433     523,497     1,209   $  933.44   93.07%   $  926.06   $  -    (1)       (1)       (1)
Monthaven Park   Nashville, TN   1999/01   2004   (22)     456     427,728     938   $  802.68   97.15%   $  799.48   $  -    (4)       (4)       (4)
Park at Hermitage   Nashville, TN   1987   1995   (22)     440     392,480     892   $  638.41   96.14%   $  634.19   $  6,645   (14)
(18) 
  0.886%   (14)
(18) 
  2/15/2034   (14)
(18) 
Verandas at Sam Ridley   Nashville, TN   2009   2010   (22)     336     391,104     1,164   $  880.81   93.75%   $  877.37   $  23,559       4.430%       10/1/2020    
                      7,511     7,301,762     972   $  762.04   94.93%   $  755.16                        
Northwood   Arlington, TX   1980   1998   (22)     270     224,100     830   $  629.37   91.48%   $  622.07   $  -    (2)       (2)       (2)
Balcones Woods    Austin, TX   1983   1997   (22)     384     313,728     817   $  782.79   96.09%   $  780.47   $  -    (2)       (2)       (2)
Grand Reserve at Sunset Valley   Austin, TX   1996   2004   (22)     210     194,460     926   $  991.34   95.71%   $  987.65   $  -    (4)       (4)       (4)
Silverado   Austin, TX   2003   2006   (22)     312     298,584     957   $  891.20   94.55%   $  865.79   $  -    (4)       (4)       (4)
Stassney Woods    Austin, TX   1985   1995   (22)     288     248,832     864   $  717.04   98.96%   $  707.36   $  4,050   (15)
(18) 
  0.886%   (15)
(18) 
  2/15/2034   (15)
(18) 
Travis Station   Austin, TX   1987   1995   (22)     304     244,720     805   $  622.73   96.71%   $  612.96   $  3,585   (16)
(18) 
  0.886%   (16)
(18) 
  2/15/2034   (16)
(18) 
Woods, The   Austin, TX   1977   1997   (22)     278     214,060     770   $  1,013.36   95.68%   $  977.20   $  -    (2)       (2)       (2)
Celery Stalk   Dallas, TX   1978   1994   (22)     410     374,330     913   $  668.62   95.85%   $  661.39   $  -    (5)       (5)       (5)
Courtyards at Campbell,   Dallas, TX   1986   1998   (22)     232     168,664     727   $  704.81   94.40%   $  704.81   $  -    (2)       (2)       (2)
Deer Run   Dallas, TX   1985   1998   (22)     304     206,720     680   $  609.42   94.74%   $  603.73   $  -    (2)       (2)       (2)
Grand Courtyard   Dallas, TX   2000   2006   (22)     390     343,980     882   $  850.25   95.38%   $  848.31   $  -    (4)       (4)       (4)
Legends at Lowe's Farm   Dallas, TX   2008   2011   (22)     456     425,904     934   $  1,012.54   93.86%   $  1,002.04   $  -                     
Watermark    Dallas, TX   2002   2004   (22)     240     205,200     855   $  813.87   96.25%   $  791.82   $  -    (5)       (5)       (5)
La Valencia at Starwood   Frisco, TX   2009   2010   (22)     270     267,840     992   $  1,100.58   94.81%   $  1,092.80   $  22,350       4.590%       3/10/2018    
Legacy Pines   Houston, TX   1999   2003   (22)     308     283,360     920   $  867.15   96.75%   $  865.42   $  -    (2)       (2)       (2)
Park Place (Houston)   Houston, TX   1996   2007   (22)     229     207,016     904   $  903.65   96.07%   $  901.43   $  -    (1)       (1)       (1)
Ranchstone   Houston, TX   1996   2007   (22)     220     193,160     878   $  846.59   96.36%   $  843.48   $  -    (4)       (4)       (4)
Reserve at Woodwind Lakes   Houston, TX   1999   2006   (22)     328     316,192     964   $  830.95   93.60%   $  822.73   $  12,823       5.930%       6/15/2015    
Cascade at Fall Creek   Humble, TX   2007   2008   (22)     246     227,796     926   $  902.39   92.28%   $  872.03   $  -                     
Chalet at Fall Creek   Humble, TX   2006   2007   (22)     268     260,228     971   $  888.24   94.03%   $  843.32   $  -    (4)       (4)       (4)
Bella Casita at Las Colinas   Irving, TX   2007   2010   (22)     268     258,352     964   $  997.45   96.27%   $  971.27   $  -    (5)       (5)       (5)
Kenwood Club   Katy, TX   2000   1999   (22)     320     341,440     1,067   $  799.58   93.44%   $  786.31   $  -                     
Lane at Towne Crossing   Mesquite, TX   1983   1994   (22)     384     277,632     723   $  608.91   95.31%   $  593.62   $  -                     
Times Square at Craig Ranch   McKinney, TX   2009   2010   (24)     313     320,512     1,024   $  1,056.98   95.85%   $  1,050.06   $  -                     
Highwood    Plano, TX   1983   1998   (22)     196     156,212     797   $  786.89   94.39%   $  783.36   $  -    (1)       (1)       (1)
Los Rios Park   Plano, TX   2000   2003   (22)     498     470,112     944   $  854.70   95.58%   $  851.20   $  -                     
Boulder Ridge   Roanoke, TX   1999/2008   2005   (22)     494     442,624     896   $  852.16   95.55%   $  839.40   $  -                     
Copper Ridge   Roanoke, TX   2007   2008   (22)     245     229,810     938   $  973.68   93.88%   $  958.46   $  -                     
Alamo Ranch   San Antonio, TX   2009   2011   (24)     340     270,640     796   $  890.59   95.00%   $  863.67   $  -                     
Stone Ranch at Westover Hills   San Antonio, TX   2008   2009   (23)     400     334,400     836   $  897.58   94.50%   $  889.74   $  19,500       5.490%       3/1/2020    
Cypresswood Court   Spring, TX   1984   1994   (22)     208     160,576     772   $  667.80   95.19%   $  659.42   $  -    (5)       (5)       (5)
Villages at Kirkwood    Stafford, TX   1996   2004   (22)     274     244,682     893   $  873.14   89.05%   $  859.33   $  -    (4)       (4)       (4)
Green Tree Place   Woodlands, TX   1984   1994   (22)     200     152,200     761   $  727.01   96.50%   $  725.76   $  -    (5)       (5)       (5)
                      10,087     8,878,066     880   $  837.56   94.99%   $  825.79                        
Seasons at Celebrate Virginia   Fredericksburg, VA   2011   2011   (24)     232     233,160     1,005   $  949.91   96.12%   $  949.91   $  -                     
Township   Hampton, VA   1987   1995   (23)     296     248,048     838   $  931.12   94.26%   $  910.12   $  10,800   (11)   1.026%   (11)   10/15/2032   (11)
Hamptons at Hunton Park   Richmond, VA   2003   2011   (24)     300     309,600     1,032   $  1,184.18   91.00%   $  1,173.64   $  -                     
                      828     790,808     955   $  1,028.07   93.60%   $  1,016.75                        
                                                                 
Subtotal 100% Owned             46,872     45,821,355     978   $  806.29   95.11%   $  793.46     331,724                    
                                                                 
Joint Venture Properties                                                             
Milstead Village   Kennesaw, GA   1998   2008   (24)     310     356,190     1,149   $  885.46   98.39%   $  875.08   $  21,414                    
Greenwood Forest   Houston, TX   1994   2008   (24)     316     310,944     984   $  842.44   95.89%   $  838.74   $  18,251                    
Ansley Village   Macon, GA   2007   2009   (24)     294     324,282     1,103   $  784.18   94.90%   $  769.50   $  12,334                    
Legacy at Western Oaks   Austin, TX   2001   2009   (24)     479     467,504     976   $  1,039.99   95.41%   $  1,015.37   $  30,290                    
Grand Cypress   Cypress, TX   2008   2010   (24)     312     280,488     899   $  973.51   96.79%   $  960.89   $  14,184                    
Venue at Stonebridge Ranch   McKinney, TX   2000   2010   (24)     250     214,000     856   $  821.35   96.40%   $  815.75   $  12,500                    
Verandas at Southwood   Tallahassee, FL   2003   2011   (24)     300     341,700     1,139   $  910.48   91.67%   $  896.89   $  22,039                    
                                                                 
Subtotal Joint Venture Properties             2,261     2,295,108     1,015   $  907.40   95.62%   $  894.17   $  131,012                    
                                                                 
Total 100% Owned and Joint Venture Properties             49,133     48,116,463     979   $  810.95   95.13%   $  798.10   $  462,736                    
                                                                     

 

(1) Encumbered by a $691.8 million FNMA facility, with $691.8 million available and $691.8 million outstanding with a variable interest rate of 0.98% on which there exists in combination with the FNMA facility mentioned in note (2) thirteen interest rate swap agreements totaling $425 million at an average rate of 5.35% and six interest rate caps totalling $165 million at an average rate of 4.58% at December 31, 2011.
(2) Encumbered by a $163.2 million FNMA facility, with $163.2 million available and $147.1 million outstanding with a variable interest rate of 0.70% on which there exists interest rate swaps and caps as mentioned in note (1) at December 31, 2011.
(3) Phase I of Paddock Park - Ocala is encumbered by $6.8 million in bonds on which there exists a $6.8 million interest rate cap of 6.00% which terminates on October 24, 2012.
(4) Encumbered by a $200 million Freddie Mac facility, with $198.2 million available and an outstanding balance of $198.2 million and a variable interest rate of 0.67% on which there exists eight interest rate swap agreements totaling $134 million at an average rate of 5.18% and a $15 million interest rate cap of 5% at December 31, 2011.
(5) Encumbered by a $128 million loan with an outstanding balance of $128 million and a fixed interest rate of 5.08% which matures on June 10, 2021.
(6) Encumbered by $8.4 million in bonds on which there exists a $8.4 million interest rate cap of 4.50% which terminates on March 1, 2014.
(7) Encumbered by $7.0 million in bonds on which there exists a $7.0 million interest rate swap agreement fixed at 4.42% and maturing on October 15, 2012.
(8) Encumbered by $5.9 million in bonds on which there exists a $5.9 million interest rate cap of 6.00% which terminates on October 31, 2012.
(9) Encumbered by $7.7 million in bonds on which there exists a $7.7 million interest rate cap of 6.00% which terminates on October 31, 2012.
(10) Encumbered by $3.4 million in bonds on which there exists a $3.4 million interest rate cap of 6.00% which terminates on October 31, 2012.
(11) Encumbered by $10.8 million in bonds on which there exists a $10.8 million interest rate swap agreement fixed at 4.42% and maturing on October 15, 2012.
(12) Encumbered by $3.5 million in bonds $0.5 million having a variable rate of 1.196% and $3.0 million with a variable rate of 0.886% on which there exists a $3.0 million interest rate cap of 6.00% which terminates on May 31, 2013.
(13) Encumbered by $5.5 million in bonds $0.5 million having a variable rate of 1.196% and $5.0 million with a variable rate of 0.886% on which there exists a $5.0 million interest rate cap of 6.00% which terminates on May 31, 2013.
(14) Encumbered by $6.6 million in bonds on which there exists a $6.6 million interest rate cap of 6.00% which terminates on November 15, 2016. 
(15) Encumbered by $4.1 million in bonds on which there exists a $4.1 million interest rate cap of 6.00% which terminates on November 15, 2016. 
(16) Encumbered by $3.6 million in bonds on which there exists a $3.6 million interest rate cap of 6.00% which terminates on November 15, 2016. 
(17) Phase I of St. Augustine is encumbered by $13.2 million in bonds on which there exists a $13.2 million interest rate cap of 4.50% which terminates on March 1, 2014. 
(18) Also encumbered by a $17.9 million FNMA facility maturing on March 1, 2014 with a variable interest rate of 0.87% on which there exists a $11.7 million interest rate cap of 5.00%  which terminates on March 1, 2014.
(19) Monthly average rent per unit represents the average of gross monthly rent amounts charged for occupied units plus prevalent market rates asked for unoccupied units in the property, divided by the total number of units in the property. This information is provided to represent average pricing for the period and does not represent actual rental revenue collected per unit.
(20) Average Occupancy is calculated by dividing the number of units occupied at each property by the total number of units at each property.
(21) Effective rent per unit is equal to the average of gross rent amounts after the effect of leasing concessions for occupied units plus prevalent market rates asked for unoccupied units in the property, divided by the total number of units in the property. Leasing concessions represent discounts to the current market rate. These discounts may be offered from time-to-time by a property for various reasons, including to assist with the initial lease-up of a newly developed property or as a response to a property’s local market economics. Concessions are not part of our standard rent offering. Concessions for the year ended December 31, 2011 were $3.6 million. As of December 31, 2011 approximately 11.4% of total leases were subject to concessions. Effective rent is provided to represent average pricing for the period and does not represent actual rental revenue collected per unit.
(22) Large market same store reportable segment.
(23) Secondary market same store reportable segment.
(24) Non-same store reportable segment.

 

28
 

ITEM 3. LEGAL PROCEEDINGS.

 

We are not presently subject to any material litigation nor, to our knowledge, are any material litigation threatened against us. We are presently subject to routine litigation arising in the ordinary course of business, some of which is expected to be covered by liability insurance and none of which is expected to have a material adverse effect on our business, financial condition, liquidity or results of operations.

 

ITEM 4. Mine Safety Disclosures.

 

Not applicable.

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Our common stock has been listed and traded on the NYSE under the symbol “MAA” since our initial public offering in February 1994. On February 3, 2012, the reported last sale price of our common stock on the NYSE was $64.44 per share, and there were approximately 1,560 holders of record of the common stock. We believe we have a significantly larger number of beneficial owners of our common stock. The following table sets forth the quarterly high and low sales prices of our common stock and the dividends declared by us with respect to the periods indicated.

 

   Sales Prices   Dividends   Dividends 
   High   Low   Paid   Declared 
2011:                    
First Quarter  $65.00   $60.41   $0.6275   $0.6275 
Second Quarter  $68.62   $62.12   $0.6275   $0.6275 
Third Quarter  $73.36   $57.04   $0.6275   $0.6275 
Fourth Quarter  $63.62   $55.10   $0.6275   $0.66 (1) 
                     
2010:                    
First Quarter  $55.03   $45.14   $0.615   $0.615 
Second Quarter  $57.34   $49.74   $0.615   $0.615 
Third Quarter  $60.88   $49.71   $0.615   $0.615 
Fourth Quarter  $64.48   $57.96   $0.615   $0.6275 

 

(1) Generally, our Board of Directors declares dividends prior to the quarter in which they are paid. The dividend of $0.66 per share declared in the fourth quarter of 2011 was paid on January 31, 2012 to shareholders of record on January 13, 2012.

 

Our quarterly dividend rate is currently $0.66 per common share. Our Board of Directors reviews and declares the dividend rate quarterly. Actual dividends made by us will be affected by a number of factors, including, but not limited to, the gross revenues received from the apartment communities, our operating expenses, the interest expense incurred on borrowings and unanticipated capital expenditures.

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We expect to make future quarterly distributions to shareholders; however, future distributions by us will be at the discretion of our Board of Directors and will depend on our actual funds from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code and such other factors as our Board of Directors deems relevant.

 

We have established the Direct Stock Purchase and Distribution Reinvestment Plan, or DRSPP, under which holders of common stock, preferred stock and limited partnership interests in our operating partnership can elect to automatically reinvest their distributions in additional shares of common stock. The plan also allows for the optional purchase of common stock of at least $250, but not more than $5,000 in any given month, free of brokerage commissions and charges. In our absolute discretion, we may grant waivers to allow for optional cash payments in excess of $5,000. To fulfill our obligations under the DRSPP, we may either issue additional shares of common stock or repurchase common stock in the open market. We may elect to sell shares under the DRSPP at up to a 5% discount.

 

In 2009, we issued a total of 25,406 shares through our DRSPP and did not offer a discount for optional cash purchases. In 2010, we issued a total of 568,323 shares through our DRSPP and offered an average discount of 2.0% for optional cash purchases. In 2011, we issued a total of 509,116 shares through our DRSPP and offered an average discount of 2.0% for optional cash purchases.

 

The following table provides information with respect to compensation plans under which our equity securities are authorized for issuance as of December 31, 2011.

 

           Number of Securities 
   Number of Securities       Remaining Available for 
   to be Issued upon   Weighted Average   Future Issuance under 
   Exercise of Outstanding   Exercise Price of   Equity Compensation Plans 
   Options, Warrants   Outstanding Options   (excluding securities 
   and Rights   Warrants and Rights   reflected in column (a)) 
   (a)(1)   (b)(1)   (c)(2) 
            
Equity compensation               
plans approved               
by security holders   -   $-    365,037 
                
Equity compensation               
plans not approved               
by security holders   N/A    N/A    N/A 
                
Total   -   $-    365,037 

 

(1)Columns (a) and (b) above do not include 16,379 shares of restricted stock that are subject to vesting requirements that were issued through our Fourth Amended and Restated 1994 Restricted Stock and Stock Option Plan, 42,583 shares of restricted stock that are subject to vesting requirements which were issued through our 2004 Stock Plan, or 82,874 shares of common stock that have been purchased by employees through the Employee Stock Purchase Plan. See Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements, Note 2 for more information on these plans.

 

(2)Column (c) above includes 297,911 shares available to be issued under our 2004 Stock Plan and 67,126 shares available to be issued under our Employee Stock Purchase Plan. See Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements, Note 2 for more information on these plans.

 

 

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We have not granted any stock options since 2002.

 

The following graph compares the cumulative total returns of the shareholders of MAA since December 31, 2006 with the S&P 500 Index and the FTSE NAREIT Equity REIT Index prepared by the National Association of Real Estate Investment Trusts, or NAREIT. The graph assumes that the base share price for our common stock and each index is $100 and that all dividends are reinvested. The performance graph is not necessarily indicative of future investment performance.

 

 

   Dec '06   Dec '07   Dec '08   Dec '09   Dec '10   Dec '11 
MAA  $100.00   $77.99   $71.43   $99.51   $137.01   $140.44 
S&P500  $100.00   $105.49   $66.46   $84.05   $96.71   $98.75 
FTSE NAREIT Equity Index  $100.00   $84.31   $52.50   $67.20   $85.98   $93.11 

 

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Purchases of Equity Securities

 

The following chart shows our repurchases of shares for the three month period ended December 31, 2011:

 

MAA Purchases of Equity Securities

 

Period  Total Number
of Shares
Purchased (1)
   Average
Price Paid
per Share
   Total
Number of
Shares Purchased
as Part of Publicly Announced Plans
or Programs
   Maximum
Number of
Shares That
May Yet be
Purchased Under
the Plans or
Programs(2)
 
October 1, 2011 - October 31, 2011   40   $59.54    -    2,138,000 
November 1, 2011 - November 30, 2011   710   $58.68    -    2,138,000 
December 1, 2011 - December 31, 2011   571   $57.73    -    2,138,000 
                     
Total   1,321   $58.29    -    2,138,000 

 

 

(1) Represents shares repurchased under ESOP plan

 

(2) This number reflects the amount of shares that were available for purchase under our 4,000,000 share repurchase program authorized by our Board of Directors in 1999.

 

 

 

ITEM 6. SELECTED FINANCIAL DATA

 

The following table sets forth selected financial data on a historical basis for us. This data should be read in conjunction with the consolidated financial statements and notes thereto and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Current Report on Form 8-K.

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MAA
Selected Financial Data
(Dollars in thousands except per share data)

   Year Ended December 31,  
   2011   2010   2009   2008   2007 
Operating Data:                         
Total operating revenues  $448,992   $398,005   $374,365   $367,999   $345,545 
Expenses:                         
Property operating expenses   191,516    172,378    157,562    154,238    141,376 
Depreciation and amortization   115,605    103,088    95,078    89,640    84,309 
Acquisition expenses   3,319    2,512    950    -    - 
Property management and general and administrative expenses   38,823    30,389    28,540    28,636    28,726 
Income from continuing operations before non-operating items   99,729    89,638    92,235    95,485    91,134 
Interest and other non-property income   574    837    385    509    195 
Interest expense   (58,612)   (55,895)   (56,994)   (62,010)   (63,639)
Loss on debt extinguishment   (755)   -    (140)   (116)   (123)
Amortization of deferred financing costs   (2,902)   (2,627)   (2,374)   (2,307)   (2,407)
Incentive fees from real estate joint ventures   -    -    -    -    1,019 
Asset impairment   -    (1,914)   -    -    - 
Net casualty (loss) gains and other settlement proceeds   (619)   330    32    (247)   589 
Gains  on sale of non-depreciable and non-real estate assets   910    -    15    21    534 
Gains on properties contributed to joint ventures   -    752    -    -    - 
Income from continuing operations before                         
investments in real estate joint ventures   38,325    31,121    33,159    31,335    27,302 
(Loss) gain from real estate joint ventures   (593)   (1,149)   (816)   (844