MAA Reports Fourth Quarter Results

03 Feb, 2016, 16:20 ET from MAA

MEMPHIS, Tenn., Feb. 3, 2016 /PRNewswire/ -- Mid-America Apartment Communities, Inc., or MAA, (NYSE: MAA) today announced operating results for the quarter and full year ended December 31, 2015.

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Highlights

  • Core Funds from Operations, or Core FFO, per diluted common share and unit, or per Share, was $1.45 for the fourth quarter and $5.51 for the full year, both representing record performance for the company.
  • Same store net operating income, or NOI, for the fourth quarter increased 7.3% as compared to the same period in the prior year, based on a 5.4% increase in revenue and a 2.4% increase in property operating expenses.
  • Average revenue per occupied unit for the same store portfolio increased 4.7% for the fourth quarter to $1,125, primarily driven by an increase in average effective rent per unit of 4.4%.
  • Average physical occupancy for the same store portfolio for the fourth quarter increased 0.7% over the same period in the prior year and physical occupancy ended the quarter at 96.5%, a fourth quarter record.
  • Resident turnover for the same store portfolio remained low for the fourth quarter of 2015 at 52.5% on a rolling twelve month basis.
  • During the fourth quarter, the company acquired two properties, Cityscape at Market Center II, a new 318-unit community located in the Dallas, Texas Metropolitan Statistical Area, or MSA, which is a phase II for an adjacent property owned by the company, and The Denton, a new 55-unit community located in the Kansas City, Missouri-Kansas MSA with a 154 unit phase II new development component which the company started during the quarter.
  • MAA has a total of five development communities under construction, containing 748 units, with a total projected cost of approximately $117 million.  An additional $13.6 million of construction costs were funded during the fourth quarter.
  • MAA completed the construction of 220 Riverside located in Jacksonville, Florida during the fourth quarter.  This community, and Cityscape at Market Center II, remained in lease-up as of year-end with average quarter-end physical occupancy of 85.3%.
  • For the full year, the company completed redevelopment of 5,781 units, achieving average rental rate increases of 10.1% above non-renovated units.
  • During the fourth quarter, the company completed the refinancing of an unsecured revolving credit facility, increasing borrowing capacity to $750 million and further improving terms to reflect the company's strong credit profile.
  • Also during the fourth quarter, the company's operating partnership, Mid-America Apartments, L.P. (MAALP), issued $400 million of new ten-year senior unsecured notes at a coupon rate of 4.00% and issuance price of 98.990%.
  • MAA ended the year with record low leverage of debt to market cap of 32.2% and net debt to gross assets of 40.6%, a decline of 190 basis points from prior year-end.  At the end of 2015, unencumbered assets have increased to 72.8% of gross real estate assets.

Eric Bolton, Chairman and Chief Executive Officer, said, "Leasing trends across MAA's high-growth Sunbelt markets remain strong and we are forecasting another year of solid growth in net operating income and core funds from operations.  Our strategic approach to diversifying capital across the region has the company well positioned for continued steady revenue growth and strong full cycle performance."

Funds from Operations For the quarter ended December 31, 2015, FFO was $118.6 million, or $1.49 per Share, compared to $107.4 million, or $1.35 per Share, for the quarter ended December 31, 2014.  Core FFO, which excludes certain non-cash or non-routine items, for the quarter ended December 31, 2015 was $115.5 million, or $1.45 per Share, as compared to $104.7 million, or $1.32 per Share, for the quarter ended December 31, 2014.

For the year ended December 31, 2015, FFO was $452.4 million, or $5.69 per Share, compared to $404.1 million, or $5.09 per Share, for the year ended December 31, 2014.  Core FFO for the year ended December 31, 2015 was $438.6 million, or $5.51 per Share, as compared to $395.7 million, or $4.99 per Share, for the year ended December 31, 2014.

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

Net Income Available for Common Shareholders For the quarter ended December 31, 2015, net income available for common shareholders was $43.0 million, or $0.57 per diluted common share, compared to $34.5 million, or $0.46 per diluted common share, for the quarter ended December 31, 2014. Results for the quarter ended December 31, 2014 included $1.2 million, or $0.02 per diluted common share, of merger and integration expenses.  

For the year ended December 31, 2015, net income available for common shareholders was $332.3 million, or $4.41 per diluted common share, compared to $148.0 million, or $1.97 per diluted common share, for the year ended December 31, 2014.  Results for the year ended December 31, 2015 included $190.1 million, or $2.53 per diluted common share, of gains related to the sale of real estate assets during the period.  Results for the year ended December 31, 2014 included $11.5 million, or $0.15 per diluted common share, of merger and integration expenses and $48.4 million, or $0.65 per diluted common share of gains related to the sale of real estate assets during the period.

Fourth Quarter Same Store Operating Results Operating results for the Same Store Portfolio of 71,376 units for the company's Large Market and Secondary Market portfolios are presented below:

 

Percent Change From

Three months ended

Three months ended December 31, 2014

December 31, 2015

Average

Average

Effective

Physical

Revenue

Expense

NOI

Rent per Unit

Occupancy

Large Markets

6.0

%

2.2

%

8.4

%

5.4

%

96.2

%

Secondary Markets

4.4

%

2.9

%

5.3

%

2.8

%

96.0

%

Same Store

5.4

%

2.4

%

7.3

%

4.4

%

96.1

%

 

Total Same Store revenue growth of 5.4% during the fourth quarter was primarily produced by a 4.7% increase in revenues per occupied unit, mainly produced by a 4.4% increase in average effective rent per unit, combined with a 0.7% increase in average physical occupancy for the quarter, as compared to the same period in the prior year.   Overall physical occupancy for the Same Store Portfolio ended the fourth quarter at 96.5%.  Operating expenses increased 2.4% for the quarter, with the largest portion of the growth related to property taxes.

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

Acquisition and Disposition Activity During the fourth quarter, MAA acquired two new communities: Cityscape at Market Center II (formerly Elan Plano), a new 318-unit community located in the Dallas, Texas MSA, and The Denton, a new 55-unit community located in the Kansas City, Missouri-Kansas MSA which includes 31,000 square feet of ground floor retail space supporting the multifamily asset.  During the fourth quarter, the company also acquired the land for development of The Denton phase II, which will consist of an additional 154 units.  The combined purchase price for all fourth quarter acquisitions was $79.0 million, bringing the full year purchase price for acquisition properties to $327.0 million, including land for three phase II development properties.

For the full year, MAA received combined gross proceeds of $354.3 million by selling 21 properties with an average age of 25 years and recognized total net gains on the sale of real estate assets of $190.0 million.  As a result of these property sales, the company exited eleven markets included in the Secondary Market segment of the portfolio, achieving an economic cap rate of 5.8% and internal rates of return on invested capital of 14.1% on a leveraged basis and 10.3% on an unleveraged basis.

Development and Lease-up Activity MAA has five development communities under construction with a total projected cost of $116.6 million, with an expected stabilized NOI yield of 7.4%. During the fourth quarter, MAA funded an additional $13.6 million of construction costs, with $74.3 million remaining to be funded.  The company had two communities remaining in lease-up during the fourth quarter: 220 Riverside, located in Jacksonville, Florida, which was completed during the fourth quarter and Cityscape at Market Center II, located in Dallas, Texas, which was acquired in lease-up during the fourth quarter.  Physical occupancy for the two communities averaged 85.3% at the end of the quarter. 

Redevelopment Activity The company continues its redevelopment program at select communities throughout the portfolio.  During the fourth quarter, MAA redeveloped a total of 1,572 units at an average cost of $4,370 per unit, bringing total units redeveloped during the year to 5,781 at an average cost of $4,452 per unit, and achieving average rental rate increases of 10.1% above non-renovated units.

Capital Expenditures Recurring capital expenditures totaled $8.6 million for the fourth quarter, or approximately $0.11 per Share, as compared to $11.2 million, or $0.14 per Share, for the same period in 2014.  These expenditures lead to Core Adjusted Funds from Operations, or Core AFFO, of $1.34 per Share, for the fourth quarter, compared to $1.18 per Share for the same period in 2014, which represents a 14% increase. 

Recurring capital expenditures for the portfolio totaled $56.9 million for the year ended December 31, 2015, or approximately $0.71 per Share, as compared to $56.1 million or $0.71 per Share, for the same period in 2014.  These expenditures lead to Core AFFO of $4.80 per Share for the year ended December 31, 2015, compared to $4.28 per Share for the same period in 2014, which represents a 12% increase. 

Total capital expenditures for the portfolio during the fourth quarter were $15.7 million on existing properties, with an additional $8.5 million on redevelopment opportunities.  Total capital expenditures for the portfolio during the year ended December 31, 2015 were $88.5 million on existing properties, with an additional $31.0 million on redevelopment opportunities.

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

Financing Activity During the fourth quarter, the company closed on a new unsecured revolving credit facility, replacing the current credit facility, which increased borrowing capacity to $750.0 million and included an option to expand to $1.5 billion at the company's request.  The new facility extends the maturity date of  the credit facility to April 2020 with one 6-month extension option, and bears interest at LIBOR plus a spread based on an investment ratings grid, currently at 1.00%.

Also during the fourth quarter, the company, through its operating partnership, completed a public bond offering to refinance 2015 debt maturities. MAALP issued $400 million of 4.00% senior unsecured notes due in 2025, at an issue price of 98.990%. In connection with the bond transaction, the company cash settled $200 million in forward interest rate swap agreements, entered earlier in the year to effectively lock the interest rate on the planned transaction, which produced an effective interest rate of 4.17% over the ten year life of the bonds.

During the fourth quarter, the company also amended the terms of one of its three existing term loans, extending the maturity from 2017 to 2021 and reducing the interest rate to LIBOR plus a spread of 1.10%, 25 bps lower than the prior agreement. The spread is based on an investment grade ratings grid.  The principal amount remained unchanged at $150 million.

Balance Sheet As of December 31, 2015,

  • Total debt to total capitalization was 32.2% (based on the December 31, 2015 closing stock price), compared to 37.2% as of December 31, 2014,
  • Total net debt to total gross assets (based on gross book value at December 31, 2015) was 40.6%, compared to 42.5% as of December 31, 2014,
  • Total debt outstanding was $3.4 billion at an average effective interest rate of 3.7%,
  • 95.9% of the total debt was fixed or hedged against rising interest rates for an average of 5.0 years,
  • Fixed charge coverage ratio (Recurring EBITDA divided by interest expense adjusted for mark-to-market debt adjustment) was 4.47x and total net debt to Recurring EBITDA was 5.79x,
  • Approximately $709.3 million combined cash and capacity under the company's unsecured credit facility was available, and
  • Unencumbered assets increased to 72.8% of gross real estate assets as compared to 66.9% in the prior year.

A reconciliation of EBITDA and Recurring EBITDA to consolidated net income and an expanded discussion of the components of EBITDA and Recurring EBITDA can be found later in this release.

88th Consecutive Quarterly Common Dividend Declared The company declared its 88th consecutive quarterly common dividend at an annual rate of $3.28 per Share, which was paid on January 29, 2016 to holders of record on January 15, 2016.

2016 Core FFO and Core AFFO per Share Guidance The company is providing initial Core FFO and Core AFFO guidance for 2016 based on management's current and expected views of company activity, the apartment market, and overall economic conditions.  Guidance is based on several key assumptions, which are summarized below and further detailed in the attached supplement.  The company plans to update Core FFO and Core AFFO per Share guidance on a quarterly basis.

Core FFO per Share for the full year 2016 is expected to range  between $5.68 and $5.88  per Share, representing $5.78 per Share at the midpoint.  The company's guidance includes a projection of Same Store Portfolio NOI growth of 4% to 5%, based on expected revenue growth of 3.75% to 4.25% and expected expense growth of 2.75% to 3.75%. The company's revenue projections are based on expected continued strong fundamentals producing average physical occupancy and effective rent growth levels in-line with 2015 performance.  Guidance projections include assumed acquisition volume of $300 to $400 million of new multifamily assets, including both stabilized and lease-up communities, and assumed disposition volume of $200 to $300 million of multifamily assets and $30 to $60 million of commercial and land assets.  The company also expects to fund an additional $50 to $60 million of new development spending.  Furthermore, guidance for 2016 includes Core FFO dilution of $0.04 to $0.06 per share from the asset recycling plans.

The company projects total recurring capital expenditures for the full year of 2016 to be approximately $56 million, producing Core AFFO of $4.98 to $5.18 per Share, or $5.08 at the mid-point, representing a 6% growth over the prior year.  This performance produces expected Free Cash Flow (defined as Core FFO less all capital expenditures on existing communities and less all dividends paid to shareholders) ranging from $90 million to $95 million for the full year 2016.

On a quarterly basis, Core FFO per Share for 2016 is expected to be in a range of $1.34 to $1.44 for the first quarter, $1.39 to $1.49 for the second quarter, $1.41 to $1.51 for the third quarter, and $1.44 to $1.54 per share in the fourth quarter.

Supplemental Material and Conference Call Supplemental data to this press release can be found on the "For Investors" page of our website at www.maac.com. MAA will host a conference call to further discuss fourth quarter results on Thursday, February 4, 2016, at 9:00 AM Central Time.  The conference call-in number is 866-952-7534.  You may also join the live webcast of the conference call by accessing the "For Investors" page of our website at www.maac.com.  Our filings with the Securities and Exchange Commission, or SEC, are filed under the registrant names of Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P.

About MAA MAA is a self-administered, self-managed real estate investment trust, which owned 79,496 apartment units throughout the Southeast and Southwest regions of the United States as of December 31, 2015. For further details, please visit the MAA website at www.maac.com or contact Investor Relations at investor.relations@maac.com, or via mail at MAA, 6584 Poplar Ave., Memphis, TN  38138, Attn: Investor Relations.

Forward-Looking Statements Sections of this press release contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Such forward-looking statements include, without limitation, statements concerning 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, operating performance and results and interest rate and other economic expectations. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from the results of operations, financial conditions or plans expressed or implied by such forward-looking statements. 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;
  • exposure, as a multifamily focused REIT, to risks inherent in investments in a single industry;
  • adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets, which we may seek to enter in the future, limitations on our ability to increase rental rates, competition, our ability to identify and consummate attractive acquisitions or development projects on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns;
  • failure of new acquisitions to achieve anticipated results or be efficiently integrated;
  • failure of development communities to be completed, if at all, within budget and on a timely basis or to lease-up as anticipated;
  • unexpected capital needs;
  • changes in operating costs, including real estate taxes, utilities and insurance costs;
  • losses from catastrophes in excess of our insurance coverage;
  • ability to obtain financing at favorable rates, if at all, and refinance existing debt as it matures;
  • level and volatility of interest or capitalization rates or capital market conditions;
  • loss of hedge accounting treatment for interest rate swaps or interest rate caps;
  • the continuation of the good credit of our interest rate swap and cap providers;
  • price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on financing;
  • the effect of any rating agency actions on the cost and availability of new debt financing;
  • significant decline in market value of real estate serving as collateral for mortgage obligations;
  • significant change in the mortgage financing market that would cause single-family housing, either as an owned or rental product, to become a more significant competitive product;
  • our ability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, the ability of our operating partnership to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of our taxable REIT subsidiaries to maintain their status as such for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;
  • inability to attract and retain qualified personnel;
  • cyberliability or potential liability for breaches of our privacy or information security systems;
  • potential liability for environmental contamination;
  • adverse legislative or regulatory tax changes;
  • litigation and compliance costs associated with laws requiring access for disabled persons; and
  • other risks identified in this press release and, from time to time, in other reports we file with the SEC or in other documents that we publicly disseminate.

We undertake no obligation to publicly update or revise these forward-looking statements to reflect events, circumstances or changes in expectations after the date of this press release.

 

FINANCIAL HIGHLIGHTS

Dollars in thousands, except per share data

Three months ended December 31,

Year ended December 31,

2015

2014

2015

2014

Total property revenues

$

263,337

$

253,219

$

1,042,779

$

992,178

Total NOI

$

165,796

$

156,278

$

642,134

$

598,814

Management fee income

$

$

$

$

154

Recurring EBITDA

$

151,294

$

143,047

$

585,046

$

549,270

Net income per share:

Basic

$

0.57

$

0.46

$

4.41

$

1.97

Diluted

$

0.57

$

0.46

$

4.41

$

1.97

Funds from operations per share (diluted):

FFO

$

1.49

$

1.35

$

5.69

$

5.09

Core FFO

$

1.45

$

1.32

$

5.51

$

4.99

Core AFFO

$

1.34

$

1.18

$

4.80

$

4.28

Dividends declared per share

$

0.82

$

0.77

$

3.13

$

2.96

Dividends/Core FFO (diluted) payout ratio

56.6

%

58.3

%

56.8

%

59.3

%

Dividends/ Core AFFO (diluted) payout ratio

61.2

%

65.3

%

65.2

%

69.2

%

Consolidated interest expense

$

30,834

$

31,378

$

122,344

$

123,953

Mark-to-market debt adjustment

3,901

5,511

19,955

25,079

Capitalized interest

342

469

1,655

1,722

Total interest incurred

$

35,077

$

37,358

$

143,954

$

150,754

Amortization of principal on notes payable

$

1,934

$

2,242

$

8,244

$

6,927

 

 

FINANCIAL HIGHLIGHTS (CONTINUED)

Dollars in thousands, except per share data

As of

December 31, 2015

December 31, 2014

Total gross assets (1)

$

8,346,994

$

8,195,457

Total debt (1)

$

3,427,568

$

3,512,699

Common shares and units, outstanding end of period

79,571,567

79,458,827

Share price, end of period

$

90.81

$

74.68

Book equity value, end of period

$

3,166,073

$

3,057,722

Market equity value, end of period

$

7,225,894

$

5,933,985

Debt to total market capitalization ratio

32.2

%

37.2

%

Total net debt/total gross assets

40.6

%

42.5

%

Unencumbered Assets/Gross Real Estate Assets

72.8

%

66.9

%

Recurring EBITDA/Debt Service

4.23x

3.75x

Fixed Charge Coverage (2)

4.47x

3.99x

Total Net Debt (3)/Recurring EBITDA (4)

5.79x

6.37x

(1)

Total gross assets and Total debt as of December 31, 2014 include the reclassification of certain debt issuance costs from Deferred financing costs to Debt.

(2)

Fixed charge coverage represents Recurring EBITDA divided by interest expense adjusted for mark-to-market debt adjustment and any preferred dividends.

(3)

Total Net Debt equals Total Debt less Cash and Cash Equivalents.

(4)

Recurring EBITDA represents the twelve months ended December 31, 2015.

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS

Dollars in thousands, except per share data

Three months ended December 31,

Year ended December 31,

2015

2014

2015

2014

Operating revenues:

Rental revenues

$

241,421

$

230,482

$

952,196

$

902,177

Other property revenues

21,916

22,737

90,583

90,001

Total property revenues

263,337

253,219

1,042,779

992,178

Management fee income

154

Total operating revenues

263,337

253,219

1,042,779

992,332

Property operating expenses:

Personnel

24,967

25,110

103,000

101,591

Building repairs and maintenance

7,329

7,361

30,524

30,715

Real estate taxes and insurance

31,793

30,291

129,618

123,419

Utilities

22,327

22,165

89,769

89,150

Landscaping

4,426

4,556

19,458

20,113

Other Operating

6,699

7,457

28,276

28,360

Depreciation and amortization

73,914

71,946

294,520

301,812

Total property operating expenses

171,455

168,886

695,165

695,160

Acquisition expense

622

1,417

2,777

2,388

Property management expenses

7,884

8,076

30,990

32,095

General and administrative expenses

6,613

4,844

25,716

20,909

Merger related expenses

(50)

3,152

Integration related expenses

1,255

8,395

Income from continuing operations before non-operating items

76,763

68,791

288,131

230,233

Interest and other non-property (expense) income

(8)

(307)

(368)

770

Interest expense

(30,834)

(31,378)

(122,344)

(123,953)

Loss on debt extinguishment

(218)

(3,602)

(2,586)

Net casualty (loss) gain after insurance and other settlement proceeds

(13)

(45)

473

(476)

(Loss) gain on sale of depreciable real estate assets excluded from discontinued operations

(72)

395

189,958

42,649

(Loss) gain on sale of non-depreciable real estate assets

(185)

172

350

Income before income tax expense

45,618

37,271

352,420

146,987

Income tax expense

(254)

(815)

(1,673)

(2,050)

Income from continuing operations before joint venture activity

45,364

36,456

350,747

144,937

(Loss) gain from real estate joint ventures

3

(10)

(2)

6,009

Income from continuing operations

45,367

36,446

350,745

150,946

Discontinued operations:

Loss from discontinued operations before (loss) gain on sale

(4)

(63)

Gain (loss) on sale of discontinued operations

16

5,394

Consolidated net income

45,367

36,458

350,745

156,277

Net income attributable to noncontrolling interests

2,380

1,933

18,458

8,297

Net income available for MAA common shareholders

$

42,987

$

34,525

$

332,287

$

147,980

Earnings per common share - basic:

Income from continuing operations available for common shareholders

$

0.57

$

0.46

$

4.41

$

1.90

Discontinued property operations

0.07

Net income available for common shareholders

$

0.57

$

0.46

$

4.41

$

1.97

Earnings per common share - diluted:

Income from continuing operations available for common shareholders

$

0.57

$

0.46

$

4.41

$

1.90

Discontinued property operations

0.07

Net income available for common shareholders

$

0.57

$

0.46

$

4.41

$

1.97

Dividends declared per common share

$

0.82

$

0.77

$

3.13

$

2.96

 

 

SHARE AND UNIT DATA

Shares and units in thousands

Three months ended December 31,

Year ended December 31,

2015

2014

2015

2014

NET INCOME SHARES (1)

Weighted average common shares - Basic

75,203

75,114

75,176

74,982

Weighted average partnership units outstanding

Effect of dilutive securities

197

Weighted average common shares - Diluted

75,400

75,114

75,176

74,982

FUNDS FROM OPERATIONS SHARES AND UNITS

Weighted average common shares and units - Basic

79,378

79,308

79,361

79,188

Weighted average common shares and units - Diluted

79,575

79,461

79,551

79,370

PERIOD END SHARES AND UNITS

Common shares at December 31,

75,409

75,268

75,409

75,268

Partnership units at December 31,

4,163

4,191

4,163

4,191

Total shares and units at December 31,

79,572

79,459

79,572

79,459

(1)

For additional information on the calculation of diluted shares and earnings per share, please refer to the Notes to Condensed Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2015, expected to be filed with the SEC on February 25, 2016.

 

 

FUNDS FROM OPERATIONS

Dollars in thousands, except per share data

Three months ended

Year ended

December 31,

December 31,

2015

2014

2015

2014

Net income available for MAA common shareholders

$

42,987

$

34,525

$

332,287

$

147,980

Depreciation and amortization of real estate assets

73,121

71,315

291,572

299,421

Depreciation and amortization of real estate assets of discontinued operations

42

Gain on sale of discontinued operations

(16)

(5,394)

Loss (gain) on sale of depreciable real estate assets excluded from discontinued operations

72

(395)

(189,958)

(42,649)

Loss (gain) on disposition within unconsolidated entities

10

(12)

(4,007)

Depreciation and amortization of real estate assets of real estate joint ventures

6

6

25

397

Net income attributable to noncontrolling interests

2,380

1,933

18,458

8,297

Funds from operations attributable to the Company

118,566

107,378

452,372

404,087

Acquisition expense

622

1,417

2,777

2,388

Merger related expenses

(50)

3,152

Integration related expenses

1,255

8,395

Loss (gain) on sale of non-depreciable real estate assets

185

(172)

(350)

Mark-to-market debt adjustment

(3,901)

(5,511)

(19,955)

(25,079)

Loss on debt extinguishment

218

3,602

3,126

(1)

Core funds from operations attributable to the Company

115,505

104,674

438,624

395,719

Recurring capital expenditures

(8,565)

(11,234)

(56,888)

(56,098)

Core adjusted funds from operations

$

106,940

$

93,440

$

381,736

$

339,621

Weighted average common shares and units - Diluted

79,575

79,461

79,551

79,370

Funds from operations per share and unit - Diluted

$

1.49

$

1.35

$

5.69

$

5.09

Core funds from operations per share and unit - Diluted

$

1.45

$

1.32

$

5.51

$

4.99

Core adjusted funds from operations per share and unit - Diluted

$

1.34

$

1.18

$

4.80

$

4.28

(1)

The loss on debt extinguishment for the twelve months ended December 31, 2014 includes MAA's share of debt extinguishment costs incurred by its joint venture, Mid-America Multifamily Fund II.

 

 

CONSOLIDATED BALANCE SHEETS

Dollars in thousands

December 31, 2015

December 31, 2014

Assets

Real estate assets

Land

$

926,532

$

913,408

Buildings and improvements

6,939,288

6,781,210

Furniture, fixtures and equipment

228,157

214,742

Capital improvements in progress

44,355

80,772

8,138,332

7,990,132

Accumulated depreciation

(1,482,368)

(1,358,400)

6,655,964

6,631,732

Undeveloped land

51,779

55,997

Corporate property, net

8,812

7,988

Investments in real estate joint ventures

1,811

1,791

Real estate assets, net

6,718,366

6,697,508

Cash and cash equivalents

37,559

26,653

Restricted cash

26,082

28,181

Deferred financing cost, net

5,232

5,996

Other assets

58,935

61,119

Goodwill

1,607

2,321

Total assets

$

6,847,781

$

6,821,778

Liabilities and Shareholders' Equity

Liabilities

Secured notes payable

$

1,286,236

$

1,589,641

Unsecured notes payable

2,141,332

1,923,058

Accounts payable

9,142

8,395

Fair market value of interest rate swaps

10,358

13,392

Accrued expenses and other liabilities

223,017

219,044

Security deposits

11,623

10,526

Total liabilities

3,681,708

3,764,056

Redeemable stock

8,250

5,911

Shareholders' equity

Common stock

754

752

Additional paid-in capital

3,627,073

3,619,270

Accumulated distributions in excess of net income

(634,141)

(729,086)

Accumulated other comprehensive loss

(1,589)

(412)

Total MAA shareholders' equity

2,992,097

2,890,524

Noncontrolling interest

165,726

161,287

Total equity

3,157,823

3,051,811

Total liabilities and shareholders' equity

$

6,847,781

$

6,821,778

 

NON-GAAP FINANCIAL MEASURES AND OTHER DEFINITIONS

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

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

Average Total Revenue per Occupied Unit Average total revenue per occupied unit represents total revenue divided by the average daily number of units that were physically occupied.

Core Adjusted Funds From Operations (Core AFFO) Core AFFO is composed of Core FFO less recurring capital expenditures. As an owner and operator of real estate, MAA considers Core AFFO to be an important measure of performance from core operations because Core AFFO measures the ability to control revenues, expenses and recurring capital expenditures.

Core Funds From Operations (Core FFO) Core FFO represents FFO excluding certain non-cash or non-routine items such as acquisition, merger and integration expenses, mark-to-market debt adjustments, loss or gain on debt extinguishment, and loss or gain on sale of non-depreciable assets.  While MAA's definition of Core FFO is similar to others in the industry, MAA's precise methodology for calculating Core FFO may differ from that utilized by other REITs and, accordingly, may not be comparable to such other REITs.  Core FFO should not be considered as an alternative to net income.  MAA believes that Core FFO is helpful in understanding operating performance in that it removes certain items that by their nature are not comparable over periods and therefore tend to obscure actual operating performance.

Development Portfolio Communities remain identified as development until certificates of occupancy are obtained for all units under development. Once all units are delivered and available for occupancy, the community moves into the Lease-up Portfolio.

Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) For purposes of calculations in this document, EBITDA is composed of net income before net gain on asset sales and insurance and other settlement proceeds, and gain or loss on debt extinguishment, plus depreciation, interest expense, income taxes, and amortization of deferred financing costs.  EBITDA is a non-GAAP financial measure used as a performance measure.  As an owner and operator of real estate, MAA considers EBITDA to be an important measure of performance from core operations because EBITDA does not include various income and expense items that are not indicative of operating performance. EBITDA should not be considered as an alternative to net income as an indicator of financial performance. MAA's computation of EBITDA may differ from the methodology utilized by other companies to calculate EBITDA.

Effective Occupancy Effective occupancy represents contract rents on occupied units divided by the sum of market rents on vacant units and contract rents on occupied units.

Free Cash Flow Core FFO less all capital expenditures on existing communities and less all dividends paid to shareholders

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

Lease-up Portfolio New acquisitions acquired during lease-up and newly developed communities remain in the Lease-up Portfolio until stabilized.

Net Operating Income (NOI) Net operating income represents total property revenues less total property operating expenses, excluding depreciation, for all properties held during the period, regardless of their status as held for sale. We believe NOI by market is a helpful tool in evaluating the operating performance within MAA's markets because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance.

Other Non-Same Store Portfolio Other Non-Same Store Portfolio includes recent acquisitions, communities in development or lease-up, communities that have undergone a significant casualty loss, and commercial assets.

Recurring Earnings Before Interest Taxes Depreciation and Amortization (Recurring EBITDA) Recurring EBITDA represents EBITDA excluding certain non-cash or non-routine items such as acquisition and merger and integration expenses.  MAA believes Recurring EBITDA is an important performance measure as it adjusts for certain items that by their nature are not comparable over periods and therefore tend to obscure actual operating performance. Recurring EBITDA should not be considered as an alternative to net income as an indicator of operating performance. MAA's computation of Recurring EBITDA may differ from the methodology utilized by other companies to calculate Recurring EBITDA.

Same Store Portfolio MAA reviews its Same Store Portfolio at the beginning of each calendar year, or as significant transactions warrant. Communities are generally added into the Same Store Portfolio if they were owned and stabilized at the beginning of the previous year.  Communities that have been approved by the Board of Directors for disposition are excluded from the Same Store Portfolio.  Communities that have undergone a significant casualty loss are also excluded from the Same Store Portfolio.  Within the Same Store Portfolio communities are designated as operating in Large or Secondary Markets:

Large Market Same Store communities are generally those communities in markets with a population of at least one million and at least 1% of the total public multifamily REIT units.

Secondary Market Same Store communities are generally those communities in markets with either a population less than one million or less than 1% of the total public multifamily REIT units, or both.

Stabilized Communities Communities are considered stabilized after achieving 90% occupancy for 90 days.

SOURCE MAA



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