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MID-AMERICA APARTMENT COMMUNITY, INC.

(MAA)
  Report
Delayed Nyse  -  04:03 2022-10-04 pm EDT
158.43 USD   -0.10%
10/03MAA Announces Date of Third Quarter 2022 Earnings Release, Conference Call
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09/27Mid-America Apartment Communities Maintains Quarterly Dividend at $1.25 a Share, Payable Oct. 31 to Shareholders as of Oct. 14
MT
09/27MAA Announces Quarterly Common Dividend
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MID AMERICA APARTMENT COMMUNITIES INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

07/28/2022 | 04:21pm EDT
The following discussion analyzes the financial condition and results of
operations of both MAA and the Operating Partnership, of which MAA is the sole
general partner and in which MAA owned a 97.3% interest as of June 30, 2022. MAA
conducts all of its business through the Operating Partnership and its various
subsidiaries. This discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto included in this Quarterly
Report on Form 10-Q.

MAA, an S&P 500 company, is a multifamily-focused, self-administered and
self-managed real estate investment trust, or REIT. We own, operate, acquire and
selectively develop apartment communities primarily located in the Southeast,
Southwest and Mid-Atlantic regions of the United States. As of June 30, 2022, we
owned and operated 290 apartment communities (which does not include development
communities under construction) through the Operating Partnership and its
subsidiaries, and we had an ownership interest in one apartment community
through an unconsolidated real estate joint venture and had five development
communities under construction. In addition, as of June 30, 2022, 33 of our
apartment communities included retail components. Our apartment communities,
including development communities under construction, were located across 16
states and the District of Columbia as of June 30, 2022.

We report in two segments, Same Store and Non-Same Store and Other. Our Same
Store segment represents those apartment communities that have been owned and
stabilized for at least 12 months as of the first day of the calendar year. Our
Non-Same Store and Other segment includes recently acquired communities,
communities being developed or in lease-up, communities that have been disposed
of or identified for disposition, communities that have experienced a
significant casualty loss and stabilized communities that do not meet the
requirements to be Same Store communities. Also included in our Non-Same Store
and Other segment are non-multifamily activities. Additional information
regarding the composition of our segments is included in Note 11 to the
condensed consolidated financial statements included in this Quarterly Report on
Form 10-Q.

Note Regarding Forward-Looking Statements


This and other sections of this Quarterly Report on Form 10-Q may contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, 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 regarding
expected operating performance and results, property stabilizations, property
acquisition and disposition activity, joint venture activity, development and
renovation activity and other capital expenditures, and capital raising and
financing activity, as well as lease pricing, revenue and expense growth,
occupancy, interest rate and other economic expectations. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"
"forecasts," "projects," "assumes," "will," "may," "could," "should," "budget,"
"target," "outlook," "proforma," "opportunity," "guidance" and variations of
such words and similar expressions are intended to identify such forward-looking
statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors, as described below, which may cause our actual
results, performance or achievements to be materially different from the results
of operations, financial conditions or plans expressed or implied by such
forward-looking statements. Although we believe that the assumptions underlying
the forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore such forward-looking statements
included in this 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 actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements:

the COVID-19 pandemic and measures taken or that may be taken by federal, state
and local governmental authorities to combat the spread of the disease;
•
inability to generate sufficient cash flows due to unfavorable economic and
market conditions, changes in supply and/or demand, competition, uninsured
losses, changes in tax and housing laws or other factors;
•
exposure to risks inherent in investments in a single industry and sector;
•
adverse changes in real estate markets, including, but not limited to, the
extent of future demand for multifamily units in our significant markets,
barriers of entry into new markets which we may seek to enter in the future,
limitations on our ability to increase or collect 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 development communities to be completed within budget and on a timely
basis, if at all, to lease-up as anticipated or to achieve anticipated results;
•
unexpected capital needs;
•
material changes in operating costs, including real estate taxes, utilities and
insurance costs, due to inflation and other factors;

                                                                            

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inability to obtain appropriate insurance coverage at reasonable rates, or at
all, or losses from catastrophes in excess of our insurance coverage;
•
ability to obtain financing at favorable rates, if at all, or refinance existing
debt as it matures;
•
level and volatility of interest or capitalization rates or capital market
conditions;
•
the effect of any rating agency actions on the cost and availability of new debt
financing;
•
significant change in the mortgage financing market or other factors that would
cause single-family housing or other alternative housing options, either as an
owned or rental product, to become a more significant competitive product;
•
ability to continue to satisfy complex rules in order to maintain our status as
a REIT for federal income tax purposes, the ability of the 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;
•
cyber liability or potential liability for breaches of our or our service
providers' information technology systems, or business operations disruptions;
•
potential liability for environmental contamination;
•
changes in the legal requirements we are subject to, or the imposition of new
legal requirements, that adversely affect our operations;
•
extreme weather, natural disasters, disease outbreaks and other public health
events;
•
impact of climate change on our properties or operations;
•
legal proceedings or class action lawsuits;
•
impact of reputational harm caused by negative press or social media postings of
our actions or policies, whether or not warranted;
•
compliance costs associated with numerous federal, state and local laws and
regulations; and
•
other risks identified in this Quarterly Report on Form 10-Q and in other
reports we file with the Securities and Exchange Commission, or the SEC, or in
other documents that we publicly disseminate.

New factors may also emerge from time to time that could have a material adverse
effect on our business. Except as required by law, we undertake no obligation to
publicly update or revise forward-looking statements contained in this Quarterly
Report on Form 10-Q to reflect events, circumstances or changes in expectations
after the date on which this Quarterly Report on Form 10-Q is filed.

Overview of the Three Months Ended June 30, 2022


For the three months ended June 30, 2022, net income available for MAA common
shareholders was $209.8 million as compared to $215.6 million for the three
months ended June 30, 2021. Results for the three months ended June 30, 2022
included $21.8 million of non-cash loss related to the fair value adjustment of
the embedded derivative in the MAA Series I preferred shares. Results for the
three months ended June 30, 2021 included $13.2 million of non-cash gain related
to the embedded derivative in the MAA Series I preferred shares. Revenues for
the three months ended June 30, 2022 increased 13.3% as compared to the three
months ended June 30, 2021, driven by a 13.7% increase in our Same Store
segment. Property operating expenses, excluding depreciation and amortization,
for the three months ended June 30, 2022 increased by 7.7% as compared to the
three months ended June 30, 2021, driven by an 8.1% increase in our Same Store
segment. The drivers of these changes are discussed in the "Results of
Operations" section.

Trends


During the three months ended June 30, 2022, revenue growth for our Same Store
segment continued to be primarily driven by growth in average effective rent per
unit. The average effective rent per unit in our Same Store segment continued to
increase from the prior year, up 14.3% for the three months ended June 30, 2022
as compared to the three months ended June 30, 2021. Average effective rent per
unit represents the average of gross rent amounts, after the effect of leasing
concessions, for occupied apartment units plus prevalent market rates asked for
unoccupied apartment units, divided by the total number of units. Leasing
concessions represent discounts to the current market rate. We believe average
effective rent per unit is a helpful measurement in evaluating average pricing;
however, it does not represent actual rental revenue collected per unit.

In addition, for the three months ended June 30, 2022, average physical
occupancy for our Same Store segment was 95.7%, as compared to 96.4% for the
three months ended June 30, 2021. Average physical occupancy is a measurement of
the total number of our apartment units that are occupied by residents, and it
represents the average of the daily physical occupancy for the period.

An important part of our portfolio strategy is to maintain diversity of markets,
submarkets, product types and price points primarily in the Southeast, Southwest
and Mid-Atlantic regions of the United States. This diversity tends to mitigate
exposure to economic issues in any one geographic market or area. We believe
that a well-balanced portfolio, including both urban and suburban locations,
with a broad range of monthly rent price points, will perform well in "up"
cycles as well as better weather "down" cycles. Through our investment in 39
defined markets, we are diversified across markets, urban and suburban
submarkets, and a variety of product types and monthly rent price points.

                                                                            

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Demand for apartments during the second quarter of 2022 was very strong, as
evidenced by the rent growth we achieved. Demand for apartments is primarily
driven by general economic conditions in our markets and is particularly
correlated to job growth, population growth, household formation and
in-migration. While our rent growth and rent collection trends in the second
quarter of 2022 were strong, we continue to monitor pressures surrounding supply
chain challenges and inflation trends. A worsening of the current environment
could contribute to uncertain rent collections going forward and suppress demand
for apartments and would likely drive rent growth on new leases and renewals
lower than what we achieved in the three and six months ended June 30, 2022.
Current elevated supply levels could further affect rent growth for our
portfolio though we expect the demand side to continue to be more impactful in
the short term. Supply chain and inflationary pressures have driven higher
operating expenses during the three and six months ended June 30, 2022,
particularly in personnel and repairs and maintenance, and this trend may
continue going forward.

Access to the financial markets remains available for high-credit rated
borrowers. However, a prolonged disruption of the markets or a decline in credit
and financing conditions could negatively affect our ability to access capital
necessary to fund our operations or refinance maturing debt in the future.
Additionally, rising interest rates could negatively impact our borrowing costs
for any variable rate borrowings or refinancing activity.

Results of Operations

Comparison of the three months ended June 30, 2022 to the three months ended June 30, 2021


For the three months ended June 30, 2022, we achieved net income available for
MAA common shareholders of $209.8 million, a 2.7% decrease as compared to the
three months ended June 30, 2021, and total revenue growth of $58.1 million,
representing a 13.3% increase in property revenues as compared to the three
months ended June 30, 2021. The following discussion describes the primary
drivers of the decrease in net income available for MAA common shareholders for
the three months ended June 30, 2022 as compared to the three months ended June
30, 2021.

Property Revenues

The following table reflects our property revenues by segment for the three months ended June 30, 2022 and 2021 (dollars in thousands):

                               Three months ended June 30,
                                2022                 2021          Increase      % Increase
Same Store                 $      472,160       $      415,403     $  56,757            13.7 %
Non-Same Store and Other           22,880               21,524         1,356             6.3 %
Total                      $      495,040       $      436,927     $  58,113            13.3 %


The increase in rental revenues for our Same Store segment for the three months
ended June 30, 2022 as compared to the three months ended June 30, 2021 was the
primary driver of total property revenue growth. The Same Store segment
generated an 13.7% increase in revenues for the three months ended June 30,
2022, primarily the result of average effective rent per unit growth of 14.3% as
compared to the three months ended June 30, 2021. The increase in property
revenues from the Non-Same Store and Other segment for the three months ended
June 30, 2022 as compared to three months ended June 30, 2021 was primarily the
result of increased revenues from recently completed development communities.

Property Operating Expenses


Property operating expenses include costs for property personnel, building
repairs and maintenance, real estate taxes and insurance, utilities, landscaping
and other operating expenses. The following table reflects our property
operating expenses by segment for the three months ended June 30, 2022 and 2021
(dollars in thousands):

                               Three months ended June 30,
                                2022                 2021          Increase       % Increase
Same Store                 $      171,922       $      159,078     $  12,844              8.1 %
Non-Same Store and Other            9,755                9,683            72              0.7 %
Total                      $      181,677       $      168,761     $  12,916              7.7 %




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The increase in property operating expenses for our Same Store segment for the
three months ended June 30, 2022 as compared to the three months ended June 30,
2021 was primarily driven by increases in real estate tax expense of $3.2
million, building repairs and maintenance of $2.9 million, personnel expense of
$2.6 million, utilities expense of $1.5 million, and office operations expense
of $0.9 million.

Depreciation and Amortization


Depreciation and amortization expense for the three months ended June 30, 2022
was $134.1 million, an increase of $2.3 million as compared to the three months
ended June 30, 2021. The increase was primarily driven by the recognition of
depreciation expense associated with our development and capital spend
activities completed after June 30, 2021 in the normal course of business
through June 30, 2022.

Other Income and Expenses


Property management expenses for the three months ended June 30, 2022 were $15.6
million, an increase of $1.9 million as compared to the three months ended June
30, 2021. General and administrative expenses for the three months ended June
30, 2022 were $15.6 million, an increase of $2.5 million as compared to the
three months ended June 30, 2021.

Interest expense for the three months ended June 30, 2022 was $38.9 million, consistent with the three months ended June 30, 2021.

For the three months ended June 30, 2022, we disposed of two apartment communities, resulting in gains on sale of depreciable assets of $132.0 million. For the three months ended June 30, 2021, we disposed of four apartment communities, resulting in gains on sale of depreciable assets of $134.8 million.


Other non-operating expense (income) for the three months ended June 30, 2022
was $28.3 million of expense as compared to $20.1 million of income for the
three months ended June 30, 2021, a decrease of $48.4 million. The expense for
the three months ended June 30, 2022 was driven by $21.8 million of non-cash
loss related to the fair value adjustment of the embedded derivative and $20.9
million of non-cash loss from investments, partially offset by $14.4 million in
casualty gains due to winter storm Uri. The income for the three months ended
June 30, 2021 was driven by $13.2 million of non-cash gain related to the fair
value adjustment of the embedded derivative and $6.3 million of non-cash gain
from investments.

Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021


For the six months ended June 30, 2022, we achieved net income available for MAA
common shareholders of $319.7 million, a 22.1% increase as compared to the six
months ended June 30, 2021, and total revenue growth of $109.2 million,
representing a 12.7% increase in property revenues as compared to the six months
ended June 30, 2021. The following discussion describes the primary drivers of
the increase in net income available for MAA common shareholders for the six
months ended June 30, 2022 as compared to the six months ended June 30, 2021.

Property Revenues

The following table reflects our property revenues by segment for the six months ended June 30, 2022 and 2021 (dollars in thousands):

                             Six months ended June 30,
                               2022               2021        Increase      % Increase
Same Store                 $     926,637       $  820,549     $ 106,088            12.9 %
Non-Same Store and Other          44,481           41,383         3,098             7.5 %
Total                      $     971,118       $  861,932     $ 109,186            12.7 %


The increase in rental revenues for our Same Store segment for the six months
ended June 30, 2022 as compared to the six months ended June 30, 2021 was the
primary driver of total property revenue growth. The Same Store segment
generated a 12.9% increase in revenues for the six months ended June 30, 2022,
primarily the result of average effective rent per unit growth of 13.3% as
compared to the six months ended June 30, 2021. The increase in property
revenues from the Non-Same Store and Other segment for the six months ended June
30, 2022 as compared to six months ended June 30, 2021 was primarily the result
of increased revenues from recently completed development communities.

                                                                            

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Property Operating Expenses


Property operating expenses include costs for property personnel, building
repairs and maintenance, real estate taxes and insurance, utilities, landscaping
and other operating expenses. The following table reflects our property
operating expenses by segment for the six months ended June 30, 2022 and 2021
(dollars in thousands):

                             Six months ended June 30,
                               2022               2021        Increase       % Increase
Same Store                 $     331,757       $  312,284     $  19,473              6.2 %
Non-Same Store and Other          19,340           18,945           395              2.1 %
Total                      $     351,097       $  331,229     $  19,868              6.0 %


The increase in property operating expenses for our Same Store segment for the
six months ended June 30, 2022 as compared to the six months ended June 30, 2021
was primarily driven by increases in building repairs and maintenance of $4.5
million, personnel expense of $4.4 million, real estate tax expense of $3.6
million, utilities expense of $2.4 million, office operations expense of $2.3
million and insurance expense of $1.5 million.

Depreciation and Amortization


Depreciation and amortization expense for the six months ended June 30, 2022 was
$267.9 million, an increase of $4.6 million as compared to the six months ended
June 30, 2021. The increase was primarily driven by the recognition of
depreciation expense associated with our development and capital spend
activities completed after June 30, 2021 in the normal course of business
through June 30, 2022.

Other Income and Expenses


Property management expenses for the six months ended June 30, 2022 were $32.2
million, an increase of $5.5 million as compared to the six months ended June
30, 2021. General and administrative expenses for the six months ended June 30,
2022 were $31.9 million, an increase of $5.8 million as compared to the six
months ended June 30, 2021.

Interest expense for the six months ended June 30, 2022 was $78.0 million, a
decrease of $0.5 million as compared to the six months ended June 30, 2021. The
decrease was primarily due to a decrease in our effective interest rate during
the six months ended June 30, 2022 as compared to the six months ended June 30,
2021.

For the six months ended June 30, 2022, we disposed of two apartment communities, resulting in gains on sale of depreciable assets of $132.0 million. For the six months ended June 30, 2021, we disposed of four apartment communities, resulting in gains on sale of depreciable assets of $134.8 million.


Other non-operating expense (income) for the six months ended June 30, 2022 was
$17.5 million of expense as compared to $4.2 million of income for the six
months ended June 30, 2021, a decrease of $21.7 million. The expense for the six
months ended June 30, 2022 was driven by $9.9 million of non-cash loss related
to the fair value adjustment of the embedded derivative and $31.1 million of
non-cash loss from investments, partially offset by $22.1 million in casualty
gains due to winter storm Uri. The income for the six months ended June 30, 2021
was driven by the recognition of $7.9 million of non-cash gain from investments,
partially offset by $1.9 million of non-cash loss related to the fair value
adjustment of the embedded derivative and $1.8 million in casualty losses.

Funds from Operations and Core Funds from Operations


Funds from operations, or FFO, a non-GAAP financial measure, represents net
income available for MAA common shareholders (computed in accordance with the
United States generally accepted accounting principles, or GAAP) excluding gains
or losses on disposition of operating properties and asset impairment, plus
depreciation and amortization of real estate assets, net income attributable to
noncontrolling interests and adjustments for joint ventures. Because net income
attributable to noncontrolling interests is added back, FFO, when used in this
Quarterly Report on Form 10-Q, represents FFO attributable to the Company.

FFO should not be considered as an alternative to net income available for MAA
common shareholders, or any other GAAP measurement, as an indicator of operating
performance or as an alternative to cash flow from operating, investing and
financing activities as a measure of liquidity. Management believes that FFO is
helpful to investors in understanding our operating performance, primarily
because its calculation excludes depreciation and amortization expense on real
estate assets. We believe 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. While our calculation of FFO is in accordance with the
National Association of Real Estate Investment Trusts', or NAREIT's, definition,
it may differ from the methodology for calculating FFO utilized by other REITs
and, accordingly, may not be comparable to such other REITs.

                                                                            

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Core FFO represents FFO as adjusted for items that are not considered part of
our core business operations such as adjustments related to the fair value of
the embedded derivative in the MAA Series I preferred shares, gain or loss on
sale of non-depreciable assets, gain or loss on investments, net casualty gain
or loss, gain or loss on debt extinguishment, legal costs and settlements, net,
COVID-19 related costs and mark-to-market debt adjustments. While our definition
of Core FFO may be similar to others in the industry, our 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 available for MAA common
shareholders, or any other GAAP measurement, as an indicator of operating
performance or as an alternative to cash flow from operating, investing and
financing activities as a measure of liquidity. We believe that Core FFO is
helpful in understanding our core operating performance between periods in that
it removes certain items that by their nature are not comparable over periods
and therefore tend to obscure actual operating performance.

The following table presents a reconciliation of net income available for MAA
common shareholders to FFO and Core FFO for the three and six months ended June
30, 2022 and 2021, as we believe net income available for MAA common
shareholders is the most directly comparable GAAP measure (dollars in
thousands):
                                           Three months ended June 30,          Six months ended June 30,
                                              2022               2021             2022               2021
Net income available for MAA common
shareholders                             $      209,780       $   215,556     $     319,660       $  261,827
Depreciation and amortization of real
estate assets                                   132,333           130,031           264,343          259,783
Gain on sale of depreciable real
estate assets                                  (131,965 )        (134,828 )        (131,964 )       (134,828 )
Depreciation and amortization of real
estate assets
  of real estate joint venture                      156               154               310              309
Net income attributable to
noncontrolling interests                          5,858             7,397             8,633            9,068
FFO attributable to the Company                 216,162           218,310           460,982          396,159
Loss (gain) from embedded derivative
in preferred shares(1)                           21,835           (13,168 )           9,939            1,940
Gain on sale of non-depreciable real
estate assets                                      (355 )             (32 )            (378 )            (32 )
Loss (gain) on investments, net of
tax(1)(2)                                        16,489            (4,962 )          24,566           (6,246 )
Net casualty (gain) loss and other
settlement proceeds(3)                          (14,413 )            (595 )         (22,125 )          1,760
Loss on debt extinguishment(1)                        -                 -                 -               37
Legal costs and settlements, net(1)                  (2 )               -               535              (16 )
COVID-19 related costs(1)                           105               109               442              419
Mark-to-market debt adjustments(4)                   35                83                71              166
Core FFO                                 $      239,856       $   199,745     $     474,032       $  394,187


(1)

Included in "Other non-operating expense (income)" in the Condensed Consolidated Statements of Operations.

(2)

For the three and six months ended June 30, 2022, loss (gain) on investments are
presented net of tax benefit of $4.4 million and $6.5 million, respectively. For
the three and six months ended June 30, 2021, loss (gain) on investments are
presented net of tax expense of $1.3 million and $1.7 million, respectively.
(3)
For the three and six months ended June 30, 2022, we recognized gains of $12.8
million and $20.4 million, respectively, from the receipt of insurance proceeds
that exceeded our casualty losses related to winter storm Uri. The gain is
reflected in "Other non-operating expense (income)" in the Condensed
Consolidated Statements of Operations. For the three and six months ended June
30, 2021, we incurred $20.4 million and $37.3 million in casualty losses related
to winter storm Uri (primarily building repairs, landscaping and asset
write-offs). The majority of the casualty losses have been reimbursed through
insurance coverage. A receivable was recognized in "Other non-operating expense
(income)" for the recorded losses that we expected to recover. Additional costs
related to the storm that were not expected to be recovered through insurance
coverage, along with other unrelated casualty losses and recoveries, are also
reflected in this adjustment. The adjustment is primarily included in "Other
non-operating expense (income)" in the Condensed Consolidated Statements of
Operations.

(4)

Included in "Interest expense" in the Condensed Consolidated Statements of Operations.

Core FFO for the three months ended June 30, 2022 was $239.9 million, an increase of $40.1 million as compared to the three months ended June 30, 2021, primarily as a result of an increase in property revenues of $58.1 million, partially offset by increases in property operating expenses, excluding depreciation and amortization, of $12.9 million, general and administrative expenses of $2.5 million and property management expenses of $1.9 million.


Core FFO for the six months ended June 30, 2022 was $474.0 million, an increase
of $79.8 million as compared to the six months ended June 30, 2021, primarily as
a result of an increase in property revenues of $109.2 million, partially offset
by increases in property operating expenses, excluding depreciation and
amortization, of $19.9 million, general and administrative expenses of $5.8
million and property management expenses of $5.5 million.

Liquidity and Capital Resources


Our cash flows from operating, investing and financing activities, as well as
general economic and market conditions, are the principal factors affecting our
liquidity and capital resources.

We expect that our primary uses of cash will be to fund our ongoing operating
needs, to fund our ongoing capital spending requirements, which relate primarily
to our development, redevelopment and property repositioning activities, to
repay maturing borrowings, to fund the future acquisition of assets and to pay
shareholder dividends. We expect to meet our cash requirements through net cash
flows from

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operating activities, existing unrestricted cash and cash equivalents, borrowings under our commercial paper program and our revolving credit facility, the future issuance of debt and equity and the future disposition of assets.


We historically have had positive net cash flows from operating activities. We
believe that future net cash flows generated from operating activities, existing
unrestricted cash and cash equivalents, borrowing capacity under our current
commercial paper program and revolving credit facility, and our ability to issue
debt and equity will provide sufficient liquidity to fund the cash requirements
for our business over the next 12 months and the foreseeable future.

As of June 30, 2022, we had $1.1 billion of combined unrestricted cash and cash equivalents and available capacity under our revolving credit facility.

Cash Flows from Operating Activities


Net cash provided by operating activities was $463.9 million for the six months
ended June 30, 2022 as compared to $397.3 million for the six months ended June
30, 2021. The increase in operating cash flows was primarily driven by our
operating performance, partially offset by the timing of cash payments.

Cash Flows from Investing Activities


Net cash used in investing activities was $57.8 million for the six months ended
June 30, 2022 as compared to $132.5 million for the six months ended June 30,
2021. The primary drivers of the change were as follows (dollars in thousands):

                                            Primary drivers of cash (outflow)
                                                         inflow
                                                                                        Increase
                                          during the six months ended June 30,         (Decrease)
                                             2022                   2021               in Net Cash
Purchases of real estate and other
assets                                   $     (17,238 )     $           (46,028 )   $        28,790
Capital improvements and other                (132,849 )                (127,932 )            (4,917 )
Development costs                              (84,636 )                (119,612 )            34,976
Contributions to affiliates                     (9,300 )                  (1,114 )            (8,186 )
Proceeds from real estate asset
dispositions                                   165,201                   158,136               7,065
Proceeds from insurance recoveries              20,675                     3,620              17,055



The decrease in cash outflows for purchases of real estate and other assets was
driven by acquisition activity during the six months ended June 30, 2022 as
compared to the six months ended June 30, 2021. The increase in cash outflows
for capital improvements and other was primarily driven by increased
redevelopment capital spend during the six months ended June 30, 2022 as
compared to the six months ended June 30, 2021. The decrease in cash outflows
for development costs was primarily driven by decreased development spend during
the six months ended June 30, 2022 as compared to the six months ended June 30,
2021. The increase in cash outflows for contributions to affiliates was driven
by investments in the technology-focused limited partnerships during the six
months ended June 30, 2022, while less limited partnership contributions were
made during the six months ended June 30, 2021. The increase in cash inflows
from proceeds from real estate asset dispositions was driven by the nature of
the real estate assets sold during the six months ended June 30, 2022 as
compared to the six months ended June 30, 2021. During the six months ended June
30, 2022, we sold two apartment communities as compared to four apartment
communities during the six months ended June 30, 2021. The increase in cash
inflows from proceeds from insurance recoveries was driven by insurance
reimbursements received for casualty claims related to winter storm Uri during
the six months ended June 30, 2022.

Cash Flows from Financing Activities


Net cash used in financing activities was $315.0 million for the six months
ended June 30, 2022 as compared to $257.4 million for the six months ended June
30, 2021. The primary drivers of the change were as follows (dollars in
thousands):

                                             Primary drivers of cash inflow (outflow)
                                                                                               (Decrease)
                                               during the six months ended June 30,             Increase
                                                  2022                      2021               in Net Cash
Net change in commercial paper             $                 -       $           108,000            (108,000 )
Principal payments on notes payable                       (691 )                (119,481 )           118,790
Dividends paid on common shares                       (250,960 )                (234,591 )           (16,369 )
Acquisition of noncontrolling interests                (43,070 )                       -             (43,070 )
Net change in other financing activities               (11,478 )                  (1,173 )           (10,305 )



The decrease in cash inflows related to the net change in commercial paper
resulted from no net borrowings on our commercial paper program during the six
months ended June 30, 2022 as compared to net borrowings of $108.0 million on
our commercial paper program during the six months ended June 30, 2021. The
decrease in cash outflows from principal payments on notes payable primarily
resulted from the

                                                                              34

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retirement of $118.6 million of property mortgages during the six months ended
June 30, 2021. The increase in cash outflows from dividends paid on common
shares primarily resulted from the increase in the dividend rate to $2.175 per
share during the six months ended June 30, 2022 as compared to the dividend rate
of $2.0500 per share during the six months ended June 30, 2021. The increase in
cash outflows from the acquisition of noncontrolling interests resulted from the
acquisition of the noncontrolling interest of a consolidated real estate entity
for $43.1 million during the six months ended June 30, 2022. The increase in
cash outflows from the net change in other financing activities was primarily
driven by shares of MAA's common stock surrendered by employees to satisfy their
statutory minimum federal and state tax obligations associated with the vesting
of restricted shares during the six months ended June 30, 2022 as compared to
the six months ended June 30, 2021.

Debt


The following schedule reflects our debt outstanding as of June 30, 2022
(dollars in thousands):

                                                                    Average Years
                                                   Principal           to Rate
                                                    Balance           Maturity          Effective Rate
Unsecured debt
Fixed rate senior notes                           $  4,175,000                 6.7                  3.3 %
Debt issuance costs, discounts, premiums and
fair market value adjustments                          (21,350 )
Total unsecured debt                              $  4,153,650                 6.7                  3.3 %
Secured debt
Fixed rate property mortgages                     $    367,864                26.3                  4.4 %
Debt issuance costs                                     (3,200 )
Total secured debt                                $    364,664                26.3                  4.4 %
Total debt                                        $  4,518,314                 8.2                  3.4 %

The following schedule presents the contractual maturity dates of our outstanding debt, net of debt issuance costs, discounts, premiums and fair market value adjustments, as of June 30, 2022 (dollars in thousands):

                  Commercial Paper & Revolving                               Property
                      Credit Facility?¹??²?            Senior Notes         Mortgages             Total
2022            $                               -     $       124,921     $            -     $       124,921
2023                                            -             349,172                  -             349,172
2024                                            -             398,433                  -             398,433
2025                                            -             397,386              4,712             402,098
2026                                            -             296,816                  -             296,816
2027                                            -             596,155                  -             596,155
2028                                            -             396,391                  -             396,391
2029                                            -             559,749                  -             559,749
2030                                            -             297,369                  -             297,369
2031                                            -             444,654                  -             444,654
Thereafter                                      -             292,604            359,952             652,556
Total           $                               -     $     4,153,650     $      364,664     $     4,518,314


(1)
There were no borrowings outstanding under MAALP's unsecured commercial paper
program as of June 30, 2022. Under the terms of the program, MAALP may issue up
to a maximum aggregate amount outstanding at any time of $500.0 million. For the
three months ended June 30, 2022, average daily borrowings outstanding under the
commercial paper program were $16.3 million.

(2)

There were no borrowings outstanding under MAALP's $1.0 billion unsecured revolving credit facility as of June 30, 2022.

35

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The following schedule reflects the interest rate maturities of our outstanding
fixed rate debt, net of debt issuance costs, discounts, premiums and fair market
value adjustments, as of June 30, 2022 (dollars in thousands):

              Fixed Rate Debt       Effective Rate
2022         $         124,921                  3.3 %
2023                   349,172                  4.2 %
2024                   398,433                  4.0 %
2025                   402,098                  4.2 %
2026                   296,816                  1.2 %
2027                   596,155                  3.7 %
2028                   396,391                  4.2 %
2029                   559,749                  3.7 %
2030                   297,369                  3.1 %
2031                   444,654                  1.8 %
Thereafter             652,556                  3.8 %
Total        $       4,518,314                  3.4 %

Unsecured Revolving Credit Facility & Commercial Paper


As of June 30, 2022, MAALP had a $1.0 billion unsecured revolving credit
facility with an option to expand to $1.5 billion. The revolving credit facility
bore an interest rate of the London Interbank Offered Rate plus a spread of
0.75% to 1.45% based on an investment grade pricing grid. The revolving credit
facility was scheduled to mature in May 2023 with an option to extend for two
additional six-month periods. As of June 30, 2022, there was no outstanding
balance under the revolving credit facility, while $4.0 million of capacity was
used to support outstanding letters of credit.

In July 2022, MAALP amended its unsecured revolving credit facility, increasing
borrowing capacity to $1.25 billion with an option to expand to $2.0 billion.
The amended revolving credit facility has a maturity date of October 2026 with
two six-month extension options and bears interest at an adjusted Secured
Overnight Financing Rate plus a spread of 0.70% to 1.40% based on an investment
grade pricing grid, currently at 0.775%. This revolving credit facility serves
as our primary source of short-term liquidity.

MAALP has established an unsecured commercial paper program, whereby it can
issue unsecured commercial paper notes with varying maturities not to exceed 397
days up to a maximum aggregate amount outstanding of $500.0 million. As of June
30, 2022, there were no borrowings outstanding under the commercial paper
program.

Unsecured Senior Notes

As of June 30, 2022, MAALP had $4.2 billion of publicly issued unsecured senior notes outstanding.


Secured Property Mortgages

MAALP maintains secured property mortgages with various life insurance companies. As of June 30, 2022, we had $367.9 million of secured property mortgages outstanding.


For more information regarding our debt capital resources, see Note 6 to the
condensed consolidated financial statements included in this Quarterly Report on
Form 10-Q.

Equity

As of June 30, 2022, MAA owned 115,438,832 OP Units, comprising a 97.3% limited
partnership interest in MAALP, while the remaining 3,202,377 outstanding OP
Units were held by limited partners of MAALP other than MAA. Holders of OP Units
(other than MAA) may require us to redeem their OP Units from time to time, in
which case we may, at our option, pay the redemption price either in cash (in an
amount per OP Unit equal, in general, to the average closing price of MAA's
common stock on the NYSE over a specified period prior to the redemption date)
or by delivering one share of MAA's common stock (subject to adjustment under
specified circumstances) for each OP Unit so redeemed. MAA has registered under
the Securities Act the 3,202,377 shares of its common stock that, as of June 30,
2022, were issuable upon redemption of OP Units, in order for those shares to be
sold freely in the public markets.

In August 2021, MAA entered into two 18-month forward sale agreements with
respect to a total of 1.1 million shares of its common stock at an initial
forward sale price of $190.56 per share, which is net of issuance costs. Under
the forward sale agreements, the forward sale price is subject to adjustment on
a daily basis based on a floating interest rate factor equal to a specified
daily rate less a spread and will be decreased based on amounts related to
dividends on MAA's common stock during the term of the forward sale agreements.
No shares had been settled under the forward sale agreements as of June 30,
2022. Subject to certain conditions, we generally have the right to elect cash
or net share

                                                                              36

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settlement under the forward sale agreements, although we expect to settle the
forward sale agreements entirely by the full physical delivery of shares of
MAA's common stock in exchange for cash proceeds. We intend to use any cash
proceeds upon settlement of the forward sale agreements to fund our development
and redevelopment activities, among other potential uses.

In November 2021, the Company entered into an equity distribution agreement to
establish a new at-the-market, or ATM, sharing offering program, replacing MAA's
previous ATM program and allowing MAA to sell shares of its common stock from
time to time to or through its sales agents into the existing market at current
market prices, and to enter into separate forward sales agreements to or through
its forward purchasers. Under its current ATM program, MAA has the authority to
issue up to an aggregate of 4.0 million shares of its common stock, at such
times to be determined by MAA. MAA has no obligation to issue shares through the
ATM program. During the six months ended June 30, 2022 and 2021, MAA did not
sell any shares of common stock under its ATM program. As of June 30, 2022,
there were 4.0 million shares remaining under the ATM program.

For more information regarding our equity capital resources, see Note 8 and Note
9 to the condensed consolidated financial statements included in this Quarterly
Report on Form 10-Q.

Material Cash Requirements

As of June 30, 2022, we had $125.7 million in debt obligations maturing in the
year ending December 31, 2022 as well as interest payments on fixed rate debt
obligations of $78.1 million. As of June 30, 2022, we also had obligations to
make additional capital contributions to three technology-focused limited
partnerships in which we hold equity interests. The capital contributions may be
called by the general partners at any time after giving appropriate notice. As
of June 30, 2022, we had committed to make additional capital contributions
totaling up to $31.7 million if and when called by the general partners of the
limited partnerships.

We have other material cash requirements that do not represent contractual obligations, but we expect to incur in the ordinary course of our business.


As of June 30, 2022, we had five development communities under construction
totaling 1,759 apartment units once complete. Expected total costs for the five
development projects are $444.0 million, of which $230.4 million had been
incurred through June 30, 2022. We expect to have additional development
projects in the future. In addition, our property redevelopment and
repositioning activities are ongoing, and we incur expenditures relating to
recurring capital replacements, which typically include scheduled carpet
replacement, new roofs, HVAC units, plumbing, concrete, masonry and other
paving, pools and various exterior building improvements. For the year ending
December 31, 2022, we expect that our total capital expenditures relating to our
development activities, our property redevelopment and repositioning activities
and recurring capital replacements will be in line with our total capital
expenditures for the year ended December 31, 2021.

In July 2022, we funded the acquisition of a multifamily apartment community for
approximately $73.0 million primarily from the proceeds we received from the
sale of two multifamily apartment communities in June 2022.

We typically declare cash dividends on MAA's common stock on a quarterly basis,
subject to approval by MAA's Board of Directors. The current annual dividend
rate is $5.00 per common share. The timing and amount of future dividends will
depend on actual cash flows from operations, our financial condition, capital
requirements, the annual distribution requirements under the REIT provisions of
the Internal Revenue Code of 1986 and other factors as MAA's Board of Directors
deems relevant. MAA's Board of Directors may modify our dividend policy from
time to time.

For information regarding our material cash requirements as of December 31, 2021, see Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 17, 2022.

Inflation


Our resident leases at our apartment communities allow for adjustments in the
rental rate at the time of renewal, which may enable us to seek rent increases.
The majority of our leases are for one year or less. The short-term nature of
these leases generally serves to reduce our risk to adverse effects of inflation
on our revenues.

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Critical Accounting Estimates


Please refer to our Annual Report on Form 10-K for the year ended December 31,
2021, filed with the SEC on February 17, 2022, for discussions of our critical
accounting estimates. During the three months ended June 30, 2022, there were no
material changes to these estimates.

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