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MID-AMERICA APARTMENT COMMUNITY, INC.

(MAA)
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MID AMERICA APARTMENT COMMUNITIES INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

10/27/2022 | 04:21pm EST
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 September 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 September 30,
2022, we owned and operated 292 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 September 30,
2022, 34 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 September 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 and storm related expenses
related to Hurricane Ian. 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:

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;
•
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;

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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 and natural disasters;
•
disease outbreaks and other public health events, such as the COVID-19 pandemic,
and measures that are taken by federal, state, and local governmental
authorities in response to such outbreaks and 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 September 30, 2022


For the three months ended September 30, 2022, net income available for MAA
common shareholders was $121.4 million as compared to $83.6 million for the
three months ended September 30, 2021. Results for the three months ended
September 30, 2022 included $0.4 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 September 30, 2021 included $13.4
million of non-cash gain related to the embedded derivative in the MAA Series I
preferred shares. Revenues for the three months ended September 30, 2022
increased 15.1% as compared to the three months ended September 30, 2021, driven
by a 14.6% increase in our Same Store segment. Property operating expenses,
excluding depreciation and amortization, for the three months ended September
30, 2022 increased by 10.8% as compared to the three months ended September 30,
2021, driven by a 10.1% 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 September 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 16.7% for the three months ended
September 30, 2022 as compared to the three months ended September 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 September 30, 2022, average physical
occupancy for our Same Store segment was 95.8%, as compared to 96.4% for the
three months ended September 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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Though demand for apartments moderated during the third quarter of 2022, we were
able to maintain strong rent growth. 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 third quarter of 2022 were strong,
we continue to monitor pressures surrounding inflation trends and supply chain
challenges. 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 nine months ended September 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 over the long term. Supply chain
and inflationary pressures have driven higher operating expenses during the
three and nine months ended September 30, 2022, particularly in personnel,
repairs and maintenance and real estate taxes, 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 September 30, 2022 to the three months ended September 30, 2021


For the three months ended September 30, 2022, we achieved net income available
for MAA common shareholders of $121.4 million, a 45.3% increase as compared to
the three months ended September 30, 2021, and total revenue growth of $68.2
million, representing a 15.1% increase in property revenues as compared to the
three months ended September 30, 2021. The following discussion describes the
primary drivers of the increase in net income available for MAA common
shareholders for the three months ended September 30, 2022 as compared to the
three months ended September 30, 2021.

Property Revenues

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


                              Three months ended September 30,
                                 2022                   2021              Increase           % Increase
Same Store                 $        495,377       $        432,206     $        63,171                14.6 %
Non-Same Store and Other             25,406                 20,369               5,037                24.7 %
Total                      $        520,783       $        452,575     $        68,208                15.1 %


The increase in rental revenues for our Same Store segment for the three months
ended September 30, 2022 as compared to the three months ended September 30,
2021 was the primary driver of total property revenue growth. The Same Store
segment generated a 14.6% increase in revenues for the three months ended
September 30, 2022, primarily the result of average effective rent per unit
growth of 16.7% as compared to the three months ended September 30, 2021. The
increase in property revenues from the Non-Same Store and Other segment for the
three months ended September 30, 2022 as compared to three months ended
September 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 September 30, 2022 and
2021 (dollars in thousands):

                              Three months ended September 30,
                                 2022                   2021              Increase           % Increase
Same Store                 $        179,761       $        163,324     $        16,437                10.1 %
Non-Same Store and Other             11,662                  9,514               2,148                22.6 %
Total                      $        191,423       $        172,838     $        18,585                10.8 %


The increase in property operating expenses for our Same Store segment for the
three months ended September 30, 2022 as compared to the three months ended
September 30, 2021 was primarily driven by increases in real estate tax expense
of $5.6 million, personnel expense of $3.3 million, building repairs and
maintenance of $2.7 million, utilities expense of $2.4 million, and office
operations expense of $1.5 million. The increase in property operating expenses
from the Non-Same Store and Other segment for the three months ended September
30, 2022 as compared to three months ended September 30, 2021 was primarily the
result of $1.6 million in storm-related expenses related to Hurricane Ian that
are recorded in Non-Same Store and Other operating expenses.

                                                                            

30

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Depreciation and Amortization


Depreciation and amortization expense for the three months ended September 30,
2022 was $136.9 million, an increase of $2.3 million as compared to the three
months ended September 30, 2021. The increase was primarily driven by the
recognition of depreciation expense associated with our development and capital
spend activities completed after September 30, 2021 in the normal course of
business through September 30, 2022.

Other Income and Expenses


Property management expenses for the three months ended September 30, 2022 were
$16.3 million, an increase of $2.4 million as compared to the three months ended
September 30, 2021. General and administrative expenses for the three months
ended September 30, 2022 were $12.2 million, a decrease of $0.5 million as
compared to the three months ended September 30, 2021.

Interest expense for the three months ended September 30, 2022 was $38.6 million, consistent with the three months ended September 30, 2021.


Other non-operating expense (income) for the three months ended September 30,
2022 was $1.7 million of expense as compared to $10.3 million of income for the
three months ended September 30, 2021, a decrease of $12.1 million. The expense
for the three months ended September 30, 2022 was driven by $0.4 million of
non-cash loss related to the fair value adjustment of the embedded derivative
and $8.2 million of non-cash loss from investments, partially offset by $7.0
million in casualty gains primarily due to winter storm Uri. The income for the
three months ended September 30, 2021 was driven by $13.4 million of non-cash
gain related to the fair value adjustment of the embedded derivative and $10.1
million of non-cash gain from investments, partially offset by $13.4 million of
debt extinguishment costs.

Comparison of the nine months ended September 30, 2022 to the nine months ended September 30, 2021


For the nine months ended September 30, 2022, we achieved net income available
for MAA common shareholders of $441.0 million, a 27.7% increase as compared to
the nine months ended September 30, 2021, and total revenue growth of $177.4
million, representing a 13.5% increase in property revenues as compared to the
nine months ended September 30, 2021. The following discussion describes the
primary drivers of the increase in net income available for MAA common
shareholders for the nine months ended September 30, 2022 as compared to the
nine months ended September 30, 2021.

Property Revenues

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

                               Nine months ended September 30,
                                 2022                   2021              Increase          % Increase
Same Store                 $      1,422,014       $      1,252,755     $      169,259                13.5 %
Non-Same Store and Other             69,887                 61,752              8,135                13.2 %
Total                      $      1,491,901       $      1,314,507     $      177,394                13.5 %


The increase in rental revenues for our Same Store segment for the nine months
ended September 30, 2022 as compared to the nine months ended September 30, 2021
was the primary driver of total property revenue growth. The Same Store segment
generated a 13.5% increase in revenues for the nine months ended September 30,
2022, primarily the result of average effective rent per unit growth of 14.5% as
compared to the nine months ended September 30, 2021. The increase in property
revenues from the Non-Same Store and Other segment for the nine months ended
September 30, 2022 as compared to nine months ended September 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 nine months ended September 30, 2022 and
2021 (dollars in thousands):

                               Nine months ended September 30,
                                 2022                   2021              Increase            % Increase
Same Store                 $        511,518       $        475,608     $        35,910                  7.6 %
Non-Same Store and Other             31,002                 28,459               2,543                  8.9 %
Total                      $        542,520       $        504,067     $        38,453                  7.6 %




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The increase in property operating expenses for our Same Store segment for the
nine months ended September 30, 2022 as compared to the nine months ended
September 30, 2021 was primarily driven by increases in real estate tax expense
of $9.2 million, personnel expense of $7.7 million, building repairs and
maintenance of $7.1 million, utilities expense of $4.9 million, office
operations expense of $3.7 million and insurance expense of $2.3 million. The
increase in property operating expenses for our Non-Same Store and Other segment
for the nine months ended September 30, 2022 as compared to the nine months
ended September 30, 2021 was primarily the result of $1.6 million in
storm-related expenses related to Hurricane Ian that are recorded in Non-Same
Store and Other operating expenses.

Depreciation and Amortization


Depreciation and amortization expense for the nine months ended September 30,
2022 was $404.8 million, an increase of $6.8 million as compared to the nine
months ended September 30, 2021. The increase was primarily driven by the
recognition of depreciation expense associated with our development and capital
spend activities completed after September 30, 2021 in the normal course of
business through September 30, 2022.

Other Income and Expenses


Property management expenses for the nine months ended September 30, 2022 were
$48.4 million, an increase of $7.9 million as compared to the nine months ended
September 30, 2021. General and administrative expenses for the nine months
ended September 30, 2022 were $44.1 million, an increase of $5.3 million as
compared to the nine months ended September 30, 2021.

Interest expense for the nine months ended September 30, 2022 was $116.7 million, a decrease of $1.1 million as compared to the nine months ended September 30, 2021. The decrease was primarily due to a decrease in our effective interest rate during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.

For the nine months ended September 30, 2022, we disposed of two apartment communities, resulting in gains on sale of depreciable assets of $132.0 million. For the nine months ended September 30, 2021, we disposed of four apartment communities, resulting in gains on sale of depreciable assets of $134.5 million.


Other non-operating expense (income) for the nine months ended September 30,
2022 was $19.2 million of expense as compared to $14.6 million of income for the
nine months ended September 30, 2021, a decrease of $33.8 million. The expense
for the nine months ended September 30, 2022 was driven by $10.4 million of
non-cash loss related to the fair value adjustment of the embedded derivative
and $39.3 million of non-cash loss from investments, partially offset by $29.2
million in casualty gains primarily due to winter storm Uri. The income for the
nine months ended September 30, 2021 was driven by $11.5 million of non-cash
gain related to the fair value adjustment of the embedded derivative and $18.0
million of non-cash gain from investments, partially offset by $13.4 million of
debt extinguishment costs and $0.9 million of COVID-19 related expenses.

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 nine months ended
September 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
                                                September 30,               

Nine months ended September 30,

                                            2022             2021              2022                   2021
Net income available for MAA common
shareholders                             $  121,389       $   83,557     $        441,049       $        345,384
Depreciation and amortization of real
estate assets                               135,023          132,803              399,366                392,586
Loss (gain) on sale of depreciable
real estate assets                                1              313             (131,963 )             (134,515 )
Depreciation and amortization of real
estate assets
  of real estate joint venture                  156              154                  466                    463
Net income attributable to
noncontrolling interests                      3,392            2,568               12,025                 11,636
FFO attributable to the Company             259,961          219,395              720,943                615,554
Loss (gain) from embedded derivative
in preferred shares(1)                          425          (13,432 )             10,364                (11,492 )
Gain on sale of non-depreciable real
estate assets                                  (431 )           (170 )               (809 )                 (202 )
Loss (gain) on investments, net of
tax(1)(2)                                     6,470           (7,985 )             31,036                (14,231 )
Net casualty (gain) loss and other
settlement proceeds(3)                       (7,046 )            244              (29,171 )                2,004
Loss on debt extinguishment(1)                   47           13,354                   47                 13,391
Legal costs and settlements, net(1)               -             (700 )                535                   (716 )
COVID-19 related costs(1)                        60              492                  502                    911
Mark-to-market debt adjustments(4)               19               67                   90                    234
Core FFO                                 $  259,505       $  211,265     $        733,537       $        605,453


(1)

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

(2)

For the three and nine months ended September 30, 2022, loss (gain) on
investments are presented net of tax benefit of $1.7 million and $8.3 million,
respectively. For the three and nine months ended September 30, 2021, loss
(gain) on investments are presented net of tax expense of $2.1 million and $3.8
million, respectively.
(3)
For the three and nine months ended September 30, 2022, we recognized a gain of
$7.2 million and $27.6 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. During the three and nine months ended
September 30, 2021, we incurred casualty losses related to winter storm Uri. 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 September 30, 2022 was $259.5 million, an
increase of $48.2 million as compared to the three months ended September 30,
2021, primarily as a result of an increase in property revenues of $68.2
million, partially offset by increases in property operating expenses, excluding
depreciation and amortization, of $18.6 million and property management expenses
of $2.4 million.

Core FFO for the nine months ended September 30, 2022 was $733.5 million, an
increase of $128.1 million as compared to the nine months ended September 30,
2021, primarily as a result of an increase in property revenues of $177.4
million, partially offset by increases in property operating expenses, excluding
depreciation and amortization, of $38.5 million, property management expenses of
$7.9 million and general and administrative expenses of $5.3 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 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.

                                                                            

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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 September 30, 2022, we had $1.2 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 $807.3 million for the nine months
ended September 30, 2022 as compared to $678.3 million for the nine months ended
September 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 $414.6 million for the nine months
ended September 30, 2022 as compared to $269.7 million for the nine months ended
September 30, 2021. The primary drivers of the change were as follows (dollars
in thousands):

                                               Primary drivers of cash (outflow)
                                                             inflow
                                                  during the nine months ended          (Decrease)
                                                         September 30,                   Increase
                                                    2022                2021           in Net Cash

Purchases of real estate and other assets $ (252,628 ) $ (46,028 ) $ (206,600 ) Capital improvements and other

                       (219,221 )          (208,563 )          (10,658 )
Development costs                                    (124,262 )          (179,810 )           55,548
Contributions to affiliates                           (11,100 )            (1,971 )           (9,129 )
Proceeds from real estate asset dispositions          165,827             158,812              7,015
Proceeds from insurance recoveries                     26,385               7,422             18,963



The increase in cash outflows for purchases of real estate and other assets was
driven by the nature of the real estate assets acquired during the nine months
ended September 30, 2022 as compared to the nine months ended September 30,
2021. During the nine months ended September 30, 2022, we acquired two apartment
communities. No apartment communities were acquired during the nine months ended
September 30, 2021. The increase in cash outflows for capital improvements and
other was primarily driven by increased capital spend relating to our property
redevelopment and repositioning activities and recurring capital replacements,
partially offset by decreased reconstruction-related capital expenditures
relating to winter storm Uri during the nine months ended September 30, 2022 as
compared to the nine months ended September 30, 2021. The decrease in cash
outflows for development costs was primarily driven by decreased development
spend during the nine months ended September 30, 2022 as compared to the nine
months ended September 30, 2021. The increase in cash outflows for contributions
to affiliates was driven by investments in the technology-focused limited
partnerships during the nine months ended September 30, 2022, while less limited
partnership contributions were made during the nine months ended September 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
nine months ended September 30, 2022 as compared to the nine months ended
September 30, 2021. During the nine months ended September 30, 2022, we sold two
apartment communities as compared to four apartment communities during the nine
months ended September 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 nine months ended
September 30, 2022.

Cash Flows from Financing Activities


Net cash used in financing activities was $469.7 million for the nine months
ended September 30, 2022 as compared to $402.7 million for the nine months ended
September 30, 2021. The primary drivers of the change were as follows (dollars
in thousands):

                                          Primary drivers of cash inflow (outflow)
                                           during the nine months ended September          Increase
                                                             30,                          (Decrease)
                                               2022                    2021               in Net Cash
Net change in commercial paper            $       125,000       $          (147,000 )   $       272,000
Proceeds from notes payable                             -                   594,423            (594,423 )
Principal payments on notes payable              (126,043 )                (466,817 )           340,774
Dividends paid on common shares                  (395,258 )                (352,384 )           (42,874 )
Acquisition of noncontrolling interests           (43,070 )                       -             (43,070 )




                                                                              34

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The increase in cash inflows related to the net change in commercial paper
resulted from the increase in net borrowings of $125.0 million on our commercial
paper program during the nine months ended September 30, 2022 as compared to the
decrease in net borrowings of $147.0 million on our commercial paper program
during the nine months ended September 30, 2021. The decrease in cash inflows
related to proceeds from notes payable primarily resulted from no issuance of
unsecured senior notes during the nine months ended September 30, 2022 as
compared to the issuance of $600.0 million of unsecured senior notes during the
nine months ended September 30, 2021. The decrease in cash outflows from
principal payments on notes payable primarily resulted from the retirement of
$125.0 million of unsecured senior notes during the nine months ended September
30, 2022 as compared to the retirement of $222.0 million of senior unsecured
private placement notes, $125.0 million of unsecured senior notes and $118.6
million of property mortgages during the nine months ended September 30, 2021.
The increase in cash outflows from dividends paid on common shares primarily
resulted from the increase in the dividend rate to $3.425 per share during the
nine months ended September 30, 2022 as compared to the dividend rate of $3.075
per share during the nine months ended September 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 nine months ended September 30, 2022.

Debt


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

                                                                     Average Years
                                                    Principal           to Rate
                                                     Balance           Maturity          Effective Rate
Unsecured debt
Fixed rate senior notes                            $  4,050,000                 6.6                  3.4 %
Variable rate commercial paper                          125,000                 0.1                  3.4 %
Debt issuance costs, discounts, premiums and
fair market value adjustments                           (20,180 )
Total unsecured debt                               $  4,154,820                 6.4                  3.4 %
Secured debt
Fixed rate property mortgages                      $    367,512                26.1                  4.4 %
Debt issuance costs                                      (3,181 )
Total secured debt                                 $    364,331                26.1                  4.4 %
Total debt                                         $  4,519,151                 8.0                  3.4 %
Total fixed rate debt                              $  4,394,151                 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 September 30, 2022 (dollars in thousands):

                Commercial Paper & Revolving                            Property
                   Credit Facility?¹??²?          Senior Notes         Mortgages             Total
2022            $                    125,000     $             -     $            -     $       125,000
2023                                       -             349,340                  -             349,340
2024                                       -             398,637                  -             398,637
2025                                       -             397,580              4,347             401,927
2026                                       -             297,009                  -             297,009
2027                                       -             596,351                  -             596,351
2028                                       -             396,543                  -             396,543
2029                                       -             559,415                  -             559,415
2030                                       -             297,456                  -             297,456
2031                                       -             444,819                  -             444,819
Thereafter                                 -             292,670            359,984             652,654
Total           $                    125,000     $     4,029,820     $      364,331     $     4,519,151


(1)
As of September 30, 2022, borrowings totaling $125.0 million were outstanding
under MAALP's unsecured commercial paper program. Under the terms of the
program, MAALP may issue up to a maximum aggregate amount outstanding at any
time of $625.0 million. For the three months ended September 30, 2022, average
daily borrowings outstanding under the commercial paper program were $29.8
million.

(2)

There were no borrowings outstanding under MAALP's $1.25 billion unsecured revolving credit facility as of September 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 September 30, 2022 (dollars in thousands):

              Fixed Rate Debt       Effective Rate
2023         $         349,340                  4.2 %
2024                   398,637                  4.0 %
2025                   401,927                  4.2 %
2026                   297,009                  1.2 %
2027                   596,351                  3.7 %
2028                   396,543                  4.2 %
2029                   559,415                  3.7 %
2030                   297,456                  3.1 %
2031                   444,819                  1.8 %
Thereafter             652,654                  3.8 %
Total        $       4,394,151                  3.4 %

Unsecured Revolving Credit Facility & Commercial Paper


In July 2022, MAALP amended its unsecured revolving credit facility, increasing
its borrowing capacity to $1.25 billion with an option to expand to $2.0
billion. The revolving credit facility 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. The revolving credit facility has a maturity date in October
2026 with an option to extend for two additional six-month periods. As of
September 30, 2022, there was no outstanding balance under the revolving credit
facility, while $4.3 million of capacity was used to support outstanding letters
of credit.

MAALP has established an unsecured commercial paper program, whereby it can
issue unsecured commercial paper notes with varying maturities not to exceed 397
days. In September 2022, MAALP amended its commercial paper program to increase
the maximum aggregate principal amount of notes that may be outstanding from
time to time under the program from $500.0 million to $625.0 million. As of
September 30, 2022, there were $125.0 million of borrowings outstanding under
the commercial paper program.

Unsecured Senior Notes

As of September 30, 2022, MAALP had $4.1 billion of publicly issued unsecured senior notes outstanding.

In September 2022, MAALP retired the remaining $125.0 million portion of its publicly issued unsecured senior notes due in December 2022.

Secured Property Mortgages

MAALP maintains secured property mortgages with various life insurance companies. As of September 30, 2022, we had $367.5 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 September 30, 2022, MAA owned 115,447,252 OP Units, comprising a 97.3%
limited partnership interest in MAALP, while the remaining 3,196,429 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 3,196,429 shares of its common stock
that, as of September 30, 2022, were issuable upon redemption of OP Units, in
order for those shares to be sold freely in the public markets.

                                                                            

36

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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 September 30,
2022. Subject to certain conditions, we generally have the right to elect cash
or net share 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, share 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 nine months ended September 30, 2022 and 2021, MAA did
not sell any shares of common stock under its ATM program. As of September 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 September 30, 2022, we had $125.4 million of outstanding debt obligations
that will mature in the year ending December 31, 2022, and we were obligated to
make $46.3 million of additional interest payments on fixed rate debt
obligations in the year ending December 31, 2022. For a schedule of the maturity
dates of our outstanding debt beyond 2022, see the "Liquidity and Capital
Resources - Debt" section above. As of September 30, 2022, we also had
obligations to make additional capital contributions to four 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 September 30, 2022, we had committed to make
additional capital contributions totaling up to $32.9 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 September 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 $266.1 million had been
incurred through September 30, 2022. 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 less than our total capital
expenditures for the year ended December 31, 2021 primarily due to a lesser
number of communities under development in the year ending December 31, 2022 as
compared to the year ended December 31, 2021. We expect to have additional
development projects in the future.

During the three months ended September 30, 2022, we funded the acquisitions of
two multifamily apartment communities for $73.0 million and $140.0 million
primarily from the proceeds we received from the sale of multifamily apartment
communities in 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.

                                                                              37

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Legal Matter


In October 2022, six plaintiffs individually and on behalf of a purported class
of plaintiffs, filed a complaint against RealPage, Inc., Greystar Real Estate
Partners, LLC, Lincoln Property Co., FPI Management, Inc., MAA, Avenue5
Residential, LLC, Equity Residential, Essex Property Trust, Inc., Thrive
Communities Management, LLC and Security Properties, Inc. in the United States
District Court for the Southern District of California. The lawsuit alleges that
RealPage and lessors of multifamily residential real estate conspired to
artificially inflate the prices of multifamily residential real estate above
competitive levels. The plaintiffs are seeking monetary damages and attorneys'
fees and costs and injunctive relief. We believe the lawsuit is without merit
and will vigorously defend the action.

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 September 30, 2022, there
were no material changes to these estimates.

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