MEMPHIS, Tenn., Nov. 2 /PRNewswire-FirstCall/ -- Mid-America Apartment
Communities, Inc. (NYSE: MAA) (the "Company") reported net income available
for common shareholders for the quarter ended September 30, 2006, of
$2,139,000, or $0.09 per common share, as compared to net income of $125,000,
or $0.01 per common share, for the same quarter a year ago. For the nine month
period ended September 30, 2006, net income available for common shareholders
was $6,176,000, or $0.26 per common share, as compared to $5,296,000, or $0.25
per common share, for the equivalent period a year ago. The Company recorded
gains from the disposition of joint venture assets and an incentive fee in the
second quarter of 2005 totaling $4,757,000.
Funds from operations ("FFO"), the widely accepted measure of performance
for real estate investment trusts, was $21,972,000, or $0.82 per share/unit,
for the third quarter of 2006, as compared to $18,299,000, or $0.75 per
share/unit, for the same quarter a year ago, an increase of 9.3%. The third
quarter FFO per share/unit result was 2 cents above the mid-point of the range
of the Company's guidance. For the nine month period ending September 30,
2006, FFO was $64,630,000, or $2.50 per share/unit, compared to $57,542,000,
or $2.38 per share/unit, for the same nine-month period a year ago. Included
in prior year FFO is a total of 8-1/2 cents per share/unit from the joint
venture incentive fee and the sale of land earned during the second quarter;
excluding this, the year-over-year growth of FFO per share/unit is 9.2%. A
reconciliation of FFO to net income and an expanded discussion of the
components of FFO can be found later in this release.
Highlights:
- FFO per share results for the quarter is a record high third quarter
performance for the Company.
- Same store physical occupancy at quarter end was strong at 95.9%.
- Same store NOI for the third quarter increased by 8.9% over the prior
year; the best third quarter performance the Company has ever achieved.
- Effective pricing on a same-store basis increased by 5.0% over the same
quarter a year ago; concessions dropped from 4.4% of net potential rent
to 3.1%, and average rent per unit increased by 3.6%.
- The Company invested $83 million for the purchase of three high quality
properties totaling 808 apartments, including two properties in lease-
up in Phoenix, AZ, marking the entry of the Company into this rapidly
growing Sunbelt market. On October 12th, the Company also acquired a
306-unit upscale property in Savannah, GA.
- The Company's fixed charge coverage continued to improve to 2.17, and
balance sheet capacity is substantial, with debt and preferred stock at
just 45% of total market value at quarter end.
- The Company anticipates the sale of its remaining joint venture
property, which is expected to result in a gain on sale of
approximately $5 million, plus an incentive fee (net of related costs)
of approximately 3 cents per share.
Eric Bolton, Chairman and CEO said, "Operating results for the third
quarter reflect the continued encouraging trend of strong market recovery and
the growing demand for apartment housing throughout the high job growth region
of the Sunbelt states. Record same-store net operating income and overall FFO
performance, improving rent growth, high occupancy, and lower resident
turnover all support what we believe will be a trend of sustained recovery in
operating results. The benefits of repositioning Mid-America's portfolio over
the last few years, along with the enhancements made to our operating
platform, further support the prospects of strong performance from our
portfolio of high-quality properties as we head into 2007. Mid-America's
capacity to support higher levels of portfolio expansion continues to build
and we're excited about increasing opportunities to step up activities
associated with growing our diversified Sunbelt portfolio across small, medium
and large markets."
Operating Results: Reflecting Market Strength and Growth
FFO per share/unit for the quarter increased by 9.3%, mainly as a result
of improved same-store operating performance, but also because the Company
grew its portfolio of apartment units to 39,987, up from 38,227 apartment
units a year ago.
The Company renewed its insurance policies effective July 1st, and
experienced an increase in property insurance premium of $3 million on a 12
month basis. Partially offsetting the increased income from operations was a
$1.2 million increase in G&A and property management expenses, mainly due to
increased bonuses for property personnel, increased asset management costs
(including expenses related to the yield management test), and increased
franchise and excise taxes. The average interest rate for the quarter
increased by only 4 basis points from a year ago, contributing to an increase
of interest expense from $15.3 million a year ago to $15.5 million.
Same Store Results: Another Record
Percent Change From Three Months Ended September 30, 2005 (Prior Year)
Average
Physical Rental
Markets Revenue(1) Expense NOI(1) Occupancy Rate
---------------------- ---------- ------- ------ --------- -------
Large Tier 11.9% -0.5% 24.0% -0.3% 3.4%
Middle Tier 7.0% 6.4% 7.5% 0.5% 3.5%
Small Tier 5.4% 6.5% 4.7% -1.0% 3.9%
---------- ------- ------ --------- -------
Operating Same Store 7.7% 4.5% 10.2% -0.2% 3.6%
Total Same Store 7.0% 8.9%
(1) Revenue and NOI by market and for operating same store are presented
before the impact of straight-line revenue adjustments. Total same
store includes straight-line revenue adjustments.
Strong occupancy continued through the third quarter, economic occupancy
increased to 90.1%, up from 87.2% in the prior year, and physical occupancy
ended the quarter at 95.9%, compared to 96.1% last year. Net effective
pricing, reflecting both the impact of rising rents and declining concessions,
increased by a very strong 5.0% over the prior year. Rolling twelve-month
turnover dropped from 62.1% to 61.7%, contributing to the strong revenue
performance. Revenues increased 7.0% over the same quarter a year ago, and
concessions dropped from 4.4% of revenue to 3.1% (after the straight-line
adjustment). Average rent per unit increased by 3.6% to $714. Our large tier
markets, especially Dallas and Atlanta which have been late to feel the
apartment recovery, began to pick up momentum as increased occupancy enabled
concessions to continue to be reduced and set the stage for more robust rent
growth from this segment of the portfolio next year.
Operating expenses (before property insurance and taxes) continued to
increase at a moderate pace, rising 3.6% over the same quarter a year ago.
Property insurance increased by 38% reflecting the increase in premiums
effective July 1, 2006. Total property expenses increased by 4.5%.
NOI increased by 8.9% compared to the same quarter a year ago, with
exceptionally strong performance from the large tier markets.
Year to date, same store revenues have increased by an average of 6.0%,
with NOI up by 7.7%.
Excluded from the same-store group are 6 properties which are part of the
Company's redevelopment program, and which are going through an extensive
rehab. The supplementary schedules also contain a report of same-store
performance which includes this 6-property group.
Acquisitions and Dispositions: Assuring a Strong Future
On September 6, 2006, the Company acquired the 328-unit Reserve at
Woodwind Lakes in Houston, TX, at an initial NOI yield of 7.2%. The property
was built in 1999. The purchase price was $20.9 million, including an assumed
loan of $14.6 million at 7.7%. On September 29, 2006, the Company purchased
two properties totaling 480 units currently in lease-up in Phoenix, AZ that
are just under 50% occupied for a total price of $62 million. The Company
plans to operate the two properties, which are adjacent to each other, as one
community, Talus Ranch at Sonoran Foothills, and anticipates a stabilized
annualized NOI yield once full lease-up is achieved in late 2007 of 6.4%.
An additional property, the 306-apartment unit Oaks of Wilmington Island
in Savannah, GA, was acquired on October 12, 2006, for $29.25 million. The
property was constructed in 1999, and the Company anticipates a first year NOI
yield of 6.8%, after investing refurbishment capital of $1 million in the
first year.
Since the two Phoenix properties are 50% occupied, the Company anticipates
modest dilution of FFO per share from the four acquisitions of 2 cents per
share in the fourth quarter. We anticipate that they will begin to be
accretive to FFO per share by the third quarter of 2007.
Financing for the properties was provided by equity raised from prior
share offerings, the loan assumption mentioned above, and the Company's credit
facilities.
Two of our Memphis properties, Hickory Farms and Gleneagles, are currently
being marketed for sale, with a sale likely in the first quarter of next year.
Both of these properties were part of the portfolio at the IPO in 1994, with
an average age of 25 years. Sale proceeds are expected to be in the $15
million range, and the disposition will not have a material impact on our
operating results.
Joint Venture: High Returns on Investment
The Company has received a verbal offer from its joint venture partner to
purchase its 1/3 interest in its joint venture property, The Verandas at
Timberglen, and expects a written offer imminently. The transaction is subject
to negotiation, but the Company expects the sale to be completed in the fourth
quarter, although the sale may not be consummated or could be delayed until
2007. The Company expects to receive total proceeds for its equity interest,
after the loan pay-off, of approximately $10 million, and to record a gain of
approximately $5 million, plus a $1 million incentive fee (which will be
included in FFO). The sales price represents $110,000 per unit, a 5.2% yield
of 2007's projected NOI, before the management fee.
Development: High Value Add
Brier Creek, the Company's 200-unit development in Raleigh, NC, is on
schedule to begin leasing in the second quarter of 2007. The 124-unit addition
to our St Augustine apartments in Jacksonville, FL, is expected to break
ground in the first quarter of 2007.
Redevelopment: Additional Internal Growth Upside
828 apartments in 23 communities have completed refurbishment, at an
average cost of $5,500 per unit. The average rent increase achieved (estimated
at above the normal rent increase) is $133, well above the level required to
meet our investment hurdle. It is anticipated that approximately 1,100
apartments will be refurbished by the end of this fiscal year.
Financing, Balance Sheet: Building Capacity
The Company's fixed charge coverage continued to improve and was 2.17,
compared to 2.00 for the same quarter a year ago. Despite $83 million of
acquisitions in the quarter, balance sheet strength and flexibility is
excellent, with leverage (debt plus preferred stock) at only 45% of market
capitalization as of the end of the quarter, and over $100 million of unused
debt capacity available. During the quarter, the Company raised $24 million in
additional common equity through its DRSPP, which was applied to fund
acquisitions.
Dividend: 51 Consecutive Dividend Payments
The Company declared its 51st consecutive quarterly common dividend on
August 22, 2006, payable on October 31, 2006, to holders of record on October
20, 2006.
The dividend was raised by 4 cents to $2.38 effective with the October
2005 distribution.
The Company's Board will review its dividend policy for 2007 at year end.
Outlook: Encouraging
FFO for the fourth quarter is forecast to be in the range $0.76 to $0.88,
which allows for the estimated 2 cent per share/unit dilutive impact of the
lease-up properties acquired in Phoenix, and for the 3-cent per share/unit
joint venture incentive fee that is expected to be earned in the quarter.
Should the joint venture sale not occur or be delayed into next year, then the
mid-point of our FFO forecast range will be reduced from 82 cents per
share/unit to 79 cents per share/unit. Reflecting the continued strong
performance of the properties, and the growing recovery of the Company's
large-tier markets, we anticipate that same store NOI for all of 2006 will
grow in the range of 6-1/2% to 7-1/2%, after adjusting for the one-time non-
cash concession revenue of $1.2 million last year.
Supplemental Material and Conference Call
Supplemental data to this release can be found on the investors page of
our web site at www.maac.net. The Company will host a conference call to
further discuss third quarter results on Friday, November 3, 2006, at 9:15 AM
Central Time. The conference call-in number is 866-793-1308 and the
moderator's name is Eric Bolton.
About Mid-America Apartment Communities, Inc.
MAA is a self-administered, self-managed apartment-only real estate
investment trust, which currently owns or has ownership interest in 40,293
apartment units throughout the Sunbelt region of the U.S. For further details,
please refer to our website at www.maac.net or contact Investor Relations at
investor.relations@maac.net or (901) 435-5371. 6584 Poplar Ave., Suite 300,
Memphis, TN 38138.
Forward-Looking Statements
Certain matters in this press release may constitute forward-looking
statements within the meaning of Section 27-A of the Securities Act of 1933
and Section 21E of the Securities and Exchange Act of 1934. Such statements
include, but are not limited to, statements made about anticipated market
conditions, anticipated acquisitions and/or dispositions, renovation and
development opportunities, and property financing. Actual results and the
timing of certain events could differ materially from those projected in or
contemplated by the forward-looking statements due to a number of factors,
including a downturn in general economic conditions or the capital markets,
competitive factors including overbuilding or other supply/demand imbalances
in some or all of our markets, shortage of acceptable property acquisition
candidates, changes in interest rates, real estate taxes, insurance costs, and
other items that are difficult to control, as well as the other general risks
inherent in the apartment and real estate businesses. Reference is hereby made
to the filings of Mid-America Apartment Communities, Inc., with the Securities
and Exchange Commission, including quarterly reports on Form 10-Q, reports on
Form 8-K, and its annual report on Form 10-K, particularly including the risk
factors contained in the latter filing.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
Three months ended Nine months ended
September 30, September 30,
------------------ -------------------
2006 2005 2006 2005
-------- ------- -------- ---------
Property revenues $82,696 $74,871 $240,954 $218,209
Management and fee income, net 53 51 157 272
Property operating expenses (35,111) (32,365) (98,970) (91,917)
Depreciation (19,613) (19,017) (57,899) (55,152)
Property management expenses (3,616) (2,749) (9,591) (8,449)
General and administrative (2,665) (2,329) (8,708) (7,148)
--------------------------------------------------------------------------
Income from continuing operations
before non-operating items 21,744 18,462 65,943 55,815
Interest and other non-property
income 162 70 494 357
Interest expense (15,505) (15,251) (47,039) (43,324)
Gain (loss) on debt extinguishment - 12 (551) (82)
Amortization of deferred financing
costs (519) (462) (1,508) (1,411)
Minority interest in operating
partnership income (375) (91) (1,196) (1,129)
(Loss) income from investments in
real estate joint ventures (16) (52) (135) 73
Incentive fee from real estate joint
ventures - - - 1,723
Net (loss) gain on insurance and
other settlement proceeds (54) 874 171 865
Gain on sale of non-depreciable
assets 32 - 32 334
Gain on dispositions within real
estate joint ventures - - - 3,034
--------------------------------------------------------------------------
Income from continuing operations 5,469 3,562 16,211 16,255
Discontinued operations:
Income from discontinued
operations 161 53 437 147
Asset impairment of discontinued
operations - - - (243)
Net loss on insurance and other
settlement proceeds of
discontinued operations - - - (25)
--------------------------------------------------------------------------
Net income 5,630 3,615 16,648 16,134
Preferred dividend distribution (3,491) (3,490) (10,472) (10,838)
--------------------------------------------------------------------------
Net income available for common
shareholders $2,139 $125 $6,176 $5,296
==========================================================================
Weighted average common shares -
Diluted 24,215 21,844 23,325 21,562
Net income per share available for
common shareholders $0.09 $0.01 $0.26 $0.25
FUNDS FROM OPERATIONS (in thousands except per share data)
Three months ended Nine months ended
September 30, September 30,
------------------ -------------------
2006 2005 2006 2005
-------- ------- -------- ---------
Net income $5,630 $3,615 $16,648 $16,134
Addback: Depreciation of real estate
assets 19,286 18,682 56,890 54,151
Subtract: Net (loss) gain on
insurance and other settlement
proceeds (54) 874 171 865
Subtract: Gain on dispositions
within real estate joint ventures - - - 3,034
Subtract: Net loss on insurance and
other settlement proceeds of
discontinued operations - - - (25)
Addback: Depreciation of real estate
assets of discontinued operations (1) - 159 160 477
Addback: Depreciation of real estate
assets of real estate joint ventures 118 116 379 363
Subtract: Preferred dividend
distribution 3,491 3,490 10,472 10,838
Addback: Minority interest in
operating partnership income 375 91 1,196 1,129
--------------------------------------------------------------------------
Funds from operations 21,972 18,299 64,630 57,542
Recurring capex (6,720) (5,035) (15,472) (12,244)
--------------------------------------------------------------------------
Adjusted funds from operations $15,252 $13,264 $49,158 $45,298
--------------------------------------------------------------------------
Weighted average common shares and
units - Diluted 26,716 24,465 25,835 24,192
Funds from operations per share and
unit - Diluted $0.82 $0.75 $2.50 $2.38
Adjusted funds from operations per
share and unit - Diluted $0.57 $0.54 $1.90 $1.87
(1) Amounts represent depreciation taken before communities classified as
discontinued operations.
CONSOLIDATED BALANCE SHEETS (in thousands)
September 30, December 31,
2006 2005
------------ ------------
Assets
Real estate assets
Land $204,569 $179,523
Buildings and improvements 1,888,083 1,740,818
Furniture, fixtures and equipment 50,032 46,301
Capital improvements in progress 10,549 4,175
Accumulated depreciation (522,721) (473,421)
Land held for future development 2,360 1,366
Commercial properties, net 6,966 7,345
Investments in and advances to real
estate joint ventures 3,839 4,182
-------------------------------------------------------------------------
Real estate assets, net 1,643,677 1,510,289
Cash and cash equivalents 7,689 14,064
Restricted cash 5,186 5,534
Deferred financing costs, net 15,715 15,338
Other assets 38,730 20,181
Goodwill 5,051 5,051
Assets held for sale 7,435 -
-------------------------------------------------------------------------
Total assets $1,723,483 $1,570,457
=========================================================================
Liabilities and Shareholders' Equity
Liabilities
Notes payable $1,202,217 $1,140,046
Accounts payable 678 3,278
Accrued expenses and other liabilities 50,827 28,380
Security deposits 7,498 6,429
Liabilities associated with assets
held for sale 213 -
-------------------------------------------------------------------------
Total liabilities 1,261,433 1,178,133
Minority interest 32,207 29,798
Shareholders' equity
Series F cumulative redeemable
preferred stock 5 5
Series H cumulative redeemable
preferred stock 62 62
Common stock 245 220
Additional paid-in capital 782,249 671,885
Other - (2,422)
Accumulated distributions in excess
of net income (363,717) (314,352)
Accumulated other comprehensive income 10,999 7,128
-------------------------------------------------------------------------
Total shareholders' equity 429,843 362,526
-------------------------------------------------------------------------
Total liabilities and
shareholders' equity $1,723,483 $1,570,457
=========================================================================
SHARE AND UNIT DATA (in thousands)
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2006 2005 2006 2005
-------- -------- -------- --------
Weighted average common shares
- Basic 23,990 21,548 23,099 21,278
Weighted average common shares
- Diluted 24,215 21,844 23,325 21,562
Weighted average common shares and
units - Basic 26,491 24,168 25,609 23,907
Weighted average common shares and
units - Diluted 26,716 24,465 25,835 24,192
Common shares at September 30
- Basic 24,291 21,748 24,291 21,748
Common shares at September 30
- Diluted 24,520 22,046 24,520 22,046
Common shares and units at
September 30 - Basic 26,784 24,364 26,784 24,364
Common shares and units at
September 30 - Diluted 27,013 24,662 27,013 24,662
NON-GAAP FINANCIAL DEFINITIONS
Funds From Operations (FFO)
FFO represents net income (computed in accordance with U.S. generally
accepted accounting principles, or GAAP) excluding extraordinary items,
minority interest in Operating Partnership income, gain on disposition of
real estate assets, plus depreciation of real estate and adjustments for
joint ventures to reflect FFO on the same basis. This definition of FFO
is in accordance with the National Association of Real Estate Investment
Trust's definition.
Disposition of real estate assets includes sales of real estate included
in discontinued operations as well as proceeds received from insurance
and other settlements from property damage.
Our calculation of FFO may differ from the methodology for calculating
FFO utilized by other REITs and, accordingly, may not be comparable to
such other REITs. FFO should not be considered as an alternative to net
income.
The Company believes that FFO is helpful in understanding the Company's
operating performance in that FFO excludes depreciation expense of real
estate assets. The Company believes that GAAP historical cost
depreciation of real estate assets is generally not correlated with
changes in the value of those assets, whose value does not diminish
predictably over time, as historical cost depreciation implies.
While the Company has included the amount charged to retire preferred
stock in excess of carrying values in its FFO calculation in response to
the SEC's Staff Policy Statement relating to EITF Topic D-42 concerning
the calculation of earnings per share for the redemption of preferred
stock, the Company believes that FFO before amount charged to retire
preferred stock in excess of carrying values is also an important measure
of operating performance as the amount charged to retire preferred stock
in excess of carrying values is a non-cash adjustment representing
issuance costs in prior periods for preferred stock.
Adjusted Funds From Operations(AFFO)
For purposes of these computations, AFFO is composed of FFO less
recurring capital expenditures. As an owner and operator of real estate,
we consider AFFO to be an important measure of performance from core
operations because AFFO measures our ability to control revenues,
expenses and recurring capital expenditures.
Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)
For purposes of these computations, EBITDA is composed of net income
before net gain on asset sales and insurance and other settlement
proceeds, and gain or loss on debt extinguishment, plus depreciation,
interest expense, and amortization of deferred financing costs. EBITDA
is a non-GAAP financial measure we use as a performance measure. As an
owner and operator of real estate, we consider EBITDA to be an important
measure of performance from core operations because EBITDA does not
include various income and expense items that are not indicative of our
operating performance. EBITDA should not be considered as an alternative
to net income as an indicator of financial performance. Our computation
of EBITDA may differ from the methodology utilized by other companies to
calculate EBITDA.
SOURCE Mid-America Apartment Communities, Inc.
Contact: Investor Relations of Mid-America Apartment Communities, +1-901-435-5371, or investor.relations@maac.net