Overview of MAA’s Financial Performance

MAA, an S&P 500 company, is a real estate investment trust (REIT) that owns and operates apartment communities primarily in the Southeast, Southwest and Mid-Atlantic regions of the U.S. For the year ended December 31, 2024, MAA reported net income available for common shareholders of $523.9 million, a 4.6% decrease compared to the prior year. Total revenues increased 2.0% to $2.19 billion, driven by a 44.7% increase in the Non-Same Store and Other segment.

The decrease in net income was primarily due to higher property operating expenses, which increased 6.8% to $820.1 million. This was driven by a 3.9% increase in the Same Store segment and a 71.8% increase in the Non-Same Store and Other segment. Depreciation and amortization expense also increased by $20.6 million, or 3.7%, due to completed development projects and ongoing capital spending.

Revenue and Profit Trends

MAA’s Same Store segment, which represents stabilized apartment communities owned for at least 12 months, saw a 0.5% increase in revenues for the year. This was primarily driven by a 0.3% increase in average effective rent per unit to $1,688. Average physical occupancy in the Same Store segment was 95.5%, down slightly from 95.6% the prior year. Resident turnover decreased to 42.0% from 44.9%.

The Non-Same Store and Other segment, which includes recently acquired, developed or repositioned communities, saw a 44.7% increase in revenues. This was due to the addition of new apartment communities to the portfolio.

On the expense side, property operating costs for the Same Store segment increased 3.9%, driven by higher personnel, real estate taxes, utilities, office operations, insurance and marketing expenses. The Non-Same Store and Other segment saw a 71.8% increase in operating expenses due to the new communities.

Overall, MAA’s core funds from operations (Core FFO), a key industry metric, decreased 3.0% to $1.06 billion, primarily due to the higher operating expenses.

Strengths and Weaknesses

A key strength of MAA is its diversified portfolio of apartment communities across 16 states and the District of Columbia. The company has a presence in 39 defined markets and approximately 150 submarkets, with a mix of garden-style, mid-rise and high-rise properties at various price points. This geographic and product diversification helps mitigate exposure to economic issues in any one market.

Demand for apartments in MAA’s markets remained strong in 2024, contributing to steady occupancy, low resident turnover and solid renewal pricing. The company believes this demand is driven by favorable economic and population growth trends in its regions.

However, MAA faces some headwinds, including elevated interest rates and inflation pressures. The company’s net debt to adjusted EBITDA ratio increased to 4.0x as of December 31, 2024, up from 3.6x the prior year, due to higher debt levels and lower adjusted EBITDA. Rising interest rates on variable-rate debt will continue to impact the company’s financing costs.

Additionally, while apartment demand has been robust, MAA is monitoring potential risks such as worsening economic conditions, which could suppress rent growth and collections going forward.

Outlook and Future Plans

Looking ahead, MAA expects to see a continued decline in new apartment deliveries impacting its portfolio in 2025, leading to a new multi-year cycle where demand outpaces supply. The company believes this will be favorable for rent growth and occupancy.

To fund its growth, MAA has access to $1.0 billion in combined unrestricted cash, cash equivalents and available capacity under its revolving credit facility as of December 31, 2024. The company plans to use this liquidity, along with future debt and equity issuances, to finance its ongoing development, redevelopment and acquisition activities.

MAA has seven development communities under construction totaling 2,312 apartment units, with $851.5 million in total expected costs. The company also has an active pipeline of property redevelopment and repositioning projects, as well as recurring capital expenditures, which it expects will continue at levels similar to 2024.

Overall, while facing some near-term headwinds, MAA remains well-positioned with its diversified portfolio, strong liquidity and access to capital markets. The company is focused on navigating the current environment while positioning itself for long-term growth as market conditions improve.