mid-america apartment communities, inc. · sector average maa repositioned portfolio and...
TRANSCRIPT
1
MAA
Mid-America Apartment Communities, Inc.
MAA Capital Markets Update
November 2010
2
MAA
Focused Investor and Operator• Apartment Only• Market Rate Product• DisciplinedFull Cycle Performance• Long-Term Perspective• Upside Growth and Downside Protection• Solid Dividend SupportHigh Growth Region• Sunbelt Focus• Higher Job Growth• Higher Household FormationsCapital Allocation Strategy• Large and Secondary Markets• Value Investor• Primarily Acquirer versus DeveloperOperations Focused• Superior Asset Management and
Property Management Platform
Value Creation Strategy
3
MAA
Better full cycle performance, with lower volatility, drives stronger and more consistent long-term performance for MAA shareholders.
-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%
2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 10 E
Secto r A verage M A A
Repositioned portfolioand strengthened
platform = stronger “up”cycle performance profile
4.6%1.6%Sector
3.7%2.0%MAA
Std DevNOI
2004-2010E
5.2%0.9%Sector
3.7%1.0%MAA
Std DevNOI
2000-2010E
Source: Green Street Residential REIT August ’10 Update.
Outperforming Sector Over The Full Cycle
4
MAA
MAA Annual Dividend
$1.50
$1.70
$1.90
$2.10
$2.30
$2.50
$2.70
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Fcst
Unique full cycle strategy, strong operating platform & disciplined capital deployment have produced high quality earnings and cash flow
Stable and growing dividend for shareholders over last 15 years
Annual dividend growth 1.4% above sector average
15 Year Compounded Dividend Growth
2.1%
0.7%
0.0%
1.0%
2.0%
3.0%
MAA Sector
One of only three apartment REITs with no dividend cut in 15 years
FFO Payout (69%) below the apartment sector avg., despite never cutting dividend
Dividend represents approximately 60% of 18.4% total annual return to shareholders over last 10 years
Source: SNL Financial.
Full Cycle Performer – Dividend Stability
5
MAA
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Jan'09
Feb'09
Mar'09
Apr'09
May'09
June'09
July'09
Aug'09
Sept'09
Oct'09
Nov'09
Dec'09
Jan'10
Feb'10
Mar'10
Apr'10
May'10
Jun'10
Jul'10
Aug'10
Sep'10
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
New Lease Rent Growth % Renewal Rent Growth % Blended Rent % Growth
New Lease &Renewal
Rent Growth
Blended Rent Growth
%
Sharp recovery in pricing is underway. Pricing for new residentsexceeded renewal pricing in August and September and will drive
meaningful recovery in overall pricing and revenues.
Lease Over Lease Rent Growth
Recovery Cycle Underway
6
MAA
Pro-Business Environment
Greater Access to Lower Cost Labor
Strong Distribution and Logistics Structure
Positive Demographic Flow
Lower Cost of Living
Expanding Import/Export Activities
Lower Taxes
Higher Job Growth and Household Formation Trends
Source: Moody’s Economy.com
Household formation trends in MAA markets exceed national outlook
Focus on High Growth Region
MAA Secondary Markets
All MAA Markets
National
MAA Large Markets
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Market Segment
7
MAARecovery Cycle Underway
0.9%
2.4%
3.6% 3.6%
2.7%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
2010 2011 2012 2013 2014
Top 25 REIT Markets MAA Markets
Job growth in MAA markets is projected to exceed both the national average and the top 25 REIT markets (where 82% of Apt. REIT sector is positioned).
2.6%
2.1%
1.5%5 Yr Avg
Source: Moody’s Economy.com.
Job Growth Projections by Market5 Yr Projected
Growth
8
MAARecovery Cycle Underway
Dramatic fall-off in new construction permits support outlook for minimal new supply pressure next three + years; particularly in MAA’s markets.
Both large and secondary MAA markets are expected to drop below the national trends for new product delivery.
Source: U.S. Census Bureau.
-90.0%
-80.0%
-70.0%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
2004 2005 2006 2007 2008 2009 2010E
Total All MSAs MAA Markets Large MAA Markets Secondary MAA Markets
2005 peak of 122k permits in MAA markets, dropped to estimated 29k in 2010 (75% drop from peak to trough)
% Change in Building Permits Issued
MAA’s large markets are at a lower relative supply level than all other
market segments
Portfolio Stability
9
MAA
Sixteen year track record focused exclusively on sourcing, underwriting, financing and closing on apartment properties in the Sunbelt Region
Deal flow has significantly increased in past 60 days
Well established record of performance for sellers; MAA active with all transaction market participants in the region
MAA is in a very strong position to execute for sellers
Meaningful ‘relative’ opportunity for MAA external growth over the next few years
New Value Growth Opportunities
10
MAA
Joint-Venture program expands field of opportunityActive current deal flow with lenders, developers and distressed financing/liquidity needs$215MM acquisitions (2,233 units) year-to-dateAdditional $25MM in final contract stagesOf the combined deals closed and in final contract phases:• $173MM in distressed lease-up or
new construction, wholly owned • $67MM in distressed stabilized
properties, JV deals
New Value Growth Opportunities
11
MAA
Balance Sheet significantly strengthened over last ten yearsTotal leverage (Debt + Preferred) reduced 19% over last ten yearsDebt to EBITDA and fixed charge coverage better than sector median
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
MAA Sector
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010F
cst
Debt/Gross Assets Debt+Pref/Gross Assets
7.07.27.47.67.88.08.28.48.68.8
MAA Sector
Fixed Charge Coverage
Debt to EBITDA
Balance Sheet in Strong Position
Source: SNL Financial and RBC Capital Markets Update as of 11-9-10.
12
MAA
10.0
15.0
20.0
25.0
30.0
MAA Sector Avg.10.0
15.0
20.0
25.0
MAA Sector Avg.
MAA currently trades at a discount to sector average despite an established record of long-term out performance, solid prospects for strong performance from same store portfolio and growing opportunities for accelerating new growth.Current MAA pricing discounts long-term growth rate by 20% vs. sector.Perceived “defensive” performance profile of MAA creating a compelling buying opportunity for emerging recovery cycle.At sector FFO multiple average of 22.8, MAA share price would be $81.00; a 25%-30% premium to current trading range.
AFFO MultipleFFO Multiple
Source: BMO Capital Markets Update 11-8-2010.
Attractive Pricing Opportunity
13
MAA• MAA is currently priced at an implied cap rate discount to the sector average.• However, MAA’s historical long-term internal same store growth (and overall FFO growth)
performance exceeds the sector average; established record of exceeding regional ‘market’ performance levels and sector ‘averages’.
• Outlook for continued ‘out-performance’ is positive.
5.3% 5.7%
1.6%2.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Sector Average MAA
Market Implied Cap Rate Same Store Growth
Source: Cap rate data from BMO Capital Markets Update (11/8/10) and same store data from Green Street Aug ’10 Residential REIT Update (last full cycle 2004-2010).
Total Implied Unleveraged ReturnImplied 10 Year IRR:• MAA outperforms by 80
bps on unleveraged basis with continued cap rate discount.
• MAA outperforms by 140 bps on a leveraged basis.
• MAA outperforms by 240 bps on a leveraged basis at the current peer average cap rate.
Attractive Pricing Opportunity
14
MAA
High-growth region, strong operating platform well positioned for recovery Solid prospects for robust internal growth over the next few years; demonstrated competitive ‘recovery cycle’ performanceStrong balance sheet and extensive deal flow; well positioned to capture meaningful new growthDividend pay-out ratio that is better than sector average
Implied cap rate pricing compared to sector that discounts long-term historical performance and near-term outlookFFO/AFFO multiple that discounts outlook for internal growth and new growth as compared to sector (20%)Meaningful upside opportunity associated with capturing ‘sector average’ pricing
Why Buy MAA
15
MAA
Certain matters in this presentation 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 economic and market conditions, expectations for future demographics, the impact of competition, general changes in the apartment industry, expectations for acquisition and joint venture performance, ability to pay dividends and the ability to obtain financing at reasonable rates. 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, changes in interest rates and other items that are difficult to control such as the impact of legislation, 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.
End of Presentation
Eric Bolton, [email protected]
Al Campbell, [email protected]
Leslie Wolfgang, External [email protected]
Jennifer Patrick, Investor [email protected]
http://ir.maac.net