Mid-America Apartment Communities Q2 Earnings Call Highlights

Key Points

• Second-quarter Core FFO exceeded guidance by $0.02 at $2.08 per diluted share, as lower property expenses and contributions from non-same-store properties offset softer same-store revenue. MAA maintained its full-year Core FFO midpoint of $8.53 per share.
• Leasing trends improved sequentially, with new lease growth up 170 basis points and blended lease pricing up 100 basis points. However, management said cautious consumers and elevated apartment supply are slowing the recovery in new lease pricing, despite resilient demand and rising inbound migration.
• MAA continued investing in growth, funding an $598 million development pipeline and completing 2,118 unit renovations during the quarter. Renovated units generated an average $110 rent premium and an estimated 25% cash-on-cash return, while expense controls and lower insurance costs supported the outlook.

Mid-America Apartment Communities NYSE: MAA reported second-quarter Core FFO of $2.08 per diluted share, exceeding its guidance by $0.02, as lower-than-expected property operating expenses and contributions from its non-same-store portfolio offset slightly softer same-store revenue.

Chief Executive Officer Brad Hill said new resident and blended lease-over-lease rates improved sequentially, although the recovery in new lease pricing has been slower than the company expected because of cautious consumer sentiment and elevated, though moderating, apartment supply in several major markets.

“As demand remains resilient and new deliveries continue to decline, we expect the recovery to expand and accelerate,” Hill said. He cited job growth, household formation, population and wage growth, along with an increase in inbound migration to MAA properties during the second quarter. Inbound migration rose to about 13% in the second quarter from roughly 10% in the first quarter, the largest quarterly increase MAA has recorded since it began tracking the metric, according to Hill.

Leasing trends and market performance

Chief Strategy and Analysis Officer Tim Argo said new lease growth improved by 170 basis points sequentially from the first quarter, exceeding the pace of improvement seen from the first to second quarter of 2025 by 20 basis points. Blended lease-over-lease pricing increased 100 basis points from the first quarter and was 20 basis points above the second-quarter 2025 level.

Renewal performance remained a source of support. Turnover declined to 39.6%, while renewal lease rates were 5.2% for the quarter. MAA’s rent-to-income ratio improved to 18%, and net delinquency was 0.3% of billed rents, consistent with recent quarters.

Virginia, South Carolina and the Washington, D.C., area continued to outperform the broader portfolio on pricing, including Norfolk, Richmond, Charleston and Greenville. MAA’s two largest concentration markets, Atlanta and Dallas, also outperformed the portfolio on blended pricing in the second quarter.

Austin remained an underperforming market but showed improvement, with blended pricing 300 basis points better and occupancy 40 basis points higher than in the second quarter of 2025. Orlando’s blended pricing improved 130 basis points year over year. Phoenix, Charlotte, Raleigh and Savannah continued to face pressure from heavy new supply.

For the third quarter, Argo said MAA expects blended pricing to improve from the second quarter, which would be unusual given that third-quarter blended pricing has typically trailed the second quarter during the past four years. The company expects July pricing to be similar to the second quarter, but cited stronger pre-leasing trends for August and September, higher renewal retention and increased lead and visit volume.

MAA expects July occupancy to finish at approximately 95.4%. Management said third-quarter renewal retention is above both the second quarter of 2026 and the third quarter of 2025, with renewal rates continuing in the 5%-plus range.

Development, renovations and lease-ups

The company funded approximately $81 million in development and pre-development costs during the quarter. Its development pipeline totaled $598 million at June 30, with $237 million of remaining funding commitments over the next three years. Including two projects expected to begin in the third quarter, MAA expects the pipeline to reach about $804 million.

MAA began construction on a Kansas City project in the second quarter and started a Nashville development in July. It also expects to start a Northern Virginia project next month and one additional project later in the year, putting it on track for four development starts in 2026.

Hill said the company continues to view development as a priority capital-allocation opportunity, citing expected yields of roughly 6% to 6.5% for new projects under conservative underwriting. The current lease-up portfolio is projected to generate average cash yields of about 6%, although Hill said yields are currently closer to 5% because of concessions.

MAA completed 2,118 interior unit upgrades during the second quarter, bringing its first-half total to 3,504 units, up 30% from the first half of 2025. Renovated units generated average rent increases of $110 over non-upgraded units. With average spending of $5,134 per unit, the program produced an estimated 25% cash-on-cash return, above the company’s 19% expectation.

The company also continued to expand its community-wide Wi-Fi initiative. Revenue from the initial 28 live properties rose to $850,000 in the second quarter from $500,000 in the first quarter, and MAA plans to add another 38 properties this year.

Outlook, expenses and capital allocation

MAA maintained its full-year Core FFO guidance midpoint of $8.53 per diluted share. However, it reduced its expectations for effective rent growth and average occupancy, saying the recovery in new lease pricing has progressed more slowly than assumed in its prior guidance.

Those revenue revisions were offset by expense controls, lower expected real estate taxes, favorable insurance costs and contribution from non-same-store properties. The company expects more than $25 million of incremental year-over-year NOI in 2026 from its non-same-store portfolio.

Same-store operating expense growth was 80 basis points year over year in the second quarter. Chief Financial Officer Clay Holder said repair and maintenance and personnel costs were key contributors to favorable expense performance. MAA renewed its insurance coverage on July 1, with total premiums declining more than 12%; it expects insurance costs to decline by more than 6% year over year for 2026.

At quarter-end, MAA had more than $880 million of combined cash and borrowing capacity under its revolving credit facility. Net debt to EBITDA was 4.5 times, while outstanding debt had an average maturity of six years and an effective rate of 3.9%.

During the quarter, the company repurchased 383,000 common shares for $50 million, at a weighted average price of $130.66 per share. MAA also entered an unsecured delayed term loan with $350 million of committed principal, including $100 million outstanding at quarter-end.

The company sold a 30-year-old, high-capital-expenditure property in Raleigh during the second quarter and expects to close on two additional dispositions in the second half, including a 42-year-old Dallas property and its sole property in Washington, D.C. Management said those sales are expected to complete its planned 2026 disposition activity.

About Mid-America Apartment Communities (NYSE:MAA)

Mid-America Apartment Communities, Inc NYSE: MAA is a publicly traded real estate investment trust (REIT) specializing in the acquisition, development, redevelopment and operation of multifamily residential properties. The company focuses on high-barrier-to-entry apartment communities, offering a mix of one-, two- and three-bedroom homes designed to meet the needs of diverse renter demographics. Its integrated business model encompasses property management, leasing, maintenance and customer service, providing residents with a comprehensive living experience under one ownership platform.

MAA's portfolio comprises more than 100 communities and over 40,000 apartment homes across key Sun Belt markets.

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