Mid-America Apartment Communities Q3 Earnings Call Highlights

Key Points

• Third-quarter core FFO was $2.10 per diluted share, in line with guidance, as lower property expenses offset weaker revenue from new-lease pricing and occupancy. Management delayed its expected recovery in new-resident pricing to the fourth quarter.
• Leasing indicators showed early improvement: renewal growth reached 5.3%, turnover fell to a record-low 39.6%, and occupancy is expected to rise toward 95.5% in the fourth quarter. However, new-lease pricing remained pressured at approximately negative 6% in Q3.
• MAA lowered its full-year core FFO midpoint by $0.04 to $8.49 per share, reflecting reduced expectations for revenue, rent, occupancy and same-store NOI growth, while continuing unit upgrades, new developments and share repurchases.

Mid-America Apartment Communities NYSE: MAA reported third-quarter core funds from operations of $2.10 per diluted share, in line with its guidance, as lower-than-expected property expenses offset softer revenue tied to new lease pricing and occupancy.

Management said apartment fundamentals showed early signs of improvement entering the fourth quarter, though the recovery in new resident pricing has arrived later than the company had anticipated. CEO and President Brad Hill said MAA now expects year-over-year improvement in new resident lease-over-lease rates for the full fourth quarter, rather than the third quarter.

“Robust demand continues to absorb the elevated supply delivered over the past few years,” Hill said, adding that absorption has exceeded new supply deliveries across the company’s markets year to date. He said lower new construction starts, stabilizing lease-up communities and declining concessions should support a more balanced supply-and-demand environment.

Leasing trends improve entering fourth quarter

Chief Strategy and Analysis Officer Tim Argo said same-store net operating income met expectations in the third quarter. Lower property operating expenses offset revenue that came in below expectations because of weaker new lease pricing.

Renewal performance remained a source of support. Rolling 12-month turnover was 39.6%, which Argo described as a record low, while renewal lease-over-lease rates rose 5.3% during the quarter. Blended lease-over-lease rates increased 10 basis points from the third quarter of 2025.

MAA also reported net delinquency of 0.3% of billed rents outstanding, a level that has remained consistent for several quarters. The company’s average resident rent-to-income ratio was 18%, matching the second quarter and remaining at its lowest level since before the COVID-19 pandemic.

New lease rates remained under pressure during the third quarter. Argo said new lease pricing was approximately negative 6% for the period and was slightly worse in September, at more than negative 7%. However, he said preliminary October trends showed improvement from September and from October 2025.

For the fourth quarter, management expects new lease pricing to moderate less than its typical seasonal decline from the third quarter. The company also expects renewal growth to remain above 5%. Argo said occupancy, which averaged 95.3% in both the second and third quarters, is expected to increase toward roughly 95.5% during the fourth quarter.

MAA said pre-leasing volume and rates for November and December were ahead of the same period last year, though management noted it remains early in the leasing cycle. More than 90% of fourth-quarter renewal decisions had been made, with accepted renewals exceeding 5% lease-over-lease growth and acceptance rates above the prior year.

Market performance varied with supply conditions

Management said market results continued to vary based on local supply levels. Charleston and Norfolk, Virginia, gained momentum and led the portfolio in third-quarter blended lease-over-lease pricing. Dallas also continued to outperform the broader portfolio.

Austin remained an underperforming market on an absolute basis but recorded a 420-basis-point year-over-year improvement in blended pricing. Orlando’s blended pricing improved 100 basis points from the third quarter of 2025.

Phoenix, Charlotte and Savannah continued to face substantial supply pressure despite strong demand, according to Argo. MAA’s Charlotte lease-up properties have offered concessions of up to 10 to 12 weeks on certain floor plans. In Atlanta, management described weaker conditions in July as a temporary issue, pointing to improving occupancy and new lease pricing entering the fourth quarter.

Urban properties continued to outperform suburban properties. Argo said blended lease performance in urban areas was about 40 basis points better than suburban areas, while the gap in new lease performance was about 100 basis points.

Investment initiatives and development activity

MAA completed 2,040 interior unit upgrades in the third quarter, bringing its year-to-date total to 5,544 units, 16% above the comparable period of 2025. The upgrades generated average rent increases of $114 over non-upgraded units on average spending of $5,926 per unit, producing an approximately 23% cash-on-cash return through the first nine months.

The company also continued expanding its community-wide Wi-Fi initiative. Revenue from properties already offering the service rose to $1.35 million in the third quarter from $850,000 in the second quarter. An additional 38 properties that began the initiative in 2026 are expected to start going live during the fourth quarter.

During the quarter, MAA began construction on three projects: an 88-unit wholly owned Phase II development in Kansas City, a 306-unit pre-purchase joint venture development in Northern Virginia, and a 312-unit pre-purchase joint venture development in Nashville. The company expects all three projects to stabilize in 2029.

Guidance reduced as recovery shifts later

CFO Clay Holder said MAA lowered the midpoint of its full-year core FFO outlook by $0.04 to $8.49 per diluted share. The revised full-year range is $8.43 to $8.55 per share.

• Same-store revenue growth midpoint was reduced 35 basis points to negative 0.25%.
• Expected effective rent growth midpoint was lowered 20 basis points to negative 0.1%.
• Expected average physical occupancy midpoint was reduced 10 basis points to 95.4%.
• Same-store expense growth midpoint was lowered 35 basis points to 1.4%, primarily because of real estate taxes.
• Same-store NOI growth midpoint was reduced 35 basis points to negative 1.25%.

For the fourth quarter, MAA expects core FFO of $2.12 to $2.24 per diluted share, with a midpoint of $2.18. The expected sequential increase reflects seasonally lower operating expenses, higher contributions from the non-same-store portfolio and lower overhead costs, partly offset by higher interest expense.

At Sept. 30, MAA had approximately $661 million of combined cash and revolver capacity and net debt to adjusted EBITDA of 4.7 times. During the quarter, the company repurchased about 400,000 common shares for $50 million at a weighted average price of $126.72 per share.

About Mid-America Apartment Communities (NYSE:MAA)

Mid-America Apartment Communities, Inc NYSE: MAA is a real estate investment trust that owns, operates and develops multifamily apartment communities. Its portfolio is focused primarily on conventional apartment housing, with properties offering a range of floor plans and amenities designed for individual renters, couples and families.

MAA concentrates its operations in high-growth markets across the Sun Belt, including communities in the Southeast, Southwest and Mid-Atlantic regions of the United States.

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