Mid-America Apartment Communities, Inc. Q3 FY2025 earnings call

• Core FFO results met expectations, showing resilience. Strong occupancy, solid collections, and year-over-year improvements in new renewal and blended lease rates.
• Demand across markets remains healthy; occupancy levels increasing and approaching pre-COVID levels. Supply levels trending down.
• Balance sheet strength with recent credit facility expansion. Identified accretive acquisition opportunities like Kansas City and Scottsdale development.
• Advancing development pipeline with 15 sites for over 4,200 units. Redevelopment initiatives with unit upgrades and amenity repositioning showing positive results.

No detailed breakdown of product segments by revenue contribution provided in the transcript.

• Adjusted core FFO midpoint to $8.74 per share, narrowing the range to $8.68 to $8.80 per share.
• Lowered midpoint of effective rent growth guidance to negative 0.4%, same-store revenue guidance to negative 0.05%, and same-store property operating expense growth projections to 2.2% midpoint.
• Anticipates 2026 to build on demand fundamentals and declining supply for sustained growth.

• Economic uncertainty, slower job growth, and tempered pricing power in new leases.
• Supply levels still elevated historically.
• Volatility in the transaction market and changes in the cost of capital.

Q: A number of peers have talked about worsening trends in late September and into October on new leases. Talk about recent pricing trends and markets moving abnormally.

A: Tim Argo said broadly normal seasonality, with new lease decline less than normal from Q2 to Q3, renewal side better. DC market moderated, Dallas and Atlanta showing encouraging trends.

Q: Thoughts on 2026 earnings and contribution from other income?

A: Brad Hill said demand fundamentals similar to 2025, job market unknown but potential help from election year. Tim Argo mentioned earn-in likely flat to slightly down, with WiFi projects driving other income.

Q: On expense side, anything in 2026 to be aware of?

A: Clay Holder said real estate taxes expected to grow between 2.5%-3.5%, insurance tailwind, personnel and R&M costs in line with inflation, marketing expenses tailing off.

Q: Scorecard on concessions in bigger development markets?

A: Tim Argo said concessions in Q3 slightly higher than Q2, 55%-60% of comps with specials, some submarkets seeing lower concessions.

Q: Lease up for development properties and cadence?

A: Tim Argo said leasing velocity slower than expected, rents in line, one stabilization date pushed back.

Q: Capital allocation, development yields, and hurdles?

A: Brad Hill said considering capital source, cost of capital, and long-term impact. Developments have 6.1%-6.5% NOI yields, focus on compounded earnings growth and dividend.

Q: Accelerating dispositions to fund development and buybacks?

A: Brad Hill said disposition strategy to improve portfolio quality, generally look to dispose $300M worth, share buyback an alternative if beneficial.

Q: Transaction market and rent growth underwriting?

A: Brad Hill said cost of capital a key driver, agencies providing 5-year money around 5.25% with buy downs, underwriting aggressive rent growth.

Q: AI implementation and reputation?

A: Tim Argo said using AI in multiple areas, expanding pilots, continuing strong reviews.

Q: 2026 lease rate growth and schedule rent acceleration?

A: Tim Argo said normal seasonality, expect new lease rents to accelerate with moderating supply.

Q: Balance between large and mid-tier markets and acquisitions?

A: Tim Argo said mid-tier markets did better, narrowing performance gap. Brad Hill said targeting both markets, similar cap rates for similar quality assets.

Q: New starts trend and private developers' financing?

A: Brad Hill said new starts at 1.8% of inventory, private developers having trouble raising capital, more opportunities for MAA in developments.

Q: Leaning into leverage to acquire assets?

A: Brad Hill said not leaning into acquisitions at current pricing, will fund development pipeline via debt.

Q: Lease ups and move-outs for home purchases?

A: Tim Argo said concession environment elevated, move-outs for home purchases at all-time low, demographics and maintenance-free lifestyle driving retention.

Q: Early indicators of demand slowdown and absorption?

A: Tim Argo said exposure at 6.1%, occupancy at 95.6%, no material slowdown in absorption.

Q: '26 earn-in and earning expectations update?

A: Tim Argo said earn-in flat to slightly down, updated monthly/quarterly, dependent on new lease rates.

Q: Turnover during recovery cycle?

A: Tim Argo said no material changes expected, job changes a key reason for turnover.

Q: Migration, household formation, and new lease rate recovery?

A: Tim Argo said demand fundamentals stable, expect new lease rates to improve year-over-year.

Q: Rent control implications in key states?

A: Rob DelPriore said 90% of NOI in states with rent control prohibitions, not concerned about current rent control measures.

Q: Technical difficulty question?

A: Brad Hill said will follow up off-line with John Flangos.