UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20172020

or

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______


Commission File NumberNumber: 001-12762 (Mid-America Apartment Communities, Inc.)

Commission File NumberNumber: 333-190028-01 (Mid-America Apartments, L.P.)

MID-AMERICA APARTMENT COMMUNITIES, INC.

MID-AMERICA APARTMENTS, L.P.

(Exact name of registrant as specified in its charter)

Tennessee (Mid-America Apartment Communities, Inc.)

62-1543819

Tennessee (Mid-America Apartments, L.P.)

62-1543816

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

6815 Poplar Ave., Suite 500, Germantown, TN  38138

(Address of principal executive offices) (Zip Code)

(901) 682-6600

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share (Mid-America Apartment Communities, Inc.)

MAA

New York Stock Exchange

8.50% Series I Cumulative Redeemable Preferred Stock, $.01 par value per share (Mid-America Apartment Communities, Inc.)

6584 Poplar Avenue, Memphis, Tennessee, 38138

MAA*I

(Address of principal executive offices) (Zip Code)
(901) 682-6600
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Mid-America Apartment Communities, Inc.

YES ý

☒

NO o

☐

Mid-America Apartments, L.P.

YES ý

☒

NO o

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Mid-America Apartment Communities, Inc.

YES ý

☒

NO o

☐

Mid-America Apartments, L.P.

YES ý

☒

NO o

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Mid-America Apartment Communities, Inc.

Large accelerated filer☒

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company☐

Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Mid-America Apartments, L.P.

Large accelerated filer ý☐

Accelerated filer o

☐

Non-accelerated filero

☒

Smaller reporting companyo

☐

Emerging growth companyo

                                                                               (Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Mid-America Apartments, L.P.
Large accelerated filer o
Accelerated filer o
Non-accelerated filer ý
Smaller reporting company o
Emerging growth company o
                                                                              (Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Mid-America Apartment Communities, Inc.

YES o

☐

NO ý

☒

Mid-America Apartments, L.P.

YES o

☐

NO ý

☒


Indicate the number of shares outstanding of each of the issuer'sissuer’s classes of common stock, as of the latest practicable date:

Mid-America Apartment Communities, Inc.

Number of Shares Outstanding at

Class

October 23, 201726, 2020

Common Stock, $0.01 par value

113,627,014

114,369,812



MID-AMERICA APARTMENT COMMUNITIES, INC.

MID-AMERICA APARTMENTS, L.P.


TABLE OF CONTENTS


Page

Page

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

4

Mid-America Apartment Communities, Inc.

Condensed Consolidated Balance Sheets as of September 30, 20172020 and December 31, 2016.2019.

4

Condensed Consolidated Statements of Operations for the Threethree and Ninenine months ended September 30, 20172020 and 2016.2019.

5

Condensed Consolidated Statements of Comprehensive Income for the Threethree and Ninenine months ended September 30, 20172020 and 2016.2019.

6

Condensed Consolidated Statements of Cash Flows for the Ninenine months ended September 30, 20172020 and 2016.2019.

7

Mid-America Apartments, L.P.

Condensed Consolidated Balance Sheets as of September 30, 20172020 and December 31, 2016.2019.

8

Condensed Consolidated Statements of Operations for the Threethree and Ninenine months ended September 30, 20172020 and 2016.2019.

9

Condensed Consolidated Statements of Comprehensive Income for the Threethree and Ninenine months ended September 30, 20172020 and 2016.2019.

10

Condensed Consolidated Statements of Cash Flows for the Ninenine months ended September 30, 20172020 and 2016.2019.

11

Notes to Condensed Consolidated Financial Statements.

12

Item 2.

Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.

33

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

47

38

Item 4.

Controls and Procedures.

48

38

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings.

49

39

Item 1A.

Risk Factors.

49

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

49

41

Item 3.

Defaults Upon Senior Securities.

49

41

Item 4.

Mine Safety Disclosures.

49

41

Item 5.

Other Information.

49

41

Item 6.

Exhibits.

50

42

Signatures.

51

43



Explanatory Note


This periodic report combines the Quarterly Reports on Form 10-Q or this Report, combines the quarterly reports for the quarter ended September 30, 20172020 of Mid-America Apartment Communities, Inc., a Tennessee corporation, and Mid-America Apartments, L.P., a Tennessee limited partnership, of which Mid-America Apartment Communities, Inc. is itsthe sole general partner.  Mid-America Apartment Communities, Inc. and its 96.4%96.6% owned subsidiary, Mid-America Apartments, L.P., are both required to file periodicquarterly reports under the Securities Exchange Act of 1934, as amended.


Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to "MAA"“MAA” refer only to Mid-America Apartment Communities, Inc., and not to any of its consolidated subsidiaries. Unless the context otherwise requires, all references in this Reportreport to "we," "us," "our,"“we,” “us,” “our,” or the "Company"“Company” refer collectively to Mid-America Apartment Communities, Inc., together with its consolidated subsidiaries, including Mid-America Apartments, L.P.  Unless the context otherwise requires, all references in this Reportreport to the "Operating Partnership"“Operating Partnership” or "MAALP"“MAALP” refer to Mid-America Apartments, L.P., together with its consolidated subsidiaries. "Common stock"“Common stock” refers to the common stock of MAA, “preferred stock” refers to the preferred stock of MAA, and "shareholders" means“shareholders” refers to the holders of shares of MAA’s common stock.stock or preferred stock, as applicable. The common units of limited partnership interest in the Operating Partnership are referred to as "OP Units"“OP Units” and the holders of the OP Units are referred to as "common unitholders"“common unitholders”.


As of September 30, 2017,2020, MAA owned 113,627,014114,369,812 OP Units (or 96.4%(96.6% of the total number of OP Units).  MAA conducts substantially all of its business and holds substantially all of its assets, directly or indirectly, through the Operating Partnership, and by virtue of its ownership of the OP Units and being the Operating Partnership'sPartnership’s sole general partner, MAA has the ability to control all of the day-to-day operations of the Operating Partnership.


We believe combining the periodic reports of MAA and the Operating Partnership, including the notes to the condensed consolidated financial statements, into this Reportreport results in the following benefits:

•

enhances investors’ understanding of MAA and the Operating Partnership by enabling investors to view the business as a whole in the same manner that management views and operates the business;


•

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this report applies to both MAA and the Operating Partnership; and

enhances investors' understanding

•

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

MAA, and the Operating Partnership by enabling investors to view the business as a whole in the same manner that management views and operates the business;

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure in this Report applies to both MAA and the Operating Partnership; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

MAAan S&P 500 company, is a multifamily focused,multifamily-focused, self-administered and self-managed real estate investment trust, or REIT.  Management operates MAA and the Operating Partnership as one business. The management of the Company is comprised of individuals who are officers of MAA and employees of the Operating Partnership. We believe it is important to understand the few differences between MAA and the Operating Partnership in the context of how MAA and the Operating Partnership operate as a consolidated company. MAA and the Operating Partnership are structured as an "umbrellaumbrella partnership REIT," or UPREIT. MAA'sMAA’s interest in the Operating Partnership entitles MAA to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to MAA'sMAA’s percentage interest therein and entitles MAA to vote on substantially all matters requiring a vote of the partners. MAA'sMAA’s only material asset is its ownership of limited partnership interests in the Operating Partnership;Partnership (other than cash held by MAA from time to time); therefore, MAA does not conduct business itself, other thanMAA’s primary function is acting as the sole general partner of the Operating Partnership, issuing public equity from time-to-timetime to time and guaranteeing certain debt of the Operating Partnership. The Operating Partnership holds, directly or indirectly, all of ourthe real estate assets. Except for net proceeds from public equity issuances by MAA, which are contributed to the Operating Partnership in exchange for limited partnership interests, the Operating Partnership generates the capital required by the Company'sCompany’s business through the Operating Partnership'sPartnership’s operations, direct or indirect incurrence of indebtedness and issuance of partnership units.

OP Units.

The presentation of MAA's shareholders'MAA’s shareholders’ equity and the Operating Partnership'sPartnership’s capital isare the principal areaareas of difference between the consolidated financial statements of MAA and those of the Operating Partnership.  MAA's shareholders'MAA’s shareholders’ equity may include shares of preferred stock, shares of common stock, additional paid-in capital, cumulative earnings, cumulative distributions, noncontrolling interests, preferred units,interest, treasury shares, accumulated other comprehensive income and redeemable common units.stock.  The Operating Partnership'sPartnership’s capital may include common capital and preferred capital of the general partner (MAA), limited partners'partners’ common capital and preferred capital, limited partners' noncontrolling interests,interest, accumulated other comprehensive income and redeemable common units.  Redeemable common units represent the number of outstanding limited partnership units as of the date of the applicable balance sheet, valued at the greater of the closing market price of MAA's common stock or the aggregate value of the individual partners' capital balances. Holders of OP Units (other than MAA and its entity affiliates)MAA) may require the Operating Partnership to redeem their OP Units from time to time, in which case the Operating Partnership may, at its option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of MAA’s common stock on the New York Stock Exchange, or NYSE, over a specified



period prior to the redemption date) or by delivering one share of MAA'sMAA’s common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.


In order to highlight the material differences between MAA and the Operating Partnership, this Quarterly Report on Form 10-Q includes sections that separately present and discuss areas that are materially different between MAA and the Operating Partnership, including:

•

the condensed consolidated financial statements in Part 1, Item 1 of this report;


•

certain accompanying notes to the condensed consolidated financial statements, including Note 2 - Earnings per Common Share of MAA and Note 3 - Earnings per OP Unit of MAALP; Note 4 - MAA Equity and Note 5 - MAALP Capital; and Note 8 - Shareholders’ Equity of MAA and Note 9 - Partners’ Capital of MAALP;

the Condensed Consolidated Financial Statements in Item 1 of this Report;

•

the controls and procedures in Part 1, Item 4 of this report; and

certain accompanying notes to the Condensed Consolidated Financial Statements, including Note 3 - Earnings per Common Share of MAA and Note 4 - Earnings per OP Unit of MAALP; Note 5 - MAA Equity and Note 6 - MAALP Capital; and Note 10 - Shareholders' Equity of MAA and Note 11 - Partners' Capital of MAALP;

•

the certifications included as Exhibits 31 and 32 to this report.

the certifications of the Chief Executive Officer and Chief Financial Officer of MAA included as Exhibits 31 and 32 to this Report.

In the sections that combine disclosuredisclosures for MAA and the Operating Partnership, this Reportreport refers to actions or holdings as being actions or holdings of the Company.  Although the Operating Partnership (directly or indirectly through one of its subsidiaries) is generally the entity that enters into contracts, holds assets and issues debt, management believes this presentation is appropriate for the reasons set forth above and because the business is one enterprise, and we operate the business through the Operating Partnership.

  MAA, the Operating Partnership and its subsidiaries operate as one consolidated business, but MAA, the Operating Partnership and each of its subsidiaries are separate, distinct legal entities.


PART I – FINANCIAL INFORMATION


Item 1.

Financial Statements.



Mid-America Apartment Communities, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except share and per share data)

 

 

September 30, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

1,909,343

 

 

$

1,905,757

 

Buildings and improvements and other

 

 

12,037,042

 

 

 

11,841,978

 

Development and capital improvements in progress

 

 

220,685

 

 

 

116,424

 

 

 

 

14,167,070

 

 

 

13,864,159

 

Less: Accumulated depreciation

 

 

(3,316,710

)

 

 

(2,955,253

)

 

 

 

10,850,360

 

 

 

10,908,906

 

Undeveloped land

 

 

34,548

 

 

 

34,548

 

Investment in real estate joint venture

 

 

43,467

 

 

 

43,674

 

Real estate assets, net

 

 

10,928,375

 

 

 

10,987,128

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

18,407

 

 

 

20,476

 

Restricted cash

 

 

9,182

 

 

 

50,065

 

Other assets

 

 

172,740

 

 

 

172,781

 

Total assets

 

$

11,128,704

 

 

$

11,230,450

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Unsecured notes payable

 

$

3,939,425

 

 

$

3,828,201

 

Secured notes payable

 

 

486,169

 

 

 

626,397

 

Accrued expenses and other liabilities

 

 

570,014

 

 

 

472,262

 

Total liabilities

 

 

4,995,608

 

 

 

4,926,860

 

 

 

 

 

 

 

 

 

 

Redeemable common stock

 

 

13,841

 

 

 

14,131

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value per share, 20,000,000 shares authorized;

   8.50% Series I Cumulative Redeemable Shares, liquidation preference $50.00

   per share, 867,846 shares issued and outstanding as of September 30, 2020

   and December 31, 2019, respectively.

 

 

9

 

 

 

9

 

Common stock, $0.01 par value per share, 145,000,000 shares authorized;

   114,369,812 and 114,246,393 shares issued and outstanding as of

   September 30, 2020 and December 31, 2019, respectively (1)

 

 

1,140

 

 

 

1,140

 

Additional paid-in capital

 

 

7,173,391

 

 

 

7,166,073

 

Accumulated distributions in excess of net income

 

 

(1,258,072

)

 

 

(1,085,479

)

Accumulated other comprehensive loss

 

 

(12,396

)

 

 

(13,178

)

Total MAA shareholders’ equity

 

 

5,904,072

 

 

 

6,068,565

 

Noncontrolling interests - Operating Partnership units

 

 

208,072

 

 

 

214,647

 

Total Company’s shareholders’ equity

 

 

6,112,144

 

 

 

6,283,212

 

Noncontrolling interests - consolidated real estate entities

 

 

7,111

 

 

 

6,247

 

Total equity

 

 

6,119,255

 

 

 

6,289,459

 

Total liabilities and equity

 

$

11,128,704

 

 

$

11,230,450

 

 September 30, 2017 December 31, 2016
Assets:   
Real estate assets:   
Land$1,828,637
 $1,816,008
Buildings and improvements10,801,863
 10,523,762
Furniture, fixtures and equipment339,039
 298,204
Development and capital improvements in progress156,938
 231,224
 13,126,477
 12,869,198
Less accumulated depreciation(1,967,481) (1,656,071)
 11,158,996
 11,213,127
    
Undeveloped land57,285
 71,464
Corporate properties, net12,367
 12,778
Investments in real estate joint ventures45,096
 44,493
Assets held for sale5,315
 —
Real estate assets, net11,279,059
 11,341,862
    
Cash and cash equivalents47,851
 33,536
Restricted cash80,253
 88,264
Deferred financing costs, net3,906
 5,065
Other assets120,493
 134,525
Goodwill1,239
 1,239
    
Total assets$11,532,801
 $11,604,491
    
Liabilities and equity: 
  
Liabilities: 
  
Unsecured notes payable$3,382,861
 $3,180,624
Secured notes payable1,109,973
 1,319,088
Accounts payable17,275
 11,970
Fair market value of interest rate swaps2,602
 7,562
Accrued expenses and other liabilities439,662
 414,244
Security deposits18,998
 18,829
Total liabilities4,971,371
 4,952,317
    
Redeemable common stock10,804
 10,073
    
Shareholders' equity: 
  
Preferred stock, $0.01 par value per share, 20,000,000 shares authorized; 8.50% Series I Cumulative Redeemable Shares, liquidation preference $50 per share, 867,846 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
9
 9
Common stock, $0.01 par value per share, 145,000,000 shares authorized; 113,627,014 and 113,518,212 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively(1)
1,134
 1,133
Additional paid-in capital7,117,829
 7,109,012
Accumulated distributions in excess of net income(802,835) (707,479)
Accumulated other comprehensive income790
 1,144
Total MAA shareholders' equity6,316,927
 6,403,819
Noncontrolling interests - operating partnership units231,393
 235,976
Total Company's shareholders' equity6,548,320
 6,639,795
Noncontrolling interests - consolidated real estate entity2,306
 2,306
Total equity6,550,626
 6,642,101
Total liabilities and equity$11,532,801
 $11,604,491

(1)

Number of shares issued and outstanding representsrepresent total shares of common stock regardless of classification on the condensed consolidated balance sheets.Condensed Consolidated Balance Sheets. The number of shares classified as redeemable common stock on the condensed consolidated balance sheets atCondensed Consolidated Balance Sheets as of September 30, 20172020 and December 31, 20162019 are 101,081 119,374and 103,578,107,162, respectively.

See accompanying notes to condensed consolidated financial statements.



Mid-America Apartment Communities, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except per share data)

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

423,199

 

 

$

415,632

 

 

$

1,254,323

 

 

$

1,224,200

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses, excluding real estate taxes and insurance

 

 

105,108

 

 

 

100,319

 

 

 

292,031

 

 

 

286,284

 

Real estate taxes and insurance

 

 

64,706

 

 

 

59,220

 

 

 

188,426

 

 

 

176,774

 

Depreciation and amortization

 

 

127,679

 

 

 

124,684

 

 

 

381,257

 

 

 

371,417

 

Total property operating expenses

 

 

297,493

 

 

 

284,223

 

 

 

861,714

 

 

 

834,475

 

Property management expenses

 

 

12,691

 

 

 

13,899

 

 

 

39,064

 

 

 

41,195

 

General and administrative expenses

 

 

11,360

 

 

 

10,225

 

 

 

35,181

 

 

 

32,960

 

Interest expense

 

 

41,010

 

 

 

44,513

 

 

 

126,610

 

 

 

136,149

 

(Gain) loss on sale of depreciable real estate assets

 

 

(20

)

 

 

(1,000

)

 

 

7

 

 

 

(987

)

Gain on sale of non-depreciable real estate assets

 

 

(1,366

)

 

 

—

 

 

 

(995

)

 

 

(9,260

)

Other non-operating (income) expense

 

 

(242

)

 

 

(18,800

)

 

 

13,647

 

 

 

(23,494

)

Income before income tax expense

 

 

62,273

 

 

 

82,572

 

 

 

179,095

 

 

 

213,162

 

Income tax expense

 

 

(665

)

 

 

(1,491

)

 

 

(2,532

)

 

 

(2,814

)

Income from continuing operations before real estate joint venture

   activity

 

 

61,608

 

 

 

81,081

 

 

 

176,563

 

 

 

210,348

 

Income from real estate joint venture

 

 

428

 

 

 

378

 

 

 

1,153

 

 

 

1,210

 

Net income

 

 

62,036

 

 

 

81,459

 

 

 

177,716

 

 

 

211,558

 

Net income attributable to noncontrolling interests

 

 

2,126

 

 

 

2,814

 

 

 

6,096

 

 

 

7,336

 

Net income available for shareholders

 

 

59,910

 

 

 

78,645

 

 

 

171,620

 

 

 

204,222

 

Dividends to MAA Series I preferred shareholders

 

 

922

 

 

 

922

 

 

 

2,766

 

 

 

2,766

 

Net income available for MAA common shareholders

 

$

58,988

 

 

$

77,723

 

 

$

168,854

 

 

$

201,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for MAA common shareholders

 

$

0.52

 

 

$

0.68

 

 

$

1.48

 

 

$

1.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for MAA common shareholders

 

$

0.52

 

 

$

0.68

 

 

$

1.47

 

 

$

1.77

 

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Operating revenues:       
Rental revenues$357,619
 $254,161
 $1,064,628
 $749,153
Other property revenues26,931
 22,737
 81,621
 68,997
Total operating revenues384,550
 276,898
 1,146,249
 818,150
Property operating expenses: 
  
  
  
Personnel35,640
 27,236
 103,655
 78,290
Building repairs and maintenance12,663
 9,377
 34,287
 23,156
Real estate taxes and insurance52,597
 34,282
 160,733
 104,182
Utilities30,175
 24,690
 84,599
 69,070
Landscaping4,809
 4,021
 18,376
 15,016
Other operating13,295
 7,040
 34,771
 20,768
Depreciation and amortization117,928
 76,959
 374,285
 227,829
Total property operating expenses267,107
 183,605
 810,706
 538,311
Acquisition expenses—
 1,033
 —
 2,167
Property management expenses10,281
 7,908
 32,007
 25,221
General and administrative expenses8,361
 6,661
 30,735
 20,257
Merger related expenses128
 3,901
 3,977
 3,901
Integration related expenses4,002
 —
 10,521
 —
Income from continuing operations before non-operating items94,671
 73,790
 258,303
 228,293
Interest and other non-property income4,303
 64
 7,632
 159
Interest expense(39,940) (32,168) (115,005) (96,418)
Gain on debt extinguishment828
 —
 3,168
 3
Net casualty gain (loss) after insurance and other settlement proceeds564
 (75) 233
 738
Gain on sale of depreciable real estate assets58,844
 47,749
 59,045
 48,572
(Loss) gain on sale of non-depreciable real estate assets(6) —
 42
 2,170
Income before income tax expense119,264
 89,360
 213,418
 183,517
Income tax expense(641) (454) (1,910) (1,200)
Income from continuing operations before joint venture activity118,623
 88,906
 211,508
 182,317
Gain from real estate joint ventures335
 —
 1,021
 27
Net income118,958
 88,906
 212,529
 182,344
Net income attributable to noncontrolling interests4,249
 4,627
 7,600
 9,508
Net income available for shareholders114,709
 84,279
 204,929
 172,836
Dividends to MAA Series I preferred shareholders922
 —
 2,766
 —
Net income available for MAA common shareholders$113,787
 $84,279
 $202,163
 $172,836
        
Earnings per common share - basic:   
  
  
Net income available for common shareholders$1.00
 $1.12
 $1.78
 $2.29
        
Earnings per common share - diluted: 
  
  
  
Net income available for common shareholders$1.00
 $1.12
 $1.78
 $2.29
        
Dividends declared per common share$0.87
 $0.82
 $2.61
 $2.46

See accompanying notes to condensed consolidated financial statements.



Mid-America Apartment Communities, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in thousands)

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

62,036

 

 

$

81,459

 

 

$

177,716

 

 

$

211,558

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss from derivative instruments

 

 

—

 

 

 

(5,562

)

 

 

—

 

 

 

(13,444

)

Adjustment for net losses (gains) reclassified to net income

   from derivative instruments

 

 

279

 

 

 

(411

)

 

 

810

 

 

 

(1,734

)

Total comprehensive income

 

 

62,315

 

 

 

75,486

 

 

 

178,526

 

 

 

196,380

 

Less: Comprehensive income attributable to noncontrolling

   interests

 

 

(2,136

)

 

 

(2,619

)

 

 

(6,124

)

 

 

(6,816

)

Comprehensive income attributable to MAA

 

$

60,179

 

 

$

72,867

 

 

$

172,402

 

 

$

189,564

 

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Net income$118,958
 $88,906
 $212,529
 $182,344
Other comprehensive income:       
Unrealized gain (loss) from the effective portion of derivative instruments90
 1,179
 (1,252) (3,840)
Reclassification adjustment for net (gains) losses included in net income for the effective portion of derivative instruments(33) 1,042
 884
 3,359
Total comprehensive income119,015
 91,127
 212,161
 181,863
Less: comprehensive income attributable to noncontrolling interests(4,251) (4,743) (7,586) (9,483)
Comprehensive income attributable to MAA$114,764
 $86,384
 $204,575
 $172,380
        
        
See accompanying notes to condensed consolidated financial statements.





Mid-America Apartment Communities, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 Nine months ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income$212,529
 $182,344
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Retail revenue accretion(292) (130)
Depreciation and amortization374,947
 228,073
Stock compensation expense8,431
 5,977
Redeemable stock expense489
 412
Amortization of debt premium and debt issuance costs(8,035) (7,546)
Gain from investments in real estate joint ventures(1,021) (27)
Gain on debt extinguishment(4,753) —
Derivative interest credit(9,298) (1,883)
Settlement of forward swaps(1,547) —
Gain on sale of non-depreciable real estate assets(42) (2,170)
Gain on sale of depreciable real estate assets(59,045) (48,572)
Net casualty gain and other settlement proceeds(233) (738)
Changes in assets and liabilities: 
  
Restricted cash(2,580) (4,955)
Other assets(6,264) (501)
Accounts payable5,305
 3,158
Accrued expenses and other44,353
 35,183
Security deposits164
 597
Net cash provided by operating activities553,108
 389,222
Cash flows from investing activities: 
  
Purchases of real estate and other assets(63,774) (262,268)
Normal capital improvements(82,030) (65,351)
Construction capital and other improvements(7,171) (5,569)
Renovations to existing real estate assets(36,692) (29,554)
Development(142,530) (42,611)
Distributions from real estate joint ventures—
 1,823
Contributions to joint ventures(750) —
Proceeds from disposition of real estate assets90,040
 187,425
Return of escrow for future acquisitions10,591
 —
Net cash used in investing activities(232,316) (216,105)
Cash flows from financing activities: 
  
Net change in credit lines(240,000) 130,000
Proceeds from notes payable597,480
 —
Principal payments on notes payable(345,053) (114,753)
Payment of deferred financing costs(5,355) (141)
Repurchase of common stock(4,782) (1,811)
Proceeds from issuances of common shares1,007
 (216)
Exercise of stock options432
 —
Distributions to noncontrolling interests(10,999) (10,234)
Dividends paid on common shares(296,441) (185,704)
Dividends paid on preferred shares(2,766) —
Net cash used in financing activities(306,477) (182,859)
Net increase (decrease) in cash and cash equivalents14,315
 (9,742)
Cash and cash equivalents, beginning of period33,536
 37,559
Cash and cash equivalents, end of period$47,851
 $27,817
    
Supplemental disclosure of cash flow information: 
  
Interest paid$123,735
 $96,271
Income taxes paid$2,256
 $1,571
Supplemental disclosure of noncash investing and financing activities: 
  
Conversion of OP Units to shares of common stock$1,133
 $780
Accrued construction in progress$15,787
 $8,742
Interest capitalized$5,884
 $1,095
Mark-to-market adjustment on derivative instruments$12,035
 $1,402

See accompanying notes to condensed consolidated financial statements.


Mid-America Apartment Communities, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

 

 

Nine months ended September 30,

 

Cash flows from operating activities:

 

2020

 

 

2019

 

Net income

 

$

177,716

 

 

$

211,558

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

381,938

 

 

 

372,210

 

Loss (gain) on sale of depreciable real estate assets

 

 

7

 

 

 

(987

)

Gain on sale of non-depreciable real estate assets

 

 

(995

)

 

 

(9,260

)

Loss (gain) on embedded derivative in preferred shares

 

 

14,603

 

 

 

(19,592

)

Stock compensation expense

 

 

12,532

 

 

 

11,550

 

Amortization of debt issuance costs, discounts and premiums

 

 

3,595

 

 

 

4,706

 

Net change in operating accounts and other operating activities

 

 

54,489

 

 

 

51,353

 

Net cash provided by operating activities

 

 

643,885

 

 

 

621,538

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of real estate and other assets

 

 

(5,004

)

 

 

(22,860

)

Capital improvements, development and other

 

 

(288,183

)

 

 

(219,670

)

Distributions from real estate joint ventures

 

 

207

 

 

 

365

 

Contributions to affiliates

 

 

(3,450

)

 

 

(4,500

)

Proceeds from disposition of real estate assets

 

 

3,278

 

 

 

15,984

 

Net cash used in investing activities

 

 

(293,152

)

 

 

(230,681

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from revolving credit facility

 

 

245,000

 

 

 

565,000

 

Repayments of revolving credit facility

 

 

(245,000

)

 

 

(1,105,000

)

Net (repayments of) proceeds from commercial paper

 

 

(35,000

)

 

 

200,000

 

Proceeds from notes payable

 

 

447,593

 

 

 

760,003

 

Principal payments on notes payable

 

 

(440,222

)

 

 

(468,635

)

Payment of deferred financing costs

 

 

(4,196

)

 

 

(11,530

)

Distributions to noncontrolling interests

 

 

(11,993

)

 

 

(11,813

)

Dividends paid on common shares

 

 

(342,983

)

 

 

(328,239

)

Dividends paid on preferred shares

 

 

(2,766

)

 

 

(2,766

)

Net change in other financing activities

 

 

(4,118

)

 

 

3,132

 

Net cash used in financing activities

 

 

(393,685

)

 

 

(399,848

)

 

 

 

 

 

 

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(42,952

)

 

 

(8,991

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

70,541

 

 

 

51,673

 

Cash, cash equivalents and restricted cash, end of period

 

$

27,589

 

 

$

42,682

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets:

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,407

 

 

$

25,826

 

Restricted cash

 

 

9,182

 

 

 

16,856

 

Total cash, cash equivalents and restricted cash

 

$

27,589

 

 

$

42,682

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

109,527

 

 

$

108,249

 

Income taxes paid

 

 

2,534

 

 

 

2,509

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Conversion of OP Units to shares of common stock

 

$

471

 

 

$

1,993

 

Accrued construction in progress

 

 

41,443

 

 

 

14,652

 

Interest capitalized

 

 

4,783

 

 

 

1,847

 

See accompanying notes to condensed consolidated financial statements.



Mid-America Apartments, L.P.

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except unit data)

 

 

September 30, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

1,909,343

 

 

$

1,905,757

 

Buildings and improvements and other

 

 

12,037,042

 

 

 

11,841,978

 

Development and capital improvements in progress

 

 

220,685

 

 

 

116,424

 

 

 

 

14,167,070

 

 

 

13,864,159

 

Less: Accumulated depreciation

 

 

(3,316,710

)

 

 

(2,955,253

)

 

 

 

10,850,360

 

 

 

10,908,906

 

Undeveloped land

 

 

34,548

 

 

 

34,548

 

Investment in real estate joint venture

 

 

43,467

 

 

 

43,674

 

Real estate assets, net

 

 

10,928,375

 

 

 

10,987,128

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

18,407

 

 

 

20,476

 

Restricted cash

 

 

9,182

 

 

 

50,065

 

Other assets

 

 

172,740

 

 

 

172,781

 

Total assets

 

$

11,128,704

 

 

$

11,230,450

 

 

 

 

 

 

 

 

 

 

Liabilities and capital

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Unsecured notes payable

 

$

3,939,425

 

 

$

3,828,201

 

Secured notes payable

 

 

486,169

 

 

 

626,397

 

Accrued expenses and other liabilities

 

 

570,014

 

 

 

472,262

 

Due to general partner

 

 

19

 

 

 

19

 

Total liabilities

 

 

4,995,627

 

 

 

4,926,879

 

 

 

 

 

 

 

 

 

 

Redeemable common units

 

 

13,841

 

 

 

14,131

 

 

 

 

 

 

 

 

 

 

Operating Partnership capital:

 

 

 

 

 

 

 

 

Preferred units, 867,846 preferred units outstanding as of September 30, 2020

   and December 31, 2019, respectively

 

 

66,840

 

 

 

66,840

 

General partner, 114,369,812 and 114,246,393 OP Units outstanding as of

   September 30, 2020 and December 31, 2019, respectively (1)

 

 

5,849,987

 

 

 

6,015,290

 

Limited partners, 4,058,258 and 4,067,174 OP Units outstanding as of

   September 30, 2020 and December 31, 2019, respectively (1)

 

 

208,072

 

 

 

214,647

 

Accumulated other comprehensive loss

 

 

(12,774

)

 

 

(13,584

)

Total operating partners’ capital

 

 

6,112,125

 

 

 

6,283,193

 

Noncontrolling interests - consolidated real estate entities

 

 

7,111

 

 

 

6,247

 

Total equity

 

 

6,119,236

 

 

 

6,289,440

 

Total liabilities and equity

 

$

11,128,704

 

 

$

11,230,450

 

 September 30, 2017 December 31, 2016
Assets:   
Real estate assets:   
Land$1,828,637
 $1,816,008
Buildings and improvements10,801,863
 10,523,762
Furniture, fixtures and equipment339,039
 298,204
Development and capital improvements in progress156,938
 231,224
 13,126,477
 12,869,198
Less accumulated depreciation(1,967,481) (1,656,071)
 11,158,996
 11,213,127
    
Undeveloped land57,285
 71,464
Corporate properties, net12,367
 12,778
Investments in real estate joint ventures45,096
 44,493
Assets held for sale5,315
 —
Real estate assets, net11,279,059
 11,341,862
    
Cash and cash equivalents47,851
 33,536
Restricted cash80,253
 88,264
Deferred financing costs, net3,906
 5,065
Other assets120,493
 134,525
Goodwill1,239
 1,239
Total assets$11,532,801
 $11,604,491
    
Liabilities and Capital: 
  
Liabilities: 
  
Unsecured notes payable$3,382,861
 $3,180,624
Secured notes payable1,109,973
 1,319,088
Accounts payable17,275
 11,970
Fair market value of interest rate swaps2,602
 7,562
Accrued expenses and other liabilities439,662
 414,244
Security deposits18,998
 18,829
Due to general partner19
 19
Total liabilities4,971,390
 4,952,336
    
Redeemable common units10,804
 10,073
    
Operating Partnership Capital: 
  
Preferred Units: 867,846 Preferred Units outstanding at September 30, 2017 and at December 31, 201666,840
 64,833
Common Units:   
General partner: 113,627,014 OP Units outstanding at September 30, 2017 and 113,518,212 OP Units outstanding at December 31, 2016 (1)
6,249,190
 6,337,721
Limited partners: 4,200,032 OP Units outstanding at September 30, 2017 and 4,220,403 OP Units outstanding at December 31, 2016 (1)
231,393
 235,976
Accumulated other comprehensive income878
 1,246
Total operating partners' capital6,548,301
 6,639,776
Noncontrolling interests - consolidated real estate entity2,306
 2,306
Total capital6,550,607
 6,642,082
Total liabilities and capital$11,532,801
 $11,604,491

(1)

Number of units outstanding represents total OP Units regardless of classification on the condensed consolidated balance sheets.Condensed Consolidated Balance Sheets. The number of OP Unitsunits classified as redeemable common units on the condensed consolidated balance sheets atCondensed Consolidated Balance Sheets as of September 30, 20172020 and December 31, 20162019 are 101,081119,374 and 103,578,107,162, respectively.

See accompanying notes to condensed consolidated financial statements.



Mid-America Apartments, L.P.

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except per unit data)

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

423,199

 

 

$

415,632

 

 

$

1,254,323

 

 

$

1,224,200

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses, excluding real estate taxes and insurance

 

 

105,108

 

 

 

100,319

 

 

 

292,031

 

 

 

286,284

 

Real estate taxes and insurance

 

 

64,706

 

 

 

59,220

 

 

 

188,426

 

 

 

176,774

 

Depreciation and amortization

 

 

127,679

 

 

 

124,684

 

 

 

381,257

 

 

 

371,417

 

Total property operating expenses

 

 

297,493

 

 

 

284,223

 

 

 

861,714

 

 

 

834,475

 

Property management expenses

 

 

12,691

 

 

 

13,899

 

 

 

39,064

 

 

 

41,195

 

General and administrative expenses

 

 

11,360

 

 

 

10,225

 

 

 

35,181

 

 

 

32,960

 

Interest expense

 

 

41,010

 

 

 

44,513

 

 

 

126,610

 

 

 

136,149

 

(Gain) loss on sale of depreciable real estate assets

 

 

(20

)

 

 

(1,000

)

 

 

7

 

 

 

(987

)

Gain on sale of non-depreciable real estate assets

 

 

(1,366

)

 

 

—

 

 

 

(995

)

 

 

(9,260

)

Other non-operating (income) expense

 

 

(242

)

 

 

(18,800

)

 

 

13,647

 

 

 

(23,494

)

Income before income tax expense

 

 

62,273

 

 

 

82,572

 

 

 

179,095

 

 

 

213,162

 

Income tax expense

 

 

(665

)

 

 

(1,491

)

 

 

(2,532

)

 

 

(2,814

)

Income from continuing operations before real estate joint venture

   activity

 

 

61,608

 

 

 

81,081

 

 

 

176,563

 

 

 

210,348

 

Income from real estate joint venture

 

 

428

 

 

 

378

 

 

 

1,153

 

 

 

1,210

 

Net income

 

 

62,036

 

 

 

81,459

 

 

 

177,716

 

 

 

211,558

 

Distributions to MAALP preferred unitholders

 

 

922

 

 

 

922

 

 

 

2,766

 

 

 

2,766

 

Net income available for MAALP common unitholders

 

$

61,114

 

 

$

80,537

 

 

$

174,950

 

 

$

208,792

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common unit - basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for MAALP common unitholders

 

$

0.52

 

 

$

0.68

 

 

$

1.48

 

 

$

1.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common unit - diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available for MAALP common unitholders

 

$

0.52

 

 

$

0.68

 

 

$

1.48

 

 

$

1.77

 

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Operating revenues:       
Rental revenues$357,619
 $254,161
 $1,064,628
 $749,153
Other property revenues26,931
 22,737
 81,621
 68,997
Total operating revenues384,550
 276,898
 1,146,249
 818,150
Property operating expenses: 
  
  
  
Personnel35,640
 27,236
 103,655
 78,290
Building repairs and maintenance12,663
 9,377
 34,287
 23,156
Real estate taxes and insurance52,597
 34,282
 160,733
 104,182
Utilities30,175
 24,690
 84,599
 69,070
Landscaping4,809
 4,021
 18,376
 15,016
Other operating13,295
 7,040
 34,771
 20,768
Depreciation and amortization117,928
 76,959
 374,285
 227,829
Total property operating expenses267,107
 183,605
 810,706
 538,311
Acquisition expenses—
 1,033
 —
 2,167
Property management expenses10,281
 7,908
 32,007
 25,221
General and administrative expenses8,361
 6,661
 30,735
 20,257
Merger related expenses128
 3,901
 3,977
 3,901
Integration related expenses4,002
 —
 10,521
 —
Income from continuing operations before non-operating items94,671
 73,790
 258,303
 228,293
Interest and other non-property income4,303
 64
 7,632
 159
Interest expense(39,940) (32,168) (115,005) (96,418)
Gain on debt extinguishment828
 —
 3,168
 3
Net casualty gain (loss) after insurance and other settlement proceeds564
 (75) 233
 738
Gain on sale of depreciable real estate assets58,844
 47,749
 59,045
 48,572
(Loss) gain on sale of non-depreciable real estate assets(6) —
 42
 2,170
Income before income tax expense119,264
 89,360
 213,418
 183,517
Income tax expense(641) (454) (1,910) (1,200)
Income from continuing operations before joint venture activity118,623
 88,906
 211,508
 182,317
Gain from real estate joint ventures335
 —
 1,021
 27
Net income118,958
 88,906
 212,529
 182,344
Dividends to preferred unitholders922
 —
 2,766
 —
Net income available for Mid-America Apartments, L.P. common unitholders$118,036
 $88,906
 $209,763
 $182,344
        
Earnings per common unit - basic:     
  
Net income available for common unitholders$1.00
 $1.12
 $1.78
 $2.29
        
Earnings per common unit - diluted:     
  
Net income available for common unitholders$1.00
 $1.12
 $1.78
 $2.29
        
Distributions declared per common unit$0.87
 $0.82
 $2.61
 $2.46

See accompanying notes to condensed consolidated financial statements.



Mid-America Apartments, L.P.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in thousands)

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

62,036

 

 

$

81,459

 

 

$

177,716

 

 

$

211,558

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss from derivative instruments

 

 

—

 

 

 

(5,562

)

 

 

—

 

 

 

(13,444

)

Adjustment for net losses (gains) reclassified to net income

   from derivative instruments

 

 

279

 

 

 

(411

)

 

 

810

 

 

 

(1,734

)

Comprehensive income attributable to MAALP

 

$

62,315

 

 

$

75,486

 

 

$

178,526

 

 

$

196,380

 

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Net income$118,958
 $88,906
 $212,529
 $182,344
Other comprehensive income:       
Unrealized gain (loss) from the effective portion of derivative instruments90
 1,179
 (1,252) (3,840)
Reclassification adjustment for net (gains) losses included in net income for the effective portion of derivative instruments(33) 1,042
 884
 3,359
Comprehensive income attributable to Mid-America Apartments, L.P.$119,015
 $91,127
 $212,161
 $181,863
        
        
See accompanying notes to condensed consolidated financial statements.



Mid-America Apartments, L.P.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 Nine months ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income$212,529
 $182,344
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Retail revenue accretion(292) (130)
Depreciation and amortization374,947
 228,073
Stock compensation expense8,431
 5,977
Redeemable units expense489
 412
Amortization of debt premium and debt issuance costs(8,035) (7,546)
Gain from investments in real estate joint ventures(1,021) (27)
Gain on debt extinguishment(4,753) —
Derivative interest credit(9,298) (1,883)
Settlement of forward swaps(1,547) —
Gain on sale of non-depreciable real estate assets(42) (2,170)
Gain on sale of depreciable real estate assets(59,045) (48,572)
Net casualty gain and other settlement proceeds(233) (738)
Changes in assets and liabilities:   
Restricted cash(2,580) (4,955)
Other assets(6,264) (501)
Accounts payable5,305
 3,158
Accrued expenses and other44,353
 35,183
Security deposits164
 597
Net cash provided by operating activities553,108
 389,222
Cash flows from investing activities: 
  
Purchases of real estate and other assets(63,774) (262,268)
Normal capital improvements(82,030) (65,351)
Construction capital and other improvements(7,171) (5,569)
Renovations to existing real estate assets(36,692) (29,554)
Development(142,530) (42,611)
Distributions from real estate joint ventures—
 1,823
Contributions to joint ventures(750) —
Proceeds from disposition of real estate assets90,040
 187,425
Return of escrow for future acquisitions10,591
 —
Net cash used in investing activities(232,316) (216,105)
Cash flows from financing activities: 
  
Net change in credit lines(240,000) 130,000
Proceeds from notes payable597,480
 —
Principal payments on notes payable(345,053) (114,753)
Payment of deferred financing costs(5,355) (141)
Repurchase of common units(4,782) (1,811)
Proceeds from issuances of common units1,007
 (216)
Exercise of unit options432
 —
Distributions paid on common units(307,440) (195,938)
Distributions paid on preferred units(2,766) —
Net cash used in financing activities(306,477) (182,859)
Net increase (decrease) in cash and cash equivalents14,315
 (9,742)
Cash and cash equivalents, beginning of period33,536
 37,559
Cash and cash equivalents, end of period$47,851
 $27,817
    
Supplemental disclosure of cash flow information: 
  
Interest paid$123,735
 $96,271
Income taxes paid$2,256
 $1,571
Supplemental disclosure of noncash investing and financing activities:   
Accrued construction in progress$15,787
 $8,742
Interest capitalized$5,884
 $1,095
Mark-to-market adjustment on derivative instruments$12,035
 $1,402

See accompanying notes to condensed consolidated financial statements.


Mid-America Apartments, L.P.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

 

 

Nine months ended September 30,

 

Cash flows from operating activities:

 

2020

 

 

2019

 

Net income

 

$

177,716

 

 

$

211,558

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

381,938

 

 

 

372,210

 

Loss (gain) on sale of depreciable real estate assets

 

 

7

 

 

 

(987

)

Gain on sale of non-depreciable real estate assets

 

 

(995

)

 

 

(9,260

)

Loss (gain) on embedded derivative in preferred shares

 

 

14,603

 

 

 

(19,592

)

Stock compensation expense

 

 

12,532

 

 

 

11,550

 

Amortization of debt issuance costs, discounts and premiums

 

 

3,595

 

 

 

4,706

 

Net change in operating accounts and other operating activities

 

 

54,489

 

 

 

51,353

 

Net cash provided by operating activities

 

 

643,885

 

 

 

621,538

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of real estate and other assets

 

 

(5,004

)

 

 

(22,860

)

Capital improvements, development and other

 

 

(288,183

)

 

 

(219,670

)

Distributions from real estate joint ventures

 

 

207

 

 

 

365

 

Contributions to affiliates

 

 

(3,450

)

 

 

(4,500

)

Proceeds from disposition of real estate assets

 

 

3,278

 

 

 

15,984

 

Net cash used in investing activities

 

 

(293,152

)

 

 

(230,681

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from revolving credit facility

 

 

245,000

 

 

 

565,000

 

Repayments of revolving credit facility

 

 

(245,000

)

 

 

(1,105,000

)

Net (repayments of) proceeds from commercial paper

 

 

(35,000

)

 

 

200,000

 

Proceeds from notes payable

 

 

447,593

 

 

 

760,003

 

Principal payments on notes payable

 

 

(440,222

)

 

 

(468,635

)

Payment of deferred financing costs

 

 

(4,196

)

 

 

(11,530

)

Distributions paid on common units

 

 

(354,976

)

 

 

(340,052

)

Distributions paid on preferred units

 

 

(2,766

)

 

 

(2,766

)

Net change in other financing activities

 

 

(4,118

)

 

 

3,132

 

Net cash used in financing activities

 

 

(393,685

)

 

 

(399,848

)

 

 

 

 

 

 

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(42,952

)

 

 

(8,991

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

70,541

 

 

 

51,673

 

Cash, cash equivalents and restricted cash, end of period

 

$

27,589

 

 

$

42,682

 

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets:

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

18,407

 

 

$

25,826

 

Restricted cash

 

 

9,182

 

 

 

16,856

 

Total cash, cash equivalents and restricted cash

 

$

27,589

 

 

$

42,682

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

109,527

 

 

$

108,249

 

Income taxes paid

 

 

2,534

 

 

 

2,509

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Accrued construction in progress

 

$

41,443

 

 

$

14,652

 

Interest capitalized

 

 

4,783

 

 

 

1,847

 

See accompanying notes to condensed consolidated financial statements.


Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P.

Notes to Condensed Consolidated Financial Statements

September 30, 2017 and 2016

(Unaudited)


1.Basis of Presentation and Principles of Consolidation and Significant Accounting Policies


Unless the context otherwise requires, all references to "we," "us," "our," or the "Company"“Company” refer collectively to Mid-America Apartment Communities, Inc., together with its consolidated subsidiaries, including Mid-America Apartments, L.P.  Unless the context otherwise requires, all references to "MAA"“MAA” refer only to Mid-America Apartment Communities, Inc., and not any of its consolidated subsidiaries.  Unless the context otherwise requires, allthe references to the "Operating Partnership"“Operating Partnership” or "MAALP"“MAALP” refer to Mid-America Apartments, L.P., together with its consolidated subsidiaries.  "Common stock"“Common stock” refers to the common stock of MAA and, "shareholders" meansunless the context otherwise requires, “shareholders” refers to the holders of shares of MAA’s common stock.  The common units of limited partnership interests in the Operating Partnership are referred to as "OP“OP Units,"” and the holders of the OP Units are referred to as "common unitholders"“common unitholders”.


As of September 30, 2017,2020, MAA owned 113,627,014114,369,812 OP Units (or 96.4%96.6% of the total number of OP Units).  MAA conducts substantially all of its business and holds substantially all of its assets, directly or indirectly, through the Operating Partnership, and by virtue of its ownership of the OP Units and being the Operating Partnership'sPartnership’s sole general partner, MAA has the ability to control all of the day-to-day operations of the Operating Partnership.


We believe

Management believes combining the notes to the condensed consolidated financial statements of MAA and MAALPthe Operating Partnership results in the following benefits:

•

enhances a readers’ understanding of MAA and the Operating Partnership by enabling the reader to view the business as a whole in the same manner that management views and operates the business;


•

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both MAA and the Operating Partnership; and

enhances

•

creates time and cost efficiencies through the preparation of one combined set of notes instead of two separate sets.

MAA, an S&P 500 company, is a readers' understanding of MAAmultifamily-focused, self-administered and the Operating Partnership by enabling the reader to view the business as a whole in the same manner that management views and operates the business;

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both MAA and the Operating Partnership; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports

self-managed real estate investment trust, or REIT.  Management operates MAA and the Operating Partnership as one business. The management of the Company is comprised of individuals who are officers of MAA and employees of the Operating Partnership.  We believeManagement believes it is important to understand the few differences between MAA and the Operating Partnership in the context of how MAA and the Operating Partnership operate as a consolidated company.  MAA and the Operating Partnership are structured as an "umbrellaumbrella partnership REIT," or UPREIT. MAA'sMAA’s interest in the Operating Partnership entitles MAA to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to MAA'sMAA’s percentage interest therein and entitles MAA to vote on substantially all matters requiring a vote of the partners.  MAA'sMAA’s only material asset is its ownership of limited partnerpartnership interests in the Operating Partnership;Partnership (other than cash held by MAA from time to time); therefore, MAA does not conduct business itself, other thanMAA’s primary function is acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership. The Operating Partnership holds, directly or indirectly, all of ourthe Company’s real estate assets.  Except for net proceeds from public equity issuances by MAA, which are contributed to the Operating Partnership in exchange for OP Units,limited partnership interests, the Operating Partnership generates the capital required by ourthe business through the Operating Partnership'sPartnership’s operations, direct or indirect incurrence of indebtedness and issuance of OP units.

Units.

The presentationpresentations of MAA's shareholders'MAA’s shareholders’ equity and the Operating Partnership'sPartnership’s capital isare the principal areaareas of difference between the condensed consolidated financial statements of MAA and those of the Operating Partnership.  MAA's shareholders'MAA’s shareholders’ equity may include shares of preferred stock, shares of common stock, additional paid-in capital, cumulative earnings, cumulative distributions, noncontrolling interests, preferred units,interest, treasury shares, accumulated other comprehensive income and redeemable common units.stock.  The Operating Partnership'sPartnership’s capital may include common capital and preferred capital of the general partner (MAA), limited partners'partners’ common capital and preferred capital, limited partners' noncontrolling interests,interest, accumulated other comprehensive income and redeemable common units.  Redeemable common units represent the number of outstanding OP Units as of the date of the applicable balance sheet, valued at the greater of the closing market price of MAA's common stock or the aggregate value of the individual partners' capital balances. Holders of OP Units (other than MAA and its corporate affiliates)MAA) may require the Operating Partnership to redeem their OP Units from time to time, in which case the Operating Partnership may, at its option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of MAA'sMAA’s common stock on the New York Stock Exchange, or NYSE, over a specified period prior to the redemption date) or by delivering one share of MAA'sMAA’s common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.




Organization of Mid-America Apartment Communities, Inc.


On December 1, 2016, MAA completed a merger with Post Properties, Inc., or Post Properties. Pursuant to

The Company owns, operates, acquires and selectively develops apartment communities primarily located in the AgreementSoutheast, Southwest and Plan of Merger, or the Merger Agreement, Post Properties merged with and into MAA, with MAA continuing as the surviving corporation, or the Parent Merger, and Post Apartment Homes, L.P, or Post LP, merged with and into MAALP, with MAALP continuing as the surviving entity, or the Partnership Merger. We refer to the Parent Merger, together with the Partnership Merger, as the Merger in this Report. Under the termsMid-Atlantic regions of the Merger Agreement, each share of Post Properties common stock was converted into the right to receive 0.71 of a newly issued share of MAA common stock, including the right, if any, to receive cash in lieu of fractional shares of MAA common stock. In addition, each limited partner interest in Post LP designated as a "Class A Unit" automatically converted into the right to receive 0.71 of a newly issued partnership unit of MAALP. Also, each share of Post Properties' 8 1/2% Series A Cumulative Redeemable Preferred Stock, which we refer to as the Post Properties Series A preferred stock, was automatically converted into the right to receive one newly issued share of MAA's 8.50% Series I Cumulative Redeemable Preferred Stock, $0.01 par value per share, which we refer to as MAA Series I preferred stock. Each newly issued share of MAA Series I preferred stock has substantially the same rights, preferences, privileges, and voting powers as those of the Post Properties Series A preferred stock.

United States.  As of September 30, 2017, we2020, the Company owned and operated 302299 apartment communities comprising99,612 apartment units located in 17 states, through the Operating Partnership. As of September 30, 2017, we also owned a 35.0%Partnership and its subsidiaries and had an ownership interest in 1 apartment community through an unconsolidated real estate joint venture and a 32.0% interest in an unconsolidated limited partnership.venture.  As of September 30, 2017, we2020, the Company had five6 development communities under construction totaling1,434 1,940 apartment units.units once complete.  Total expected costs for the six development projects are $305.0$459.5 million, of which $235.3$264.0 million hashad been incurred through September 30, 2017. We expect2020.  MAA expects to complete construction on two projects by1 of these developments in


2020, 4 developments in 2021 and 1 development in 2022. As of September 30, 2020, NaN of the fourth quarter of 2017, one project by the first quarter of 2018, one project by the third quarter of 2018, and one project by the fourth quarter of 2018. Twenty-nine of our multifamily properties includeCompany’s apartment communities included retail components with approximately 600,000630,000 square feet of gross leasable area. We also have four wholly-ownedspace.  In addition, as of September 30, 2020, the Company had 4 commercial properties which we acquired through the Merger, with approximately 232,000260,000 square feet of combined gross leasable area.


  The Company’s apartment communities and commercial properties were located across 16 states and the District of Columbia as of September 30, 2020.

Basis of Presentation and Principles of Consolidation


The accompanying Condensed Consolidated Financial Statementscondensed consolidated financial statements have been prepared by ourthe Company’s management in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC.  The Condensed Consolidated Financial Statementscondensed consolidated financial statements of MAA presented herein include the accounts of MAA, the Operating Partnership and all other subsidiaries in which MAA has a controlling financial interest. MAA owns, directly or indirectly, approximately 92.5%80% to 100% of all consolidated subsidiaries, including the Operating Partnership.  The Condensed Consolidated Financial Statementscondensed consolidated financial statements of MAALP presented herein include the accounts of MAALP and all other subsidiaries in which MAALP has a controlling financial interest.  MAALP owns, directly or indirectly, 92.5%80% to 100% of all consolidated subsidiaries.  In ourmanagement’s opinion, all adjustments necessary for a fair presentation of the Condensed Consolidated Financial Statementscondensed consolidated financial statements have been included, and all such adjustments were of a normal recurring nature.  All significant intercompany accounts and transactions have been eliminated in consolidation.

We invest

The Company invests in entities which may qualify as variable interest entities, or VIEs, and MAALP is considered a VIE.  A VIE is a legal entity in which the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of the equity investment at risk lack the power to direct the activities of a legal entity as well as the obligation to absorb its expected losses or the right to receive its expected residual returns.  MAALP is classified as a VIE, sincebecause the limited partners lack substantive kick-out rights and substantive participating rights.  We consolidateThe Company consolidates all VIEs for which we areit is the primary beneficiary and useuses the equity method to account for investments that qualify as VIEs but for which we areit is not the primary beneficiary.  In determining whether we arethe Company is the primary beneficiary of a VIE, we considermanagement considers both qualitative and quantitative factors, including, but not limited to, those activities that most significantly impact the VIE'sVIE’s economic performance and which party controls such activities.


We use  The Company uses the equity method of accounting for ourits investments in entities for which we exercisethe Company exercises significant influence, but dodoes not have the ability to exercise control.  The factors considered in determining that we do not havewhether the Company has the ability to exercise control include ownership of voting interests and participatory rights of investors (see "Investment“Investments in Unconsolidated Real Estate Joint Ventures"Affiliates” below).

Noncontrolling Interests

At

Reclassifications

In order to present comparative financial statements, certain reclassifications have been made to the Condensed Consolidated Statements of Operations. Prior year amounts have been changed to conform to the Company’s current year presentation.  As a result of these reclassifications, $1.3 million and $2.3 million of expenses previously reported as “General and administrative expenses” for the three and nine months ended September 30, 2017,2019, respectively, have been reclassified to the “Other non-operating (income) expense” line item of the Condensed Consolidated Statements of Operations in this report.

Noncontrolling Interests

As of September 30, 2020, the Company had two types of noncontrolling interests with respect to its consolidated subsidiaries, (1) noncontrolling interests related to the common unitholders of theits Operating Partnership (see Note 11) and (2) noncontrolling interests related to its consolidated real estate entities (see "Investment in Consolidated Real Estate Joint Ventures" below).



Investment in Unconsolidated Joint Ventures

Immediately priorentities.  The noncontrolling interests relating to the effective date of the Merger, Post Properties together with other institutional investors, in a limited liability company, or the Apartment LLC, owned one apartment community, Post Massachusetts Avenue, located in Washington, D.C.  Post Properties had a 35.0% equity interest in this unconsolidated joint venture, which we retained immediately following the effectiveness of the Merger and as of September 30, 2017. We provide property and asset management services to the Apartment LLC for which we earn fees.

This joint venture was determined to be a VIE, but we are not designated as a primary beneficiary. As a result, we account for our investment in the Apartment LLC using the equity method of accounting, as we are able to exert significant influence, but do not have a controlling interest in this joint venture.  At September 30, 2017, our investment in the Apartment LLC totaled $45.1 million.  

During September 2017, MAA entered into a limited partnership together with a general partner and other limited partners to form Real Estate Technology Ventures, L.P. MAA's equity interest in the partnership is 32.0%, which is considered more than minor. This joint venture was determined to be a VIE, but we are not designated as a primary beneficiary. Therefore, we account for our investment in the limited partnership using the equity method of accounting, as we are able to exert significant influence over the partnership but do not have a controlling interest in this joint venture. At September 30, 2017, our investmentinterests in the limited partnership totaled $0.8 million, and weOperating Partnership are committed to make additional capital contributions totaling $14.2 million overowned by the next five years from the dateholders of the initial capital contribution.

InvestmentClass A OP Units. MAA is the sole general partner of the Operating Partnership and holds all of the outstanding Class B OP Units. Net income (after allocations to preferred ownership interests) is allocated to MAA and the noncontrolling interests based on their respective ownership percentages of the Operating Partnership. Issuance of additional Class A OP Units or Class B OP Units changes the ownership percentage of both the noncontrolling interests and MAA. The issuance of Class B OP Units generally occurs when MAA issues common stock and the issuance proceeds are contributed to the Operating Partnership in Consolidated Real Estate Joint Ventures

In 2015, Post Properties entered into a joint venture arrangement with aexchange for Class B OP Units equal to the number of shares of MAA’s common stock issued. At each reporting period, the allocation between total MAA shareholders’ equity and noncontrolling interests is adjusted to account for the change in the respective percentage ownership of the underlying equity of the Operating Partnership. MAA’s Board of Directors established economic rights in respect to each Class A OP Unit that were equivalent to the economic rights in respect to each share of MAA common stock. See Note 9 for additional details.

The noncontrolling interests relating to the Company’s two consolidated real estate entities are owned by private real estate company to develop, construct and operate a 358-unit apartment community in Denver, Colorado. At September 30, 2017, we owned a 92.5% equity interest in the consolidated joint venture. In 2015, this joint venture acquired the land site and initiated the development of the apartment community. The venture partner willcompanies that are generally be responsible for the development and construction of the community and we will continue to manageapartment communities that are owned through the community upon its completion. This joint venture wasconsolidated real estate entities with a noncontrolling interest.  The entities were determined to be a VIEVIE’s with usthe Company designated as the primary beneficiary.  As a result, the accounts of the joint ventureentities are consolidated by us. Atthe Company.  As of September 30, 2017, our2020, the consolidated assets, liabilities and equity included construction in progress of $60.3 million, land of $14.5 million, and accounts payable and accrued expenses of $6.2 million.


Assets Held for Sale

During September 2017, one land parcel was classified as held for sale. The criteria for classifying the land parcel as held for sale were met during June; however, the sale is not expected to close until the fourth quarter of 2017. As a result, the assets and liabilities associatedof the Company’s consolidated real estate entities with a noncontrolling interest were $96.0 million and $10.2 million, respectively.  As of December 31, 2019, the land parcelconsolidated assets and liabilities of the Company’s consolidated real estate entities with a noncontrolling interest were $46.0 million and $3.2 million, respectively.


Investments in Unconsolidated Affiliates

The Company uses the equity method to account for its investments in a real estate joint venture and two technology-focused limited partnerships that qualify as a VIE. Management determined the Company is not the primary beneficiary in any of these investments but does have the ability to exert significant influence over the operations and financial policies of the real estate joint venture and considers its investment in the limited partnerships to be more than minor. The Company’s investment in the real estate joint venture was $43.5 million and $43.7 million as of September 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020 and December 31, 2019, the Company’s investments in the technology-focused limited partnerships were $21.3 million and $13.1 million, respectively, and are included in “Other assets” in the accompanying Condensed Consolidated Balance Sheets. As of September 30, 2020, the Company was committed until February 2025 to make additional capital contributions totaling $21.3 million if and when called by the general partners of the limited partnerships.

Fair Value Measurements

The Company applies the guidance in Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, to the valuation of real estate assets recorded at fair value, to its impairment valuation analysis of real estate assets, to its disclosure of the fair value of financial instruments, principally indebtedness and to its derivative financial instruments.  Fair value disclosures required under ASC Topic 820 as well as the Company’s derivative accounting policies are summarized in Note 7 utilizing the following hierarchy:

Level 1 - Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2 - Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs for the assets or liability.

Revenue Recognition

The Company primarily leases multifamily residential apartments to residents under operating leases generally due on a monthly basis with terms of approximately one year or less.  Rental revenues are recognized in accordance with ASC Topic 842, Leases, using a method that represents a straight-line basis over the term of the lease. In addition, in circumstances where a lease incentive is provided to tenants, the incentive is recognized as a reduction of rental revenues on a straight-line basis over the reasonably assured lease term.  Rental revenues represent approximately 93% of the Company’s total revenues and include gross rents charged less adjustments for concessions and bad debt.  Approximately 6% of the Company’s total revenues represent non-lease reimbursable property revenues from its residents for utility reimbursements, which are generally recognized and due on a monthly basis as residents obtain control of the service over the term of the lease.  The remaining 1% of the Company’s total revenues represents other non-lease property revenues primarily driven by nonrefundable fees and commissions.

In accordance with ASC Topic 842, rental revenues and non-lease reimbursable property revenues meet the criteria to be aggregated into a single lease component and are reported on a combined basis in the line item “Rental revenues”, as presented in the disaggregation of the Company’s revenues in Note 11.Other non-lease property revenues are accounted for in accordance with ASC Topic 606, Revenue from Contracts with Customers, which requires revenue recognized outside of the scope of ASC Topic 842 to be recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. Other non-lease property revenues are reported in the line item “Other property revenues”, as heldpresented in the disaggregation of the Company’s revenues in Note 11.

Leases

The Company is the lessee under certain ground, office, equipment and other operational leases, all of which are accounted for saleas operating leases in accordance with ASC Topic 842. The Company recognizes a right-of-use asset for the right to use the underlying asset for all leases where the Company is the lessee with terms of more than twelve months, and a related lease liability for the obligation to make lease payments. Expenses related to leases determined to be operating leases are recognized on a straight-line basis.  As of September 30, 2020and December 31, 2019, right-of-use assets recorded within “Other assets” totaled $50.1 million and $53.8 million, respectively, and related lease obligations recorded within “Accrued expenses and other liabilities” totaled $32.2 million and $33.1 million, respectively, in the Condensed Consolidated Balance Sheets.


2.    Business Combination

On December 1, 2016, we completed  As of September 30, 2020, the Merger. As partCompany’s operating leases had a weighted average remaining lease term of approximately 31 years and a weighted average discount rate of approximately 4.4%. Lease expense recognized for the Merger, we acquired 61 wholly-owned apartment communities comprising 24,138 apartment units, including 269 apartment units in one community held in an unconsolidated entity,three and 2,262  apartment units in six communities that were under development at the Merger date. Post Properties had operations in ten markets across the United States. In additionnine months ended September 30, 2020 and 2019 was immaterial to the apartment communities, we also acquired four commercial properties, totaling approximately 232,000 square feet of combined gross leasable area. The consolidated net assets and results of operations of Post Properties areCompany. Cash paid for amounts included in our Consolidated Financial Statements from the closing date, December 1, 2016, going forward.

The total purchase price of approximately $4.0 billion was determined based on the number of shares of Post Properties' common stock, the number of shares of Post Properties’ Series A preferred stock, and shares of Post LP's Class A Units of limited partnership interest outstanding as of December 1, 2016, in addition to cash consideration provided by the Operating Partnership immediately prior to the Merger to pay off a $300.0 million Post LP unsecured term loan and a $162.0 million Post LP line of credit, both outstanding from Wells Fargo. In all cases in which MAA’s common stock price was a determining factor in arriving at final consideration for the Merger, the stock price used to determine the purchase price was the opening price of MAA’s common stock on December 1, 2016 ($91.41 per share). At the date of acquisition, the MAA Series I preferred stock consideration was valued at $77.00 per share, which included a $14.24 per share bifurcated call option (See Notes 8 & 9). The total purchase price also included $2.0 million of other consideration, a majority of which related to assumed stock compensation plans. As a result of the Merger, we issued approximately 38.0 million shares of MAA common stock,


approximately 80,000 OP Units, and 867,846 newly issued shares of MAA Series I preferred stock.

The Merger has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification, or ASC, 805, Business Combinations, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair values.

For larger, portfolio style acquisitions, like the Merger, management engages a third party valuation specialist to assist with the fair value assessment, which includes an allocation of the purchase price. Similar to management's methods, the third party uses cash flow analysis as well as an income approach and a market approach to determine the fair value of assets acquired. The third party uses stabilized net operating income, or NOI, and market specific capitalization and discount rates. Management reviews the inputs used by the third party specialist as well as the allocation of the purchase price provided by the third party to ensure reasonableness and that the procedures are performed in accordance with management's policy. The allocation of the purchase price is based on management’s assessment, which may differ as more information becomes available. Subsequent adjustments made to the purchase price allocation, if any, are made within the allocation period, which typically does not exceed one year.

The allocation of the purchase price described above requires a significant amount of judgment and represents management's best estimate of the fair value as of the acquisition date. The following preliminary purchase price allocation for the Merger reflects updates primarily to an adjustment to litigation reserves offset by increased derivative asset values on the preferred share bifurcated call option (included in "Other assets") and real estate asset values from our December 31, 2016 estimates. Such preliminary purchase price allocation was based on our valuation as well as estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed.

The purchase price was allocated as follows (in thousands):
Land$875,294
Buildings and improvements3,397,342
Furniture, fixtures and equipment81,243
Development and capital improvements in progress183,881
Undeveloped land24,200
Commercial properties, net3,610
Investment in real estate joint venture44,435
Lease intangible assets53,192
Cash and cash equivalents34,292
Restricted cash3,608
Deferred costs and other assets, excluding lease intangible assets41,803
Total assets acquired4,742,900
  
Notes payable(595,609)
Fair market value of interest rate swaps(2,118)
Lease intangible liabilities(1,661)
Accounts payable, accrued expenses, and other liabilities(132,613)
Total liabilities assumed, including debt(732,001)
  
Noncontrolling interests - consolidated real estate entity(2,306)
  
Total purchase price$4,008,593

The purchase price accounting reflected in the accompanying financial statements is based upon estimates and assumptions that are subject to change within the measurement period, pursuant to ASC 805. See Note 12 for loss contingencies identified, measured, and included in "Accounts payable, accrued expenses, and other liabilities" in the allocation above. We have preliminarily completed our valuation procedures. Adjustments may still occur as the valuation and revised preliminary purchase allocation is finalized in areas such as real estate related assets andof operating lease liabilities equity investments, litigation reserves, debt and debt related instruments, and certain other acquired assets and liabilities assumed. We will complete our purchase price allocation during the fourth quarter of 2017.



We incurred Merger and integration related expenses of $14.5 million for the nine months ended September 30, 2017. These amounts were expensed as incurred2020 and are included2019 was also immaterial.


Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Measurement of Credit Losses on Financial Instruments, which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities and other financial instruments.  The ASU requires entities to estimate a lifetime expected credit loss for most financial instruments, including trade receivables.  Subsequent changes in the Condensed Consolidated Statementsvaluation allowance are recorded in current earnings and reversal of Operationsprevious losses is permitted.  In November 2018, the FASB issued an amendment excluding operating lease receivables accounted for under ASC Topic 842 from the scope of the new credit losses standard. The Company adopted the standard on January 1, 2020. The adoption of ASU No. 2016-13 did not result in significant changes in the items titled "Merger related expenses", primarily consistingaccounting for the Company’s approach to estimate credit losses on financial assets, as substantially all of severance and professional costs, and "Integration related expenses", primarily consisting of temporary systems, staffing, and facilities costs.


3.    the Company’s financial assets are operating lease receivables.

2.Earnings per Common Share of MAA


Basic earnings per share is computed by dividing net income available forto MAA common shareholders by the weighted average number of common shares outstanding during the period.  All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share.  Both the unvested restricted shares and other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis with our diluted earnings per share being the more dilutive of the treasury stock or two-class methods.  OP Units are included in dilutive earnings per share calculations when theythe units are dilutive to earnings per share.

For the three and nine months ended September 30, 20172020 and 2016, MAA's basic earnings per share was computed using the two-class method, and MAA's2019, MAA’s diluted earnings per share was computed using the more dilutive of the treasury stock method or two-class method, as presented below:below (dollars and shares in thousands, except per share amounts):

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Calculation of Earnings per common share - basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

62,036

 

 

$

81,459

 

 

$

177,716

 

 

$

211,558

 

Net income attributable to noncontrolling interests

 

 

(2,126

)

 

 

(2,814

)

 

 

(6,096

)

 

 

(7,336

)

Unvested restricted stock (allocation of earnings)

 

 

(78

)

 

 

(118

)

 

 

(229

)

 

 

(302

)

Preferred dividends

 

 

(922

)

 

 

(922

)

 

 

(2,766

)

 

 

(2,766

)

Net income available for MAA common shareholders, adjusted

 

$

58,910

 

 

$

77,605

 

 

$

168,625

 

 

$

201,154

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - basic

 

 

114,216

 

 

 

113,877

 

 

 

114,177

 

 

 

113,814

 

Earnings per common share - basic

 

$

0.52

 

 

$

0.68

 

 

$

1.48

 

 

$

1.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Calculation of Earnings per common share - diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

62,036

 

 

$

81,459

 

 

$

177,716

 

 

$

211,558

 

Net income attributable to noncontrolling interests (1)

 

 

(2,126

)

 

 

(2,814

)

 

 

(6,096

)

 

 

(7,336

)

Preferred dividends

 

 

(922

)

 

 

(922

)

 

 

(2,766

)

 

 

(2,766

)

Net income available for MAA common shareholders, adjusted

 

$

58,988

 

 

$

77,723

 

 

$

168,854

 

 

$

201,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares - basic

 

 

114,216

 

 

 

113,877

 

 

 

114,177

 

 

 

113,814

 

Effect of dilutive securities

 

 

252

 

 

 

260

 

 

 

310

 

 

 

238

 

Weighted average common shares - diluted

 

 

114,468

 

 

 

114,137

 

 

 

114,487

 

 

 

114,052

 

Earnings per common share - diluted

 

$

0.52

 

 

$

0.68

 

 

$

1.47

 

 

$

1.77

 

(dollars and shares in thousands, except per share amounts)Three months ended September 30, Nine months ended September 30, 
 2017 2016 2017 2016 
Shares Outstanding        
Weighted average common shares - basic113,434
 75,302
 113,392
 75,276
 
Weighted average partnership units outstanding—
(1) 
—
(1) 
—
(1) 
4,156
 
Effect of dilutive securities219
 —
(2) 
270
 246
 
Weighted average common shares - diluted113,653
 75,302
 113,662
 79,678
 
         
Calculation of Earnings per Share - basic     
  
 
Net income$118,958
 $88,906
 $212,529
 $182,344
 
Net income attributable to noncontrolling interests(4,249) (4,627) (7,600) (9,508) 
Unvested restricted stock (allocation of earnings)(181) (254) (337) (485) 
Preferred dividends(922) —
 (2,766) —
 
Net income available for common shareholders, adjusted$113,606
 $84,025
 $201,826
 $172,351
 
         
Weighted average common shares - basic113,434
 75,302
 113,392
 75,276
 
Earnings per share - basic$1.00
 $1.12
 $1.78
 $2.29
 
         
Calculation of Earnings per Share - diluted     
  
 
Net income$118,958
 $88,906
 $212,529
 $182,344
 
Net income attributable to noncontrolling interests(4,249)
(1) 
(4,628)
(1) 
(7,600)
(1) 
—
 
Unvested restricted stock (allocation of earnings)—
 (254)
(2) 
—
 —
 
Preferred dividends(922) —
 (2,766) —
 
Net income available for common shareholders, adjusted$113,787
 $84,024
 $202,163
 $182,344
 
         
Weighted average common shares - diluted113,653
 75,302
 113,662
 79,678
 
Earnings per share - diluted$1.00
 $1.12
 $1.78
 $2.29
 

(1)

For the three and nine months ended September 30, 2020 and 2019, 4.1 million OP Units and their related income are not included in the diluted earnings per share calculations as they are not dilutive.


(1) For both the three and nine months ended September 30, 2017 and the three months ended September 30, 2016, 4.2 million OP Units and their related income are not included in the diluted earnings per share calculations as they are not dilutive.
(2) For the three months ended September 30, 2016, 0.2 million potentially dilutive securities and their related income are not included in the diluted earnings per share calculations as they are not dilutive.



4.    

3.Earnings per OP Unit of MAALP


Basic earnings per OP Unitcommon unit is computed by dividing net income available for common unitholders by the weighted average number of OP Units outstanding during the period.  All outstanding unvested restricted unit awards contain rights to non-forfeitable distributions and participate in undistributed earnings with common unitholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per OPcommon unit.  Diluted earnings per OP Unitcommon unit reflects the potential dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units.  A reconciliation ofBoth the numeratorsunvested restricted unit awards and denominators ofother potentially dilutive common units, and the basic andrelated impact to earnings, are considered when calculating earnings per common unit on a diluted basis with diluted earnings per OP Unit computations forcommon unit being the more dilutive of the treasury stock or two-class methods.

For the three and nine months ended September 30, 20172020 and 2016 is presented below:


(dollars and units in thousands, except per unit amounts)Three months ended September 30, Nine months ended September 30, 
 2017 2016 2017 2016 
Units Outstanding        
Weighted average common units - basic117,643
 79,449
 117,607
 79,432
 
Effect of dilutive securities219
 —
(1) 
270
 246
 
Weighted average common units - diluted117,862
 79,449
 117,877
 79,678
 
         
Calculation of Earnings per Unit - basic     
  
 
Net income$118,958
 $88,906
 $212,529
 $182,344
 
Unvested restricted stock (allocation of earnings)(181) (254) (337) (484) 
Preferred unit distributions(922) —
 (2,766) —
 
Net income available for common unitholders, adjusted$117,855
 $88,652
 $209,426
 $181,860
 
         
Weighted average common units - basic117,643
 79,449
 117,607
 79,432
 
Earnings per common unit - basic$1.00
 $1.12
 $1.78
 $2.29
 
         
Calculation of Earnings per Unit - diluted     
  
 
Net income$118,958
 $88,906
 $212,529
 $182,344
 
Unvested restricted stock (allocation of earnings)—
 (254)
(1) 
—
 —
 
Preferred unit distributions(922) —
 (2,766) —
 
Net income available for common unitholders, adjusted$118,036
 $88,652
 $209,763
 $182,344
 
         
Weighted average common units - diluted117,862
 79,449
 117,877
 79,678
 
Earnings per common unit - diluted$1.00
 $1.12
 $1.78
 $2.29
 

(1) For the three months ended September 30, 2016, 0.2 million potentially dilutive securities and their related income are not included in the2019, MAALP’s diluted earnings per share calculationscommon unit was computed using the treasury stock method as they are not dilutive.presented below (dollars and units in thousands, except per unit amounts):

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Calculation of Earnings per common unit - basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

62,036

 

 

$

81,459

 

 

$

177,716

 

 

$

211,558

 

Unvested restricted stock (allocation of earnings)

 

 

(78

)

 

 

(118

)

 

 

(229

)

 

 

(302

)

Preferred unit distributions

 

 

(922

)

 

 

(922

)

 

 

(2,766

)

 

 

(2,766

)

Net income available for MAALP common unitholders, adjusted

 

$

61,036

 

 

$

80,419

 

 

$

174,721

 

 

$

208,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common units - basic

 

 

118,274

 

 

 

117,958

 

 

 

118,238

 

 

 

117,910

 

Earnings per common unit - basic

 

$

0.52

 

 

$

0.68

 

 

$

1.48

 

 

$

1.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Calculation of Earnings per common unit - diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

62,036

 

 

$

81,459

 

 

$

177,716

 

 

$

211,558

 

Preferred unit distributions

 

 

(922

)

 

 

(922

)

 

 

(2,766

)

 

 

(2,766

)

Net income available for MAALP common unitholders, adjusted

 

$

61,114

 

 

$

80,537

 

 

$

174,950

 

 

$

208,792

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common units - basic

 

 

118,274

 

 

 

117,958

 

 

 

118,238

 

 

 

117,910

 

Effect of dilutive securities

 

 

252

 

 

 

260

 

 

 

310

 

 

 

238

 

Weighted average common units - diluted

 

 

118,526

 

 

 

118,218

 

 

 

118,548

 

 

 

118,148

 

Earnings per common unit - diluted

 

$

0.52

 

 

$

0.68

 

 

$

1.48

 

 

$

1.77

 




5.    

4.MAA Equity


Changes in MAA’s total equity and its components for the nine-month periodsthree months ended September 30, 20172020 and 20162019 were as follows (dollars in thousands, except per share and per unit data)thousands):

 

 

Mid-America Apartment Communities, Inc. Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Distributions

in Excess of

Net Income

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Noncontrolling

Interests -

Operating

Partnership

 

 

Noncontrolling

Interests -

Consolidated

Real Estate

Entities

 

 

Total

Equity

 

EQUITY BALANCE JUNE 30, 2020

 

$

9

 

 

$

1,140

 

 

$

7,168,886

 

 

$

(1,202,536

)

 

$

(12,665

)

 

$

209,894

 

 

$

6,849

 

 

$

6,171,577

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

59,910

 

 

 

—

 

 

 

2,126

 

 

 

—

 

 

 

62,036

 

Other comprehensive income - derivative instruments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

269

 

 

 

10

 

 

 

—

 

 

 

279

 

Issuance and registration of common shares

 

 

—

 

 

 

—

 

 

 

33

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

33

 

Shares issued in exchange for common units

 

 

—

 

 

 

—

 

 

 

21

 

 

 

—

 

 

 

—

 

 

 

(21

)

 

 

—

 

 

 

—

 

Redeemable stock fair market value adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(155

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(155

)

Adjustment for noncontrolling interests in

   Operating Partnership

 

 

—

 

 

 

—

 

 

 

71

 

 

 

—

 

 

 

—

 

 

 

(71

)

 

 

—

 

 

 

—

 

Amortization of unearned compensation

 

 

—

 

 

 

—

 

 

 

4,380

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,380

 

Dividends on preferred stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(922

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(922

)

Dividends on common stock ($1.00 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(114,369

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(114,369

)

Dividends on noncontrolling interests units

   ($1.00 per unit)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,866

)

 

 

—

 

 

 

(3,866

)

Contribution from noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

262

 

 

 

262

 

EQUITY BALANCE SEPTEMBER 30, 2020

 

$

9

 

 

$

1,140

 

 

$

7,173,391

 

 

$

(1,258,072

)

 

$

(12,396

)

 

$

208,072

 

 

$

7,111

 

 

$

6,119,255

 

 

 

Mid-America Apartment Communities, Inc. Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Distributions

in Excess of

Net Income

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Noncontrolling

Interests -

Operating

Partnership

 

 

Noncontrolling

Interests -

Consolidated

Real Estate

Entities

 

 

Total

Equity

 

EQUITY BALANCE JUNE 30, 2019

 

$

9

 

 

$

1,138

 

 

$

7,146,076

 

 

$

(1,086,665

)

 

$

(9,092

)

 

$

215,404

 

 

$

5,656

 

 

$

6,272,526

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

78,645

 

 

 

—

 

 

 

2,814

 

 

 

—

 

 

 

81,459

 

Other comprehensive loss - derivative instruments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,778

)

 

 

(195

)

 

 

—

 

 

 

(5,973

)

Issuance and registration of common shares

 

 

—

 

 

 

—

 

 

 

140

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

140

 

Exercise of stock options

 

 

—

 

 

 

—

 

 

 

(204

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(204

)

Shares issued in exchange for common units

 

 

—

 

 

 

—

 

 

 

836

 

 

 

—

 

 

 

—

 

 

 

(836

)

 

 

—

 

 

 

—

 

Redeemable stock fair market value adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,269

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,269

)

Adjustment for noncontrolling interests in

   Operating Partnership

 

 

—

 

 

 

—

 

 

 

(272

)

 

 

—

 

 

 

—

 

 

 

272

 

 

 

—

 

 

 

—

 

Amortization of unearned compensation

 

 

—

 

 

 

—

 

 

 

3,313

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,313

 

Dividends on preferred stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(922

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(922

)

Dividends on common stock ($0.96 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(109,503

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(109,503

)

Dividends on noncontrolling interests units

   ($0.96 per unit)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,912

)

 

 

—

 

 

 

(3,912

)

Contribution from noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

955

 

 

 

955

 

EQUITY BALANCE SEPTEMBER 30, 2019

 

$

9

 

 

$

1,138

 

 

$

7,149,889

 

 

$

(1,119,714

)

 

$

(14,870

)

 

$

213,547

 

 

$

6,611

 

 

$

6,236,610

 


Changes in MAA’s total equity and its components for the nine months ended September 30, 2020 and 2019 were as follows (dollars in thousands):

 

 

Mid-America Apartment Communities, Inc. Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Distributions

in Excess of

Net Income

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Noncontrolling

Interests -

Operating

Partnership

 

 

Noncontrolling

Interests -

Consolidated

Real Estate

Entities

 

 

Total

Equity

 

EQUITY BALANCE DECEMBER 31, 2019

 

$

9

 

 

$

1,140

 

 

$

7,166,073

 

 

$

(1,085,479

)

 

$

(13,178

)

 

$

214,647

 

 

$

6,247

 

 

$

6,289,459

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

171,620

 

 

 

—

 

 

 

6,096

 

 

 

—

 

 

 

177,716

 

Other comprehensive income - derivative instruments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

782

 

 

 

28

 

 

 

—

 

 

 

810

 

Issuance and registration of common shares

 

 

—

 

 

 

—

 

 

 

(344

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(344

)

Shares repurchased and retired

 

 

—

 

 

 

—

 

 

 

(5,657

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,657

)

Exercise of stock options

 

 

—

 

 

 

—

 

 

 

71

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

71

 

Shares issued in exchange for common units

 

 

—

 

 

 

—

 

 

 

471

 

 

 

—

 

 

 

—

 

 

 

(471

)

 

 

—

 

 

 

—

 

Redeemable stock fair market value adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,659

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,659

 

Adjustment for noncontrolling interests in

   Operating Partnership

 

 

—

 

 

 

—

 

 

 

244

 

 

 

—

 

 

 

—

 

 

 

(244

)

 

 

—

 

 

 

—

 

Amortization of unearned compensation

 

 

—

 

 

 

—

 

 

 

12,533

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

12,533

 

Dividends on preferred stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,766

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,766

)

Dividends on common stock ($3.00 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(343,106

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(343,106

)

Dividends on noncontrolling interests units

   ($3.00 per unit)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(11,984

)

 

 

—

 

 

 

(11,984

)

Contribution from noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

864

 

 

 

864

 

EQUITY BALANCE SEPTEMBER 30, 2020

 

$

9

 

 

$

1,140

 

 

$

7,173,391

 

 

$

(1,258,072

)

 

$

(12,396

)

 

$

208,072

 

 

$

7,111

 

 

$

6,119,255

 

 

 

Mid-America Apartment Communities, Inc. Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Distributions

in Excess of

Net Income

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Noncontrolling

Interests -

Operating

Partnership

 

 

Noncontrolling

Interests -

Consolidated

Real Estate

Entities

 

 

Total

Equity

 

EQUITY BALANCE DECEMBER 31, 2018

 

$

9

 

 

$

1,136

 

 

$

7,138,170

 

 

$

(989,263

)

 

$

(212

)

 

$

220,043

 

 

$

2,306

 

 

$

6,372,189

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

204,222

 

 

 

—

 

 

 

7,336

 

 

 

—

 

 

 

211,558

 

Other comprehensive loss - derivative instruments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(14,658

)

 

 

(520

)

 

 

—

 

 

 

(15,178

)

Issuance and registration of common shares

 

 

—

 

 

 

2

 

 

 

748

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

750

 

Shares repurchased and retired

 

 

—

 

 

 

—

 

 

 

(3,724

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,724

)

Exercise of stock options

 

 

—

 

 

 

—

 

 

 

1,036

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,036

 

Shares issued in exchange for common units

 

 

—

 

 

 

—

 

 

 

1,993

 

 

 

—

 

 

 

—

 

 

 

(1,993

)

 

 

—

 

 

 

—

 

Shares issued in exchange for redeemable stock

 

 

—

 

 

 

—

 

 

 

575

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

575

 

Redeemable stock fair market value adjustment

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,455

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,455

)

Adjustment for noncontrolling interests in

   Operating Partnership

 

 

—

 

 

 

—

 

 

 

(459

)

 

 

—

 

 

 

—

 

 

 

459

 

 

 

—

 

 

 

—

 

Amortization of unearned compensation

 

 

—

 

 

 

—

 

 

 

11,550

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11,550

 

Dividends on preferred stock

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,766

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,766

)

Dividends on common stock ($2.88 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(328,452

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(328,452

)

Dividends on noncontrolling interests units

   ($2.88 per unit)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(11,778

)

 

 

—

 

 

 

(11,778

)

Contribution from noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,305

 

 

 

4,305

 

EQUITY BALANCE SEPTEMBER 30, 2019

 

$

9

 

 

$

1,138

 

 

$

7,149,889

 

 

$

(1,119,714

)

 

$

(14,870

)

 

$

213,547

 

 

$

6,611

 

 

$

6,236,610

 

  Mid-America Apartment Communities, Inc. Shareholders' Equity      
 Preferred Stock Amount 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Distributions
in Excess of
Net Income
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest Operating Partnership
 Noncontrolling Interest - Consolidated Real Estate Entity 
Total
Equity
EQUITY BALANCE DECEMBER 31, 2016$9
 $1,133
 $7,109,012
 $(707,479) $1,144
 $235,976
 $2,306
 $6,642,101
Net income attributable to controlling interest—
 —
 —
 204,929
 —
 7,600
 —
 212,529
Other comprehensive income - derivative instruments (cash flow hedges)—
 —
 —
 —
 (354) (14) —
 (368)
Issuance and registration of common shares—
 1
 153
 —
 —
 —
 —
 154
Issuance and registration of preferred shares—
 —
 2,007
 —
 —
 —
 —
 2,007
Shares repurchased and retired—
 —
 (4,782) —
 —
 —
 —
 (4,782)
Exercise of stock options—
 —
 218
 —
 —
 —
 —
 218
Shares issued in exchange for common units—
 —
 1,133
 —
 —
 (1,133) —
 —
Shares issued in exchange for redeemable stock—
 —
 1,482
 —
 —
 —
 —
 1,482
Redeemable stock fair market value adjustment—
 —
 —
 (870) —
 —
 —
 (870)
Adjustment for noncontrolling interest ownership in operating partnership—
 —
 54
 —
 —
 (54) —
 —
Amortization of unearned compensation—
 —
 8,552
 (114) —
 —
 —
 8,438
Dividends on preferred stock—
 —
 —
 (2,766) —
 —
 —
 (2,766)
Dividends on common stock ($2.61 per share)—
 —
 —
 (296,535) —
 —
 —
 (296,535)
Dividends on noncontrolling interest units ($2.61 per unit)—
 —
 —
 —
 —
 (10,982) —
 (10,982)
EQUITY BALANCE SEPTEMBER 30, 2017$9
 $1,134
 $7,117,829
 $(802,835) $790
 $231,393
 $2,306
 $6,550,626


  Mid-America Apartment Communities, Inc. Shareholders' Equity      
 Preferred Stock Amount 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Distributions
in Excess of
Net Income
 
Accumulated
Other
Comprehensive
Income (Loss)
 Noncontrolling
Interest Operating Partnership		 Noncontrolling Interest - Consolidated Real Estate Entity 
Total
Equity
EQUITY BALANCE DECEMBER 31, 2015$—
 $753
 $3,627,074
 $(634,141) $(1,589) $165,726
 $—
 $3,157,823
Net income attributable to controlling interest—
 —
 —
 172,836
 —
 9,508
 —
 182,344
Other comprehensive loss - derivative instruments (cash flow hedges)—
 —
 —
 —
 (456) (25) —
 (481)
Issuance and registration of common shares—
 1
 (739) —
 —
 —
 —
 (738)
Shares repurchased and retired—
 —
 (1,811) —
 —
 —
 —
 (1,811)
Shares issued in exchange for common units—
 —
 780
 —
 —
 (780) —
 —
Shares issued in exchange for redeemable stock—
 —
 122
 —
 —
 —
 —
 122
Redeemable stock fair market value adjustment—
 —
 —
 (296) —
 —
 —
 (296)
Adjustment for noncontrolling interest ownership in operating partnership—
 —
 (38) —
 —
 38
 —
 —
Amortization of unearned compensation—
 —
 6,625
 —
 —
 —
 ��
 6,625
Dividends on common stock ($2.46 per share)—
 —
 —
 (185,789) —
 —
 —
 (185,789)
Dividends on noncontrolling interest units ($2.46 per unit)—
 —
 —
 —
 —
 (10,217) —
 (10,217)
EQUITY BALANCE SEPTEMBER 30, 2016$—
 $754
 $3,632,013
 $(647,390) $(2,045) $164,250
 $—
 $3,147,582



6.    

5.MAALP Capital


Changes in MAALP’s total capital and its components for the nine-month periodsthree months ended September 30, 20172020 and 20162019 were as follows (dollars in thousands, except per unit data)thousands):

 

 

Mid-America Apartments, L.P. Unitholders’ Capital

 

 

 

 

 

 

 

 

 

 

 

Limited

Partners

 

 

General

Partner

 

 

Preferred

Units

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Noncontrolling

Interests-

Consolidated

Real Estate

Entities

 

 

Total

Partnership

Capital

 

CAPITAL BALANCE JUNE 30, 2020

 

$

209,894

 

 

$

5,901,028

 

 

$

66,840

 

 

$

(13,053

)

 

$

6,849

 

 

$

6,171,558

 

Net income

 

 

2,126

 

 

 

58,988

 

 

 

922

 

 

 

—

 

 

 

—

 

 

 

62,036

 

Other comprehensive income - derivative instruments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

279

 

 

 

—

 

 

 

279

 

Issuance of units

 

 

—

 

 

 

33

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

33

 

General partnership units issued in exchange for limited

   partnership units

 

 

(21

)

 

 

21

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Redeemable units fair market value adjustment

 

 

—

 

 

 

(155

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(155

)

Adjustment for limited partners’ capital at redemption value

 

 

(61

)

 

 

61

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Amortization of unearned compensation

 

 

—

 

 

 

4,380

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,380

 

Distributions to preferred unitholders

 

 

—

 

 

 

—

 

 

 

(922

)

 

 

—

 

 

 

—

 

 

 

(922

)

Distributions to common unitholders ($1.00 per unit)

 

 

(3,866

)

 

 

(114,369

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(118,235

)

Contribution from noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

262

 

 

 

262

 

CAPITAL BALANCE SEPTEMBER 30, 2020

 

$

208,072

 

 

$

5,849,987

 

 

$

66,840

 

 

$

(12,774

)

 

$

7,111

 

 

$

6,119,236

 

 

 

Mid-America Apartments, L.P. Unitholders’ Capital

 

 

 

 

 

 

 

 

 

 

 

Limited

Partners

 

 

General

Partner

 

 

Preferred

Units

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Noncontrolling

Interests -

Consolidated

Real Estate

Entities

 

 

Total

Partnership

Capital

 

CAPITAL BALANCE JUNE 30, 2019

 

$

215,404

 

 

$

5,993,973

 

 

$

66,840

 

 

$

(9,366

)

 

$

5,656

 

 

$

6,272,507

 

Net income

 

 

2,814

 

 

 

77,723

 

 

 

922

 

 

 

—

 

 

 

—

 

 

 

81,459

 

Other comprehensive loss - derivative instruments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,973

)

 

 

—

 

 

 

(5,973

)

Issuance of units

 

 

—

 

 

 

140

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

140

 

Exercise of unit options

 

 

—

 

 

 

(204

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(204

)

General partnership units issued in exchange for limited

   partnership units

 

 

(836

)

 

 

836

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Redeemable units fair market value adjustment

 

 

—

 

 

 

(1,269

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,269

)

Adjustment for limited partners’ capital at redemption value

 

 

77

 

 

 

(77

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Amortization of unearned compensation

 

 

—

 

 

 

3,313

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,313

 

Distributions to preferred unitholders

 

 

—

 

 

 

—

 

 

 

(922

)

 

 

—

 

 

 

—

 

 

 

(922

)

Distributions to common unitholders ($0.96 per unit)

 

 

(3,912

)

 

 

(109,503

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(113,415

)

Contribution from noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

955

 

 

 

955

 

CAPITAL BALANCE SEPTEMBER 30, 2019

 

$

213,547

 

 

$

5,964,932

 

 

$

66,840

 

 

$

(15,339

)

 

$

6,611

 

 

$

6,236,591

 


Changes in MAALP’s total capital and its components for the nine months ended September 30, 2020 and 2019 were as follows (dollars in thousands):

 

 

Mid-America Apartments, L.P. Unitholders’ Capital

 

 

 

 

 

 

 

 

 

 

 

Limited

Partners

 

 

General

Partner

 

 

Preferred

Units

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Noncontrolling

Interests-

Consolidated

Real Estate

Entities

 

 

Total

Partnership

Capital

 

CAPITAL BALANCE DECEMBER 31, 2019

 

$

214,647

 

 

$

6,015,290

 

 

$

66,840

 

 

$

(13,584

)

 

$

6,247

 

 

$

6,289,440

 

Net income

 

 

6,096

 

 

 

168,854

 

 

 

2,766

 

 

 

—

 

 

 

—

 

 

 

177,716

 

Other comprehensive income - derivative instruments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

810

 

 

 

—

 

 

 

810

 

Issuance of units

 

 

—

 

 

 

(344

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(344

)

Units repurchased and retired

 

 

—

 

 

 

(5,657

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,657

)

Exercise of unit options

 

 

—

 

 

 

71

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

71

 

General partnership units issued in exchange for limited

   partnership units

 

 

(471

)

 

 

471

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Redeemable units fair market value adjustment

 

 

—

 

 

 

1,659

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,659

 

Adjustment for limited partners’ capital at redemption value

 

 

(216

)

 

 

216

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Amortization of unearned compensation

 

 

—

 

 

 

12,533

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

12,533

 

Distributions to preferred unitholders

 

 

—

 

 

 

—

 

 

 

(2,766

)

 

 

—

 

 

 

—

 

 

 

(2,766

)

Distributions to common unitholders ($3.00 per unit)

 

 

(11,984

)

 

 

(343,106

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(355,090

)

Contribution from noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

864

 

 

 

864

 

CAPITAL BALANCE SEPTEMBER 30, 2020

 

$

208,072

 

 

$

5,849,987

 

 

$

66,840

 

 

$

(12,774

)

 

$

7,111

 

 

$

6,119,236

 

 

 

Mid-America Apartments, L.P. Unitholders’ Capital

 

 

 

 

 

 

 

 

 

 

 

Limited

Partners

 

 

General

Partner

 

 

Preferred

Units

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Noncontrolling

Interests -

Consolidated

Real Estate

Entities

 

 

Total

Partnership

Capital

 

CAPITAL BALANCE DECEMBER 31, 2018

 

$

220,043

 

 

$

6,083,142

 

 

$

66,840

 

 

$

(161

)

 

$

2,306

 

 

$

6,372,170

 

Net income

 

 

7,336

 

 

 

201,456

 

 

 

2,766

 

 

 

—

 

 

 

—

 

 

 

211,558

 

Other comprehensive loss - derivative instruments

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(15,178

)

 

 

—

 

 

 

(15,178

)

Issuance of units

 

 

—

 

 

 

750

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

750

 

Units repurchased and retired

 

 

—

 

 

 

(3,724

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,724

)

Exercise of unit options

 

 

—

 

 

 

1,036

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,036

 

General partnership units issued in exchange for limited

   partnership units

 

 

(1,993

)

 

 

1,993

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Units issued in exchange for redeemable units

 

 

—

 

 

 

575

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

575

 

Redeemable units fair market value adjustment

 

 

—

 

 

 

(3,455

)

 

 

—

 

 

 

—

 

 

 

��

 

 

 

(3,455

)

Adjustment for limited partners’ capital at redemption value

 

 

(61

)

 

 

61

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Amortization of unearned compensation

 

 

—

 

 

 

11,550

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11,550

 

Distributions to preferred unitholders

 

 

—

 

 

 

—

 

 

 

(2,766

)

 

 

—

 

 

 

—

 

 

 

(2,766

)

Distributions to common unitholders ($2.88 per unit)

 

 

(11,778

)

 

 

(328,452

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(340,230

)

Contribution from noncontrolling interest

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,305

 

 

 

4,305

 

CAPITAL BALANCE SEPTEMBER 30, 2019

 

$

213,547

 

 

$

5,964,932

 

 

$

66,840

 

 

$

(15,339

)

 

$

6,611

 

 

$

6,236,591

 

6.Borrowings

The following table summarizes the Company’s outstanding debt as of September 30, 2020 (dollars in thousands):

 

 

Balance

 

 

Weighted Average Effective Rate

 

 

Weighted Average Contract Maturity

 

Unsecured debt

 

 

 

 

 

 

 

 

 

 

 

 

Variable rate revolving credit facility

 

$

—

 

 

 

—

 

 

 

—

 

Variable rate commercial paper program

 

 

35,000

 

 

 

0.2

%

 

10/2/2020

 

Fixed rate senior notes

 

 

3,922,000

 

 

 

3.6

%

 

1/27/2027

 

Debt issuance costs, discounts, premiums and fair market value adjustments

 

 

(17,575

)

 

 

 

 

 

 

 

 

Total unsecured debt

 

$

3,939,425

 

 

 

3.6

%

 

 

 

 

Secured debt

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate property mortgages

 

$

489,595

 

 

 

4.6

%

 

12/31/2041

 

Debt issuance costs and fair market value adjustments

 

 

(3,426

)

 

 

 

 

 

 

 

 

Total secured debt

 

$

486,169

 

 

 

4.6

%

 

 

 

 

Total outstanding debt

 

$

4,425,594

 

 

 

3.7

%

 

 

 

 


 Mid-America Apartments, L.P. Unitholders' Capital    
 Limited Partner General Partner Preferred Units Accumulated
Other
Comprehensive
Income (Loss)		 Noncontrolling Interest - Consolidated Real Estate Entity Total Partnership Capital
CAPITAL BALANCE DECEMBER 31, 2016$235,976
 $6,337,721
 $64,833
 $1,246
 $2,306
 $6,642,082
Net income attributable to controlling interest7,600
 202,163
 2,766
 —
 —
 212,529
Other comprehensive income - derivative instruments (cash flow hedges)—
 —
 —
 (368) —
 (368)
Issuance of units—
 154
 2,007
 —
 —
 2,161
Units repurchased and retired—
 (4,782) —
 —
 —
 (4,782)
Exercise of unit options—
 218
 —
 —
 —
 218
General partner units issued in exchange for limited partner units(1,133) 1,133
 —
 —
 —
 —
Units issued in exchange for redeemable units—
 1,482
 —
 —
 —
 1,482
Redeemable units fair market value adjustment—
 (870) —
 —
 —
 (870)
Adjustment for limited partners' capital at redemption value(68) 68
 —
 —
 —
 —
Amortization of unearned compensation—
 8,438
 —
 —
 —
 8,438
Distributions to preferred unitholders—
 —
 (2,766) —
 —
 (2,766)
Distributions ($2.61 per unit)(10,982) (296,535) —
 —
 —
 (307,517)
CAPITAL BALANCE SEPTEMBER 30, 2017$231,393
 $6,249,190
 $66,840
 $878
 $2,306
 $6,550,607

  Mid-America Apartments, L.P. Unitholders' Capital    
 Limited Partner General Partner Preferred Units Accumulated
Other
Comprehensive
Income (Loss)		 Noncontrolling Interest - Consolidated Real Estate Entity Total Partnership Capital
CAPITAL BALANCE DECEMBER 31, 2015$165,726
 $2,993,696
 $—
 $(1,618) $—
 $3,157,804
Net income attributable to controlling interest9,508
 172,836
 —
 —
 —
 182,344
Other comprehensive loss - derivative instruments (cash flow hedges)—
 —
 —
 (481) —
 (481)
Issuance of units—
 (738) —
 —
 —
 (738)
Units repurchased and retired—
 (1,811) —
 —
 —
 (1,811)
General partner units issued in exchange for limited partner units(780) 780
 —
 —
 —
 —
Units issued in exchange for redeemable units—
 122
 —
 —
 —
 122
Redeemable units fair market value adjustment—
 (296) —
 —
 —
 (296)
Adjustment for limited partners' capital at redemption value13
 (13) —
 —
 —
 —
Amortization of unearned compensation—
 6,625
 —
 —
 —
 6,625
Distributions ($2.46 per unit)(10,217) (185,789) —
 —
 —
 (196,006)
CAPITAL BALANCE SEPTEMBER 30, 2016$164,250
 $2,985,412
 $—
 $(2,099) $—
 $3,147,563



7.           Borrowings

The weighted average effective interest rate at September 30, 2017 and December 31, 2016 for the $4.5 billion of debt outstanding was 3.5% at both balance sheet dates. Our debt consists of an unsecured revolving credit facility, unsecured term loans, senior unsecured notes, a secured credit facility with the Federal National Mortgage Association, or the Fannie Mae

Unsecured Revolving Credit Facility and secured property mortgages. We utilize fixed rate borrowings, interest rate swaps, and interest rate caps to manage our current and future interest rate risk.


At September 30, 2017, we had $2.8 billion of senior unsecured notes and unsecured term loans fixed at an average interest rate of 3.8%, $300.0 million of variable rate unsecured term loans with an average interest rate of 2.2%, and

In May 2019, MAALP entered into a $1.0 billion unsecured variable rate revolving credit facility with an average interest rate of 2.1% with $250.0 million borrowed at September 30, 2017. Additionally, we had $110.0 million of secured variable rate debt outstanding at an average interest rate of 1.7% and $50.0 million of capped secured variable rate debt at an average interest rate of 1.7%. The interest rate on all other secured debt, totaling $950.0 million, was hedged or fixed at an average interest rate of 4.0%.


Unsecured Revolving Credit Facility

We maintain a $1.0 billion unsecured credit facility with a syndicate of banks led by KeyBankWells Fargo Bank, National Association, or Wells Fargo, and fourteen other banks, which is referred to as the KeyBankCredit Facility.  The KeyBankCredit Facility replaced MAALP’s previous unsecured revolving credit facility, and it includes an expansion option up to $1.5 billion.  The KeyBankCredit Facility bears an interest rate of Thethe London Interbank Offered Rate, or LIBOR, plus a spread of 0.85%0.75% to 1.55%1.45% based on an investment grade pricing grid and is currently bearing interest at 2.14%.grid. The KeyBankCredit Facility expiresmatures in April 2020May 2023 with an option to extend for antwo additional six months. Atsix-month periods.  As of September 30, 2017, we had $250.0 million actually borrowed2020, there was 0 outstanding balance under this facility, and another approximately $2.5the Credit Facility, while $3.4 million of the facilitycapacity was used to support outstanding letters of credit.

Unsecured Term Loans


We also maintain four term loansCommercial Paper

In May 2019, MAALP established an unsecured commercial paper program whereby MAALP may issue unsecured commercial paper notes with varying maturities not to exceed 397 days up to a syndicatemaximum aggregate principal amount outstanding of banks, one led by KeyBank National Association, or KeyBank, two by Wells Fargo Bank, N.A., or Wells Fargo, and one by U.S. Bank National Association, or U.S. Bank, respectively. The KeyBank term loan has a balance of $150.0 million, matures in 2021, and has a variable interest rate of LIBOR plus a spread of 0.90% to 1.75% based on our credit ratings. The Wells Fargo term loans have balances of $250.0 million and $300.0 million, respectively, mature in 2018 and 2022, respectively, and have variable interest rates of LIBOR plus spreads of 0.90% to 1.90%% and 0.90% to 1.75%%, respectively, based on our credit ratings. The U.S. Bank term loan has a balance of $150.0 million, matures in 2020, and has a variable interest rate of LIBOR plus a spread of 0.90% to 1.90% based on our credit ratings.


Senior Unsecured Notes

$500.0 million.  As ofSeptember 30, 2017, we2020, MAALP had approximately $2.0$35.0 million outstanding under the commercial paper program. For the three months ended September 30, 2020, the average daily borrowings outstanding under the commercial paper program were $118.0 million.  

Unsecured Senior Notes

As ofSeptember 30, 2020, MAALP had $3.7 billion (face value) of publicly issued unsecured senior notes outstanding and $310$222.0 million of private placement notes. Theseprivately placed unsecured senior notes outstanding.  The unsecured senior notes had maturities at issuance ranging from fiveten to twelve years, averaging 7.1with a weighted average of 6.3 years remaining until maturity as of September 30, 2017.


On May 9, 2017, the Operating Partnership2020.

In August 2020, MAALP publicly issued $600.0$450.0 million in aggregate principal amount of unsecured senior notes, maturing on June 1, 2027February 2031 with an interesta coupon rate of 3.60%1.700% per annum, or the 20272031 Notes.  The purchase price paid by the initial purchasers was 99.58%99.465% of the principal amount.  The 20272031 Notes are general unsecured senior obligations of the Operating PartnershipMAALP and rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership.MAALP.  Interest on the 20272031 Notes is payable on June 1February 15 and December 1August 15 of each year, beginning on December 1, 2017.February 15, 2021.  The net proceeds fromof the offering, after deducting the original issue discount, of approximately $2.5 million and underwriting commissions and expenses of approximately $3.9$5.3 million in the aggregate, were approximately $593.6$444.7 million.  The 20272031 Notes have an effective interest rate of 1.76% and have been reflected net of discount and debt issuance costs in the Condensed Consolidated Balance Sheet. Sheets as of September 30, 2020.

Unsecured Term Loan

In connection with the issuance of the 2027 Notes, we cash settledAugust 2020, MAALP retired a $300.0 million term loan with a syndicate of banks led by Wells Fargo due in forward interest rate swap agreements, entered into during the first two quarters in the year to effectively lock the interest rate on the planned transaction, which produced an effective interest rateMarch 2022.    

Secured Property Mortgages

As of 3.68% over the ten year life of the 2027 Notes.


On July 17, 2017, we paid off $150.0 million of senior unsecured notes assumed as part of the Merger. The notes were scheduled for maturity in October 2017.

Secured Credit Facility

We maintain a $160.0 million secured credit facility with Prudential Mortgage Capital, which is credit enhanced by the Fannie Mae Facility. The Fannie Mae Facility has maturities from 2017 through 2018. Borrowings under the Fannie Mae Facility


totaled $160.0 million at September 30, 2017, all of which was variable rate at an average interest rate of 1.7%. The available borrowing capacity at September 30, 2017 was $160.0 million.

Secured Property Mortgages

At September 30, 2017, we2020, MAALP had $933.3$489.6 millionof fixed rate conventional property mortgages with ana weighted average interest rate of 4.0%4.60% and ana weighted average maturity in 2019. On February 7, 2017, we paid off a $15.82041.

In July 2020, MAALP retired $63.6 million mortgageof mortgages associated with the Grand Cypress3 apartment community. The mortgage was scheduled forcommunities at maturity in August 2017. On May 31, 2017, we paid off a $156.4and $72.2 million mortgageof mortgages associated with the following4 apartment communities: CG at Edgewater, CG at Madison, CG at Seven Oaks, CG at Town Park, CG at Barrett Creek, CG at River Oaks, and CG at Huntersville. The mortgage was scheduled for maturity in June 2019. On September 11, 2017, we paid off a $13.9 million mortgage associated with the Venue at Stonebridge Ranch. The loan was scheduled for maturity in December 2017.


In additioncommunities prior to these payoffs, we paid $9.0 million associated with property mortgage principal amortizations during the nine months endedtheir October 2020 maturities.

Guarantees

As of September 30, 2017.


Guarantees

2020, MAA fully and unconditionally guarantees the following debt incurred by the Operating Partnership:

$160.0 million of the Fannie Mae Facility, of which $160.0 million has been borrowed as of September 30, 2017; and
$310.0guaranteed $222.0 million of the privately placed unsecured senior unsecured notes.

Total Outstanding Debt

The following table summarizes our indebtednessnotes issued by MAALP.

7.Financial Instruments and Derivatives

Financial Instruments Not Carried atSeptember 30, 2017 (dollars in thousands):

 
Borrowed
Balance
 
Effective
Rate
 
Average Contract
Maturity
Fixed Rate Secured Debt     
Individual property mortgages$933,256
 4.0% 9/11/2019
      
Variable Rate Secured Debt (1)
 
  
  
Fannie Mae Facility160,000
 1.7% 6/1/2018
      
Fair market value adjustments and debt issuance costs16,717
    
Total Secured Debt1,109,973
 3.6% 7/3/2019
      
Unsecured Debt 
  
  
Variable rate revolving credit facility250,000
 2.1% 4/15/2020
Variable rate term loans300,000
 2.2% 8/29/2020
Term loans fixed with swaps550,000
 3.0% 4/17/2018
Fixed rate senior notes2,310,000
 4.0% 10/24/2024
Fair market value adjustments, debt issuance costs and discounts(27,139)    
Total Unsecured Debt3,382,861
 3.5% 1/18/2023
      
Total Outstanding Debt$4,492,834
 3.5% 2/13/2022

(1) Includes capped balances.

8.           Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage


economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of our debt funding and the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future contractual and forecasted cash amounts, principally related to our borrowings, the value of which are determined by changing interest rates, related cash flows and other factors.

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we use interest rate swaps and interest rate caps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and nine months ended September 30, 2017 and 2016, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt and forecasted issuances of fixed-rate debt.  The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings and is mainly attributable to a mismatch in the underlying indices of the derivatives and the hedged interest payments made on our variable-rate debt and due to the designation of acquired interest rate swaps with a non-zero fair value at inception.

Amounts reported in "Accumulated other comprehensive income" related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on our variable-rate or fixed-rate debt. During the next twelve months, we estimate that an additional $80,500 will be reclassified to earnings as an increase to Interest expense, which primarily represents the difference between our fixed interest rate swap payments and the projected variable interest rate swap receipts.

As of September 30, 2017, we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
Interest Rate Derivative Number of Instruments Notional Amount
Interest Rate Caps 2 $50,000,000
  Interest Rate Swaps 10 $550,000,000

The fair value of our interest rate derivatives designated as hedging instruments at September 30, 2017 included $2.0 million of asset derivatives reported in Other assets and $2.6 million of liability derivatives reported in the Fair market value of interest rate swaps in the Condensed Consolidated Balance Sheet. The fair value of our interest rate derivatives designated as hedging instruments at December 31, 2016 included $2.4 million of asset derivatives reported in "Other assets" and $7.6 million of liability derivatives reported in "Fair market value of interest rate swaps" in the Condensed Consolidated Balance Sheet.

Bifurcated Embedded Derivatives

Additionally, as a result of the Merger (see Note 2), on December 1, 2016, we issued 867,846 shares of MAA Series I preferred stock as consideration. These shares are redeemable, at our option, on and after October 1, 2026, at the redemption price per share of $50 (see Note 10).

This redemption feature embedded in the MAA Series I preferred stock was evaluated in accordance with ASC 815, Derivatives and Hedging, and we determined that we were required to bifurcate the value associated with this feature from its host instrument, the perpetual preferred shares, and account for it as a freestanding derivative on the balance sheet at fair value as a result of the call option.

Thus, the redemption feature embedded in the MAA Series I preferred stock is reported as a derivative asset in "Other assets" on the accompanying Condensed Consolidated Balance Sheets and is adjusted to its fair value at each reporting date, with a corresponding non-cash adjustment to Other non-property income or expense. The embedded derivative for these preferred shares was initially recorded at a fair value of  $10.8 million at the date of the Merger and as of December 31, 2016 and then subsequently adjusted to fair value of $18.2 million at September 30, 2017. This $7.4 million year-to-date increase includes a


purchase price allocation adjustment of $1.6 million related to the Merger opening balance sheet date, which was recorded in the first quarter of 2017 , as well as $5.8 million of year-to-date mark to market adjustments of non-cash income recorded to reflect the change in fair value of the derivative asset in the nine months ended September 30, 2017.
Tabular Disclosure of the Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations

The table below presents the effect of our derivative financial instruments on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 (dollars in thousands):
Derivatives in Cash Flow Hedging Relationships Amount of Gain or (Loss)
Recognized in 
OCI on Derivative 
(Effective Portion)		 Location of Gain or
(Loss) Reclassified 
from Accumulated
OCI into Income
(Effective Portion)		 Amount of Gain or (Loss)
Reclassified from
Accumulated 
OCI into Interest Expense 
(Effective Portion)		 Location of Gain or
(Loss) Recognized in
Income on Derivative
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)		 Amount of Gain or (Loss) Recognized in Interest Expense (Ineffective
Portion and Amount
Excluded from
Effectiveness  Testing)
Three months ended September 30, 2017 2016  2017 2016  2017 2016
                 
Interest rate contracts $90
 $1,179
 Interest Expense $33
 $(1,042) Interest Expense $(3) $96
                 
Nine months ended September 30,  
  
    
  
    
  
                 
Interest rate contracts $(1,252) $(3,840) Interest Expense $(884) $(3,359) Interest Expense $(17) $(67)
                 
Derivatives Not Designated as Hedging Instruments           Location of Gain Recognized in Income on Derivative Amount of Gain Recognized in Income on Derivative
Three months ended September 30,            2017 2016
                 
Preferred stock embedded derivative           Interest and other non-property income $4,107
 $—
                 
Nine months ended September 30,  
  
    
  
    
  
                 
Preferred stock embedded derivative           Interest and other non-property income $5,827
 $—

Credit-Risk-Related Contingent Features

As of September 30, 2017, derivatives that were in a net liability position and subject to credit-risk-related contingent features had a termination value of $2.8 million, which included accrued interest but excluded any adjustment for nonperformance risk. These derivatives had a fair value, gross of asset positions, of $2.6 million at September 30, 2017.

Certain of our derivative contracts contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of September 30, 2017, we had not breached the provisions of these agreements. If we had breached these provisions, we could have been required to settle our obligations under the agreements at the termination value of $2.8 million.

Although our derivative contracts are subject to master netting arrangements, which serve as credit mitigants to both us and our counterparties under certain situations, we do not net our derivative fair values or any existing rights or obligations to cash collateral on the Condensed Consolidated Balance Sheets. We did not have any asset or liability derivative balances that were offsetting that would have resulted in reported net derivative balances differing from the recorded gross amount of derivative assets of $2.0 million and $2.4 million (excluding the preferred stock embedded derivative) as of September 30, 2017 and December 31, 2016, respectively, or gross recorded derivative liabilities of $2.6 million and $7.6 million as of September 30, 2017 and December 31, 2016, respectively.





Other Comprehensive Income

MAA's other comprehensive income consists entirely of gains and losses attributable to the effective portion of our cash flow hedges. The chart below shows the change in the balance for the nine months ended September 30, 2017 and 2016 (dollars in thousands):
Changes in Accumulated Other Comprehensive Income (Loss) by Component
  Affected Line Item in the Condensed Consolidated Statements Of Operations Gains and Losses on Cash Flow Hedges
For the nine months ended September 30,  2017 2016
Beginning balance   $1,144
 $(1,589)
Other comprehensive income (loss) before reclassifications   (1,252) (3,840)
Amounts reclassified from accumulated other comprehensive income (interest rate contracts) Interest expense 884
 3,359
Net current-period other comprehensive loss attributable to noncontrolling interests   14
 25
Net current-period other comprehensive loss attributable to MAA   (354) (456)
Ending balance   $790
 $(2,045)

See also discussions in Note 9 to the Condensed Consolidated Financial Statements.

9. Fair Value Disclosure of Financial Instruments

Cash and cash equivalents, restricted cash accounts payable,and accrued expenses and other liabilities and security deposits are carried at amounts that reasonably approximate their fair value due to their short term nature.


We apply Financial Accounting Standard Board, or FASB, ASC 820 Fair Value Measurements and Disclosures, or ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Fixed rate notes payable atas of September 30, 20172020 and December 31, 2016,2019, totaled $3.23$4.4 billion and $3.00$4.1 billion, respectively, and had estimated fair values of $3.41$4.9 billion and $3.13$4.5 billion (excluding prepayment penalties), respectively, as of September 30, 20172020 and December 31, 2016.2019, respectively. The carrying values of variable rate notes payabledebt (excluding the effect of interest rate swap and cap agreements) atas of September 30, 20172020 and December 31, 2016,2019, totaled $1.3 billion$35.0 million and $1.5 billion,$370.0 million, respectively, and had estimated fair values of $1.3 billion$35.0 million and $1.5 billion$370.8 million (excluding prepayment penalties), respectively, as of September 30, 20172020 and December 31, 2016. The valuation of our debt is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each debt instrument. This analysis reflects



the contractual terms of the debt, and uses observable market-based inputs, including interest rate curves and credit spreads.2019, respectively. The fair values of fixed rate debt are determined by using the present value of future cash outflows discounted with the applicable current market rate plus a credit spread. The fair values of variable rate debt are determined using the stated variable rate plus the


current market credit spread. OurThe variable rates reset every 30 to 90 days, and we conclude thatmanagement concluded these rates reasonably estimate current market rates. We have determined that inputs used

Financial Instruments Measured at Fair Value on a Recurring Basis

As of September 30, 2020, the Company had one outstanding series of cumulative redeemable preferred stock, which is referred to value our debt fall within Level 2 ofas the fair value hierarchy and therefore our fair market valuation of debt is considered Level 2MAA Series I preferred stock (see Note 8).  The Company has recognized a derivative asset related to the redemption feature embedded in the fair value hierarchy.


Financial Instruments Carried at Fair Value

Currently, we use interest rate swaps and interest rate caps (options)to manage our interest raterisk. MAA Series I preferred stock. The valuation of these instrumentsderivative asset is determinedvalued using widely accepted valuation techniques, including a discounted cash flow analysis onin which the expected cash flowsperpetual value of each derivative. Thisthe preferred shares is compared to the value of the preferred shares assuming the call option is exercised, with the value of the bifurcated call option as the difference between the two values. The analysis reflects the contractual terms of the derivatives,redeemable preferred shares, which are redeemable at the Company’s option beginning on October 1, 2026 and at the redemption price of $50.00 per share. The Company uses various inputs in the analysis, including trading data available on the periodpreferred shares, coupon yields on preferred stock issuances from REITs with similar credit ratings as MAA and treasury rates to maturity,determine the fair value of the bifurcated call option.

The redemption feature embedded in the MAA Series I preferred stock is reported as a derivative asset in “Other assets” in the accompanying Condensed Consolidated Balance Sheets and is adjusted to its fair value at each reporting date, with a corresponding non-cash adjustment to “Other non-operating (income) expense” in the accompanying Condensed Consolidated Statements of Operations.  As a result of adjustments of non-cash expense recorded to reflect the change in fair value of the derivative asset during the nine months ended September 30, 2020, the fair value of the embedded derivative asset decreased to $21.9 million as of September 30, 2020 as compared to $36.5 million as of December 31, 2019.

Periodically, the Company uses observable market-based inputs, including interest rate curvesswaps to add stability to interest expense and implied volatilities.to manage, or hedge, its exposure to interest rate movements associated with anticipated future debt transactions and variable rate debt. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.


The fair values of interest rate options are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.

To comply with the provisions of ASC 820, we incorporate

Management incorporates credit valuation adjustments to appropriately reflect both our ownits nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of ourthe derivative contracts for the effect of nonperformance risk, we have consideredthe Company considers the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees. In conjunction withBased on guidance issued by the FASB's fair value measurement guidance, weFASB, the Company made an accounting policy election to measure the credit risk of ourits derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.


As of September 30, 2020, the Company did 0t have any outstanding interest rate derivatives designated as cash flow hedges of interest rate risk. The fair value of interest rate derivative asset related to the redemption feature embeddedcontracts designated as hedging instruments recorded in “Other assets” in the MAA Series I preferred stock issuedaccompanying Condensed Consolidated Balance Sheets as of December 31, 2019 was $0.1 million.  The Company’s interest rate derivative contracts designated as hedging instruments and their related gains and losses are reported in connection with Merger is valued using widely accepted valuation techniques, including discounted cash flow analysis“Net change in whichoperating accounts and other operating activities” in the perpetual valueaccompanying Condensed Consolidated Statements of the preferred shares is compared to the value with the call option giving the value of the bifurcated call option as the difference between the two values. This analysis reflects the contractual terms of the redeemable preferred shares, redeemable at the Company's option, on October 1, 2026, reflecting the redemption price per share, $50, as the price at which the preferred stock is redeemable. Cash Flows.

The analysis uses observable market-based inputs, including discount rates based on trading data available on the preferred shares to interpolate an as called value and adjusted based treasury rates to determine the present value of cash flows for the called value and the perpetual value in addition to market data available on the preferred shares to interpolate an as called value and discount rate and again adjusted from there to determine the perpetual discount rate using the applicable treasury rates.


We haveCompany has determined that the majority of the inputs used to value our derivativesits outstanding debt and its embedded derivative fall within Level 2 of the fair value hierarchy, and as a result, allthe fair value valuation of our derivativesits debt and embedded derivative held as of September 30, 20172020 and December 31, 20162019 were classified as Level 2 in the fair value hierarchy.

Cash Flow Hedges of Interest Rate Risk

The changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in “Accumulated other comprehensive loss” and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. As long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, there is no periodic measurement or recognition of ineffectiveness. Rather, the full impact of hedge gains and losses is recognized in the period in which hedged transactions impact earnings, regardless of whether or not economic mismatches exist in the hedging relationship.  Amounts reported in “Accumulated other comprehensive loss” related to derivatives designated as qualifying cash flow hedges are reclassified to interest expense as interest payments are made on the Company’s variable rate or fixed rate debt. During the next twelve months, the Company estimates that an additional $1.1 million will be reclassified to earnings as an increase to “Interest expense”, which primarily represents the difference between the fixed interest rate swap payments and the projected variable interest rate swap receipts.


















Tabular Disclosure of the Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations

The tables below present our assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, aggregated by the level in the fair value hierarchy within which those measurements fall.


Assets and Liabilities Measured at Fair Value on a Recurring Basis at September 30, 2017
(dollars in thousands)
 Balance Sheet Location Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)		 Balance at September 30, 2017
   
Assets   
  
  
  
Interest rate derivative contractsOther assets $—
 $2,043
 $—
 $2,043
Preferred stock embedded derivativeOther assets —
 18,190
 —
 18,190
Total  $—
 $20,233
 $—
 $20,233
Liabilities   
  
  
  
Interest derivative rate contractsFair market value of interest rate swaps $—
 $2,602
 $—
 $2,602


Assets and Liabilities Measured at Fair Value on a Recurring Basis at December 31, 2016
(dollars in thousands)
 Balance Sheet Location Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)		 Significant
Other
Observable
Inputs
(Level 2)		 Significant
Unobservable
Inputs
(Level 3)		 Balance at December 31, 2016
   
Assets   
  
  
  
Interest rate derivative contractsOther assets $—
 $2,364
 $—
 $2,364
Preferred stock embedded derivativeOther assets —
 10,783
 —
 10,783
Total  $—
 $13,147
 $—
 $13,147
Liabilities   
  
  
  
Interest derivative rate contractsFair market value of interest rate swaps $—
 $7,562
 $—
 $7,562

The fair value estimates presented herein are based on information available to management as of September 30, 2017 and December 31, 2016.  These estimates are not necessarily indicativeeffect of the amounts we could ultimately realize.  See also discussions in Note 8 toCompany’s derivative financial instruments on the Condensed Consolidated Financial Statements.Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands):

Derivatives in Cash Flow

Hedging Relationships

 

Loss Recognized in

OCI on Derivative

 

 

Location of

(Loss) Gain Reclassified

from Accumulated

 

Net (Loss) Gain

Reclassified from Accumulated

OCL into Interest Expense(1)

 

Three months ended September 30,

 

2020

 

 

2019

 

 

OCL into Income

 

2020

 

 

2019

 

Interest rate contracts

 

$

—

 

 

$

(5,562

)

 

Interest expense

 

$

(279

)

 

$

411

 

Nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts

 

$

—

 

 

$

(13,444

)

 

Interest expense

 

$

(810

)

 

$

1,734

 


(1)

See the Condensed Consolidated Statements of Comprehensive Income for changes in accumulated other comprehensive loss as these changes are presented net of the allocation to noncontrolling interests.

Derivatives Not Designated as Hedging Instruments

 

Location of Gain (Loss) Recognized in

 

Gain (Loss) Recognized in

Earnings on Derivative

 

Three months ended September 30,

 

Income on Derivative

 

2020

 

 

2019

 

Preferred stock embedded derivative

 

Other non-operating (income) expense

 

$

1,342

 

 

$

15,522

 

Nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

Preferred stock embedded derivative

 

Other non-operating (income) expense

 

$

(14,603

)

 

$

19,592

 

10.           Shareholders'

8.Shareholders’ Equity of MAA


On

As of September 30, 2017, 113,627,0142020, 114,369,812 shares of common stock of MAA and 4,200,0324,058,258 OP Units in the Operating Partnership (excluding the OP Units held by MAA) were issued and outstanding, representing a total of 117,827,046118,428,070 common shares and units.  AtAs of September 30, 2016, 75,542,5832019, 114,065,859 shares of common stock of MAA and 4,143,2034,074,277 OP Units in(excluding the Operating Partnership (excluding OP Units held by MAA) were issued and outstanding, representing a total of 79,685,786118,140,136 common shares and units. There were 108,438 optionsOptions to acquirepurchase 19,845 shares of MAAMAA’s common stock were outstanding as of September 30, 2017, as2020, compared to 39,08445,390 outstanding options as of September 30, 2016.


2019. During the nine months ended September 30, 2017, 47,9562020 and 2019, MAA issued 918 common shares of MAAand 24,256 common stock were acquired from employees to satisfy minimum tax withholding obligations that arose upon vesting of restricted stock granted pursuant to approved plans. During the nine months ended September 30, 2016, 19,727 shares, were acquired for that purpose. During the nine months ended September 30, 2017, we issued 10,340 sharesrespectively, related to the exercise of stock options. These exercises resulted in net proceeds of $0.4 million. During the nine months ended September 30, 2016, there were no stock options exercised.




$0.1 million and $1.0 million, respectively.

Preferred Stock


As of September 30, 2017,2020, MAA had one outstanding series of cumulative redeemable preferred stock which has the following characteristics:

Description

 

Outstanding

Shares

 

 

Liquidation

Preference(1)

 

 

Optional

Redemption

Date

 

Redemption

Price(2)

 

 

Stated

Dividend

Yield

 

 

Approximate

Dividend

Rate

 

Series I

 

 

867,846

 

 

$

50.00

 

 

10/1/2026

 

$

50.00

 

 

 

8.50

%

 

$

4.25

 

(1)

The total liquidation preference for the outstanding preferred stock is $43.4 million.

(2)

The redemption price is the price at which the preferred stock is redeemable, at MAA’s option, for cash.

Description Outstanding Shares 
Liquidation Preference(1)
 Optional Redemption Date 
Redemption Price (2)
 Stated Dividend Yield Dividend Rate
    (per share)   (per share) (per share) (per share)
Series I 867,846 $50.00 10/1/2026 $50.00 8.50% $4.25
(1)

See Note 7 for details of the valuation of the derivative asset related to the redemption feature embedded in the MAA Series I preferred stock.  

At-the-Market Share Offering Program

The total liquidation preference for outstanding preferredCompany has entered into separate distribution agreements with each of J.P. Morgan Securities LLC, BMO Capital Markets Corp. and KeyBanc Capital Markets Inc. to establish an at-the-market share offering program, or ATM program, allowing MAA to sell shares of its common stock is $43.4 million.

(2) from time to time into the existing market at current market prices or through negotiated transactions.  Under the ATM program, MAA has the authority to issue up to an aggregate of 4.0 million shares of its common stock, at such times to be determined by MAA.  The redemption price isATM program currently has a maturity of September 2021.  MAA has no obligation to issue shares through the price at whichATM program.

During the preferrednine months ended September 30, 2020 and 2019, MAA did 0t sell any shares of common stock is redeemable, at MAA's option, for cash.

under its ATM program.  As of September 30, 2020, 3.9 million shares remained issuable under the ATM program.


11.    Partners'

9.Partners’ Capital of MAALP


Operating Partnership Units

Interests

Common units of limited partnership interests in MAALP are represented by OP Units.  As of September 30, 2017,2020, there were 117,827,046118,428,070 OP Units outstanding, 113,627,014114,369,812, or 96.4%96.6%, of which represent Class B OP Units (common units issued to or held by MAALP’s general partner or any of its subsidiaries), which were owned by MAA, MAALP'sMAALP’s general partner.  The remaining 4,200,0324,058,258 OP Units were Class A OP Units owned by non-affiliated limited partners, or Class A Limited Partners.limited partners.  As of September 30, 2016,2019, there were 79,685,786118,140,136 OP Units outstanding, 75,542,583114,065,859, or 94.8%96.6%, of which were owned by MAA and 4,143,2034,074,277 of which were owned by the Class A Limited Partners.


limited partners.

MAA, as the sole general partner of MAALP, has full, complete and exclusive discretion to manage and control the business of the Operating PartnershipMAALP subject to the restrictions specifically contained within the Operating Partnership'sMAALP’s agreement of limited partnership, or the Partnership Agreement.  Unless otherwise stated in the Partnership Agreement, this power includes, but is not limited to, acquiring, leasing or disposing of any real property; constructing buildings and making other improvements to properties owned; borrowing money, modifying or extinguishing current borrowings, issuing evidence of indebtedness and securing such indebtedness by mortgage, deed of trust, pledge or other lien on the Operating Partnership'sMAALP’s assets; and distribution of Operating PartnershipMAALP’s cash or other assets in accordance with the Partnership Agreement.  MAA can generally, at its sole discretion, issue and redeem OP Units and determine the consideration to be received or the redemption price to be paid, as applicable.  MAAThe general partner may delegate these and other powers granted if MAA, the general partner remains in supervision of the designee.


Under the Partnership Agreement, the Operating PartnershipMAALP may issue Class A OP Units and Class B OP Units.  Class A OP Units may only be held by limited partners who are not affiliated with MAA, in its capacity as general partner of the Operating Partnership,any OP Units other than Class B OP Units, while Class B OP Units may only beare those issued to or held by MAA, in its capacity asMAALP’s general partner or any of the Operating Partnership, and as of September 30, 2017, a total of 4,200,032 Class A Units in the Operating Partnership were held by limited partners unaffiliated with MAA, while a total of 113,627,014 Class B Units were held by MAA.its subsidiaries.  In general, the limited partners do not have the power to participate in the management or control of the Operating Partnership'sMAALP’s business except in limited circumstances, including changes in the general partner and protective rights if the general partner acts outside of the provisions provided in the Partnership Agreement.  The transferability of Class A OP Units is also limited by the Partnership Agreement.


Net income of MAALP (after allocations to preferred ownership interests) is allocated to the general partner and limited partners based on their respective ownership percentages of the Operating Partnership.MAALP.  Issuance or redemption of additional Class A OP Units or Class B OP Units changes the relative ownership percentage of the partners.  The issuance of Class B OP Units generally occurs when MAA issues common stock and the proceeds from that issuance are contributed to the Operating PartnershipMAALP in exchange for the issuance to MAA of a number of OP Units equal to the number of shares of common stock issued.  Likewise, if MAA repurchases or redeems outstanding shares of common stock, the Operating PartnershipMAALP generally redeems an equal number of Class B OP Units with similar terms held by MAA for a redemption price equal to the purchase price of those shares of common stock.  At each reporting period, the allocation between general partner capital and limited partner capital is adjusted to account for the change in the respective percentage ownership of the underlying capital of the Operating Partnership.MAALP.  Holders of the Class A OP Units may require MAA to redeem their Class A OP Units, in which case MAA may, at its option, pay the redemption price either in cash (in an amount per Class A OP Unit equal, in general, to the average closing price of MAA'sMAA’s common stock on the NYSE over a specified period prior to the redemption date) or by delivering one share of MAA common stock (subject to adjustment under specified circumstances) for each Class A OP Unit so redeemed.


At

As of September 30, 2017,2020, a total of 4,200,0324,058,258 Class A OP Units were outstanding and redeemable for 4,200,0324,058,258 shares of MAA common stock, with an approximate value of $448.9$470.6 million, based on the closing price of MAA’s common stock on the NYSE on September 29, 2017,30, 2020 of $106.88$115.95 per share.  AtAs of September 30, 2016,2019, a total of 4,143,2034,074,277 Class A OP Units were outstanding and



redeemable for 4,143,2034,074,277 shares of MAA common stock, with an approximate value of $389.4$529.7 million, based on the closing price of MAA’s common stock on the NYSE on September 30, 20162019 of $93.99$130.01 per share.

The Operating Partnership  MAALP pays the same per unit distributiondistributions in respect to the OP Units as the per share dividenddividends MAA pays in respect to its common stock.

12.     Legal Proceedings

In

As of September 2010,30, 2020, MAALP had one outstanding series of cumulative redeemable preferred units, or the United States DepartmentMAALP Series I preferred units.  The MAALP Series I preferred units have the same characteristics as the MAA Series I preferred stock described in Note 8.  As of Justice, or DOJ, filed suit against Post Properties (and by virtueSeptember 30, 2020, 867,846 units of the Merger, MAA)MAALP Series I preferred units were outstanding.


10.Commitments and Contingencies

Leases

The Company’s leases include a ground lease expiring in 2074 related to one of its apartment communities and an office lease expiring in 2028 related to its corporate headquarters.  Both leases contain stated rent increases that generally compensate for the impact of inflation.  The Company also has other commitments related to immaterial office and equipment operating leases.

The table below reconciles undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease obligations recorded on the Condensed Consolidated Balance Sheets as of September 30, 2020 (in thousands):

 

 

Operating Leases

 

2020

 

$

707

 

2021

 

 

2,854

 

2022

 

 

2,885

 

2023

 

 

2,875

 

2024

 

 

2,853

 

Thereafter

 

 

65,863

 

Total minimum lease payments

 

 

78,037

 

Net present value adjustments

 

 

(45,856

)

Operating lease obligations

 

$

32,181

 

Legal Proceedings

In June 2016, plaintiffs Cathi Cleven and Tara Cleven, on behalf of a purported class of plaintiffs, filed a complaint against MAA and the Operating Partnership in the United States District Court for the Western District of Columbia allegingTexas, Austin Division.  In January 2017, Areli Arellano and Joe L. Martinez joined the lawsuit as additional plaintiffs.  The lawsuit alleges that certain ofthe Company (but not Post Properties’ apartments violated accessibility requirementsProperties (see the description of the Fair Housing Act,Brown class action lawsuit below)) charged late fees at its Texas properties that violate Section 92.019 of the Texas Property Code, or FHA, and the Americans with Disabilities Act of 1990, or ADA. The DOJ is seeking,Section 92.019, which provides that a landlord may not charge a tenant a late fee for failing to pay rent unless, among other things, an injunction against MAA, requiring MAAthe fee is a reasonable estimate of uncertain damages to retrofit the propertieslandlord that are incapable of precise calculation and comply with FHA and ADA standards in future design and construction, as well asresult from the late payment of rent.  The plaintiffs are seeking monetary damages and civil penalties. No trial date has been set.


Weattorneys’ fees and costs.  In September 2018, the District Court certified a class proposed by the plaintiffs. Additionally, in September 2018, the District Court denied the Company’s motion for summary judgment and granted the plaintiffs’ motion for partial summary judgment.  Because the District Court certified a class prior to granting the plaintiffs’ motion for partial summary judgment, the District Court’s ruling applies to the entire class.  In October 2018, the Fifth Circuit Court of Appeals accepted the Company’s petition to review the District Court’s order granting class certification.  In September 2019, the Fifth Circuit Court of Appeals heard the Company’s oral arguments. The Company also intends to appeal the District Court’s order granting plaintiff’s motion for summary judgment to the Fifth Circuit Court of Appeals if permission to appeal is granted.  The Company will continue to vigorously defend the action and pursue such appeals.  Management estimates that the Company’s maximum exposure in the lawsuit, given the class certification and summary judgment ruling, is $54.6 million, which includes both potential damages and attorneys’ fees but excludes any prejudgment interest that may be awarded.

In April 2017, plaintiff Nathaniel Brown, on behalf of a purported class of plaintiffs, filed a complaint against the Operating Partnership, as the successor by merger to Post Properties’ primary operating partnership, and MAA in the United States District Court for the Western District of Texas, Austin Division.  The lawsuit alleges that Post Properties (and, following the Post Properties merger in December 2016, the Operating Partnership) charged late fees at its Texas properties that violate Section 92.019.  The plaintiffs are seeking monetary damages and attorney’s fees and costs.  In September 2018, the District Court certified a class proposed by the plaintiff.  Additionally, in September 2018, the District Court denied the Company’s motion for summary judgment and granted the plaintiff’s motion for partial summary judgment. Because the District Court certified a class prior to granting the plaintiff’s motion for partial summary judgment, the District Court’s ruling applies to the entire class.  In October 2018, the Fifth Circuit Court of Appeals accepted the Company’s petition to review the District Court’s order granting class certification. In September 2019, the Fifth Circuit Court of Appeals heard the Company’s oral arguments. The Company also intends to appeal the District Court’s order granting plaintiff’s motion for summary judgment to the Fifth Circuit Court of Appeals if permission to appeal is granted.  The Company will continue to vigorously defend the action and pursue such appeals.  Management estimates that the Company’s maximum exposure in the lawsuit, given the class certification and summary judgment ruling, is $8.4 million, which includes both potential damages and attorneys’ fees but excludes any prejudgment interest that may be awarded.

The Company is subject to various other legal proceedings and claims that arise in the ordinary course of ourits business operations.  Matters which arise out of allegations of bodily injury, property damage and employment practices are generally covered by insurance.  While the resolution of these other matters cannot be predicted with certainty, management does not currently believes,believe that such matters, either individually or in the aggregate, the final outcome of such matters will not have any additionala material adverse effect on ourthe Company’s financial position,condition, results of operations or cash flows.flows in the event of a negative outcome.


Loss Contingencies


The outcomes of the claims, disputes and legal proceedings described or referenced above are subject to significant uncertainty.  We recordThe Company records an accrual for loss contingencies when a loss is probable and the amount of the loss can be reasonably estimated.  We reviewThe Company also accrues an estimate of defense costs expected to be incurred in connection with legal matters.  Management reviews these accruals quarterly and makemakes revisions based on changes in facts and circumstances.  When a loss contingency is not both probable and reasonably estimable, we domanagement does not accrue the loss. However, if the loss (or an additional loss in excess of the accrual) is at least a reasonable possibility and material, then we disclosemanagement discloses a reasonable estimate of the possible loss, or range of loss, if such reasonable estimate can be made.  If wethe Company cannot make a reasonable estimate of the possible loss, or range of loss, then a statement to that effect is disclosed.


The assessment of whether a loss is probable or a reasonable possibility, and whether the loss or range of loss is reasonably estimable, often involves a series of complex judgments about future events.  Among the factors that we considerconsidered in this assessment, including with respect to the matters disclosed in this Note, are the nature of existing legal proceedings and claims, the asserted or possible damages or loss contingency (if reasonably estimable), the progress of the matter, existing law and precedent, the opinions or views of legal counsel and other advisers, ourmanagement’s experience in similar matters, the facts available to usmanagement at the time of assessment, and how we intendthe Company intends to respond, or havehas responded, to the proceeding or claim.  OurManagement’s assessment of these factors may change over time as individual proceedings or claims progress.  For matters where we aremanagement is not currently able to reasonably estimate a range of reasonably possible loss, the factors that have contributed to this determination include the following: (i) the damages sought are indeterminate; (ii) the proceedings are in the early stages; (iii) the matters involve novel or unsettled legal theories or a large or uncertain number of actual or potential cases or parties; and/or (iv) discussions with the parties in matters that are ultimately expected ultimately to be resolved through negotiation and settlement have not reached the point where we believemanagement believes a reasonable estimate of loss, or range of loss, can be made.  In such instances, we believeThe Company believes that there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss or business impact, if any.


As of September 30, 20172020 and December 31, 2016,2019, the Company'sCompany’s accrual for loss contingencies relating to unresolved legal matters was $35.1$7.4 million and $42.1$8.6 million in the aggregate, respectively.




13.             The loss contingencies are presented in “Accrued expenses and other liabilities” in the accompanying Condensed Consolidated Balance Sheets.

11.Segment Information


As of September 30, 2017, we2020, the Company owned or had ownership interest in 303and operated 299 multifamily apartment communities in 1716 different states and the District of Columbia from which weit derived all significant sources of earnings and operating cash flows.  Senior managementThe Company views each consolidated apartment community as an operating segment. The Company’s chief operating decision maker, which is the Company’s Chief Executive Officer, evaluates performance and determines resource allocations of each of ourthe apartment communities on a Large Market Same Store, Secondary Market Same Store and Non-Same Store and Other basis, as well as an individual apartment community basis. This is consistent with the aggregation criteria under GAAP as each of ourthe apartment communities generally has similar economic characteristics, facilities, services, and tenants.

The following arereflects the three2 reportable operating segments for MAA and the Operating Partnership:Company:

•

Same Store communities are communities that the Company has owned and have been stabilized for at least a full 12 months.


•

Non-Same Store and Other includes recently acquired communities, communities in development or lease-up, communities that have been identified for disposition, communities that have incurred a significant casualty loss and stabilized communities that do not meet the requirements to be Same Store communities. Also included in Non-Same Store and Other are non-multifamily activities.

Large market same store communities are generally communities in markets with a population of at least 1 million and at least 1% of the total public multifamily REIT units that we have owned and have been stabilized for at least a full 12 months.
Secondary market same store communities are generally communities in markets with populations of more than 1 million but less than 1% of the total public multifamily REIT units or markets with populations of less than 1 million that we have owned and have been stabilized for at least a full 12 months.
Non-same store communities and other includes recent acquisitions, communities in development or lease-up, communities that have been identified for disposition, and communities that have undergone a significant casualty loss. Also included in non-same store communities are non-multifamily activities.

On the first day of each calendar year, we determinethe Company determines the composition of our same store operatingits Same Store and Non-Same Store and Other reportable segments for that year as well as adjustadjusts the previous year, which allows usthe Company to evaluate full period-over-period operating comparisons.  Properties in development or lease-up will beare added to the same storeSame Store portfolio on the first day of the calendar year after they havea community has been owned and stabilized for at least a full 12 months.  Communities are considered stabilized after achieving 90% occupancy for 90 days.  Communities that have been identified for disposition are excluded from our same storethe Same Store portfolio.


We utilize

The chief operating decision maker utilizes net operating income, or NOI, in evaluating the performance of theits operating segments.  Total NOI represents total property revenues less total property operating expenses, excluding depreciation and amortization, for all properties held during the period regardless of their status as held for sale.  We believeManagement believes that NOI is a helpful tool in evaluating the operating performance of ourthe segments because it measures the core operations of property performance by excluding corporate level expenses and other items not directly related to property operating performance.


All properties acquired from Post Properties have been placed in our Non-Same Store and Other operating segment, as the properties are recent acquisitions and have not been owned and stabilized for at least 12 months as of the first day of the current calendar year.

























Revenues and NOI for each reportable segment for the three-three and nine- month periodsnine months ended September 30, 20172020 and 20162019 were as follows (dollars in(in thousands):

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

394,556

 

 

$

386,356

 

 

$

1,170,844

 

 

$

1,137,967

 

Other property revenues

 

 

3,044

 

 

 

3,244

 

 

 

9,012

 

 

 

9,926

 

Total Same Store revenues

 

 

397,600

 

 

 

389,600

 

 

 

1,179,856

 

 

 

1,147,893

 

Non-Same Store and Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

 

25,465

 

 

 

25,917

 

 

 

74,204

 

 

 

75,825

 

Other property revenues

 

 

134

 

 

 

115

 

 

 

263

 

 

 

482

 

Total Non-Same Store and Other revenues

 

 

25,599

 

 

 

26,032

 

 

 

74,467

 

 

 

76,307

 

Total rental and other property revenues

 

$

423,199

 

 

$

415,632

 

 

$

1,254,323

 

 

$

1,224,200

 

Net Operating Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same Store NOI

 

$

238,702

 

 

$

241,362

 

 

$

730,702

 

 

$

717,216

 

Non-Same Store and Other NOI

 

 

14,683

 

 

 

14,731

 

 

 

43,164

 

 

 

43,926

 

Total NOI

 

 

253,385

 

 

 

256,093

 

 

 

773,866

 

 

 

761,142

 

Depreciation and amortization

 

 

(127,679

)

 

 

(124,684

)

 

 

(381,257

)

 

 

(371,417

)

Property management expenses

 

 

(12,691

)

 

 

(13,899

)

 

 

(39,064

)

 

 

(41,195

)

General and administrative expenses

 

 

(11,360

)

 

 

(10,225

)

 

 

(35,181

)

 

 

(32,960

)

Interest expense

 

 

(41,010

)

 

 

(44,513

)

 

 

(126,610

)

 

 

(136,149

)

Gain (loss) on sale of depreciable real estate assets

 

 

20

 

 

 

1,000

 

 

 

(7

)

 

 

987

 

Gain on sale of non-depreciable real estate assets

 

 

1,366

 

 

 

—

 

 

 

995

 

 

 

9,260

 

Other non-operating income (expense)

 

 

242

 

 

 

18,800

 

 

 

(13,647

)

 

 

23,494

 

Income tax expense

 

 

(665

)

 

 

(1,491

)

 

 

(2,532

)

 

 

(2,814

)

Income from real estate joint venture

 

 

428

 

 

 

378

 

 

 

1,153

 

 

 

1,210

 

Net income attributable to noncontrolling interests

 

 

(2,126

)

 

 

(2,814

)

 

 

(6,096

)

 

 

(7,336

)

Dividends to MAA Series I preferred shareholders

 

 

(922

)

 

 

(922

)

 

 

(2,766

)

 

 

(2,766

)

Net income available for MAA common shareholders

 

$

58,988

 

 

$

77,723

 

 

$

168,854

 

 

$

201,456

 

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Revenues:       
Large Market Same Store$169,105
 $165,046
 $503,076
 $487,725
Secondary Market Same Store87,895
 85,822
 261,272
 254,685
Non-Same Store and Other127,550
 26,030
 381,901
 75,740
Total operating revenues$384,550
 $276,898
 $1,146,249
 $818,150
        
NOI: 
  
  
  
Large Market Same Store$104,574
 $101,595
 $313,419
 $302,230
Secondary Market Same Store53,836
 53,124
 162,617
 159,263
Non-Same Store and Other76,961
 15,533
 233,792
 46,175
Total NOI235,371
 170,252
 709,828
 507,668
Depreciation and amortization(117,928) (76,959) (374,285) (227,829)
Acquisition expenses—
 (1,033) —
 (2,167)
Property management expenses(10,281) (7,908) (32,007) (25,221)
General and administrative expenses(8,361) (6,661) (30,735) (20,257)
Merger related expenses(128) (3,901) (3,977) (3,901)
Integration costs(4,002) —
 (10,521) —
Interest and other non-property income4,303
 64
 7,632
 159
Interest expense(39,940) (32,168) (115,005) (96,418)
Gain on debt extinguishment/modification828
 —
 3,168
 3
Gain on sale of depreciable real estate assets58,844
 47,749
 59,045
 48,572
Net casualty gain (loss) after insurance and other settlement proceeds564
 (75) 233
 738
Income tax expense(641) (454) (1,910) (1,200)
(Loss) gain on sale of non-depreciable real estate assets(6) —
 42
 2,170
Gain from real estate joint ventures335
 —
 1,021
 27
Net income attributable to noncontrolling interests(4,249) (4,627) (7,600) (9,508)
Preferred Dividends(922) —
 (2,766) —
Net income available for MAA common shareholders$113,787
 $84,279
 $202,163
 $172,836

Assets for each reportable segment as of September 30, 20172020 and December 31, 20162019 were as follows (dollars in(in thousands):

 

 

September 30,

2020

 

 

December 31,

2019

 

Assets:

 

 

 

 

 

 

 

 

Same Store

 

$

9,740,808

 

 

$

9,975,880

 

Non-Same Store and Other

 

 

1,198,693

 

 

 

1,049,029

 

Corporate assets

 

 

189,203

 

 

 

205,541

 

Total assets

 

$

11,128,704

 

 

$

11,230,450

 


 September 30, 2017 December 31, 2016
Assets:   
Large Market Same Store$4,038,127
 $4,126,885
Secondary Market Same Store1,731,050
 1,768,183
Non-Same Store and Other5,527,583
 5,479,780
Corporate assets236,041
 229,643
Total assets$11,532,801
 $11,604,491




14.           

12.Real Estate Acquisitions and Dispositions


The following chart shows ourtable reflects the Company’s acquisition activity for the nine months ended September 30, 2017:


2020:

Land Acquisition

Market

Acres

Date Acquired

Georgetown

Austin, TX

22

Community

MarketUnitsDate Acquired
Charlotte at MidtownNashville, TN279March 16, 2017

January 2020


The following chart shows ourtable reflects the Company’s disposition activity for the nine months ended September 30, 2017:2020:

Land Disposition

Market

Acres

Date Sold

Colonial Promenade

Huntsville, AL

27

September 2020


CommunityMarketUnits or AcresDate Sold
Lakewood Ranch - OutparcelTampa, FL12 acresApril 7, 2017
Post Alexander - OutparcelAtlanta, GA1 acreJune 12, 2017
Paddock Club LakelandLakeland, FL464July 13, 2017
Paddock Club Lakeland - OutparcelLakeland, FL9 acresJuly 13, 2017
Paddock Club MontgomeryMontgomery, AL208July 20, 2017
Northwood PlaceFort Worth, TX270July 20, 2017
Town Park Lot 12Orlando, FL1 acreAugust 7, 2017

15.           Recent Accounting Pronouncements

The following table provides a brief description of recent accounting pronouncements that could have a material effect on our financial statements:
StandardDescriptionDate of AdoptionEffect on the Financial Statements or Other Significant Matters
ASU 2014-09,  Revenue from Contracts with Customers
This ASU establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services as outlined in a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied. Income from lease contracts is specifically excluded from this ASU.

This ASU is effective for annual reporting periods beginning after December 15, 2017, as a result of a deferral of the effective date arising from the issuance of ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date. Early adoption is permitted.

The amendments may be applied using the full retrospective transition method or by using the modified retrospective transition method with a cumulative effect recognized as of the date of initial application. We will adopt ASU 2014-09 effective January 1, 2018, using the modified retrospective approach. The majority of our revenue is derived from real estate lease contracts, which falls under ASU 2016-02, Leases. Our analysis on non-lease related revenues, which comprise approximately 10% of consolidated revenues, indicates the adoption of this ASU will not have a material impact on our consolidated financial statements and internal accounting policies.
ASU 2016-02,  Leases
This ASU amends existing accounting standards for lease accounting and establishes the principles for lease accounting for both the lessee and lessor. The amendment requires an entity to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendment also requires certain quantitative and qualitative disclosures about leasing arrangements.

This ASU is effective for annual reporting periods beginning after December 15, 2018; however, early adoption is permitted.
The standard must be adopted using a modified retrospective transition and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently evaluating the impact this standard may have on our consolidated financial statements and related disclosures upon adoption.

ASU 2016-09,  Improvements to Employee Share-Based Payment Accounting
This ASU amends existing accounting standards for certain aspects of share-based payments to employees. The new guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also will allow an employer to repurchase more of an employee’s shares than it can today for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur.This ASU is effective for annual reporting periods beginning after December 15, 2016. We adopted this guidance effective January 1, 2017.We adopted this standard effective January 1, 2017, using the modified retrospective transition method, with a cumulative-effect adjustment to retained earnings, and there was no material effect on our consolidated financial position or results of operations taken as a whole.



StandardDescriptionDate of AdoptionEffect on the Financial Statements or Other Significant Matters
ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)
This ASU clarifies how several specific cash receipts and cash payments are to be presented and classified on the statement of cash flows, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration made after a business combination, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of predominance principle.This ASU is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted.Each amendment in this standard must be applied prospectively, retrospectively, or as of the beginning of the earliest comparative period presented in the year of adoption, depending on the type of amendment. We expect to adopt ASU 2016-15 as of January 1, 2018. We have determined that three of the eight transactions in the update are relevant to MAA and its cash flows, including: 1) debt prepayment or debt extinguishment costs, 2) proceeds from the settlement of insurance claims and 3) distributions received from equity method investees. We performed an analysis and determined that only the change in classification of debt prepayment or debt extinguishment costs, which we currently report in operating activities, will have a material impact on the statement of cash flows. Upon adoption in Q1 2018, $1.6 million of cash outflows for debt prepayment or extinguishment costs currently reported in net cash provided by operating activities for the nine months ended September 30, 2017, will be re-classified to and reported in net cash used in financing activities.
ASU 2016-18, Statement of Cash Flows (Topic 230):Restricted Cash (A Consensus of the FASB Emerging Issues Task Force)
This ASU requires restricted cash to be presented with cash and cash equivalents when reconciling the beginning and ending amounts in the statements of cash flows.This ASU is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted.The update should be applied retrospectively to each period presented. We expect to adopt ASU 2016-18 as of January 1, 2018. We currently report the change in restricted cash within the operating and investing activities in our consolidated statement of cash flows. Upon adoption in Q1 2018, cash and cash equivalents reported in our consolidated statements of cash flows for the nine months ended September 30, 2017 will increase by approximately $80.3 million to reflect the restricted cash balances. Additionally, net cash used in investing activities will decrease by $10.6 million for the nine months ended September 30, 2017.
ASU 2017-01, Clarifying the Definition of a Business (Topic 805)
This ASU clarifies the definition of a business and provides further guidance for evaluating whether a transaction will be accounted for as an acquisition of an asset or a business.This ASU is effective for interim and annual periods beginning after December 15, 2017. We early adopted this standard effective January 1, 2017.We adopted this standard as of January 1, 2017 and the adoption did not require any additional disclosures. We believe most of our future acquisitions of operating properties will qualify as asset acquisitions and most future transaction costs associated with these acquisitions will be capitalized. Through the third quarter of 2017, acquisition costs totaling $0.6 million related to our acquisition of Charlotte at Midtown were capitalized and allocated to the assets acquired based on the relative fair market value of those underlying assets.
ASU 2017-12, Derivatives and Hedging (Topic 815)

This ASU clarifies hedge accounting requirements, improves disclosure of hedging arrangements, and better aligns risk management activities and financial reporting for hedging relationships.This ASU is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted.The standard should be adopted using a modified retrospective approach. We are currently evaluating the impact this standard may have on our consolidated financial statements and related disclosures upon adoption.



Item 2.    

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.


The following discussion analyzes the financial condition and results of operations of both MAA and the Operating Partnership, of which MAA is the sole general partner and in which MAA owned a 96.4% limited partner96.6% interest as of September 30, 2017.2020. MAA conducts substantially all of its business through the Operating Partnership and the Operating Partnership’sits various subsidiaries.


The following This discussion should be read in conjunction with the Condensed Consolidated Financial Statementscondensed consolidated financial statements and notes appearingthereto included elsewhere in this Report.  Historical resultsQuarterly Report on Form 10-Q.

MAA, an S&P 500 company, is a multifamily-focused, self-administered and trends that might appearself-managed real estate investment trust, or REIT. We own, operate, acquire and selectively develop apartment communities primarily located in the following discussionSoutheast, Southwest and Mid-Atlantic regions of the United States.  As of September 30, 2020, we owned and operated 299 apartment communities through the Operating Partnership and its subsidiaries, and we had an ownership interest in one apartment community through an unconsolidated real estate joint venture and had six development communities under construction.  In addition, as of September 30, 2020, we owned four commercial properties, and 32 of our apartment communities included retail components.  Our apartment communities and commercial properties were located across 16 states and the District of Columbia as of September 30, 2020.

We report in two segments, Same Store and Non-Same Store and Other. Our Same Store segment represents those apartment communities that have been owned and stabilized for at least 12 months as of the first day of the calendar year. Our Non-Same Store and Other segment includes recently acquired communities, communities being developed or in lease-up, communities undergoing extensive renovations, communities identified for disposition, communities that have incurred a significant casualty loss and stabilized communities that do not meet the Condensed Consolidated Financial Statements should notrequirements to be interpreted as being indicativeSame Store communities. Also included in our Non-Same Store and Other segment are non-multifamily activities.  Additional information regarding the composition of future operations.


Riskour segments is included in Note 11 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Risks Associated with Forward Looking Statements


We consider this and other sections of this Quarterly Report on Form 10-Q to contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to our expectations for future periods.  Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Such forward-looking statements may include, without limitation, statements concerningregarding the potential impact of the COVID-19 pandemic on our business, statements regarding expected operating performance and results, property acquisitionsstabilizations, property acquisition and dispositions,disposition activity, joint venture activity, development and renovation activity and other capital expenditures, and capital raising and financing activity, as well as other capital expenditures, capital raising activities, rentlease pricing, revenue and expense growth, occupancy, financing activities and interest rate and other economic expectations, as well as statements about the anticipated benefits from the Merger.expectations. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates,"“expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “forecasts,” “projects,” “assumes,” “will,” “may,” “could,” “should,” “target,” “outlook,” “guidance” and variations of such words and similar expressions are intended to identify such forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors, as described below, which may cause theour actual results, performance or achievements to be materially different from the results of operations, financial conditions or plans expressed or implied by such forward-looking statements.  Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such forward-looking statements included in this Reportreport may not prove to be accurate.  In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.


The following factors, among others, could cause our futureactual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements:

•

COVID-19 pandemic and measures taken or that may be taken by federal, state and local governmental authorities to combat the spread of the disease;  

•

inability to generate sufficient cash flows due to unfavorable economic and market conditions, changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws, or other factors;

inability to generate sufficient cash flows due to market conditions, changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws, or other factors;

•

exposure, as a multifamily focused REIT, to risks inherent in investments in a single industry and sector;

exposure, as a multifamily-focused REIT, to risks inherent in investments in a single industry and sector;

•

adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets which we may seek to enter in the future, limitations on our ability to increase rental rates, competition, our ability to identify and consummate attractive acquisitions or development projects on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns;

adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets, which we may seek to enter in the future, limitations on our ability to increase rental rates, competition, our ability to identify and consummate attractive acquisitions or development projects on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns;

•

failure of new acquisitions to achieve anticipated results or be efficiently integrated;

failure of new acquisitions to achieve anticipated results or be efficiently integrated;

•

failure of development communities to be completed within budget and on a timely basis, if at all, to lease-up as anticipated or to achieve anticipated results;

failure of development communities to be completed, if at all, within budget and on a timely basis or to lease-up as anticipated;

•

unexpected capital needs;

unexpected capital needs;

•

changes in operating costs, including real estate taxes, utilities and insurance costs;

changes in operating costs, including real estate taxes, utilities and insurance costs;

•

inability to obtain appropriate insurance coverage at reasonable rates, or at all, or losses from catastrophes in excess of our insurance coverage;

losses from catastrophes in excess of our insurance coverage;

•

ability to obtain financing at favorable rates, if at all, and refinance existing debt as it matures;

ability to obtain financing at favorable rates, if at all, and refinance existing debt as it matures;
level and volatility of interest or capitalization rates or capital market conditions;
loss of hedge accounting treatment for interest rate swaps or interest rate caps;
the continuation of the good credit of our interest rate swap and cap providers;
price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on financing;
the effect of any rating agency actions on the cost and availability of new debt financing;
significant decline in market value of real estate serving as collateral for mortgage obligations;
significant change in the mortgage financing market that would cause single-family housing, either as an owned or rental product, to become a more significant competitive product;
our ability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, the ability of the Operating Partnership to satisfy the rules to maintain its status as a partnership for federal

•

level and volatility of interest or capitalization rates or capital market conditions;



•

price volatility, dislocations and liquidity disruptions in the financial markets and the resulting impact on financing;

income tax purposes, the ability of our taxable REIT subsidiaries to maintain their status as such for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;

•

the effect of any rating agency actions on the cost and availability of new debt financing;

inability to attract and retain qualified personnel;

•

the effect of the phase-out of the London Interbank Offered Rate, or LIBOR, as a variable rate debt benchmark by the end of 2021 and the transition to a different benchmark interest rate;

cyber liability or potential liability for breaches of our privacy or information security systems;

•

significant decline in market value of real estate serving as collateral for mortgage obligations;

potential liability for environmental contamination;

•

significant change in the mortgage financing market that would cause single-family housing, either as an owned or rental product, to become a more significant competitive product;

adverse legislative or regulatory tax changes;

•

our ability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, the ability of the Operating Partnership to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of our taxable REIT subsidiaries to maintain their status as such for federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;

litigation and compliance costs associated with laws requiring access for disabled persons;

•

inability to attract and retain qualified personnel;

risks associated with the Merger, including the integration of MAA's and Post Properties' businesses and achieving expected revenue synergies and/or cost savings as a result of the Merger;

•

cyber liability or potential liability for breaches of our or our service providers’ information technology systems, or business operations disruptions;

risks associated with unexpected costs or unexpected liabilities that may arise from the Merger; and

•

potential liability for environmental contamination;

other risks identified in this Report and, from time to time, in other reports we file with the SEC or in other documents that we publicly disseminate.

•

adverse legislative or regulatory developments;

•

extreme weather, natural disasters, disease outbreak and public health events;

•

legal proceedings relating to various issues, which, among other things, could result in a class action lawsuit;

•

compliance costs associated with numerous federal, state and local laws and regulations, including those costs associated with laws requiring access for disabled persons; and

•

other risks identified in this Quarterly Report on Form 10-Q and in other reports we file with the Securities and Exchange Commission, or the SEC, or in other documents that we publicly disseminate.

New factors may also emerge from time to time that could have a material adverse effect on our business. Except as

otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect events, circumstances or changes in expectations after the date on which this Report is filed.

Critical Accounting Policies and Estimates

Please refer to our AnnualQuarterly Report on Form 10-K for the year ended December 31, 2016 that we filed with the SEC on February 24, 2017 for discussions of our critical accounting policies. During the nine months ended September 30, 2017, there were no material changes to these policies.

10-Q is filed.

Overview of the Three Months Ended September 30, 2017


As noted earlier, on December 1, 2016, we consummated the Merger and acquired all of Post Properties' consolidated net assets. The consolidated net assets and results of operations of Post Properties are included in our Condensed Consolidated Financial Statements of this Report from the closing date, December 1, 2016, going forward. All properties acquired from Post Properties have been placed in our Non-Same Store and Other operating segment, as the properties are recent acquisitions and have not been owned and stabilized for at least 12 months.

2020

For the three months ended September 30, 2017,2020, net income available for MAA common shareholders was $113.8$59.0 million as compared to $84.3$77.7 million for the three months ended September 30, 2016.2019.  Results for the three months ended September 30, 20172020 included $58.8$1.3 million of gainsnon-cash income related to the salefair value adjustment of real estate assets, $4.1the embedded derivative in the MAA Series I preferred shares.  Results for the three months ended September 30, 2019 included $15.5 million of merger and integration costsnon-cash income related to the Merger as well as $38.8 million of additional depreciation and amortization expense. Resultsembedded derivative in the MAA Series I preferred shares. Revenues for the quarterthree months ended September 30, 2016 included $47.7 million of gains related2020 increased 1.8% as compared to the sale of real estate assets and $3.9 million of merger costs. These increases to net expense werethree months ended September 30, 2019, driven by a 2.1% increase in our Same Store segment, partially offset by increases in revenues primarily resulting from the Merger, as we experienced a 390.0% increase1.7% decrease in our Non-Same Store and Other segment. We also experiencedProperty operating expenses, excluding depreciation and amortization, for the three months ended September 30, 2020 increased by 6.4% as compared to the three months ended September 30, 2019, driven by a 2.5%7.2% increase in our Large Market Same Store segment revenues and a 2.4% increase in our Secondary Market Same Store segment revenue. The increases in expense were driven by the above mentioned factors and increased property operating expenses primarily in our Non-Same Store and Other segment from the properties we acquired in the Merger resulting in a 381.9% increase in our Non-Same Store and Other segment. We also experienced a 1.7% increase in our Large Market Same Store segment expenses and a 4.2% increase in our Secondary Market Same Store segment expenses.


The drivers of these increases are discussed below in the "Results“Results of Operations"Operations” section.

COVID-19 Developments

We believe the best way we can continue to help our residents is to work with those who have lost wages or compensation due to the COVID-19 pandemic so that they can remain in their homes. We have offered these impacted residents amendments to their leases that provided varying degrees of payment flexibility with respect to rent and waived late fees and interest charges under the original lease for rent that was deferred under a lease amendment.

Our same storeon-site leasing offices have remained open throughout the COVID-19 pandemic while adhering to orders and directives issued by state and local governments. During the third quarter of 2020, we continued normal operations at our on-site leasing offices, permitting public access and walk-in traffic, subject to social distancing restrictions. Further, property amenities were open as permitted by governmental orders, directives and guidelines. We continue to support our on-site associates with enhanced leave and sick time policies, enhanced flextime arrangements and additional COVID-19 paid time off, among other benefits.

We continue to monitor and comply with the various federal, state and local laws, orders and directives issued in response to the COVID-19 pandemic that affect apartment owners and operators, including the Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19 issued by the Centers for Disease Control and Prevention in September 2020.

Trends

During the three months ended September 30, 2020, revenue growth for our Same Store portfolio represents those communities that have been heldcontinued to be favorably impacted by in-place rents and have been stabilizedthe contribution of average effective rent per unit growth. The average effective rent per unit for at least 12 months. Communities excludedour Same Store portfolio continued to increase from the same store portfolio include recent acquisitions, suchprior year, up 1.8% for the three months ended September 30, 2020 as the communities acquired as result of the Merger, communities being developed or in lease-up, communities undergoing extensive renovations, and communities identified for disposition. Additional information regarding the composition of our operating segments is included in Note 13 compared


to the Condensed Consolidated Financial Statements included in this Report.











The following table shows our multifamily real estate assets as of three months ended September 30, 2017 and 2016:

 September 30, 2017 September 30, 2016
Properties(1)
303 251
Units(1)
99,881 79,170
Development units1,434 550
Average effective rent per unit for the three months ended, excluding lease-up and development$1,180 $1,058
Physical occupancy, excluding lease-up and development96.4% 96.6%
(1) Includes property/units owned2019. This growth was partially offset by a nonconsolidated joint venture.

lower occupancy as compared to the more normal operating conditions for the three months ended September 30, 2019. Average effective rent per unit is equal torepresents the average of gross rent amounts, after the effect of leasing concessions, for occupied apartment units plus prevalent market rates asked for unoccupied apartment units, divided by the total number of units. Leasing concessions represent discounts to the current market rate. We believe average effective rent per unit is a helpful measurement in evaluating average pricing. Itpricing; however, it does not represent actual rental revenuesrevenue collected per unit. See discussion

In addition, for the three months ended September 30, 2020, average physical occupancy for our Same Store portfolio was 95.6%, which compares to average physical occupancy of same store96.1% achieved during the three months ended September 30, 2019.  Average physical occupancy is a measurement of the total number of our apartment units that are occupied by residents, and it represents the average rent per unitof the daily physical occupancy for the period.

An important part of our portfolio strategy is to maintain diversity of markets, submarkets, product types and occupancy comparisonsprice points in the "Trends" section below.


In additionSoutheast, Southwest and Mid-Atlantic regions of the United States. This diversity tends to mitigate exposure to economic issues in any one geographic market or area. We believe that a well-balanced portfolio, including inner loop, suburban and downtown/central business district locations, with various monthly rent price points, will perform well in “up” cycles as well as better weather “down” cycles. Through our investment in 36 defined markets, we are diversified across markets, urban and suburban submarkets, and a variety of product types and monthly rent pricing points.

The COVID-19 pandemic continues to disrupt the United States economy and we cannot predict when an economic recovery will occur. Demand for apartments is primarily driven by general economic conditions in our markets and is particularly correlated to job growth.  Government restrictions implemented in response to the multi-family assets detailedpandemic continue to drive high unemployment and limit the number of people looking to change their current living situation.  While our rent collections in the third quarter of 2020 slightly increased as compared to the rent collections in the second quarter of 2020, the current environment could contribute to lower rent collections in the fourth quarter of 2020 and continue to suppress demand for apartments, likely driving rent growth on new leases and renewals lower than it would be in a more normal economic environment. Current elevated supply levels could further affect rent growth for our portfolio, particularly for apartment communities located in urban submarkets.  Properties in suburban submarkets have been impacted somewhat less by supply, primarily because less new development has occurred in those submarkets.

Markets throughout the country have been impacted differently by the pandemic.  The individual market economies continue to be at various stages of reopening and we expect them to stay this way for some period. Further, as new COVID-19 infections continue to occur in most areas of the country including markets where we operate, we are unable to predict if economies will continue to remain open or if they will be disrupted again in the near future.  As we move through this uncertain time, we believe that our portfolio strategy of maintaining a diversity of markets, submarkets, product types, and price points will serve the company better in this environment than a more concentrated portfolio profile.

Our focus during this challenging time has been on working with residents who have been financially impacted by the pandemic on rent payment flexibility. At a portfolio level, we have focused on using our pricing system to maintain strong occupancy. As noted above, twenty-nine ofaverage physical occupancy for our multifamily properties also include retail components with approximately 600,000 square feet of gross leasable area. We also owned four commercial properties totaling approximately 232,000 square feet of combined gross leasable space atSame Store portfolio for the three months ended September 30, 2017.


2020 was 95.6%, which we believe positions us well to manage through the current environment.  

While access to the financial markets was initially disrupted by the COVID-19 pandemic, access has returned, particularly for high credit borrowers.  With our successful bond issuance in the third quarter of 2020, we showed our ability to efficiently raise capital through the debt market and believe we could do the same in the equity market as necessary. However, a prolonged disruption of the markets or a decline in credit and financing conditions could negatively affect our ability to access capital necessary to fund our operations or refinance maturing debt.

Results of Operations


Comparison of the three months ended September 30, 20172020 to the three months ended September 30, 2016

2019

For the three months ended September 30, 2020, we achieved net income available for MAA common shareholders of $59.0 million, a 24.1% decrease as compared to the three months ended September 30, 2019, and total revenue growth of $7.6 million, representing a 1.8% increase in property revenues as compared to the three months ended September 30, 2019.  The following discussion describes the primary drivers of the decrease in net income available for MAA common shareholders for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.


Property Revenues


The following table showsreflects our property revenues by segment for the three months ended September 30, 20172020 and September 30, 20162019 (dollars in thousands):

 

 

Three months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Increase

 

 

% Increase

 

Same Store

 

$

397,600

 

 

$

389,600

 

 

$

8,000

 

 

 

2.1

%

Non-Same Store and Other

 

 

25,599

 

 

 

26,032

 

 

 

(433

)

 

 

(1.7

)%

Total

 

$

423,199

 

 

$

415,632

 

 

$

7,567

 

 

 

1.8

%


 Three months ended September 30,    
 2017 2016 Increase Percentage Increase
Large Market Same Store$169,105
 $165,046
 $4,059
 2.5%
Secondary Market Same Store87,895
 85,822
 2,073
 2.4%
Same Store Portfolio257,000
 250,868
 6,132
 2.4%
Non-Same Store and Other127,550
 26,030
 101,520
 390.0%
Total$384,550
 $276,898
 $107,652
 38.9%

The increasesincrease in property revenues fromfor our Large Market Same Store and Secondary Marketsegment for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019 was the primary driver of total property revenue growth.  The Same Store segments aresegment generated a 2.1% increase in revenues for the three months ended September 30, 2020, primarily a result of increased average effective rent per unit growth of 2.8% for both segments year over year, respectively.1.8% as compared to the three months ended September 30, 2019.  The increasedecrease in property revenues from ourthe Non-Same Store and Other segment isfor the three months ended September 30, 2020 as compared to three months ended September 30, 2019 was primarily the result of decreased revenues from our retail properties and from the Merger, as we classified the properties we acquired as non-same store. See the discussiondisposition of our segment classification methodologyfive multifamily properties located in Note 13 to the Condensed Consolidated Financial Statements included in this Report.













Little Rock, Arkansas market during the fourth quarter of 2019, which marked our exit from that particular market.  These decreases were partially offset by increased revenues from recently completed development properties and 2019 multifamily acquisitions.  

Property Operating Expenses


Property operating expenses include costs primarily consisting offor property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and landscaping.other operating expenses. The following table showsreflects our property operating expenses by segment for the three months ended September 30, 20172020 and September 30, 20162019 (dollars in thousands):

 

 

Three months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Increase

 

 

% Increase

 

Same Store

 

$

158,898

 

 

$

148,238

 

 

$

10,660

 

 

 

7.2

%

Non-Same Store and Other

 

 

10,916

 

 

 

11,301

 

 

 

(385

)

 

 

(3.4

)%

Total

 

$

169,814

 

 

$

159,539

 

 

$

10,275

 

 

 

6.4

%


 Three months ended September 30,    
 2017 2016 Increase Percentage Increase
Large Market Same Store$64,531
 $63,451
 $1,080
 1.7%
Secondary Market Same Store34,059
 32,698
 1,361
 4.2%
Same Store Portfolio98,590
 96,149
 2,441
 2.5%
Non-Same Store and Other50,589
 10,497
 40,092
 381.9%
Total$149,179
 $106,646
 $42,533
 39.9%

The increase in property operating expenses fromfor our Large Market Same Store segment isfor the three months ended September 30, 2020 as compared to the three months ended September 30, 2019 was primarily a result ofdriven by increases in real estate taxestax expense of $0.5$3.0 million, and hurricane related expenses resulting from Hurricanes Harvey and Irma of $1.4 million. These were offset by decreases in insurance expense of $0.5$2.1 million, utility expense of $1.8 million, and building repairs and maintenancemarketing expense of $0.3$1.7 million. The increase in property operating expenses from our Secondary Market Same Store segment is primarily a result of increases in real estate taxes of $0.5 million, hurricane related expenses of $0.6 million and personnel expense of $0.2 million. The increase in property expenses from our Non-Same Store and Other segment is primarily the result of the Merger and $0.3 million of hurricane related expenses.


Depreciation and Amortization


Depreciation and amortization expense for the three months ended September 30, 20172020 was approximately $117.9$127.7 million, an increase of $41.0$3.0 million fromas compared to the three months ended September 30, 2016.2019. The increase inwas primarily driven by the recognition of depreciation expense associated with our development and amortization expense is primarily due to additional depreciation of $37.9 million resulting from properties acquired from the Merger, in addition to asset additions maderedevelopment activities completed after September 30, 2019 in the normal course of business.


Acquisition Expense

During the three months endedbusiness through September 30, 2017, no significant acquisition expense was recorded. A decrease of approximately $1.0 million from the three months ended September 30, 2016 was due to the adoption of ASU 2017-01, Clarifying the Definition of a Business (Topic 805), during the first quarter of 2017. Based on the adoption of this guidance, acquisition costs related to properties acquired are now capitalized.

Property Management2020.

Other Income and Expenses


Property management expenses for the three months ended September 30, 20172020 were approximately $10.3$12.7 million, an increasea decrease of $2.4$1.2 million fromas compared to the three months ended September 30, 2016. This increase is primarily due to the growth in our portfolio as a result of the Merger.


General and Administrative Expenses

2019. General and administrative expenses for the three months ended September 30, 20172020 were approximately $8.4$11.4 million, an increase of $1.7$1.1 million fromas compared to the three months ended September 30, 2016. This increase is primarily driven by our growth as a result of the Merger, as well as, increases in legal expenses quarter over quarter.

Merger and Integration Related Expenses

Merger and integration related expenses for the acquisition of Post Properties for the three months ended September 30, 2017 were primarily comprised of approximately $0.1 million legal costs and $4.0 million of systems and professional costs. Such current year expenses were approximately $0.2 million more than the merger and integration related expenses for the then pending acquisition of Post Properties for the three months ended September 30, 2016.




Interest and Other Non-Property Income

Interest and other non-property income for the three months ended September 30, 2017 was approximately $4.3 million, an increase of approximately $4.2 million from the three months ended September 30, 2016. This increase is primarily driven by $4.1 million of quarter-to-date mark-to-market adjustments of the bifurcated embedded derivative related to the MAA Series I preferred stock issued as a result of the Merger.
Interest Expense

2019.  

Interest expense for the three months ended September 30, 20172020 was approximately $39.9$41.0 million, an increasea decrease of $7.8$3.5 million fromas compared to the three months ended September 30, 2016.2019. The increasedecrease was primarily due to increased borrowing as we assumed several loans as a resultdecrease of the Merger, including a secured loan with a face value of $186.0 million27 basis points in our effective interest rate and two unsecured loans with face values of $150.0 million and $250.0 million. Additionally, we entered into a new $300.0 million term loan on the closing date of the Merger. Duringan increase in capitalized interest during the three months ended JuneSeptember 30, 2017, we issued a public bond with a face value of $600.0 million, bearing interest at 3.60% per annum. Such increases were offset by a slight2020 as compared to the three months ended September 30, 2019.  The decrease in our effective interest rate was primarily due to debt retirements subsequent to the third quarter of 2019 and through August 2020, which were retired with proceeds from unsecured debt issuances with lower effective interest rates over the same period.  The increase in the capitalized interest expense as during July 2017was due to an increase in the number of development projects.  

During the three months ended September 30, 2020, we paid off the $150.0sold a land parcel resulting in a $1.4 million unsecured loan assumed as part of the Merger; the note was scheduled for maturity in October 2017.


Gain on Debt Extinguishment

We recorded a gain on debt extinguishmentsale of $0.8 millionnon-depreciable assets.  No land parcels were sold during the three months ended September 30, 2019.

Other non-operating (income) expense for the three months ended September 30, 2017. We did not record2020 was $0.2 million of income, a gain or loss fordecrease of $18.6 million as compared to the three months ended September 30, 2016.2019. The current period gain on debt extinguishment resulted fromdecrease was primarily driven by $1.3 million of non-cash income related to the payoffs of a US Bank term loan with a facefair value of $150.0 million and a mortgage associated with the Venue at Stonebridge Ranch with a face value of $14.0 million during three months ended September 30, 2017. There was approximately $0.8 million and $0.1 million on the term loan and mortgage, respectively, of unamortized debt adjustments remaining asadjustment of the payoff dates. These fair market values were recognized as a gain on debt extinguishment embedded derivative in the MAA Series I preferred shares


during the three months ended September 30, 2017.


Net Casualty Gain (Loss) After Insurance and Other Settlement Proceeds

2020, compared to the recognition of $15.5 million of non-cash income related to the adjustment of the embedded derivative during the three months ended September 30, 2019. During the three months ended September 30, 2017,2020, we recorded a net casualty gain after insurance proceeds of $0.6 million. This increase of $0.6 million from the three months ended September 30, 2016 was due to the receipt of insurance proceeds for a previous casualty loss of $1.3 million, offset by a casualty loss of $0.7 million from damage caused by Hurricane Irma.

Gain on Sale of Depreciable Real Estate Assets

We recorded a gain on sale of depreciable real estate assets of $58.8 million for the three months ended September 30, 2017, an increase of approximately $11.1 million from the three months ended September 30, 2016. Although disposition activity decreased from the three months ended September 30, 2016, gain on sale of depreciable assets increased primarily due to the nature of the real estate assets sold.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the three months ended September 30, 2017 was approximately $4.2 million, a decrease ofalso recognized $0.4 million of COVID-19 related expenses and recognized $0.1 million of non-cash expense from the three months ended September 30, 2016. This decrease is primarily duean unconsolidated limited partnership in other non-operating (income) expense compared to the dilutive impact$4.3 million of the Merger to minority interest. As a result, our ownership percentage has increasednon-cash income from 94.8% to 96.4% year over year.

Preferred Dividends Distributed

As a result of the Merger, for the three months ended September 30, 2017 we recorded a dividend distribution to holders of MAA Series I preferred stock of $0.9 million. As there were no shares of MAA Series I preferred stock issued and outstandingan unconsolidated limited partnership during the three months ended September 30, 2016, we did not record a preferred dividend distribution in that quarter.






Net Income Available for MAA Common Shareholders

Primarily as a result2019.  Our COVID-19 related expenses consisted primarily of the foregoing, net income available for MAA common shareholders increased by approximately $29.5 million for the three months ended September 30, 2017 from the three months ended September 30, 2016.

cleaning supplies, contract labor and COVID-19 related leave.

Comparison of the nine months ended September 30, 20172020 to the nine months ended September 30, 2016


2019

For the nine months ended September 30, 2020, we achieved net income available for MAA common shareholders of $168.9 million, a 16.2% decrease as compared to the nine months ended September 30, 2019, and total revenue growth of $30.1 million, representing a 2.5% increase in property revenues as compared to the nine months ended September 30, 2019. The following discussion describes the primary drivers of the decrease in net income available for MAA common shareholders for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.

Property Revenues


The following table showsreflects our property revenues by segment for the nine months ended September 30, 20172020 and September 30, 20162019 (dollars in thousands):

 

 

Nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Increase

 

 

% Increase

 

Same Store

 

$

1,179,856

 

 

$

1,147,893

 

 

$

31,963

 

 

 

2.8

%

Non-Same Store and Other

 

 

74,467

 

 

 

76,307

 

 

 

(1,840

)

 

 

(2.4

)%

Total

 

$

1,254,323

 

 

$

1,224,200

 

 

$

30,123

 

 

 

2.5

%


 Nine months ended September 30,    
 2017 2016 Increase Percentage Increase
Large Market Same Store$503,076
 $487,725
 $15,351
 3.1%
Secondary Market Same Store261,272
 254,685
 6,587
 2.6%
Same Store Portfolio764,348
 742,410
 21,938
 3.0%
Non-Same Store and Other381,901
 75,740
 306,161
 404.2%
Total$1,146,249
 $818,150
 $328,099
 40.1%

The increasesincrease in property revenues fromfor our Large Market Same Store and Secondary Marketsegment for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 was the primary driver of total property revenue growth. The Same Store segments aresegment generated a 2.8% increase in revenues for the nine months ended September 30, 2020, primarily a result of increased average effective rent per unit growth of 3.3% and 2.8%, respectively,3.1% as compared to the sixnine months ended JuneSeptember 30, 2016.2019. The increasedecrease in property revenues from ourthe Non-Same Store and Other portfolio issegment for the nine months ended September 30, 2020 as compared to nine months ended September 30, 2019 was primarily the result of decreased revenues from our retail properties and from our exit from the Merger, as we classifiedLittle Rock, Arkansas market during the fourth quarter of 2019.  These decreases were partially offset by increased revenues from recently completed development properties we acquired as non-same store. See the discussion of our segment classification methodology in Note 13 to the Condensed Consolidated Financial Statements included in this Report.


and 2019 multifamily acquisitions.  

Property Operating Expenses


Property operating expenses include costs primarily consisting offor property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and landscaping.other operating expenses. The following table showsreflects our property operating expenses by segment for the nine months ended September 30, 20172020 and September 30, 20162019 (dollars in thousands):

 

 

Nine months ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Increase

 

 

% Increase

 

Same Store

 

$

449,154

 

 

$

430,677

 

 

$

18,477

 

 

 

4.3

%

Non-Same Store and Other

 

 

31,303

 

 

 

32,381

 

 

 

(1,078

)

 

 

(3.3

)%

Total

 

$

480,457

 

 

$

463,058

 

 

$

17,399

 

 

 

3.8

%


 Nine months ended September 30,    
 2017 2016 Increase Percentage Increase
Large Market Same Store$189,657
 $185,495
 $4,162
 2.2%
Secondary Market Same Store98,655
 95,422
 3,233
 3.4%
Same Store Portfolio288,312
 280,917
 7,395
 2.6%
Non-Same Store and Other148,109
 29,565
 118,544
 401.0%
Total$436,421
 $310,482
 $125,939
 40.6%

The increase in property operating expenses fromfor our Large Market Same Store segment isfor the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 was primarily a result ofdriven by increases in real estate taxestax expense of $3.4$7.3 million, utilities expense of $0.5$3.1 million, personnelmarketing expense of $0.8$3.0 million, other operating expense of $0.4 million, and landscaping expense of $0.2 million. These were offset by a decrease in insurance expense of $1.0$2.8 million.  The increase in property operating expenses from our Secondary Market Same Store Segment is primarily a result of increases in real estate taxes of $1.3 million, utilities expense of $0.4 million, personnel expense of $1.0 million, other operating expense of $0.7 million, and landscaping expense of $0.1 million. These were offset by a decrease in insurance expense of $0.2 million. The increase in property expenses from our Non-Same Store and Other segment is primarily the result of the Merger.


Depreciation and Amortization


Depreciation and amortization expense for the nine months ended September 30, 20172020 was approximately $374.3$381.3 million, an increase of $146.5$9.8 million fromas compared to the nine months ended September 30, 2016.2019. The increase inwas primarily driven by the recognition of depreciation and



amortization expense is primarily due to depreciation of $111.0 millionassociated with our development and amortization expenses of $27.7 million resulting from the Merger, in addition to asset additions maderedevelopment activities completed after September 30, 2019 in the normal course of business.

Acquisition Expense

During the nine months endedbusiness through September 30, 2017, no significant acquisition expense was recorded. A decrease of approximately $2.2 million from the nine months ended September 30, 2016 was due to the adoption of ASU 2017-01, Clarifying the Definition of a Business (Topic 805), during the first quarter of 2017. Based on the adoption of this guidance, acquisition costs related to properties acquired are now capitalized.

Property Management2020.

Other Income and Expenses


Property management expenses for the nine months ended September 30, 20172020 were approximately $32.0$39.1 million, an increase $6.8a decrease of $2.1 million of fromas compared to the nine months ended September 30, 2016. This increase is primarily due to the growth in our portfolio as a result of the Merger.


General and Administrative Expenses

2019. General and administrative expenses for the nine months ended September 30, 20172020 were approximately $30.7$35.2 million, an increase of $10.5$2.2 million fromas compared to the nine months ended September 30, 2016. This increase is primarily driven by increases in other corporate general and administrative expenses and legal expenses as a result of the Merger.
2019.  


Merger and Integration Related Expenses

Merger and integration related expenses for the acquisition of Post Properties, were primarily comprised of approximately $4.0 million legal costs and $10.5 million of systems and professional costs for the nine months ended September 30, 2017. Merger and integration related expenses for the nine months ended September 30, 2016 were approximately $10.6 million less than the Merger and integration related expenses for the nine months ended September 30, 2017 due to the Merger not being complete until December 1, 2016.

Interest and Other Non-property Income

Interest and other non-property income for the nine months ended September 30, 2017 was approximately $7.6 million, an increase of approximately $7.5 million from the nine months ended September 30, 2016. This increase is primarily driven by $5.8 million of year-to-date mark-to-market adjustments of the bifurcated embedded derivative related to the MAA Series I preferred stock issued as a result of the Merger.

Interest Expense

Interest expense for the nine months ended September 30, 20172020 was approximately $115.0$126.6 million, an increasea decrease of $18.6$9.5 million fromas compared to the nine months ended September 30, 2016.2019. The increasedecrease was due to increased borrowing as we assumed several loans as a result of the Merger, including a secured loan with a face value of $186.0 million and two unsecured loans with face values of $150.0 million and $250.0 million. Additionally, we entered into a new $300.0 million term loan on the closing date of the Merger. During the three months ended June 30, 2017, we issued a public bond with a face value of $600.0 million, bearing interest at 3.60% per annum. The remainder of the increase was mainly due to interest related to the newly issued bond. Such increases were offset by a slight decrease in interest expense as a result of our July 2017 payoff of a $150.0 million of unsecured notes assumed as part of the Merger; the notes were scheduled for maturity in October 2017.


Gain on Debt Extinguishment

We recorded a gain on debt extinguishment of $3.2 million for the nine months ended September 30, 2017, an increase of approximately $3.2 million from the nine months ended September 30, 2016. This increase was primarily the result of a $4.8 million gain due to the write-offs of the mark-to-market debt adjustments related to the payoffs of the secured mortgages with Fannie Mae and the US Bank Term Loan, partially offset by a cash prepayment penalty of $1.6 million.

Gain on Sale of Depreciable Real Estate Assets

During the nine months ended September 30, 2017, we recorded a gain on the sale of depreciable real estate assets of $59.0 million, an increase of $10.5 million from the nine months ended September 30, 2016. Although disposition activity


decreased from the nine months ended September 30, 2016, gain on sale of depreciable assets increased primarily due to the nature of the real estate assets sold.

Gain on Sale of Non-depreciable Real Estate Assets

During the nine months ended September 30, 2017, no significant gain on sale of non-depreciable real estate assets was recorded. This decrease of approximately $2.1 million from the nine months ended September 30, 2016 was due to a decrease of 10 basis points in disposition activity during the nine months ended September 30, 2017.

Gain from Real Estate Joint Ventures

During the nine months ended September 30, 2017, we recorded a gain from real estate joint ventures of $1.0 million. We did not record a significant gain from real estate joint ventures for the nine months ended September 30, 2016. Theour effective interest rate, an increase of $1.0 million is due to income attributable to our ownershipin capitalized interest in the Post Mass Avenue joint venture acquired with the Merger.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests for the nine months ended September 30, 2017 was approximately $7.6 million,and a decrease of $1.9 million from the nine months ended September 30, 2016. This decrease is primarily due to the dilutive impact of the Merger to minority interest. As a result, our ownership percentage has increased from 94.8% to 96.4% year over year.

Preferred Dividends Distributed

As a result of the Merger, for the nine months ended September 30, 2017 we recorded a dividend distribution to holders of MAA Series I preferred stock of $2.8 million. As there were no shares of MAA Series I preferred stock issued andin average daily debt outstanding during the nine months ended September 30, 2016,2020 as compared to the nine months ended September 30, 2019.  The decrease in our effective interest rate was primarily due to debt retirements subsequent to the third quarter of 2019 and through August 2020, which were retired with proceeds from unsecured debt issuances with lower effective interest rates over the same period.  The increase in the capitalized interest expense was due to an increase in the number of development projects.  

Gain on sale of non-depreciable assets during the nine months ended September 30, 2020 was $1.0 million, primarily driven by the sale of one land parcel in the third quarter of 2020. During the nine months ended September 30, 2019, we did not recordsold two land parcels resulting in a preferred dividend distribution in that period.


Net Income Available for MAA Common Shareholders

Primarily as a result$9.3 million gain on sale of the foregoing, net income available for MAA common shareholders increased by approximately $29.3 millionnon-depreciable assets.

Other non-operating (income) expense for the nine months ended September 30, 2017 from2020 was $13.6 million of expense, as compared to $23.5 million of income for the nine months ended September 30, 2016.


2019. The increase was primarily driven by $14.6 million of non-cash expense related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares during the nine months ended September 30, 2020, compared to the recognition of $19.6 million of non-cash income related to the adjustment of the embedded derivative during the nine months ended September 30, 2019. During the nine months ended September 30, 2020, we also recognized $4.8 million of non-cash income from an unconsolidated limited partnership and $3.0 million of COVID-19 related expenses in other non-operating (income) expense compared to $4.0 million of non-cash income from an unconsolidated limited partnership during nine months ended September 30, 2019. Our COVID-19 related expenses consisted primarily of cleaning supplies, contract labor and COVID-19 related leave.

Funds from Operations


and Core Funds from Operations

Funds from operations, or FFO, a non-GAAP financial measure, represents net income available for MAA common shareholders (computed in accordance with the United States generally accepted accounting principles, or GAAP) excluding extraordinary items, asset impairment, gains or losses on disposition of real estate assets,operating properties and asset impairment, plus net income available to noncontrolling interests, depreciation and amortization of real estate assets, net income attributable to noncontrolling interests and adjustments for joint ventures to reflect FFO on the same basis.ventures. Because noncontrolling interest is added back, FFO, when used in this document,Quarterly Report on Form 10-Q, represents FFO attributable to the Company.


FFO should not be considered as an alternative to net income available for MAA common stockholders or any other GAAP measurement, of performance, as an indicator of operating performance or as an alternative to cash flow from operating, investing and financing activities as a measure of liquidity. Management believes that FFO is helpful to investors in understanding our operating performance, primarily because its calculation excludes depreciation and amortization expense on real estate assets. We believe that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. While our calculation of FFO is in accordance with the National Association of Real Estate Investment Trusts'Trusts’, or NAREIT's,NAREIT’s, definition, it may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to such other REITs.

Core FFO represents FFO as adjusted for items that are not considered part of our core business operations such as adjustments related to the fair value of the embedded derivative in the MAA Series I preferred shares, gain or loss on sale of non-depreciable assets, adjustments for gains or losses from unconsolidated limited partnerships, net casualty gain or loss, gain or loss on debt extinguishment, non-routine legal costs and settlements, COVID-19 related costs and mark-to-market debt adjustments. While our definition of Core FFO may be similar to others in the industry, our methodology for calculating Core FFO may differ from that utilized by other REITs and, accordingly, may not be comparable to such other REITs. Core FFO should not be considered as an alternative to Net income available for MAA common shareholders as an indicator of operating performance. We believe that Core FFO is helpful in understanding our core operating performance between periods in that it removes certain items that by their nature are not comparable over periods and therefore tend to obscure actual operating performance.











The following table ispresents a reconciliation of FFO to net income available for MAA common shareholders to FFO and Core FFO for the three and nine months ended September 30, 20172020 and September 30, 20162019, as we believe net income available for MAA common shareholders is the most directly comparable GAAP measure (dollars in thousands):

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income available for MAA common shareholders

 

$

58,988

 

 

$

77,723

 

 

$

168,854

 

 

$

201,456

 

Depreciation and amortization of real estate assets

 

 

125,916

 

 

 

123,171

 

 

 

376,430

 

 

 

366,704

 

(Gain) loss on sale of depreciable real estate assets

 

 

(20

)

 

 

(1,000

)

 

 

7

 

 

 

(987

)

Depreciation and amortization of real estate assets

   of real estate joint venture

 

 

153

 

 

 

154

 

 

 

458

 

 

 

465

 

Net income attributable to noncontrolling interests

 

 

2,126

 

 

 

2,814

 

 

 

6,096

 

 

 

7,336

 

FFO attributable to the Company

 

 

187,163

 

 

 

202,862

 

 

 

551,845

 

 

 

574,974

 

(Gain) loss on embedded derivative in preferred shares(1)

 

 

(1,342

)

 

 

(15,522

)

 

 

14,603

 

 

 

(19,592

)

Gain on sale of non-depreciable real estate assets

 

 

(1,366

)

 

 

—

 

 

 

(995

)

 

 

(9,260

)

Loss (gain) from unconsolidated limited partnerships, net of tax(1)(2)

 

 

100

 

 

 

(3,493

)

 

 

(4,085

)

 

 

(3,169

)

Net casualty loss (gain) and other settlement proceeds(1)

 

 

511

 

 

 

(46

)

 

 

1,207

 

 

 

(1,899

)

Loss on debt extinguishment(1)

 

 

345

 

 

 

5

 

 

 

344

 

 

 

60

 

Non-routine legal costs and settlements(1)

 

 

—

 

 

 

1,260

 

 

 

40

 

 

 

2,276

 

COVID-19 related costs(1)(3)

 

 

376

 

 

 

—

 

 

 

2,983

 

 

 

—

 

Mark-to-market debt adjustment(4)

 

 

83

 

 

 

(51

)

 

 

(9

)

 

 

(222

)

Core FFO

 

$

185,870

 

 

$

185,015

 

 

$

565,933

 

 

$

543,168

 

(1)

Included in “Other non-operating (income) expense” in the Condensed Consolidated Statements of Operations.


(2)

For the nine months ended September 30, 2020, $4.8 million of gains from unconsolidated limited partnerships are offset by $0.7 million of income tax expense.  For the three and nine months ended September 30, 2019, $4.3 million and $4.0 million, respectively, of gains from unconsolidated limited partnerships are offset by $0.8 million of income tax expense.

(3)

Non-recurring additional costs resulting from the COVID-19 pandemic, consisting primarily of additional cleaning supplies, contract labor and COVID-19 related leave.

 Three months ended September 30, Nine months ended September 30,
 2017 2016 2017 2016
Net income available for MAA common shareholders$113,787
 $84,279
 $202,163
 $172,836
Depreciation and amortization of real estate assets116,882
 76,105
 371,194
 225,328
Gain on sale of depreciable real estate assets(58,844) (47,749) (59,045) (48,572)
Loss on disposition within unconsolidated entities—
 —
 —
 98
Depreciation and amortization of real estate assets of real estate joint ventures148
 —
 449
 11
Net income attributable to noncontrolling interests4,249
 4,627
 7,600
 9,508
Funds from operations attributable to the Company$176,222
 $117,262
 $522,361
 $359,209

(4)

Included in “Interest expense” in the Condensed Consolidated Statements of Operations.


Core FFO for the three months ended September 30, 2017 increased approximately $59.02020 was $185.9 million, froman increase of $0.9 million as compared to the three months ended September 30, 20162019, primarily as a result of thean increase in total property revenues of approximately $107.7$7.6 million, which wasand decreases in interest expense of $3.5 million and property management expenses of $1.2 million. The increases to Core FFO were offset by the increases in property operating expenses, excluding depreciation and amortization, of $42.5 million, property management expenses of $2.4$10.3 million and general and administrative expenses of $1.7$1.1 million.


Core FFO for the nine months ended September 30, 2017 increased approximately $163.22020 was $565.9 million, froman increase of $22.8 million as compared to the nine months ended September 30, 20162019, primarily as a result of thean increase in total property revenues of approximately $328.1$30.1 million, which wasand decreases in interest expense of $9.5 million and property management expenses of $2.1 million. The increases to Core FFO were offset by the increases in property operating expenses, excluding depreciation and amortization, of $125.9$17.4 million property management expenses of $6.8 million,and general and administrative expenses of $10.5 million, and merger and integration related expenses of $10.6$2.2 million. The majority of the remaining variance was attributable to an an increase in interest expense of $18.6 million, offset by an increase in interest and other non-property income of $7.5 million.


Trends

During the three months ended September 30, 2017, demand for apartments continued to be strong, as it was during the three months ended September 30, 2016. Physical occupancy for our same store portfolio (which excludes properties acquired through the Merger) ended September 30, 2017 at a strong 96.5% and average daily physical occupancy for our same store portfolio was 96.2% for the quarter. Our same store average effective rent per unit continued to grow, up 2.8% in the three months ended September 30, 2017 as compared to the three months ended September 30, 2016.
An important part of our portfolio strategy is to maintain a diversity of markets, submarkets, product types and price points across the Southeast and Southwest regions of the United States. This diversity tends to mitigate exposure to economic issues in any one geographic market or area. We believe that a well-balanced portfolio, including inner loop, suburban, and downtown/central business district locations and various monthly rent price points will perform well in “up” cycles as well as weather “down” cycles better. Through our investment in 39 defined Metropolitan Statistical Areas, or MSAs, we are diversified across markets, urban and suburban submarkets, and a variety of monthly rent pricing points.
The current supply level as a result of elevated permitting activity in 2015 and 2016 is impacting our total portfolio from a demand standpoint, particularly properties located in urban submarkets, the majority of which were acquired in the Merger. Our same store portfolio has been impacted somewhat less, primarily due to being in submarkets that have experienced lower supply relative to other submarkets in a given MSA. Encouragingly, according to U.S. Census Bureau data, as of August 2017 year to date, multifamily permitting across our markets was down 2% as compared to August 2016 year to date. This activity should result in relatively lower supply in our markets in the future as compared to the current environment. In addition, we believe the lack of new apartments in the past few years and the demand from new households will help keep supply and demand essentially in balance in most markets. Also, we believe that more disciplined credit terms for residential mortgages should continue to favor rental demand at existing multifamily properties. Furthermore, rental competition from single family homes has not been a major competitive factor impacting our portfolio. For the three months ended September 30, 2017, total move outs attributable to single family home rentals for our combined portfolio was just over 6% of total move outs, in line with the three months ended September 30, 2016. We have seen significant rental competition from single family homes in only a few of our submarkets. Long term, we expect demographic trends (including the growth of prime age groups


for rentals and immigration and population movement to the Southeast and Southwest) will continue to support apartment rental demand for our markets.

Our focus is on maintaining strong physical occupancy while increasing pricing where possible through our revenue management system. As noted above, physical occupancy for our same store portfolio for the period ended September 30, 2017 was strong, and the average for the three months ended September 30, 2017 was sustained above 96%. As we move into the typically slower leasing season of the fall and winter, the current level of physical occupancy puts us in a good position to maintain solid pricing growth in the fourth quarter of 2017.
As a result of the Merger, we continue to combine best practices across the entire portfolio that we believe will ultimately enable us to capture more revenues and reduce expenses. Likewise, we believe our scale as a result of the Merger will help achieve efficiencies and create additional buying power that will benefit our properties acquired as part of the Merger as well as our properties that were owned prior to the Merger.

Liquidity and Capital Resources


Our cash flows from operating, investing and financing activities, as well as general economic and market conditions, are the principal factors affecting our liquidity and capital resources. The significant changes in

Operating Activities

Net cash due toprovided by operating investing and financing activities was $643.9 million for the nine months ended September 30, 20172020 as compared to $621.5 million for the nine months ended September 30, 2019.  The increase in operating cash flows was primarily driven by our operating performance.


Investing Activities

Net cash used in investing activities was $293.2 million for the nine months ended September 30, 2020 as compared to $230.7 million for the nine months ended September 30, 2019.  The primary drivers of the change were as follows (dollars in thousands):

 

 

Primary drivers of cash (outflow) inflow

 

 

 

 

 

 

 

during the nine months ended September 30,

 

 

Increase (Decrease)

 

 

 

2020

 

 

2019

 

 

in Net Cash

 

Purchases of real estate and other assets

 

$

(5,004

)

 

$

(22,860

)

 

$

17,856

 

Capital improvements, development and other

 

 

(288,183

)

 

 

(219,670

)

 

 

(68,513

)

Proceeds from disposition of real estate assets

 

 

3,278

 

 

 

15,984

 

 

 

(12,706

)

The decrease in cash outflows for purchases of real estate and other assets was driven by the acquisition activity during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2016 are2019.  The increase in cash outflows for capital improvements, development and other was primarily driven by increased development capital spend during the nine months ended September 30, 2020 as follows:


Operatingcompared to the nine months ended September 30, 2019. The decrease in cash inflows related to proceeds from disposition of real estate assets was primarily due to the nature of the real estate assets sold during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019.  

Financing Activities


Net cash flow provided by operatingused in financing activities increased to $553.1was $393.7 million for the nine months ended September 30, 20172020 as compared to $389.2$399.8 million for the nine months ended September 30, 2016. This2019.  The primary drivers of the change was a resultwere as follows (dollars in thousands):

 

 

Primary drivers of cash (outflow) inflow

 

 

 

 

 

 

 

during the nine months ended September 30,

 

 

Increase (Decrease)

 

 

 

2020

 

 

2019

 

 

in Net Cash

 

Net change in revolving credit facility

 

$

—

 

 

$

(540,000

)

 

$

540,000

 

Net change in commercial paper

 

 

(35,000

)

 

 

200,000

 

 

 

(235,000

)

Proceeds from notes payable

 

 

447,593

 

 

 

760,003

 

 

 

(312,410

)

Principal payments on notes payable

 

 

(440,222

)

 

 

(468,635

)

 

 

28,413

 

Dividends paid on common shares

 

 

(342,983

)

 

 

(328,239

)

 

 

(14,744

)

The decrease in cash outflows related to the net change in revolving credit facility resulted from no net borrowings during the nine months ended September 30, 2020, as compared to the decrease in net borrowings of various items relating to operating performance, including higher revenues as discussed above.


Investing Activities

Net cash used in investing activities$540.0 million during the nine months ended September 30, 2017 was $232.3 million compared to net cash used in investing activities during the nine months ended September 30, 2016 of $216.1 million. The primary drivers of this change were as follows:

 Primary drivers of cash (outflow) inflow during the nine months ended September 30,    
 2017 2016 Increase (Decrease) in Net Cash Percentage Increase (Decrease) in Net Cash
Purchases of real estate and other assets$(63,774) $(262,268) $198,494
 75.7 %
Normal capital improvements(82,030) (65,351) (16,679) (25.5)%
Construction capital and other improvements(7,171) (5,569) (1,602) (28.8)%
Renovations to existing real estate assets(36,692) (29,554) (7,138) (24.2)%
Development(142,530) (42,611) (99,919) (234.5)%
Proceeds from disposition of real estate assets90,040
 187,425
 (97,385) (52.0)%
Return of escrow for future acquisitions10,591
 —
 10,591
 100.0 %

The decrease in purchases of real estate and other assets resulted from the acquisition of one apartment community during the nine months ended September 30, 2017, compared to the acquisition of four apartment communities during the nine months ended September 30, 2016. The decrease in proceeds from the disposition of real estate assets resulted from the sale of three apartment communities and four land parcels during the nine months ended September 30, 2017, compared to the sale of seven apartment communities, one commercial property, and three land parcels during the nine months ended September 30, 2016. The increase in cash outflows for normal capital improvements, construction capital and other improvements, renovations to existing real estate assets, and development compared to prior year primarily resulted from the property portfolio increase as a result of the Merger and the increase in our development pipeline as a result of the Merger. The increase in cash


inflows from the return of escrow for future acquisitions was a result of funding for three 1031(b) transactions offset by the release of three 1031(b) transactions that never occurred during the nine months ended September 30, 2017; there was no net 1031(b) transaction activity during the nine months ended September 30, 2016.

Financing Activities

Net cash used in financing activities increased to $306.5 million for the nine months ended September 30, 2017 compared to $182.9 million for the nine months ended September 30, 2016. The primary drivers of this change were as follows:

 Primary drivers of cash (outflow) inflow during the nine months ended September 30,    
 2017 2016 (Decrease) Increase in Net Cash Percentage (Decrease) Increase in Net Cash
Net change in credit lines$(240,000) $130,000
 $(370,000) (284.6)%
Proceeds from notes payable597,480
 —
 597,480
 100.0 %
Principal payments on notes payable(345,053) (114,753) (230,300) (200.7)%
Dividends paid on common shares(296,441) (185,704) (110,737) (59.6)%

2019.  The decrease in cash outflowsinflows related to the net change in credit linescommercial paper resulted from the decrease in net borrowings of $240.0$35.0 million on our commercial paper program during the KeyBank Facility during thenine months ended September 30, 2017,2020, as compared to the increase in net borrowings of $130.0$200.0 million on the KeyBank Facilityour commercial paper program during the nine months ended September 30, 2016.2019.  The increasedecrease in cash inflows related to proceeds from notes payable duringprimarily resulted from the nine months ended September 30, 2017 relates to the May 2017 issuance of $450.0 million of senior unsecured notes discussed in Note 7; there was no debt issued during the nine months ended September 30, 2016.2020, as compared to the issuance of $550.0 million of senior notes and $191.3 million of property mortgages during the nine months ended September 30, 2019.  The increasedecrease in cash outflows from principal payments on notes payable primarily resulted from paying off approximately $186.1the retirement of a $300.0 million term loan and $135.7 million of secured property mortgages and $150.0 million of unsecured public bonds during the nine months ended September 30, 20172020, as compared to paying off approximately $68.1the retirement of $450.0 million in term loans and $13.2 million of 2006 unsecured public bonds, $33.6 million of secured property mortgages and $7.1 million of unsecured notes payable during the nine months ended September 30, 2016. 2019.  The increase in cash outflows from dividends paid on common shares primarily resulted from the increased number of common shares outstanding resulting from the Merger and the increase in the dividend rate to $2.61$3.00 per share during thenine months ended September 30, 20172020, as compared to the dividend rate of $2.46$2.88 per share during the nine months ended September 30, 2016.

Net cash provided by operating activities (computed in accordance with GAAP) was in excess of our funding of normal capital improvements to existing real estate assets, distributions to common unitholders and dividends paid on common shares for both the nine months ended September 30, 2017 and 2016. While we had sufficient liquidity to permit common share distributions at current rates through additional borrowings, if necessary, any significant deterioration in operations could result in our financial resources being insufficient to pay distributions to common shareholders at the current rate, in which event we would be required to reduce the distribution rate.

We believe that we have adequate resources to fund our current operations, annual refurbishment of our properties, and incremental investment in new properties. To the extent additional capital resources are required or deemed desirable, we may, from time to time, issue equity or debt securities.

2019.

Equity

As of September 30, 2017,2020, MAA owned 113,627,014114,369,812 OP Units, comprising a 96.4%96.6% limited partnership interest in the Operating Partnership,MAALP, while the remaining 4,200,0324,058,258 outstanding OP Units were held by third party limited partners of the Operating Partnership.MAALP other than MAA.  Holders of OP Units (other than MAA and its corporate affiliates)MAA) may require us to redeem their OP Units from time to time, in which case MAAwe may, at itsour option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of MAA'sMAA’s common stock on the NYSE over a specified period prior to the redemption date) or by delivering one share of MAA'sMAA’s common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.  In addition, MAA has registered under the Securities Act the 4,200,0324,058,258 shares of its common stock that, as of September 30, 2017,2020, were issuable upon redemption of OP Units, so thatin order for those shares canto be sold freely in the public markets.

We have entered into separate distribution agreements with each of J.P. Morgan Securities LLC, BMO Capital Markets Corp. and KeyBanc Capital Markets Inc. to establish an ATM program allowing MAA to sell shares of its common stock from time to time into the existing market at current market prices or through negotiated transactions.  Under the ATM program, MAA has the authority



to issue up to an aggregate of 4.0 million shares of its common stock, at such times to be determined by MAA.  The ATM program currently has a maturity of September 2021.  MAA has no obligation to issue shares through the ATM program.

During the nine months ended September 30, 2020 and 2019, MAA did not sell any shares of common stock under its ATM program. As of September 30, 2020, 3.9 million shares remained issuable under the ATM program.

For more information regarding our equity capital resources, see Note 108 and Note 119 to the Condensed Consolidated Financial Statementscondensed consolidated financial statements included elsewhere in this Report.


Quarterly Report on Form 10-Q.

Debt


The following schedule outlinesreflects our variablefixed and fixedvariable rate debt including the impact of interest rate swaps and caps, outstanding as of September 30, 20172020 (dollars in thousands):

 

 

Principal

Balance

 

 

Average Years

to Rate Maturity

 

 

Effective

Rate

 

Unsecured debt

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate senior notes

 

$

3,922,000

 

 

 

6.3

 

 

 

3.6

%

Variable rate commercial paper

 

 

35,000

 

 

 

0.1

 

 

 

0.2

%

Debt issuance costs, discounts, premiums and fair market value adjustments

 

 

(17,575

)

 

 

 

 

 

 

 

 

Total unsecured rate maturity

 

$

3,939,425

 

 

 

6.3

 

 

 

3.6

%

Secured debt

 

 

 

 

 

 

 

 

 

 

 

 

Fixed rate property mortgages

 

$

489,595

 

 

 

21.3

 

 

 

4.6

%

Debt issuance costs and fair market value adjustments

 

 

(3,426

)

 

 

 

 

 

 

 

 

Total secured rate maturity

 

$

486,169

 

 

 

21.3

 

 

 

4.6

%

Total debt

 

$

4,425,594

 

 

 

7.9

 

 

 

3.7

%

Total fixed rate debt

 

$

4,390,594

 

 

 

8.0

 

 

 

3.7

%

 
Principal
Balance
 
Average
Years to
Rate
Maturity
 
Effective
Rate
SECURED DEBT 
  
  
Conventional - Fixed Rate or Swapped$933,256
 1.9
 4.0%
Conventional - Variable Rate - Capped (1)
50,000
 0.5
 1.7%
Total Fixed or Hedged Rate Maturity983,256
 1.9
 3.8%
Conventional - Variable Rate110,000
 0.1
 1.7%
Fair Market Value Adjustments and Debt Issuance Costs16,717
 

  
Total Secured Indebtedness1,109,973
 1.7
 3.6%
UNSECURED DEBT 
    
Fixed Rate or Swapped2,860,000
 5.7
 3.8%
Variable Rate550,000
 0.1
 2.2%
Fair Market Value Adjustments, Debt Issuance Costs and Discounts(27,139) 

  
Total Unsecured Indebtedness3,382,861
 4.6
 3.5%
TOTAL DEBT$4,492,834
 4.1
 3.5%
TOTAL FIXED OR HEDGED DEBT$3,833,603
 4.8
 3.7%

(1)
The effective rate represents the average rate on the underlying variable debt unless the cap rates are reached, which average 4.5% of LIBOR for conventional caps.

As of September 30, 2017, we had entered into interest rate swaps totaling a notional amount of $550.0 million related to issued debt. To date, these swaps have proven to be highly effective hedges. We had also entered into interest rate cap agreements totaling a notional amount of $50.0 million as of September 30, 2017.

The following schedule outlinespresents the contractual maturity dates of our outstanding debt, net of debt issuance costs, discounts, premiums and fair market value adjustments, debt issuance costs and discounts, as of September 30, 20172020 (dollars in thousands):

 

 

Revolving Credit Facility & Comm. Paper ⁽¹⁾ ⁽²⁾

 

 

Public Bonds

 

 

Other Unsecured

 

 

Secured

 

 

Total

 

2020

 

$

35,000

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

35,000

 

2021

 

 

—

 

 

 

—

 

 

 

72,711

 

 

 

119,312

 

 

 

192,023

 

2022

 

 

—

 

 

 

249,182

 

 

 

116,849

 

 

 

—

 

 

 

366,031

 

2023

 

 

—

 

 

 

347,992

 

 

 

12,230

 

 

 

—

 

 

 

360,222

 

2024

 

 

—

 

 

 

397,010

 

 

 

19,958

 

 

 

—

 

 

 

416,968

 

2025

 

 

—

 

 

 

396,030

 

 

 

—

 

 

 

7,125

 

 

 

403,155

 

2026

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

2027

 

 

—

 

 

 

594,785

 

 

 

—

 

 

 

—

 

 

 

594,785

 

2028

 

 

—

 

 

 

395,326

 

 

 

—

 

 

 

—

 

 

 

395,326

 

2029

 

 

—

 

 

 

562,082

 

 

 

—

 

 

 

—

 

 

 

562,082

 

Thereafter

 

 

—

 

 

 

740,270

 

 

 

—

 

 

 

359,732

 

 

 

1,100,002

 

Total

 

$

35,000

 

 

$

3,682,677

 

 

$

221,748

 

 

$

486,169

 

 

$

4,425,594

 

(1)

The $35.0 million maturing in 2020 reflects the principal outstanding under MAALP’s unsecured commercial paper program as of September 30, 2020.  Under the terms of the program, MAALP may issue up to a maximum aggregate amount outstanding at any time of $500.0 million.  For the three months ended September 30, 2020, average daily borrowings outstanding under the commercial paper program were $118.0 million.

(2)

There were no borrowings outstanding under MAALP’s $1.0 billion unsecured revolving credit facility as of September 30, 2020.  The unsecured revolving credit facility has a maturity date of May 2023 plus two six-month extensions.


 Amount Borrowed
 Credit Facilities        
 Key Bank Unsecured Public Bonds Other Unsecured Secured Total
2017$—
 $—
 $17,996
 $80,000
 $97,996
2018—
 —
 300,364
 166,980
 467,344
2019—
 —
 19,963
 563,034
 582,997
2020250,000
 —
 149,747
 164,022
 563,769
2021—
 —
 222,040
 125,164
 347,204
Thereafter—
 1,974,885
 447,866
 10,773
 2,433,524
Total$250,000
 $1,974,885
 $1,157,976
 $1,109,973
 $4,492,834






The following schedule outlinesreflects the interest rate maturities of our outstanding fixed or hedgedrate debt, net of debt issuance costs, discounts, premiums and fair market value adjustments, debt issuance costs and discounts, as of September 30, 20172020 (dollars in thousands):

 

 

Fixed

Rate

Debt

 

 

Effective

Rate

 

2021

 

$

192,023

 

 

 

5.2

%

2022

 

 

366,031

 

 

 

3.6

%

2023

 

 

360,222

 

 

 

4.2

%

2024

 

 

416,968

 

 

 

4.0

%

2025

 

 

403,155

 

 

 

4.2

%

2026

 

 

—

 

 

 

—

 

2027

 

 

594,785

 

 

 

3.7

%

2028

 

 

395,326

 

 

 

4.2

%

2029

 

 

562,082

 

 

 

3.7

%

Thereafter

 

 

1,100,002

 

 

 

3.0

%

Total

 

$

4,390,594

 

 

 

3.7

%


  Fixed Rate Debt Interest Rate Swaps Total Fixed Rate Balances Contract Rate Interest Rate Caps Total Fixed or Hedged 
        
2017 $17,996
 $—
 $17,996
 3.2% $25,000
 $42,996
 
2018 136,942
 250,402
 387,344
 3.7% 25,000
 412,344
 
2019 582,996
 —
 582,996
 5.9% —
 582,996
 
2020 164,022
 299,097
 463,119
 3.7% —
 463,119
 
2021 197,721
 —
 197,721
 5.2% —
 197,721
 
Thereafter 2,134,427
 —
 2,134,427
 3.9% —
 2,134,427
 
Total $3,234,104
 $549,499
 $3,783,603
 4.2% $50,000
 $3,833,603
 

Unsecured Revolving Credit Facility


On October 15, 2015, the Operating Partnership entered into & Commercial Paper

In May 2019, MAALP closed on a $750.0 million$1.0 billion unsecured revolving credit facility agreement with a syndicate of banks led by KeyBank,Wells Fargo Bank, National Association, or Wells Fargo, and fourteen other banks, which we refer to as the KeyBankCredit Facility.  ThisThe Credit Facility replaced our previous unsecured revolving credit facility replaced the Operating Partnership's previous unsecured credit facility with KeyBank.and includes an expansion option up to $1.5 billion.  The Credit Facility bears an interest rate is determined using an investment grade pricing grid usingof LIBOR, plus a spread of 0.85%0.75% to 1.55%. On December 1, 2016, the Operating Partnership amended the KeyBank1.45% based on an investment grade pricing grid.  The Credit Facility by increasing the borrowing capacitymatures in May 2023 with an option to $1.0 billion.extend for two additional six-month periods.  As of September 30, 2017, we had $250.0 million borrowed2020, there was no outstanding balance under the KeyBankCredit Facility, bearing interest at a ratewhile $3.4 million of LIBOR plus 0.90%.capacity was used to support outstanding letters of credit.  The KeyBankCredit Facility serves as our primary source of short term liquidity and hasshort-term liquidity.

In May 2019, MAALP established an accordion feature that we may useunsecured commercial paper program, whereby it can issue unsecured commercial paper notes with varying maturities not to expand its capacityexceed 397 days up to $1.5 billion. This facility matures on April 15, 2020, with an option to extend for an additional six months.


Unsecured Term Loans

In addition to the KeyBank facility, we maintain four unsecured term loans. We had total borrowingsa maximum aggregate amount outstanding of $850.0 million outstanding under these term loan agreements at September 30, 2017, comprised of:     

A $250.0 million term loan with Wells Fargo that bears interest at a rate of LIBOR plus a spread of 0.90% to 1.90% based on the credit ratings of our unsecured debt. The loan matures on August 1, 2018.$500.0 million. As of September 30, 2017, this loan2020, there was bearing interest at a rate of LIBOR plus 0.98%.

A $150.0$35.0 million term loan with U.S. Bank that bears interest at a rate of LIBOR plus a spread of 0.90% to 1.90% based onoutstanding under the credit ratings of our unsecured debt The loan matures on March 1, 2020. commercial paper program.

Unsecured Senior Notes

As of September 30, 2017, this loan was bearing interest at2020, we had $3.7 billion of publicly issued unsecured senior notes and $222.0 million of privately placed unsecured senior notes outstanding.

In August 2020, MAALP publicly issued $450.0 million in aggregate principal amount of unsecured senior notes, maturing February 2031 with a coupon rate of LIBOR plus 0.98%.


A $150.0 million term loan with KeyBank that bears interest at1.700% per annum paid semi-annually on February 15 and August 15 of each year.

Unsecured Term Loan

In August 2020, we retired a rate of LIBOR plus a spread of 0.90% to 1.75% based on the credit ratings of our unsecured debt. The loan matures on March 1, 2021. As of September 30, 2017, this loan was bearing interest at a rate of LIBOR plus 0.95%.


A $300.0 million term loan with a syndicate of banks led by Wells Fargo that bears interest at a rate of LIBOR plus a spread of 0.90% to 1.75% based on the credit ratings of our unsecured debt. The loan matures on March 1, 2022. As of September 30, 2017, this loan was bearing interest at a rate of LIBOR plus 0.95%.

Senior Unsecured Notes

We have also issued both public and private unsecured notes. As of September 30, 2017, we had approximately $2.0 billion (face value) of publicly issued notes and $310.0 million of unsecured notes issued in two private placements. In October 2013, we publicly issued $350.0 million of senior unsecured notes due 2023 with a coupon of 4.30%, paid semi-annually on April 15 and October 15. In June 2014, we publicly issued $400.0 million of senior unsecured notes due 2024 with a coupon of 3.75%, paid semi-annually on June 15 and December 15. In November 2015, we publicly issued $400.0 million of senior unsecured notes due 2025 with a coupon of 4.00%, paid semi-annually on May 15 and November 15. As a result of the Merger in December 2016, we assumed two series of publicly traded senior notes totaling $400.0 million. One series of senior notes assumed as a result of the Merger has a face value of $250.0 million, is due 2022, and has a coupon of 3.38% paid semiannually on June 1 and December 1. The other series of senior notes assumed as a result of the Merger had a face value of


$150.0 million and was due in October 2017, but was paid off in July 2017. In May 2017, we publicly issued $600.0 million of senior unsecured notes due June 1, 2027 with a coupon of 3.60%, paid semi-annually on June 1 and December 1. The proceeds from the notes issued in May 2017 were used to pay down outstanding amounts of the Unsecured Revolving Credit Facility. As of September 30, 2017, all of these amounts, with the exception of the series of senior notes assumed in the Merger with a face value of $150.0 million that was paid off in July 2017, remained outstanding.

On July 29, 2011, we issued $135.0 million of senior unsecured notes. The notes were offered in a private placement with three maturity tranches: $50.0 million at 4.7% maturing on July 29, 2018, $72.8 million at 5.4% maturing on July 29, 2021; and $12.3 million at 5.6% maturing on July 29, 2023; all of which were outstanding at September 30, 2017.

On August 31, 2012, we issued $175.0 million of senior unsecured notes. The notes were offered in a private placement with four maturity tranches: $18.0 million at 3.15% maturing on November 30, 2017; $20.0 million at 3.61% maturing on November 30, 2019; $117.0 million at 4.17% maturing on November 30, 2022; and $20.0 million at 4.33% maturing on November 30, 2024; all of which were outstanding at September 30, 2017.

Secured Credit Facility

Approximately 3.6% of our outstanding obligations at September 30, 2017 were borrowed through a credit facility credit enhanced by Fannie Mae, also referred to as the Fannie Mae Facility. The Fannie Mae Facility has a combined line limit of $160.0 million, of which $160.0 million was collateralized, available to borrow, and borrowed at September 30, 2017. Various Fannie Mae rate tranches of the Fannie Mae Facility mature from 2017 through 2018.

March 2022.

Secured Property Mortgages


We also maintain secured property mortgages with the Federal National Mortgage Association,  the Federal Home Loan Mortgage Corporation, and various life insurance companies.  These mortgages are usually fixed rate and can range from five to 1030 years in maturity.  As of September 30, 2017,2020, we had $933$489.6 million of secured property mortgages.


mortgages with a weighted average interest rate of 4.60%.

In July 2020, we retired $63.6 million of mortgages associated with three apartment communities at maturity and $72.2 million of mortgages associated with four apartment communities prior to their October 2020 maturities.

For more information regarding our debt capital resources, see Note 76 to the Condensed Consolidated Financial Statementscondensed consolidated financial statements included elsewhere in this Report.


Contractual Obligations

The following table reflects our total contractual cash obligations which consist of our long-term debt, development fees and operating leases as of September 30, 2017 (dollars in thousands):
Contractual
Obligations (1)
 2017 2018 2019 2020 2021 Thereafter Total
Long-Term Debt Obligations (2)
 $100,804
 $476,626
 $570,127
 $558,284
 $342,903
 $2,454,512
 $4,503,256
Fixed Rate or  
  
  
  
  
  
  
Swapped Interest (3)
 67,084
 142,704
 109,231
 97,804
 89,454
 270,524
 776,801
Purchase Obligations (4)
 578
 542
 —
 —
 —
 —
 1,120
Operating Lease Obligations (5)
 293
 839
 689
 708
 718
 63,521
 66,768
Total $168,759
 $620,711
 $680,047
 $656,796
 $433,075
 $2,788,557
 $5,347,945

(1) Fixed rate and swapped interest are shown in this table. The average interest rates of variable rate debt are shown in preceding tables.
(2) Represents principal payments gross of discounts, debt issuance costs and fair market value of debt assumed.
(3) Swapped interest is subject to the ineffective portion of cash flow hedges as described in Note 8 to the Condensed Consolidated Financial Statements included in this Report. 
(4) Represents development fees.
(5) Primarily comprised of a ground lease underlying one apartment community we own.

We have a commitment, which is not reflected in the table above, to make additional capital contributions to a limited partnership where we hold an equity interest that may be called in the future by the general partner at any time after giving appropriate notice. At September 30, 2017, we have committed to make additional capital contributions totaling $14.2 million that are subject to being called by the general partner.



Quarterly Report on Form 10-Q.

Off-Balance Sheet Arrangements


As of September 30, 2017,2020 and 2019, we had a 35.0%an ownership interest in the Apartment LLC joint venture, which consists ofa limited liability company that owns one apartment community comprised of 269 apartment units, located in Washington, D.C.  We also had a 32.0% ownership interestinterests in Real Estate Technology Ventures, L.P.two technology-focused limited partnerships as of September 30, 2020. Our investmentsinterests in these joint venturesinvestments are unconsolidated and are recorded using the equity method for the investments in whichas we do not have a controlling interest.


At

As of September 30, 20172020 and 2016,2019, we did not have any relationships, including those with unconsolidated entities or financial partnerships, for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.


In addition, we do not engage in trading activities involving non-exchange traded contracts.  As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.  We do not have any relationships or transactions with persons or entities that derive benefits from their non-independent relationships with us or our related parties other than those disclosed in Note 1412 to the Consolidated Financial Statementsconsolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016,2019, filed with the SEC on February 24, 2017.

20, 2020.

Insurance


We carry comprehensive general liability coverage on our apartment communities, with limits of liability we believe are customary within the multifamily apartment industry, to insure against liability claims and related defense costs. We also maintain insurance against the risk of direct physical damage to reimburse us on a replacement cost basis for costs incurred to repair or rebuild any property, including loss of rental income during the reconstruction period.

We renegotiated our insurance programs effective July 1, 2017.2020. We believe that ourthe current property and casualty insurance program in place provides appropriate insurance coverage for financial protection against insurable risks such that any insurable loss experienced that can be reasonably anticipated would not have a significant impact on our liquidity, financial position or results of operations.


Inflation


Our resident leases at theour apartment communities allow, at the time of renewal, for adjustments in the rent payable thereunder, and thus may enable us to seek rent increases.  Almost allThe majority of our leases are for one year or less. The short-term nature of these leases generally serves to reduce our risk to adverse effects of inflation.


Impact

Critical Accounting Policies and Estimates

Please refer to our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 20, 2020, for discussions of Recently Issued Accounting Standards


Note 15our critical accounting policies.  During the nine months ended September 30, 2020, there were no material changes to the Condensed Consolidated Financial Statements included in this Report provides a brief description ofthese policies.  For more information on recent accounting pronouncements that could have a material effectimpact on our condensed consolidated financial statements.

statements see Note 1 to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Item 3.Quantitative and QualitativeQualitative Disclosures About Market Risk.


Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. Our primary market risk exposure is to changes in interest rates on our borrowings. AtAs of September 30, 2017, 26.3%2020, 24.4% of our total market capitalization consisted of debt borrowings. Our interest rate risk objective is to limit the impact of interest rate fluctuations on earnings and cash flows and to lower our overall borrowing costs. To achieve this objective, we manage our exposure to fluctuations in market interest rates for borrowings through the use of fixed rate debt instruments and interest rate swaps, and caps, which mitigate our interest rate risk on a related financial instrument and effectively fix or cap the interest rate on a portion of our variable debt or on future refinancings. We use our best efforts to have our debt instruments mature across multiple years, which we believe limits our exposure to interest rate changes in any one year. We do not enter into derivative instruments for trading or other speculative purposes.  AtAs of September 30, 2017, approximately 85.3% 2020, 99.2%of our outstanding debt was subject to fixed or capped rates, after considering related derivative instruments.and we did not have any outstanding interest rate swaps.  We regularly review interest rate exposure on outstanding borrowings in an effort to minimize the risk of interest rate fluctuations.


There have been no material changes in our market risk as disclosed in theour Annual Report on Form 10-K for the year ended December 31, 20162019, filed with the SEC on February 24, 2017.



20, 2020.

Item 4.Controls and Procedures.


Mid-America Apartment Communities, Inc.


Management’s

(a) Evaluation of Disclosure Controls and Procedures


MAA's

MAA is required to maintain disclosure controls and procedures, within the meaning of Exchange Act Rules 13a-15 and 15d-15.  MAA’s management, with the participation of MAA'sMAA’s Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of MAA'sMAA’s disclosure controls and procedures as of September 30, 2017 pursuant to Exchange Act Rule 13a-15.2020.  Based on that evaluation, MAA'sMAA’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of September 30, 20172020 to ensure that information required to be disclosed by MAA in its Exchange Act filings is accurately recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to MAA'sMAA’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.


(b) Changes in Internal Control over Financial Reporting


There was no change to MAA'sMAA’s internal control over financial reporting, as that term is defined in Rule 13a-15(f) underwithin the meaning of Exchange Act Rules 13a-15 and 15d-15, that occurred during the quarter ended September 30, 20172020 that has materially affected, or is reasonably likely to materially affect, MAA'sMAA’s internal control over financial reporting.


Mid-America Apartments, L.P.


Management’s

(a) Evaluation of Disclosure Controls and Procedures


The Operating Partnership is required to maintain disclosure controls and procedures, within the meaning of Exchange Act Rules 13a-15 and 15d-15. Management of the Operating Partnership, with the participation of the Chief Executive Officer and Chief Financial Officer of MAA, as the general partner of the Operating Partnership, carried out an evaluation of the effectiveness of the Operating Partnership’s disclosure controls and procedures as of September 30, 2017 pursuant to Exchange Act Rule 15d-15.2020.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of MAA, as the general partner of the Operating Partnership, concluded that the disclosure controls and procedures were effective as of September 30, 20172020 to ensure that information required to be disclosed by the Operating Partnership in its Exchange Act filings is accurately recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of MAA, as the general partner of the Operating Partnership, as appropriate to allow timely decisions regarding required disclosure.


(b) Changes in Internal Control over Financial Reporting


There was no change to the Operating Partnership’s internal control over financial reporting, as that term is defined in Rule 15d-15(f) underwithin the meaning of Exchange Act Rules 13a-15 and 15d-15, that occurred during the quarter ended September 30, 20172020 that has materially affected, or is reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.



PART II – OTHER INFORMATION


Item 1.      

Item 1.


In September 2010,June 2016, plaintiffs Cathi Cleven and Tara Cleven, on behalf of a purported class of plaintiffs, filed a complaint against MAA and the United States Department of Justice, orOperating Partnership in the DOJ, filed suit against Post Properties (and by virtue of the Merger, MAA) in United States District Court for the Western District of Columbia allegingTexas, Austin Division. In January 2017, Areli Arellano and Joe L. Martinez joined the lawsuit as additional plaintiffs. The lawsuit alleges that certain of MAA’s apartments violated accessibility requirementswe (but not Post Properties (see the description of the Fair Housing Act,Brown class action lawsuit below)) charged late fees at our Texas properties that violate Section 92.019 of the Texas Property Code, or the FHA, and the Americans with Disabilities Act of 1990, or the ADA. The DOJ is seeking,Section 92.019, which provides that a landlord may not charge a tenant a late fee for failing to pay rent unless, among other things, an injunction against MAA, requiring MAAthe fee is a reasonable estimate of uncertain damages to retrofit the propertieslandlord that are incapable of precise calculation and comply with FHA and ADA standards in future design and construction, as well asresult from the late payment of rent.  The plaintiffs are seeking monetary damages and civil penalties. No trial date has been set.


attorneys’ fees and costs. In September 2018, the District Court certified a class proposed by the plaintiffs.  Additionally, in September 2018, the District Court denied our motion for summary judgment and granted the plaintiffs’ motion for partial summary judgment. Because the District Court certified a class prior to granting the plaintiffs’ motion for partial summary judgment, the District Court’s ruling applies to the entire class. In October 2018, the Fifth Circuit Court of Appeals accepted our petition to review the District Court’s order granting class certification.  In September 2019, the Fifth Circuit Court of Appeals heard our oral arguments.  We intend to appeal the District Court’s order granting plaintiff’s motion for summary judgment to the Fifth Circuit Court of Appeals if permission to appeal is granted. We will continue to vigorously defend the action and pursue such appeals.

In April 2017, plaintiff Nathaniel Brown, on behalf of a purported class of plaintiffs, filed a complaint against the Operating Partnership, as the successor by merger to Post Properties’ primary operating partnership, and MAA in the United States District Court for the Western District of Texas, Austin Division. The lawsuit alleges that Post Properties (and, following the Post Properties merger in December 2016, the Operating Partnership) charged late fees at its Texas properties that violate Section 92.019. The plaintiffs are seeking monetary damages and attorneys’ fees and costs. In September 2018, the District Court certified a class proposed by the plaintiff. Additionally, in September 2018, the District Court denied our motion for summary judgment and granted the plaintiff’s motion for partial summary judgment. Because the District Court certified a class prior to granting the plaintiff’s motion for partial summary judgment, the District Court’s ruling applies to the entire class. In October 2018, the Fifth Circuit Court of Appeals accepted our petition to review the District Court’s order granting class certification.  In September 2019, the Fifth Circuit Court of Appeals heard our oral arguments.  We intend to appeal the District Court’s order granting plaintiff’s motion for summary judgment to the Fifth Circuit Court of Appeals if permission to appeal is granted. We will continue to vigorously defend the action and pursue such appeals.

In addition, we are subject to various other legal proceedings and claims that arisearising in the ordinary course of our business operations. Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance. While the resolutionno assurances can be given, we do not currently believe that any of these matters cannot be predicted with certainty, we currently believe the final outcome of suchother outstanding matters will not have a material adverse effect on our financial position,condition, results of operations or cash flows.

flows in the event of a negative outcome.


For more information regarding our legal proceedings, see Note 12 to the Condensed Consolidated Financial Statements included in this Report.

Item 1A.   

Item 1A.

Risk Factors.


There

Other than the risk factor set forth below, there have been no material changes to the risk factors that were discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20162019, filed with the SEC on February 24, 2017.20, 2020.

The COVID-19 pandemic and mitigation efforts to control the spread of the disease have and are expected to continue to materially impact our business, and our financial condition, results of operations and cash flows could be materially adversely affected by factors relating to COVID-19.

In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and the President of the United States proclaimed that the COVID-19 outbreak in the United States constituted a national emergency. Extraordinary actions were taken by federal, state and local governmental authorities to combat the spread of COVID-19, including issuance of “stay-at-home” directives and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.  These measures, while intended to protect human life, led to significantly reduced economic activity and a surge in unemployment throughout the United States, including the markets where our properties are located. In April 2020, the national unemployment rate reached its highest level since the Great Depression, and in June 2020, the National Bureau of Economic Research officially declared that the United States had fallen into a recession. The duration and severity of this economic slowdown remain uncertain. Although much of the Unites States economy has reopened, the pandemic is intensifying in most areas of the country, and many public health experts expect a COVID-19 surge in the coming weeks and months of fall and winter.  Reinstatement of directives and mandates requiring businesses to again curtail or cease normal operations remains a possibility, just as some jurisdictions rolled back reopening plans in the summer of 2020.  The federal emergency unemployment benefit expired at end of July 2020.  Negotiations continue with respect to an additional federal stimulus package, but it is uncertain whether and to what extent Congress will be able to pass such relief legislation.

Our ability to lease our apartments and collect rental revenues is dependent upon national, regional and local economic conditions, particularly unemployment levels and personal income levels.  As unemployment rises and incomes fall, fewer people, including both current and prospective residents, may be able to afford our apartment communities, and it may be difficult for some of our residents to make timely rental payments to us under their leases. To assist our residents who have lost wages or compensation due to the COVID-19 pandemic, we have offered these residents amendments to their leases that provided varying degrees of payment flexibility with respect to rent and waived late fees and interest charges under the original lease for rent that was deferred under the lease amendment.  Whether we extend similar arrangements to defer rent will be determined in the future taking into account facts and circumstances at that particular time.

The ongoing COVID-19 pandemic and restrictions intended to prevent its spread could have significant adverse impacts on our business, financial condition, results of operations and cash flows that are difficult to predict. Such adverse impacts will depend on, among other factors:

•

our residents’ ability or willingness to pay rent in full on a timely basis;

•

federal, state, local and industry-initiated efforts that may adversely affect the ability of landlords, including us, to collect rent and customary fees, adjust rental rates and enforce remedies for the failure to pay rent, such as the order issued in September 2020 by the Centers for Disease Control and Prevention, located within the U.S. Department of Health and Human Services, to temporarily halt residential evictions to prevent the further spread of COVID-19;

•

our ability to renew leases or relet units on favorable terms or at all, including as a result of unfavorable economic and market conditions in those markets where our apartment communities are located;

•

our ability to lease or relet units due to social distancing or other restrictions intended to prevent the spread of COVID-19 that may frustrate our leasing activities;

•

our ability to successfully complete the lease up of properties in our lease up portfolio and attain expected rental and occupancy rates on the originally anticipated schedule due to social distancing or other restrictions intended to prevent the spread of COVID-19 that may frustrate our leasing activities;

•

our ability to complete the construction of properties in our development portfolio due to social distancing or other restrictions intended to prevent the spread of COVID-19 that may slow down or temporarily halt our construction activities;

•

our ability to continue our apartment unit redevelopment programs and attain increased rental rates for renovated or upgraded units due to social distancing or other restrictions intended to prevent the spread of COVID-19;

•

the possibility that one or more of our apartment communities could become a cluster site for COVID-19 infections, which could negatively impact our reputation and occupancy levels and result in operational losses due to reduced rental demand;

•

severe and prolonged disruption and instability in the financial markets, including the debt and equity capital markets, which have already experienced and may continue to experience significant volatility, or deteriorations in credit and financing conditions (or a refusal or failure of one or more lenders under our unsecured revolving credit facility to fund their respective financing commitment to us), which may affect our ability to access capital necessary to fund our business operations or refinance maturing debt on a timely basis, on attractive terms or at all, which would adversely affect our ability to meet liquidity and capital expenditure requirements;


•

sustained stock market volatility that negatively affects the market price of our securities, including market conditions unrelated to our operating performance or prospects; and

•

our ability to manage our business to the extent our management or personnel are impacted in significant numbers by the COVID-19 pandemic and are not willing, available or allowed to conduct work.

The ongoing COVID-19 pandemic and the current economic, financial and capital markets environment present material risks and uncertainties for us.  However, the fluidity of the situation precludes any prediction as to the ultimate impact COVID-19 will have on our business, financial condition, results of operation and cash flows, which will depend largely on future developments directly or indirectly relating to the duration and scope of the COVID-19 pandemic in the United States. To the extent the COVID-19 pandemic adversely affects our business, financial condition, results of operation and cash flows, it may also have the effect of heightening many of the other risks described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019.

Item 2.   

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

The following chart shows repurchases of shares for the three-month period ended September 30, 2017:
MAA

Purchases of Equity Securities


The following table reflects repurchases of shares of MAA’s common stock during the three months ended September 30, 2020:

Period

Period

Total Number

of Shares (or Units)

Purchased

Average
Price Paid
per Share (or Unit)

Average Price

Paid per

Share

Total

Number of
Shares (or Units) Share Purchased
as Part of Publicly Announced Plans
or Programs

Maximum

Number of
Shares (or Units)That
May Yet be
Purchased Under
the Plans or
Programs(1)

July 1, 20172020 - July 31, 20172020

—


—

$

—


$

—

—


—

4,000,000

August 1, 20172020 - August 31, 20172020

—


—

$

—


$

—

—


—

4,000,000

September 1, 20172020 - September 30, 20172020

—


—

$

—


$

—

—


—

4,000,000

Total

—


—

$

—


—


—

4,000,000

(1)

(1)

This column reflects the number of shares of MAA'sMAA’s common stock that wereare available for purchase under the 4,000,0004.0 million share repurchase program authorized by MAA'sMAA’s Board of Directors in December 2015.


Item 3.  

Item 3.

Defaults Upon Senior Securities.


Not Applicable.

applicable.


Item 4.  

Item 4.

Mine Safety Disclosures.


Not Applicable.

applicable.


Item 5.  

Item 5.

Other Information.

Not applicable.



Not Applicable.



Item 6.         Exhibits.

Exhibits.


(a)

The following exhibits are filed as part of this Report.report.

Exhibit

Number

Exhibit Description

Exhibit
Number

Exhibit Description

2.1

    3.1

AgreementComposite Charter of Mid-America Apartment Communities, Inc. (Filed as Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K filed on February 24, 2017 and Planincorporated herein by reference)

    3.2

Fourth Amended and Restated Bylaws of Merger dated August 15, 2016, by and among Mid-America Apartment Communities, Inc., dated as of March 13, 2018 (filed as Exhibit 3.2(i) to the Registrant’s Current Report on Form 8-K filed on March 14, 2018 and incorporated herein by reference)

    3.3

Composite Certificate of Limited Partnership of Mid-America Apartments, L.P., Post Properties, Inc.,  Post GP Holdings, Inc. and Post Apartment Homes, L.P. (filed as Exhibit 2.13.1 to the Registrant'sRegistrant’s Quarterly Report on Form 10-Q filed on August 1, 2019 and incorporated herein by reference)

    3.4

Third Amended and Restated Agreement of Limited Partnership of Mid-America Apartments, L.P. dated as of October 1, 2013 (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 2, 2013 and incorporated herein by reference)

    3.5

First Amendment to the Third Amended and Restated Agreement of Limited Partnership of Mid-America Apartments, L.P. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 10, 2016 and incorporated herein by reference)

    4.1

Indenture, dated as of May 9, 2017, by and between Mid-America Apartments, L.P. and U.S. Bank National Association (filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on May 9, 2017 and incorporated herein by reference)

4.2

Fifth Supplemental Indenture, dated as of August 12, 2020, by and between Mid-America Apartments, L.P. and U.S. Bank National Association (filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on August 15, 201612, 2020 and incorporated herein by reference).

11.1

Statement re Computation of Per Share Earnings for MAA

11.2

  31.1

Statement re Computation of Per Unit Earnings for MAALP

12.1
Statements re Computation of Consolidated Ratio of Earnings to Fixed charges for MAA
12.2
Statements re Computation of Consolidated Ratio of Earnings to Fixed charges for MAALP
31.1
Certification of Chief Executive Officer of MAA Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

  31.2

MAA Certification of Chief Financial Officer of MAA Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.3

  31.3

MAALP Certification of Chief Executive Officer of MAA, in its capacity as general partner of MAALP, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.4

  31.4

MAALP Certification of Chief Financial Officer of MAA, in its capacity as general partner of MAALP, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

  32.1

MAA Certification of Chief Executive Officer of MAA Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

  32.2

MAA Certification of Chief Financial Officer of MAA Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.3

  32.3

MAALP Certification of Chief Executive Officer of MAA, in its capacity as general partner of MAALP, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.4

  32.4

MAALP Certification of Chief Financial Officer of MAA, in its capacity as general partner of MAALP, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following financial information from Mid-America Apartment Communities, Inc.’s (MAA) and Mid-America Apartments, L.P.'s (MAALP) Report for the period ended September 30, 2017, filed with the SEC on October 26, 2017,

101

Interactive Data Files submitted pursuant to Rule 405 of Regulation S-T formatted in ExtensibleInline eXtensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets as of September 30, 2017 (Unaudited)(Inline XBRL)

104

Cover Page Interactive Data File (formatted in Inline XBRL and December 31, 2016 (Unaudited); (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 (Unaudited) and 2016 (Unaudited); (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 (Unaudited) and 2016 (Unaudited); (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 (Unaudited) and 2016 (Unaudited); and (v) Notes to Condensed Consolidated Financial Statements (Unaudited).contained in Exhibit 101)




SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.


MID-AMERICA APARTMENT COMMUNITIES, INC.

Date:

October 26, 201729, 2020

By:

/s/ A. Clay Holder

A. Clay Holder

Senior Vice President and Chief Accounting Officer

(Duly Authorized Officer)
















































SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.


MID-AMERICA APARTMENTS, L.P.

By:

By:

Mid-America Apartment Communities, Inc., its general partner

Date:

October 26, 201729, 2020

/s/ A. Clay Holder

A. Clay Holder

Senior Vice President and Chief Accounting Officer

(Duly Authorized Officer)













































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