Edgar Filing: MID AMERICA APARTMENT COMMUNITIES INC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2010

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

For the transition period from ______ to ______

Commission File Number: 1-12762

MID-AMERICA APARTMENT COMMUNITIES, INC.

(Exact name of registrant as specified in its charter)

TENNESSEE	62-1543819
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

6584 POPLAR AVENUE
MEMPHIS, TENNESSEE	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)

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.

þYes ¨ No

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).

þ Yes ¨ No

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

Large accelerated filer þ	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller Reporting Company ¨

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

¨ Yes þ No

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

	Number of Shares Outstanding
Class	at October 21, 2010
Common Stock, $0.01 par value		34,184,668

MID-AMERICA APARTMENT COMMUNITIES, INC.

TABLE OF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.	3
	Condensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2010 (Unaudited) and 2009 (Unaudited).	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 (Unaudited) and 2009 (Unaudited).	5
	Notes to Condensed Consolidated Financial Statements (Unaudited).	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	31
Item 4.	Controls and Procedures.	31
Item 4T.	Controls and Procedures.	32

	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	32
Item 1A.	Risk Factors.	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	40
Item 3.	Defaults Upon Senior Securities.	40
Item 4.	(Removed and Reserved).	40
Item 5.	Other Information.	40
Item 6.	Exhibits.	41
	Signatures	42

MID-AMERICA APARTMENT COMMUNITIES, INC.

Condensed Consolidated Balance Sheets

September 30, 2010 (Unaudited) and December 31, 2009

(Dollars in thousands, except per share data)

	September 30, 2010			December 31, 2009
Assets:
Real estate assets:
Land	$	270,980		$	255,425
Buildings and improvements		2,509,193			2,364,918
Furniture, fixtures and equipment		81,301			73,975
Capital improvements in progress		3,735			10,517
		2,865,209			2,704,835
Less accumulated depreciation		(862,662	)		(788,260	)
		2,002,547			1,916,575

Land held for future development		1,306			1,306
Commercial properties, net		8,163			8,721
Investments in real estate joint ventures		15,571			8,619
Real estate assets, net		2,027,587			1,935,221

Cash and cash equivalents		100,091			13,819
Restricted cash		2,426			561
Deferred financing costs, net		14,329			13,369
Other assets		22,519			19,731
Goodwill		4,106			4,106
Assets held for sale		18,793			19
Total assets	$	2,189,851		$	1,986,826

Liabilities and Shareholders' Equity:
Liabilities:
Notes payable	$	1,551,203		$	1,399,596
Accounts payable		2,099			1,702
Fair market value of interest rate swaps		60,070			51,160
Accrued expenses and other liabilities		80,030			69,528
Security deposits		7,181			8,789
Liabilities associated with assets held for sale		417			23
Total liabilities		1,701,000			1,530,798

Redeemable stock		3,368			2,802

Shareholders' equity:
Preferred stock, $0.01 par value per share, 20,000,000 shares authorized, $25 per share liquidation preference; 8.30% Series H Cumulative Redeemable Preferred Stock, 6,200,000 shares authorized, 0 and 6,200,000 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		-			62
Common stock, $0.01 par value per share, 50,000,000 shares authorized; 33,898,029 and 29,095,251 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively (1)		338			290
Additional paid-in capital		1,085,697			988,642
Accumulated distributions in excess of net income		(559,610	)		(510,993	)
Accumulated other comprehensive losses		(60,975	)		(47,435	)
Total Mid-America Apartment Communities, Inc. shareholders' equity		465,450			430,566
Noncontrolling interest		20,033			22,660
Total Equity		485,483			453,226
Total liabilities and equity	$	2,189,851		$	1,986,826

(1)

Number of shares issued and outstanding represent total shares of common stock regardless of classification on the consolidated balance sheet. The number of shares classified as redeemable stock on the consolidated balance sheet for September 30, 2010 and December 31, 2009 are 57,792 and 58,038, respectively.

See accompanying notes to consolidated financial statements.

MID-AMERICA APARTMENT COMMUNITIES, INC.

Condensed Consolidated Statements of Operations (Unaudited)

Three and nine months ended September 30, 2010 and 2009

(Dollars in thousands, except per share data)

	Three months ended						Nine months ended
	September 30,						September 30,
	2010			2009			2010			2009
Operating revenues:
Rental revenues	$	92,842		$	89,220		$	274,199		$	268,011
Other property revenues		8,356			5,701			23,073			15,009
Total property revenues		101,198			94,921			297,272			283,020
Management fee income		186			78			477			205
Total operating revenues		101,384			94,999			297,749			283,225
Property operating expenses:
Personnel		13,036			12,244			38,111			35,570
Building repairs and maintenance		4,375			4,310			11,363			10,409
Real estate taxes and insurance		11,068			11,368			34,287			34,411
Utilities		6,671			6,135			17,941			16,874
Landscaping		2,561			2,451			7,594			7,245
Other operating		7,429			5,629			20,047			14,845
Depreciation		26,466			23,913			76,489			71,316
Total property operating expenses		71,606			66,050			205,832			190,670
Acquisition expenses		989			30			1,451			139
Property management expenses		4,547			4,007			13,303			12,751
General and administrative expenses		2,957			3,163			8,878			8,306
Income from continuing operations before non-operating items		21,285			21,749			68,285			71,359
Interest and other non-property income		217			161			618			309
Interest expense		(13,598	)		(14,371	)		(41,482	)		(43,072	)
Loss on debt extinguishment		-			(2	)		-			(140	)
Amortization of deferred financing costs		(675	)		(587	)		(1,918	)		(1,781	)
Asset impairment		(324	)		-			(1,914	)		-
Net casualty gains (loss) and other settlement proceeds		350			(109	)		979			(253	)
Gain on sale of non-depreciable assets		-			1			-			1
Income from continuing operations before loss from real estate joint ventures		7,255			6,842			24,568			26,423
Loss from real estate joint ventures		(282	)		(288	)		(856	)		(640	)
Income from continuing operations		6,973			6,554			23,712			25,783
Discontinued operations:
Income from discontinued operations before gain on sale		-			311			-			1,058
Gain (loss) on sale of discontinued operations		-			13			(2	)		2,600
Consolidated net income		6,973			6,878			23,710			29,441
Net income attributable to noncontrolling interests		224			260			889			1,536
Net income attributable to Mid-America Apartment Communities, Inc.		6,749			6,618			22,821			27,905
Preferred dividend distributions		629			3,216			6,549			9,649
Premiums and original issuance costs associated with the redemption of preferred stock		2,576			-			5,149			-
Net income available for common shareholders	$	3,544		$	3,402		$	11,123		$	18,256

Weighted average shares outstanding (in thousands):
Basic		33,312			28,364			31,039			28,186
Effect of dilutive securities		101			77			101			6
Diluted		33,413			28,441			31,140			28,192

Net income available for common shareholders	$	3,544		$	3,402		$	11,123		$	18,256
Discontinued property operations		-			(324	)		2			(3,658	)
Income from continuing operations available for common shareholders	$	3,544		$	3,078		$	11,125		$	14,598

Earnings per share - basic:
Income from continuing operations available for common shareholders	$	0.11		$	0.11		$	0.36		$	0.51
Discontinued property operations		-			0.01			-			0.13
Net income available for common shareholders	$	0.11		$	0.12		$	0.36		$	0.64

Earnings per share - diluted:
Income from continuing operations available for common shareholders	$	0.11		$	0.11		$	0.36		$	0.51
Discontinued property operations		-			0.01			-			0.13
Net income available for common shareholders	$	0.11		$	0.12		$	0.36		$	0.64

Dividends declared per common share	$	0.615		$	0.615		$	1.845		$	1.845

See accompanying notes to consolidated financial statements.

Mid-America Apartment Communities, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Nine Months Ended September 30, 2010 and 2009

(Dollars in thousands)

	2010			2009
Cash flows from operating activities:
Consolidated net income	$	23,710		$	29,441
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of deferred financing costs		78,407			73,097
Stock compensation expense		1,915			939
Redeemable stock issued		296			253
Amortization of debt premium		(270	)		(270	)
Loss from investments in real estate joint ventures		856			640
Loss on debt extinguishment		-			140
Derivative interest expense		405			685
Gain on sale of non-depreciable assets		-			(1	)
Loss (gain) on sale of discontinued operations		2			(2,600	)
Asset impairment		1,914			-
Net casualty (gains) loss and other settlement proceeds		(979	)		253
Changes in assets and liabilities:
Restricted cash		(1,865	)		(626	)
Other assets		(4,351	)		(616	)
Accounts payable		399			(63	)
Accrued expenses and other		7,775			9,846
Security deposits		(1,546	)		(32	)
Net cash provided by operating activities		106,668			111,086
Cash flows from investing activities:
Purchases of real estate and other assets		(215,068	)		(17,949	)
Improvements to existing real estate assets		(31,722	)		(34,326	)
Renovations to existing real estate assets		(4,763	)		(6,004	)
Development		-			(5,340	)
Distributions from real estate joint ventures		1,607			108
Contributions to real estate joint ventures		(9,739	)		(2,729	)
Proceeds from disposition of real estate assets		71,421			14,372
Net cash used in investing activities		(188,264	)		(51,868	)
Cash flows from financing activities:
Net change in credit lines		15,000			35,694
Proceeds from notes payable		137,881			-
Principal payments on notes payable		(1,004	)		(44,323	)
Payment of deferred financing costs		(7,122	)		(1,933	)
Repurchase of common stock		(891	)		(833	)
Proceeds from issuances of common shares and units		247,104			25,329
Distributions to noncontrolling interests		(4,284	)		(4,604	)
Dividends paid on common shares		(56,172	)		(51,836	)
Dividends paid on preferred shares		(7,622	)		(9,649	)
Redemption of preferred stock		(155,022	)		-
Net cash provided by (used in) financing activities		167,868			(52,155	)
Net increase in cash and cash equivalents		86,272			7,063
Cash and cash equivalents, beginning of period		13,819			9,426
Cash and cash equivalents, end of period	$	100,091		$	16,489

Supplemental disclosure of cash flow information:
Interest paid	$	41,718		$	41,054
Supplemental disclosure of noncash investing and financing activities:
Conversion of units to share of common stock	$	1,219		$	196
Accrued construction in progress	$	2,165		$	2,476
Interest capitalized	$	-		$	173
Marked-to-market adjustment on derivative instruments	$	(14,444	)	$	18,229
Reclassification of redeemable stock to liabilities	$	271		$	-

See accompanying notes to consolidated financial statements.

Mid-America Apartment Communities, Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2010 (Unaudited) and 2009 (Unaudited)

1.	Consolidation and Basis of Presentation

Mid-America Apartment Communities, Inc., or we, is a self-administered real estate investment trust, or REIT, that owns, acquires, renovates, develops and manages apartment communities in the Sunbelt region of the United States. As of September 30, 2010, we owned or owned interests in a total of 155 multifamily apartment communities comprising 45,841 apartments located in 13 states, including two communities comprising 626 apartments owned through our joint venture, Mid-America Multifamily Fund I, LLC, and three communities comprising 1,085 apartments owned through our joint venture, Mid-America Multifamily Fund II, LLC.

The accompanying unaudited condensed consolidated financial statements have been prepared by our management in accordance with U.S. generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, and our accounting policies in effect as of December 31, 2009 as set forth in our annual consolidated financial statements, as of such date. The accompanying unaudited condensed consolidated financial statements include the accounts of Mid-America Apartment Communities, Inc. and its subsidiaries, including Mid-America Apartments, L.P. In our opinion, all adjustments necessary for a fair presentation of the condensed 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. The results of operations for the three and nine month periods ended September 30, 2010 are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 25, 2010.

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the dates of the financial statements and the amounts of revenues and expenses during the reporting periods. Actual amounts realized or paid could differ from those estimates.

2.	Segment Information

As of September 30, 2010, we owned or had an ownership interest in 155 multifamily apartment communities in 13 different states from which we derived all significant sources of earnings and operating cash flows. Senior management evaluates performance and determines resource allocations by reviewing apartment communities individually and in the following reportable operating segments:

Large market same store communities are generally communities in markets with a population of at least 1 million that we have owned and have been stabilized for at least a full 12 months and have not been classified as held for sale.

Secondary market same store communities are generally communities in markets with populations of less than 1 million that we have owned and have been stabilized for at least a full 12 months and have not been classified as held for sale.

Non same store communities and other includes recent acquisitions, communities in development or lease-up, communities that have been classified as held for sale and non multifamily activities which represent less than 1% of our portfolio.

On the first day of each calendar year, we determine the composition of our same store operating segments for that year, which allows us to evaluate full period-over-period operating comparisons. We utilize net operating income, or NOI, in evaluating the performance. Total NOI represents total property revenues less total property operating expenses, excluding depreciation, for all properties held during the period regardless of their status as held for sale. We believe NOI is a helpful tool in evaluating the operating performance of our segments because it measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance.

Revenues and NOI for each reportable segment for the three and nine month periods ended September 30, 2010 and 2009, were as follows (dollars in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2010			2009			2010			2009
Revenues
Large Market Same Store	$	44,942		$	44,910		$	134,118		$	135,321
Secondary Market Same Store		43,670			42,774			130,111			127,782
Non-Same Store and Other		12,586			7,237			33,043			19,917
Total property revenues		101,198			94,921			297,272			283,020
Management fee income		186			78			477			205
Total operating revenues	$	101,384		$	94,999		$	297,749		$	283,225

NOI
Large Market Same Store	$	24,791		$	24,938		$	75,069		$	78,212
Secondary Market Same Store		24,337			24,172			74,160			74,464
Non-Same Store and Other		6,930			4,001			18,700			12,106
Total NOI		56,058			53,111			167,929			164,782
Discontinued operations NOI included above		-			(327	)		-			(1,116	)
Management fee income		186			78			477			205
Depreciation		(26,466	)		(23,913	)		(76,489	)		(71,316	)
Acquisition expense		(989	)		(30	)		(1,451	)		(139	)
Property management expense		(4,547	)		(4,007	)		(13,303	)		(12,751	)
General and administrative expense		(2,957	)		(3,163	)		(8,878	)		(8,306	)
Interest and other non-property income		217			161			618			309
Interest expense		(13,598	)		(14,371	)		(41,482	)		(43,072	)
Gain (loss) on debt extinguishment		-			(2	)		-			(140	)
Amortization of deferred financing costs		(675	)		(587	)		(1,918	)		(1,781	)
Asset impairment		(324	)		-			(1,914	)		-
Net casualty gains (loss) and other settlement proceeds		350			(109	)		979			(253	)
Gain on sale of non-depreciable assets		-			1			-			1
Loss from real estate joint ventures		(282	)		(288	)		(856	)		(640	)
Discontinued operations		-			324			(2	)		3,658
Net income attributable to noncontrolling interests		(224	)		(260	)		(889	)		(1,536	)
Net income attributable to Mid-America Apartment Communities, Inc.	$	6,749		$	6,618		$	22,821		$	27,905

Assets for each reportable segment as of September 30, 2010 and December 31, 2009, were as follows (dollars in thousands):

	September 30,		December 31,
	2010		2009
Assets
Large Market Same Store	$	915,932	$	934,182
Secondary Market Same Store		657,347		672,692
Non-Same Store and Other		567,508		336,683
Corporate assets		49,064		43,269
Total assets	$	2,189,851	$	1,986,826

3.	Comprehensive Income and Equity

Total comprehensive income, equity and their components for the nine month periods ended September 30, 2010, and 2009, were as follows (dollars in thousands, except per share and per unit data):

							Mid-America Apartment Communities, Inc. Shareholders
															Accumulated			Accumulated
												Additional			Distributions			Other
				Comprehensive			Preferred			Common		Paid-In			in Excess of			Comprehensive			Noncontrolling
	Total			Income			Stock			Stock		Capital			Net Income			Loss			Interest
EQUITY AT DECEMBER 31, 2009	$	453,226					$	62		$	290	$	988,642		$	(510,993	)	$	(47,435	)	$	22,660
Equity Activity Excluding Comprehensive Income:
Issuance and registration of common shares		247,008									48		246,960
Shares repurchased and retired		(891	)										(891	)
Exercise of stock options		89											89
Shares issued in exchange for units		-											1,219									(1,219	)
Redeemable stock fair market value		(539	)													(539	)
Adjustment for Noncontrolling Interest Ownership in operating partnership		-											(2,418	)								2,418
Amortization of unearned compensation		1,907											1,907
Dividends on common stock ($1.845 per share)		(59,201	)													(59,201	)
Dividends on noncontrolling interest units ($1.845 per unit)		(4,215	)																			(4,215	)
Redemption of preferred stock		(155,022	)					(62	)				(149,811	)		(5,149	)
Dividends on preferred stock		(6,549	)													(6,549	)
Comprehensive income:
Net income		23,710			23,710											22,821						889
Other comprehensive loss - derivative instruments (cash flow hedges) (1)		(14,040	)		(14,040	)													(13,540	)		(500	)
Comprehensive income		9,670			9,670

EQUITY BALANCE SEPTEMBER 30, 2010	$	485,483					$	-		$	338	$	1,085,697		$	(559,610	)	$	(60,975	)	$	20,033

(1) Total other comprehensive loss – derivative instruments (cash flow hedges) for the three months ended September 30, 2010 was a loss of $4,277, consisting of a $137 loss attributable to noncontrolling interests and a loss of $4,140 attributable to Mid-America Apartment Communities, Inc.

						Mid-America Apartment Communities, Inc. Shareholders
													Accumulated			Accumulated
										Additional			Distributions			Other
				Comprehensive		Preferred		Common		Paid-In			in Excess of			Comprehensive			Noncontrolling
	Total			Income		Stock		Stock		Capital			Net Income			Income (Loss)			Interest
EQUITY AT DECEMBER 31, 2008	$	442,617				$	62	$	282	$	954,127		$	(464,617	)	$	(72,885	)	$	25,648
Equity Activity Excluding Comprehensive Income:
Issuance and registration of common shares		25,286							6		25,280
Shares repurchased and retired		(833	)								(833	)
Exercise of stock options		45									45
Shares issued in exchange for units		-									196									(196	)
Redeemable stock fair market value		(464	)											(464	)
Adjustment for Noncontrolling Interest Ownership in operating partnership		-									(521	)								521
Amortization of unearned compensation		966									966
Dividends on common stock ($1.845 per share)		(52,215	)											(52,215	)					-
Dividends on noncontrolling interest units ($1.845 per unit)		(4,593	)																	(4,593	)
Dividends on preferred stock		(9,649	)											(9,649	)
Comprehensive income:
Net income		29,441			29,441									27,905						1,536
Other comprehensive income - derivative instruments (cash flow hedges) (2)		18,914			18,914												17,795			1,119
Comprehensive income		48,355			48,355

EQUITY BALANCE SEPTEMBER 30, 2009	$	449,515				$	62	$	288	$	979,260		$	(499,040	)	$	(55,090	)	$	24,035

(2) Total other comprehensive income – derivative instruments (cash flow hedges) for the three months ended September 30, 2010 was a loss of $5,063, consisting of a $191 loss attributable to noncontrolling interests and a loss of $4,872 attributable to Mid-America Apartment Communities, Inc.

The marked-to-market adjustment on derivative instruments is based upon the change of interest rates available for derivative instruments with similar terms and remaining maturities existing at each balance sheet date.

4.	Real Estate Acquisitions

The following communities were purchased during the first nine months of 2010:

	Location	Number
Community	(Metropolitan Statistical Area: MSA)	of Units	Date Purchased
100% Owned Communities
Grand Cypress (1)	Cypress, TX (Houston)	312	April 30, 2010
535 Brookwood	Simpsonville, SC (Greenville)	256	June 24, 2010
Avondale at Kennesaw Farms	Gallatin, TN (Nashville)	288	June 29, 2010
Verandas at Sam Ridley	Smyrna, TN (Nashville)	336	August 12, 2010
Hue	Raleigh, NC (Raleigh)	208	August 17, 2010
Times Square at Craig Ranch	McKinney, TX (Dallas)	313	August 26, 2010
La Valencia at Starwood	Frisco, TX (Dallas)	270	August 27, 2010
The Venue at Stonebridge Ranch (2)	McKinney, TX (Dallas)	250	September 1, 2010
		2,233

(1) On July 13, 2010, we contributed Grand Cypress to Mid-America Multifamily Fund II, LLC, one of our joint ventures.

(2) The Venue at Stonebridge Ranch is classified as held for sale in our financial statements because it was acquired with the intention of contributing the community to Mid-America Multifamily Fund II, LLC, one of our joint ventures. We plan to make this contribution in the fourth quarter of 2010 when the permanent financing is completed.

On August 27, 2008, we purchased 215 units of the 234-unit Village Oaks apartments located in the Tampa, Florida MSA. The remaining 19 units had previously been sold as condominiums and we intend to acquire these units if they become available, and operate them as apartment rentals with the rest of the community. During the remainder of 2008 and during 2009, we acquired 11 of the remaining 19 units. During the first nine months of 2010, we have purchased an additional two units.

5.	Discontinued Operations

As part of our portfolio strategy to selectively dispose of mature assets that no longer meet our investment criteria and long-term strategic objectives, in July 2008, we entered into marketing contracts to list the 440-unit River Trace apartments in Memphis, Tennessee, the 96-unit Riverhills apartments in Grenada, Mississippi, and the 304-unit Woodstream apartments in Greensboro, North Carolina. All of these apartments were subsequently sold during 2009. In accordance with accounting standards governing the disposal of long lived assets, all of these communities are considered discontinued operations in the accompanying condensed consolidated financial statements.

The following is a summary of discontinued operations for the three and nine month periods ended September 30, 2010 and 2009, (dollars in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2010		2009		2010			2009
Revenues
Rental revenues	$	-	$	728	$	-		$	2,480
Other revenues		-		48		-			101
Total revenues		-		776		-			2,581
Expenses
Property operating expenses		-		449		-			1,465
Interest expense		-		16		-			58
Total expense		-		465		-			1,523
Income from discontinued operations before gain on sale		-		311		-			1,058
Gain (loss) on sale of discontinued operations		-		13		(2	)		2,600
Income from discontinued operations	$	-	$	324	$	(2	)	$	3,658

6.	Share and Unit Information

On September 30, 2010, 33,898,029 common shares and 2,195,654 operating partnership units were outstanding, representing a total of 36,093,683 shares and units. Additionally, we had outstanding options for the purchase of 19,357 shares of common stock at September 30, 2010, of which 8,795 were anti-dilutive. At September 30, 2009, 28,835,783 common shares and 2,386,188 operating partnership units were outstanding, representing a total of 31,221,971 shares and units. Additionally, Mid-America had outstanding options for the purchase of 23,507 shares of common stock at September 30, 2009, of which 14,348 were anti-dilutive.

On November 3, 2006, we entered into a sales agreement with Cantor Fitzgerald & Co. to sell up to 2,000,000 shares of our common stock, from time to time in at-the-market offerings or negotiated transactions through a controlled equity offering program. On July 3, 2008, and November 5, 2009, we entered into second and third sales agreements with Cantor Fitzgerald & Co. with materially the same terms for an additional 1,350,000 shares and 4,000,000 shares, respectively. On August 26, 2010, we entered into sales agreements with Cantor Fitzgerald & Co., Raymond James & Associates, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated with materially the same terms as our previous at-the-market agreements for a combined total of 6,000,000 shares of our common stock.

During the three months ended September 30, 2010, we issued 1,039,400 shares of common stock through our at-the-market, or ATM, programs for net proceeds of $55.0 million. During the nine months ended September 30, 2010, we issued a total of 4,114,000 shares of common stock through our ATM programs for net proceeds of $216.5 million.

During the three months ended September 30, 2010, we issued 551,082 shares of common stock through our Dividend and Distribution Reinvestment and Share Purchase Program, or DRSPP. The shares were issued through a one-time waiver to the optional cash purchase feature of the DRSPP. The issuance resulted in net proceeds of $30.0 million.

On June 2, 2010, we redeemed 3,100,001 shares of the 6,200,000 issued and outstanding shares of our 8.30% Series H Cumulative Redeemable Preferred Stock, or Series H. On August 5, 2010, we redeemed the remaining 3,099,999 shares of the issued and outstanding Series H. The Series H shares were redeemed for a $25 per share redemption price plus any accrued and unpaid dividends through and including the respective redemption date. The redemptions were funded by proceeds through issuances of our common shares through our ATM and DRSPP programs.

7.	Notes Payable

On September 30, 2010, we had total indebtedness of $1.6 billion, compared to $1.4 billion as of December 31, 2009. Our indebtedness as of September 30, 2010 consisted of both conventional and tax exempt debt. Borrowings were made through individual property mortgages as well as company-wide secured credit facilities.

As of September 30, 2010, approximately 85% of our outstanding debt was borrowed through secured credit facility relationships with Prudential Mortgage Capital, which are credit enhanced by the Federal National Mortgage Association, or FNMA, Financial Federal, which are credit enhanced by the Federal Home Loan Mortgage Corporation, or Freddie Mac, and a $50 million bank facility with a syndicate of banks.

We utilize interest rate swaps and interest rate caps to help manage our current and future interest rate risk and entered into 31 interest rate swaps and 21 interest rate caps as of September 30, 2010, representing notional amounts of $785 million and $271 million, respectively.

The following table summarizes our debt structure as of September 30, 2010 (dollars in thousands):

	Borrowed		Effective			Contract
	Balance		Rate			Maturity
Fixed Rate Debt
Individual property mortgages	$	206,853		5.0	%	2/25/2020
Tax-exempt		11,070		5.3	%	12/1/2028
FNMA conventional credit facilities		50,000		4.7	%	3/31/2017
Credit facility balances managed with interest rate swaps
LIBOR-based interest rate swaps		767,000		5.3	%	1/2/2013
SIFMA-based interest rate swaps		17,800		4.4	%	10/15/2012
Total fixed rate debt		1,052,723		5.2	%	10/10/2014

Variable Rate Debt (1)
FNMA conventional credit facilities		329,318		0.8	%	11/19/2014
FNMA tax-free credit facilities		72,715		1.1	%	3/1/2014
Feddie Mac credit facilities		81,247		0.8	%	6/28/2013
Freddie Mac mortgage		15,200		3.7	%	12/10/2015
Total variable rate debt		498,480		1.0	%	8/1/2014

Total Outstanding Debt	$	1,551,203		3.8	%	9/18/2014

(1) Includes capped balances.

8.	Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

We are exposed to certain risk 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.

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 this objective, 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, 2010 and 2009, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three months ended September 30, 2010 and 2009, we recorded ineffectiveness of $86,000 and $68,000, respectively, and during the nine months ended September 30, 2010 and 2009, $346,000 and $744,000, respectively, as an increase to interest expense attributable to a mismatch in the underlying indices of the derivatives and the hedged interest payments made on our variable-rate debt.

We also have nine interest rate caps, totaling a notional amount of $56.3 million, where only the changes in intrinsic value are recorded in accumulated other comprehensive income. Changes in fair value of these interest rate caps due to changes in time value (e.g. volatility, passage of time, etc.) are excluded from effectiveness testing and are recognized directly in earnings. During the three months ended September 30, 2010 and 2009, we recorded a loss of $7,000 and a gain of less than $1,000, respectively, and during the nine months ended September 30, 2010 and 2009, a loss of $37,000 and a gain of $109,000, respectively, due to changes in the time value of these interest rate caps.

Amounts reported in accumulated other comprehensive income related to derivatives designated in qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next twelve months, we estimate that an additional $28.9 million 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 payments.

As of September 30, 2010 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
Interest Rate Caps	21	$	270,651,000
Interest Rate Swaps	31	$	784,800,000

Non-designated Hedges

We do not use derivatives for trading or speculative purposes and currently do not have any derivatives that are not designated as qualifying accounting hedges under ASC 815.

Tabular Disclosure of Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of our derivative financial instruments as well as their classification on the Condensed Consolidated Balance Sheet as of September 30, 2010 and December 31, 2009, respectively:

Fair Values of Derivative Instruments on the Condensed Consolidated Balance Sheet as of

September 30, 2010 and December 31, 2009 (dollars in thousands)

Asset Derivatives

Liability Derivative

30-Sep-10

31-Dec-09

30-Sep-10

31-Dec-09

Balance