Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2016
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 Number 001-12762 (Mid-America Apartment Communities, Inc.)
Commission File Number 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.)
 
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.
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 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, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Mid-America Apartment Communities, Inc.
 
 
 
 
 
Large accelerated filer  ý
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
 
 
 
(Do not check if a smaller reporting company)
 
Mid-America Apartments, L.P.
 
 
 
 
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer  ý
Smaller reporting company o
 
 
 
(Do not check if a smaller reporting company)
 
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's classes of common stock, as of the latest practicable date:
 
Number of Shares Outstanding at
Class
October 24, 2016
Common Stock, $0.01 par value
75,542,172



MID-AMERICA APARTMENT COMMUNITIES, INC.
MID-AMERICA APARTMENTS, L.P.

TABLE OF CONTENTS

 
 
Page
 PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements.
 
Mid-America Apartment Communities, Inc.
 
 
 
Condensed Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015 (Unaudited).
4
 
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 (Unaudited) and 2015 (Unaudited).
5
 
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 (Unaudited) and 2015 (Unaudited).
6
 
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 (Unaudited) and 2015 (Unaudited).
7
Mid-America Apartments, L.P.
 
 
 
Condensed Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31, 2015 (Unaudited).
8
 
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 (Unaudited) and 2015 (Unaudited).
9
 
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 (Unaudited) and 2015 (Unaudited).
10
 
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 (Unaudited) and 2015 (Unaudited).
11
 
 
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited).
12
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
30
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
42
Item 4.
Controls and Procedures.
43
 
 
 
 PART II – OTHER INFORMATION
Item 1.
Legal Proceedings.
44
Item 1A.
Risk Factors.
44
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
45
Item 3.
Defaults Upon Senior Securities.
46
Item 4.
Mine Safety Disclosures.
46
Item 5.
Other Information.
46
Item 6.
Exhibits.
46
 
Signatures.
47
 
Exhibit Index.
49

1


Explanatory Note

This periodic report on Form 10-Q, or this Report, combines the quarterly reports for the quarter ended September 30, 2016 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 its sole general partner. Mid-America Apartment Communities, Inc. and its 94.8% owned subsidiary, Mid-America Apartments, L.P., are both required to file periodic reports under the Securities Exchange Act of 1934, as amended.

Unless the context otherwise requires, all references in this Report to "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 Report to "we," "us," "our," or the "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, the references in this Report to the "Operating Partnership" or "MAALP" refer to Mid-America Apartments, L.P. together with its consolidated subsidiaries. "Common stock" refers to the common stock of MAA and "shareholders" means the holders of shares of MAA’s common stock. The limited partnership interests of the Operating Partnership are referred to as "OP Units" and the holders of the OP Units are referred to as "unitholders".

As of September 30, 2016, MAA owned 75,542,583 units (or approximately 94.8%) of the limited partnership interests of the Operating Partnership. MAA conducts substantially all of its business and holds substantially all of its assets through the Operating Partnership, and by virtue of its ownership of the OP Units and being the Operating Partnership'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 Report 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
•
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

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 "umbrella partnership REIT," or UPREIT. MAA'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's percentage interest therein and entitles MAA to vote on substantially all matters requiring a vote of the partners. MAA's only material asset is its ownership of limited partnership interests in the Operating Partnership; therefore, MAA does not conduct business itself, other than 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 our 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, the Operating Partnership generates the capital required by the Company's business through the Operating Partnership's operations, direct or indirect incurrence of indebtedness and issuance of OP Units.

The presentation of MAA's shareholders' equity and the Operating Partnership's capital is the principal area of difference between the consolidated financial statements of MAA and those of the Operating Partnership. 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, treasury shares, accumulated other comprehensive income and redeemable common units. The Operating Partnership's capital may include common capital and preferred capital of the general partner (MAA), limited partners' preferred capital, limited partners' noncontrolling interests, 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 for conversion 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) may require us to redeem their OP Units, from time to time, in which case we may, at our 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 our common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.

2


In order to highlight the material differences between MAA and the Operating Partnership, this Report 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 Item 1 of this Report;
•
certain accompanying notes to the 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 9 - Shareholders' Equity of MAA and Note 10 - Partners' Capital of MAALP; and
•
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 disclosure for MAA and the Operating Partnership, this Report 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.


3



Mid-America Apartment Communities, Inc.
Condensed Consolidated Balance Sheets
September 30, 2016 and December 31, 2015
(Unaudited)
(Dollars in thousands, except share data)
 
September 30, 2016
 
December 31, 2015
Assets:
 
 
 
Real estate assets:
 
 
 
Land
$
943,320

 
$
926,532

Buildings and improvements
7,142,278

 
6,939,288

Furniture, fixtures and equipment
253,586

 
228,157

Development and capital improvements in progress
51,277

 
44,355

 
8,390,461

 
8,138,332

Less accumulated depreciation
(1,680,431
)
 
(1,482,368
)
 
6,710,030

 
6,655,964

 
 
 
 
Undeveloped land
40,514

 
51,779

Corporate properties, net
9,257

 
8,812

Investments in real estate joint ventures
20

 
1,811

Real estate assets, net
6,759,821

 
6,718,366

 
 
 
 
Cash and cash equivalents
27,817

 
37,559

Restricted cash
31,037

 
26,082

Deferred financing costs, net
4,260

 
5,232

Other assets
56,771

 
58,935

Goodwill
1,607

 
1,607

Total assets
$
6,881,313

 
$
6,847,781

 
 
 
 
Liabilities and equity:
 

 
 

Liabilities:
 

 
 

Unsecured notes payable
$
2,195,989

 
$
2,141,332

Secured notes payable
1,238,168

 
1,286,236

Accounts payable
9,080

 
5,922

Fair market value of interest rate swaps
8,950

 
10,358

Accrued expenses and other liabilities
259,965

 
226,237

Security deposits
12,221

 
11,623

Total liabilities
3,724,373

 
3,681,708

 
 
 
 
Redeemable stock
9,358

 
8,250

 
 
 
 
Shareholders' equity:
 

 
 

Common stock, $0.01 par value per share, 100,000,000 shares authorized; 75,542,583 and 75,408,571 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively (1)
754

 
753

Additional paid-in capital
3,632,013

 
3,627,074

Accumulated distributions in excess of net income
(647,390
)
 
(634,141
)
Accumulated other comprehensive loss
(2,045
)
 
(1,589
)
Total MAA shareholders' equity
2,983,332

 
2,992,097

Noncontrolling interests
164,250

 
165,726

Total equity
3,147,582

 
3,157,823

Total liabilities and equity
$
6,881,313

 
$
6,847,781

(1) 
Number of shares issued and outstanding represent total shares of common stock regardless of classification on the condensed consolidated balance sheets. The number of shares classified as redeemable stock on the condensed consolidated balance sheets at September 30, 2016 and December 31, 2015 are 100,266 and 90,844, respectively.

See accompanying notes to condensed consolidated financial statements.

4


Mid-America Apartment Communities, Inc.
Condensed Consolidated Statements of Operations
Three and nine months ended September 30, 2016 and 2015
(Unaudited)
(Dollars in thousands, except per share data)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Operating revenues:
 
 
 
 
 
 
 
Rental revenues
$
254,161

 
$
239,670

 
$
749,153

 
$
710,775

Other property revenues
22,737

 
22,328

 
68,997

 
68,666

Total operating revenues
276,898

 
261,998

 
818,150

 
779,441

Property operating expenses:
 

 
 

 
 

 
 

Personnel
27,236

 
26,500

 
78,290

 
78,033

Building repairs and maintenance
9,377

 
8,793

 
23,156

 
23,195

Real estate taxes and insurance
34,282

 
31,699

 
104,182

 
97,824

Utilities
24,690

 
23,769

 
69,070

 
67,442

Landscaping
4,021

 
3,900

 
15,016

 
15,032

Other operating
7,040

 
6,938

 
20,768

 
21,577

Depreciation and amortization
76,959

 
73,098

 
227,829

 
220,606

Total property operating expenses
183,605

 
174,697

 
538,311

 
523,709

Acquisition expenses
1,033

 
656

 
2,167

 
2,155

Property management expenses
7,908

 
7,628

 
25,221

 
23,106

General and administrative expenses
6,661

 
5,879

 
20,257

 
19,103

Merger-related expenses
3,901

 
—

 
3,901

 
—

Income from continuing operations before non-operating items
73,790

 
73,138

 
228,293

 
211,368

Interest and other non-property income (expense)
64

 
(179
)
 
159

 
(359
)
Interest expense
(32,168
)
 
(30,229
)
 
(96,418
)
 
(91,511
)
(Loss) gain on debt extinguishment
—

 
(5
)
 
3

 
(3,384
)
Net casualty (loss) gain after insurance and other settlement proceeds
(75
)
 
(5
)
 
738

 
485

Gain on sale of depreciable real estate assets
47,749

 
54,621

 
48,572

 
190,031

Gain on sale of non-depreciable real estate assets
—

 
—

 
2,170

 
172

Income before income tax expense
89,360

 
97,341

 
183,517

 
306,802

Income tax expense
(454
)
 
(512
)
 
(1,200
)
 
(1,419
)
Income from continuing operations before joint venture activity
88,906

 
96,829

 
182,317

 
305,383

(Loss) gain from real estate joint ventures
—

 
(1
)
 
27

 
(5
)
Consolidated net income
88,906

 
96,828

 
182,344

 
305,378

Net income attributable to noncontrolling interests
4,627

 
5,094

 
9,508

 
16,078

Net income available for MAA common shareholders
$
84,279

 
$
91,734

 
$
172,836

 
$
289,300

 
 
 
 
 
 
 
 
Earnings per common share - basic:
 
 
 

 
 

 
 

Net income available for common shareholders
$
1.12

 
$
1.22

 
$
2.29

 
$
3.84

 
 
 
 
 
 
 
 
Earnings per common share - diluted:
 

 
 

 
 

 
 

Net income available for common shareholders
$
1.12

 
$
1.22

 
$
2.29

 
$
3.84

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.82

 
$
0.77

 
$
2.46

 
$
2.31


See accompanying notes to condensed consolidated financial statements.

5


Mid-America Apartment Communities, Inc.
Condensed Consolidated Statements of Comprehensive Income
Three and nine months ended September 30, 2016 and 2015
(Unaudited)
(Dollars in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Consolidated net income
$
88,906

 
$
96,828

 
$
182,344

 
$
305,378

Other comprehensive income:
 
 
 
 
 
 
 
Unrealized gain (loss) from the effective portion of derivative instruments
1,179

 
(9,269
)
 
(3,840
)
 
(11,812
)
Reclassification adjustment for net losses included in net income for the effective portion of derivative instruments
1,042

 
1,607

 
3,359

 
5,590

Total comprehensive income
91,127

 
89,166

 
181,863

 
299,156

Less: comprehensive income attributable to noncontrolling interests
(4,743
)
 
(4,690
)
 
(9,483
)
 
(15,750
)
Comprehensive income attributable to MAA
$
86,384

 
$
84,476

 
$
172,380

 
$
283,406

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements.



6


Mid-America Apartment Communities, Inc.
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 2016 and 2015
(Unaudited)
(Dollars in thousands)
 
Nine months ended September 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Consolidated net income
$
182,344

 
$
305,378

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

 
 

Retail revenue accretion
(130
)
 
(952
)
Depreciation and amortization
228,073

 
220,941

Stock compensation expense
5,977

 
4,438

Redeemable stock expense
412

 
741

Amortization of debt premium and debt issuance costs
(7,546
)
 
(12,755
)
(Gain) loss from investments in real estate joint ventures
(27
)
 
6

Loss on debt extinguishment
—

 
2,788

Derivative interest credit
(1,883
)
 
(1,567
)
Gain on sale of non-depreciable real estate assets
(2,170
)
 
(172
)
Gain on sale of depreciable real estate assets
(48,572
)
 
(190,031
)
Net casualty gain and other settlement proceeds
(738
)
 
(485
)
Changes in assets and liabilities:
 

 
 

Restricted cash
(4,955
)
 
(1,533
)
Other assets
(501
)
 
5,927

Accounts payable
3,158

 
(1,211
)
Accrued expenses and other
35,183

 
28,877

Security deposits
597

 
1,146

Net cash provided by operating activities
389,222

 
361,536

Cash flows from investing activities:
 

 
 

Purchases of real estate and other assets
(262,268
)
 
(248,668
)
Normal capital improvements
(65,351
)
 
(72,786
)
Construction capital and other improvements
(5,569
)
 
(5,479
)
Renovations to existing real estate assets
(29,554
)
 
(22,470
)
Development
(42,611
)
 
(24,870
)
Distributions from real estate joint ventures
1,823

 
6

Contributions to real estate joint ventures
—

 
(29
)
Proceeds from disposition of real estate assets
187,425

 
358,017

Funding of escrow for future acquisitions
—

 
(59,607
)
Net cash used in investing activities
(216,105
)
 
(75,886
)
Cash flows from financing activities:
 

 
 

Net change in credit lines
130,000

 
8,885

Principal payments on notes payable
(114,753
)
 
(92,211
)
Payment of deferred financing costs
(141
)
 
(178
)
Repurchase of common stock
(1,811
)
 
(957
)
Proceeds from issuances of common shares
(216
)
 
326

Exercise of stock options
—

 
420

Distributions to noncontrolling interests
(10,234
)
 
(9,676
)
Dividends paid on common shares
(185,704
)
 
(174,036
)
Net cash used in financing activities
(182,859
)
 
(267,427
)
Net (decrease) increase in cash and cash equivalents
(9,742
)
 
18,223

Cash and cash equivalents, beginning of period
37,559

 
26,653

Cash and cash equivalents, end of period
$
27,817

 
$
44,876

 
 
 
 
Supplemental disclosure of cash flow information:
 

 
 

Interest paid
$
96,271

 
$
97,798

Income taxes paid
$
1,571

 
$
2,095

Supplemental disclosure of noncash investing and financing activities:
 

 
 

Conversion of OP Units to shares of common stock
$
780

 
$
236

Accrued construction in progress
$
8,742

 
$
8,333

Interest capitalized
$
1,095

 
$
1,313

Mark-to-market adjustment on derivative instruments
$
1,402

 
$
(4,632
)

See accompanying notes to condensed consolidated financial statements.

7



Mid-America Apartments, L.P.
Condensed Consolidated Balance Sheets
September 30, 2016 and December 31, 2015
(Unaudited)
(Dollars in thousands, except unit data)
 
September 30, 2016
 
December 31, 2015
Assets:
 
 
 
Real estate assets:
 
 
 
Land
$
943,320

 
$
926,532

Buildings and improvements
7,142,278

 
6,939,288

Furniture, fixtures and equipment
253,586

 
228,157

Development and capital improvements in progress
51,277

 
44,355

 
8,390,461

 
8,138,332

Less accumulated depreciation
(1,680,431
)
 
(1,482,368
)
 
6,710,030

 
6,655,964

 
 
 
 
Undeveloped land
40,514

 
51,779

Corporate properties, net
9,257

 
8,812

Investments in real estate joint ventures
20

 
1,811

Real estate assets, net
6,759,821

 
6,718,366

 
 
 
 
Cash and cash equivalents
27,817

 
37,559

Restricted cash
31,037

 
26,082

Deferred financing costs, net
4,260

 
5,232

Other assets
56,771

 
58,935

Goodwill
1,607

 
1,607

Total assets
$
6,881,313

 
$
6,847,781

 
 
 
 
Liabilities and Capital:
 

 
 

Liabilities:
 

 
 

Unsecured notes payable
$
2,195,989

 
$
2,141,332

Secured notes payable
1,238,168

 
1,286,236

Accounts payable
9,080

 
5,922

Fair market value of interest rate swaps
8,950

 
10,358

Accrued expenses and other liabilities
259,965

 
226,237

Security deposits
12,221

 
11,623

Due to general partner
19

 
19

Total liabilities
3,724,392

 
3,681,727

 
 
 
 
Redeemable units
9,358

 
8,250

 
 
 
 
Capital:
 

 
 

General partner: 75,542,583 OP Units outstanding at September 30, 2016 and 75,408,571 OP Units outstanding at December 31, 2015 (1)
2,985,412

 
2,993,696

Limited partners: 4,143,203 OP Units outstanding at September 30, 2016 and 4,162,996 OP Units outstanding at December 31, 2015 (1)
164,250

 
165,726

Accumulated other comprehensive loss
(2,099
)
 
(1,618
)
Total capital
3,147,563

 
3,157,804

Total liabilities and capital
$
6,881,313

 
$
6,847,781


(1) 
Number of units outstanding represents total OP Units regardless of classification on the condensed consolidated balance sheets. The number of units classified as redeemable units on the condensed consolidated balance sheets at September 30, 2016 and December 31, 2015 are 100,266 and 90,844, respectively.

See accompanying notes to condensed consolidated financial statements.


8


Mid-America Apartments, L.P.
Condensed Consolidated Statements of Operations
Three and nine months ended September 30, 2016 and 2015
(Unaudited)
(Dollars in thousands, except per unit data)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Operating revenues:
 
 
 
 
 
 
 
Rental revenues
$
254,161

 
$
239,670

 
$
749,153

 
$
710,775

Other property revenues
22,737

 
22,328

 
68,997

 
68,666

Total operating revenues
276,898

 
261,998

 
818,150

 
779,441

Property operating expenses:
 

 
 

 
 

 
 

Personnel
27,236

 
26,500

 
78,290

 
78,033

Building repairs and maintenance
9,377

 
8,793

 
23,156

 
23,195

Real estate taxes and insurance
34,282

 
31,699

 
104,182

 
97,824

Utilities
24,690

 
23,769

 
69,070

 
67,442

Landscaping
4,021

 
3,900

 
15,016

 
15,032

Other operating
7,040

 
6,938

 
20,768

 
21,577

Depreciation and amortization
76,959

 
73,098

 
227,829

 
220,606

Total property operating expenses
183,605

 
174,697

 
538,311

 
523,709

Acquisition expenses
1,033

 
656

 
2,167

 
2,155

Property management expenses
7,908

 
7,628

 
25,221

 
23,106

General and administrative expenses
6,661

 
5,879

 
20,257

 
19,103

Merger-related expenses
3,901

 
—

 
3,901

 
—

Income from continuing operations before non-operating items
73,790

 
73,138

 
228,293

 
211,368

Interest and other non-property income (expense)
64

 
(179
)
 
159

 
(359
)
Interest expense
(32,168
)
 
(30,229
)
 
(96,418
)
 
(91,511
)
(Loss) gain on debt extinguishment
—

 
(5
)
 
3

 
(3,384
)
Net casualty (loss) gain after insurance and other settlement proceeds
(75
)
 
(5
)
 
738

 
485

Gain on sale of depreciable real estate assets
47,749

 
54,621

 
48,572

 
190,031

Gain on sale of non-depreciable real estate assets
—

 
—

 
2,170

 
172

Income before income tax expense
89,360

 
97,341

 
183,517

 
306,802

Income tax expense
(454
)
 
(512
)
 
(1,200
)
 
(1,419
)
Income from continuing operations before joint venture activity
88,906

 
96,829

 
182,317

 
305,383

(Loss) gain from real estate joint ventures
—

 
(1
)
 
27

 
(5
)
Net income available for Mid-America Apartments, L.P. common unitholders
$
88,906

 
$
96,828

 
$
182,344

 
$
305,378

 
 
 
 
 
 
 
 
Earnings per common unit - basic:
 
 
 
 
 

 
 

Net income available for common unitholders
$
1.12

 
$
1.22

 
$
2.29

 
$
3.84

 
 
 
 
 
 
 
 
Earnings per common unit - diluted:
 
 
 
 
 

 
 

Net income available for common unitholders
$
1.12

 
$
1.22

 
$
2.29

 
$
3.84

 
 
 
 
 
 
 
 
Distributions declared per common unit
$
0.82

 
$
0.77

 
$
2.46

 
$
2.31


See accompanying notes to condensed consolidated financial statements.

9


Mid-America Apartments, L.P.
Condensed Consolidated Statements of Comprehensive Income
Three and nine months ended September 30, 2016 and 2015
(Unaudited)
(Dollars in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Net income available for Mid-America Apartments, L.P. common unitholders
$
88,906

 
$
96,828

 
$
182,344

 
$
305,378

Other comprehensive income:
 
 
 
 
 
 
 
Unrealized gain (loss) from the effective portion of derivative instruments
1,179

 
(9,269
)
 
(3,840
)
 
(11,812
)
Reclassification adjustment for net losses included in net income for the effective portion of derivative instruments
1,042

 
1,607

 
3,359

 
5,590

Comprehensive income attributable to Mid-America Apartments, L.P.
$
91,127

 
$
89,166

 
$
181,863

 
$
299,156

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements.


10


Mid-America Apartments, L.P.
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 2016 and 2015
(Unaudited)
(Dollars in thousands)
 
Nine months ended September 30,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
Consolidated net income
$
182,344

 
$
305,378

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

 
 

Retail revenue accretion
(130
)
 
(952
)
Depreciation and amortization
228,073

 
220,941

Stock compensation expense
5,977

 
4,438

Redeemable units expense
412

 
741

Amortization of debt premium and debt issuance costs
(7,546
)
 
(12,755
)
(Gain) loss from investments in real estate joint ventures
(27
)
 
6

Loss on debt extinguishment
—

 
2,788

Derivative interest credit
(1,883
)
 
(1,567
)
Gain on sale of non-depreciable real estate assets
(2,170
)
 
(172
)
Gain on sale of depreciable real estate assets
(48,572
)
 
(190,031
)
Net casualty gain and other settlement proceeds
(738
)
 
(485
)
Changes in assets and liabilities:
 
 
 
Restricted cash
(4,955
)
 
(1,533
)
Other assets
(501
)
 
5,927

Accounts payable
3,158

 
(1,211
)
Accrued expenses and other
35,183

 
28,877

Security deposits
597

 
1,146

Net cash provided by operating activities
389,222

 
361,536

Cash flows from investing activities:
 

 
 

Purchases of real estate and other assets
(262,268
)
 
(248,668
)
Normal capital improvements
(65,351
)
 
(72,786
)
Construction capital and other improvements
(5,569
)
 
(5,479
)
Renovations to existing real estate assets
(29,554
)
 
(22,470
)
Development
(42,611
)
 
(24,870
)
Distributions from real estate joint ventures
1,823

 
6

Contributions to real estate joint ventures
—

 
(29
)
Proceeds from disposition of real estate assets
187,425

 
358,017

Funding of escrow for future acquisitions
—

 
(59,607
)
Net cash used in investing activities
(216,105
)
 
(75,886
)
Cash flows from financing activities:
 

 
 

Net change in credit lines
130,000

 
8,885

Principal payments on notes payable
(114,753
)
 
(92,211
)
Payment of deferred financing costs
(141
)
 
(178
)
Repurchase of common units
(1,811
)
 
(957
)
Proceeds from issuances of common units
(216
)
 
326

Exercise of unit options
—

 
420

Distributions paid on common units
(195,938
)
 
(183,712
)
Net cash used in financing activities
(182,859
)
 
(267,427
)
Net (decrease) increase in cash and cash equivalents
(9,742
)
 
18,223

Cash and cash equivalents, beginning of period
37,559

 
26,653

Cash and cash equivalents, end of period
$
27,817

 
$
44,876

 
 
 
 
Supplemental disclosure of cash flow information:
 

 
 

Interest paid
$
96,271

 
$
97,798

Income taxes paid
$
1,571

 
$
2,095

Supplemental disclosure of noncash investing and financing activities:
 
 
 
Accrued construction in progress
$
8,742

 
$
8,333

Interest capitalized
$
1,095

 
$
1,313

Mark-to-market adjustment on derivative instruments
$
1,402

 
$
(4,632
)

See accompanying notes to condensed consolidated financial statements.

11


Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P.
Notes to Condensed Consolidated Financial Statements
September 30, 2016 and 2015
(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" 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" refer only to Mid-America Apartment Communities, Inc. and not any of its consolidated subsidiaries. Unless the context otherwise requires, the references to the "Operating Partnership" or "MAALP" refer to Mid-America Apartments, L.P. together with its consolidated subsidiaries. "Common stock" refers to the common stock of MAA and "shareholders" means the holders of shares of MAA’s common stock. The limited partnership interests of the Operating Partnership are referred to as "OP Units" or "common units," and the holders of the OP Units are referred to as "unitholders".

As of September 30, 2016, MAA owned 75,542,583 units (or approximately 94.8%) of the limited partnership interests of the Operating Partnership. MAA conducts substantially all of its business and holds substantially all of its assets through the Operating Partnership, and by virtue of its ownership of the OP Units and being the Operating Partnership'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 notes to the condensed consolidated financial statements of MAA and MAALP 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; and
•
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.

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 "umbrella partnership REIT," or UPREIT. MAA'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's percentage interest therein, and entitles MAA to vote on substantially all matters requiring a vote of the partners. MAA's only material asset is its ownership of limited partner interests in the Operating Partnership; therefore, MAA does not conduct business itself, other than 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 our 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, the Operating Partnership generates the capital required by our business through the Operating Partnership's operations, direct or indirect incurrence of indebtedness, and issuance of OP units.

The presentation of MAA's shareholders' equity and the Operating Partnership's capital is the principal area of difference between the condensed consolidated financial statements of MAA and those of the Operating Partnership. 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, treasury shares, accumulated other comprehensive income and redeemable common units. The Operating Partnership's capital may include common capital and preferred capital of the general partner (MAA), limited partners' preferred capital, limited partners' noncontrolling interests, 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) may require us to redeem their OP Units from time to time, in which case we may, at our 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 over a specified period prior to the redemption date) or by delivering one share of our common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.


12


As of September 30, 2016, we owned and operated 251 apartment communities comprising 79,170 apartments located in 15 states principally through the Operating Partnership.

As of September 30, 2016, we had three development communities under construction totaling 550 units. Total expected costs for the development projects are $81.8 million, of which $48.6 million has been incurred through September 30, 2016. We expect to complete construction on two projects by the second quarter of 2017 and one project by the fourth quarter of 2017. Six of our multifamily properties include retail components with approximately 194,000 square feet of gross leasable area.

On August 15, 2016, we entered into an agreement and plan of merger with Post Properties, Inc., which we refer to as “Post Properties,” an Atlanta, Georgia-based REIT operating in the multifamily sector, pursuant to which MAA and Post Properties will combine through a merger of Post Properties with and into MAA, with MAA surviving the merger, which we refer to as the “parent merger.” If the parent merger is completed pursuant to the merger agreement, each issued and outstanding share of Post Properties’ common stock will be converted into the right to receive 0.71 shares of MAA common stock, with cash paid for fractional shares of Post Properties common stock. In addition, in the parent merger, each outstanding share of Post Properties’ 8 1/2% Series A Cumulative Redeemable Preferred Shares, which we refer to as “Post Properties Series A preferred stock,” will be automatically converted into the right to receive one newly-issued share of MAA’s 8.50% Series I Cumulative Redeemable Preferred Stock, which we refer to as “MAA Series I preferred stock,” which will have the same rights, preferences, privileges and voting powers as those of the Post Properties Series A preferred stock. We anticipate that MAA will issue approximately 38 million shares of MAA’s common stock and approximately 868,000 shares of MAA Series I preferred stock in connection with the parent merger. Pursuant to the merger agreement, and prior to the parent merger, Post Apartment Homes, L.P., Post Properties’ operating partnership, which we refer to as “Post LP,” will merge with and into MAALP, with MAALP continuing as the surviving entity, which we refer to as the “partnership merger.” As a result of the partnership merger, each limited partnership interest in Post LP designated as a “Partnership Unit” under Post LP’s limited partnership agreement that is issued and outstanding immediately prior to the effectiveness of the partnership merger will be converted into the right to receive 0.71 OP Units, which we anticipate will result in the issuance of approximately 80,000 additional new OP Units.

The closing of the partnership merger and the parent merger, which we refer to collectively as the “mergers,” is conditioned, among other things, upon requisite approval of the parent merger by the holders of Post Properties’ common stock and the holders of MAA’s common stock. In addition to those shareholder approvals, the closing of the mergers is subject to other customary closing conditions. Accordingly, there is no assurance that the mergers will occur on the terms described herein, or at all. Shareholder meetings for each of MAA and Post Properties are scheduled for November 10, 2016. All costs related to the mergers are being expensed in the period they are incurred and are included in “Merger-related expenses” in our Condensed Consolidated Statements of Operations. In connection with these activities, we incurred approximately
$3.9 million in expenses for both the three and nine months ended September 30, 2016.

Subject to satisfaction of all of the conditions to closing, including receipt of the separate approvals of the MAA and Post Properties shareholders, the transactions contemplated by the merger agreement, including the mergers, are expected to close on or about December 1, 2016. The combined company will retain the name "Mid-America Apartment Communities, Inc." and the executive officers of MAA immediately prior to the effective of the mergers will continue as the executive officers of the combined company following the effective time of the mergers.

For additional details regarding the terms and conditions of the proposed business combination with Post Properties and related matters, please refer to our other filings with the SEC that were made in connection with the proposed mergers, including the Joint Proxy Statement/Prospectus filed with the SEC pursuant to Rule 424(b)(3) on September 30, 2016 and the Current Report on Form 8-K filed with the SEC on August 15, 2016.

Reclassifications

In order to present comparative financial statements, certain reclassifications have been made to prior period numbers. As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015, we early adopted Accounting Standards Update ("ASU") 2015-03, Interest - Imputation of Interest (Subtopic 835-30): "Simplifying the Presentation of Debt Issuance Costs", which requires debt issuance costs to be presented in the balance sheet as a reduction of the related debt liability rather than an asset. As a result of this adoption and to improve comparability, we reclassified certain costs from "Amortization of deferred financing costs" to "Interest Expense." Thus, the $0.9 million and $2.7 million of "Amortization of deferred financing costs" previously reported in our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2015, respectively, have been reclassified to "Interest expense" for the three months and nine months ended September 30, 2015 in the Condensed Consolidated Statements of Operations included in this Report. As a result of this income statement

13


reclassification, $2.7 million of amortization of deferred financing costs for the nine months ended September 30, 2015, initially reported in the "Depreciation and amortization" line of the Condensed Consolidated Statements of Cash Flows in the 2015 Form 10-Q for the nine months ended September 30, 2015, have been reclassified to "Amortization of debt premium and debt issuance costs," presented in the Condensed Consolidated Statements of Cash Flows included in this Report.

Basis of Presentation and Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements have been prepared by our 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 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 approximately 95% to 100% of all consolidated subsidiaries, including the Operating Partnership. The condensed 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, 100% of all consolidated subsidiaries. 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.
 
We invest in entities which may qualify as variable interest entities, or VIEs. 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. We consolidate all VIEs for which we are the primary beneficiary and use the equity method to account for investments that qualify as VIEs but for which we are not the primary beneficiary. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including but not limited to, those activities that most significantly impact the VIE's economic performance and which party controls such activities.

Effective January 1, 2016, we adopted ASU 2015-02, Consolidation: Topic 810, which resulted in the Operating Partnership now being classified as a VIE, since the limited partners of both entities lack substantive kick-out rights and substantive participating rights. The adoption of the new standard did not result in the consolidation of entities not previously consolidated or the de-consolidation of any entities previously consolidated. We are the primary beneficiary of, and continue to consolidate, both entities, and there was no material effect on our financial position or results of operations as a result of this adoption. See Footnote 14, Recent Accounting Pronouncements, for further details on the adoption of this standard.

We use the equity method of accounting for our investments in entities for which we exercise significant influence, but do not have the ability to exercise control. These entities are not VIEs. The factors considered in determining that we do not have the ability to exercise control include ownership of voting interests and participatory rights of investors.


14


2.    Earnings per Common Share of MAA

Basic earnings per share is computed by dividing net income attributable to common shareholders by the weighted average number of 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 they are dilutive to earnings per share. For the three and nine months ended September 30, 2016 and 2015, MAA's basic earnings per share was computed using the two-class method, and MAA's diluted earnings per share was computed using the more dilutive of the treasury stock method or two-class method, as presented below:
(dollars and shares in thousands, except per share amounts)
Three months ended September 30,
 
Nine months ended September 30,
 
 
2016
 
2015
 
2016
 
2015
 
Shares Outstanding
 
 
 
 
 
 
 
 
Weighted average common shares - basic
75,302

 
75,189

 
75,276

 
75,167

 
Weighted average partnership units outstanding
—

(1) 
—

(1) 
4,156

 
—

(1) 
Effect of dilutive securities
—

(2) 
—

(2) 
246

 
—

(2) 
Weighted average common shares - diluted
75,302

 
75,189

 
79,678

 
75,167

 
 
 
 
 
 
 
 
 
 
Calculation of Earnings per Share - basic
 
 
 
 
 

 
 

 
Income from continuing operations
$
88,906

 
$
96,828

 
$
182,344

 
$
305,378

 
Income from continuing operations attributable to noncontrolling interests
(4,627
)
 
(5,094
)
 
(9,508
)
 
(16,078
)
 
Income from continuing operations allocated to unvested restricted shares
(254
)
 
(221
)
 
(485
)
 
(668
)
 
Income from continuing operations available for common shareholders, adjusted
$
84,025

 
$
91,513

 
$
172,351

 
$
288,632

 
 
 
 
 
 
 
 
 
 
Weighted average common shares - basic
75,302

 
75,189

 
75,276

 
75,167

 
Earnings per share - basic
$
1.12

 
$
1.22

 
$
2.29

 
$
3.84

 
 
 
 
 
 
 
 
 
 
Calculation of Earnings per Share - diluted
 
 
 
 
 

 
 

 
Income from continuing operations
$
88,906

 
$
96,828

 
$
182,344

 
$
305,378

 
Income from continuing operations attributable to noncontrolling interests
(4,628
)
(1) 
(5,094
)
(1) 
—

 
(16,080
)
(1) 
Income from continuing operations allocated to unvested restricted shares
(254
)
(2) 
(221
)
(2) 
—

 
(668
)
(2) 
Income from continuing operations available for common shareholders, adjusted
$
84,024

 
$
91,513

 
$
182,344

 
$
288,630

 
 
 
 
 
 
 
 
 
 
Weighted average common shares - diluted
75,302

 
75,189

 
79,678

 
75,167

 
Earnings per share - diluted
$
1.12

 
$
1.22

 
$
2.29

 
$
3.84

 

(1) For the three months ended September 30, 2016 and for both the three and nine months ended September 30, 2015, 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 and for both the three and nine months ended September 30, 2015, 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.








15


3.    Earnings per OP Unit of MAALP

Basic earnings per OP 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 OP unit. Diluted earnings per OP 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 of the numerators and denominators of the basic and diluted earnings per OP Unit computations for the three and nine months ended September 30, 2016 and 2015 is presented below:

(dollars and units in thousands, except per unit amounts)
Three months ended September 30,
 
Nine months ended September 30,
 
 
2016
 
2015
 
2016
 
2015
 
Units Outstanding
 
 
 
 
 
 
 
 
Weighted average OP Units - basic
79,449

 
79,374

 
79,432

 
79,356

 
Effect of dilutive securities
—

(1) 
—

(1) 
246

 
—

(1) 
Weighted average OP Units - diluted
79,449

 
79,374

 
79,678

 
79,356

 
 
 
 
 
 
 
 
 
 
Calculation of Earnings per Unit - basic
 
 
 
 
 

 
 

 
Income from continuing operations
$
88,906

 
$
96,828

 
$
182,344

 
$
305,378

 
Income from continuing operations allocated to unvested restricted common units
(254
)
 
(221
)
 
(484
)
 
(668
)
 
Income from continuing operations available for common unitholders, adjusted
$
88,652

 
$
96,607

 
$
181,860

 
$
304,710

 
 
 
 
 
 
 
 
 
 
Weighted average OP Units - basic
79,449

 
79,374

 
79,432

 
79,356

 
Earnings per OP Unit - basic
$
1.12

 
$
1.22

 
$
2.29

 
$
3.84

 
 
 
 
 
 
 
 
 
 
Calculation of Earnings per Unit - diluted
 
 
 
 
 

 
 

 
Income from continuing operations
$
88,906

 
$
96,828

 
$
182,344

 
$
305,378

 
Income from continuing operations allocated to unvested restricted common units
(254
)
(1) 
(221
)
(1) 
—

 
(668
)
(1) 
Income from continuing operations available for common unitholders, adjusted
$
88,652

 
$
96,607

 
$
182,344

 
$
304,710

 
 
 
 
 
 
 
 
 
 
Weighted average OP Units - diluted
79,449

 
79,374

 
79,678

 
79,356

 
Earnings per OP Unit - diluted
$
1.12

 
$
1.22

 
$
2.29

 
$
3.84

 

(1) For the three months ended September 30, 2016 and for both the three and nine months ended September 30, 2015, 0.2 million potentially dilutive securities and their related income are not included in the diluted earnings per unit calculations as they are not dilutive.

16


4.    MAA Equity

Changes in total equity and its components for the nine-month periods ended September 30, 2016 and 2015 were as follows (dollars in thousands, except per share and per unit data):

  
Mid-America Apartment Communities, Inc. Shareholders' Equity
 
 
 
 
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Distributions
in Excess of
Net Income
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
Equity
EQUITY BALANCE DECEMBER 31, 2015
$
753

 
$
3,627,074

 
$
(634,141
)
 
$
(1,589
)
 
$
165,726

 
$
3,157,823

Net income
—

 
—

 
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 OP Units
—

 
780

 
—

 
—

 
(780
)
 
—

Shares issued in exchange from 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 OP Units ($2.46 per OP Unit)
—

 
—

 
—

 
—

 
(10,217
)
 
(10,217
)
EQUITY BALANCE SEPTEMBER 30, 2016
$
754

 
$
3,632,013

 
$
(647,390
)
 
$
(2,045
)
 
$
164,250

 
$
3,147,582


  
Mid-America Apartment Communities, Inc. Shareholders' Equity
 
 
 
 
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Distributions
in Excess of
Net Income
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interests
 
Total
Equity
EQUITY BALANCE DECEMBER 31, 2014
$
752

 
$
3,619,270

 
$
(729,086
)
 
$
(412
)
 
$
161,287

 
$
3,051,811

Net income
—

 
—

 
289,300

 
—

 
16,078

 
305,378

Other comprehensive loss - derivative instruments (cash flow hedges)
—

 
—

 
—

 
(5,894
)
 
(328
)
 
(6,222
)
Issuance and registration of common shares
2

 
324

 
—

 
—

 
—

 
326

Shares repurchased and retired
—

 
(957
)
 
—

 
—

 
—

 
(957
)
Exercise of stock options
—

 
420

 


 
—

 
—

 
420

Shares issued in exchange for OP Units
—

 
236

 
—

 
—

 
(236
)
 
—

Redeemable stock fair market value adjustment
—

 
—

 
(614
)
 
—

 
—

 
(614
)
Adjustment for noncontrolling interest ownership in operating partnership
—

 
(409
)
 
—

 
—

 
409

 
—

Amortization of unearned compensation
—

 
4,950

 
—

 
—

 
—

 
4,950

Dividends on common stock ($2.31 per share)
—

 
—

 
(174,100
)
 
—

 
—

 
(174,100
)
Dividends on noncontrolling interest OP Units ($2.31 per OP Unit)
—

 
—

 
—

 
—

 
(9,671
)
 
(9,671
)
EQUITY BALANCE SEPTEMBER 30, 2015
$
754

 
$
3,623,834

 
$
(614,500
)
 
$
(6,306
)
 
$
167,539

 
$
3,171,321



17


5.    MAALP Capital

Changes in total capital and its components for the nine-month periods ended September 30, 2016 and 2015 were as follows (dollars in thousands, except per unit data):

  
Mid-America Apartments, L.P. Unitholders' Capital
 
Limited Partner
 
General Partner
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total Partnership Capital
CAPITAL BALANCE DECEMBER 31, 2015
$
165,726

 
$
2,993,696

 
$
(1,618
)
 
$
3,157,804

Net income
9,508

 
172,836

 
—

 
182,344

Other comprehensive loss - derivative instruments (cash flow hedges)
—

 
—

 
(481
)
 
(481
)
Issuance of OP Units
—

 
(738
)
 
—

 
(738
)
OP Units repurchased and retired
—

 
(1,811
)
 
—

 
(1,811
)
General partner OP Units issued in exchange for limited partner units
(780
)
 
780

 
—

 
—

OP Units issued in exchange for redeemable units
—

 
122

 
—

 
122

Redeemable OP Units fair market value adjustment
—

 
(296
)
 
—

 
(296
)
Adjustment for limited partners' capital at redemption value
13

 
(13
)
 
—

 
—

Amortization of unearned compensation
—

 
6,625

 
—

 
6,625

Distributions ($2.46 per OP Unit)
(10,217
)
 
(185,789
)
 
—

 
(196,006
)
CAPITAL BALANCE SEPTEMBER 30, 2016
$
164,250

 
$
2,985,412

 
$
(2,099
)
 
$
3,147,563


  
Mid-America Apartments, L.P. Unitholders' Capital
 
Limited Partner
 
General Partner
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total Partnership Capital
CAPITAL BALANCE DECEMBER 31, 2014
$
161,310

 
$
2,890,858

 
$
(376
)
 
$
3,051,792

Net income
16,078

 
289,300

 
—

 
305,378

Other comprehensive loss - derivative instruments (cash flow hedges)
—

 
—

 
(6,222
)
 
(6,222
)
Issuance of OP Units
—

 
326

 
—

 
326

OP Units repurchased and retired
—

 
(957
)
 
—

 
(957
)
Exercise of OP Unit options
 
 
420

 
—

 
420

General partner OP Units issued in exchange for limited partner units
(236
)
 
236

 
—

 
—

Redeemable OP Units fair market value adjustment
—

 
(614
)
 
—

 
(614
)
Adjustment for limited partners' capital at redemption value
58

 
(58
)
 
—

 
—

Amortization of unearned compensation
—

 
4,950

 
—

 
4,950

Distributions ($2.31 per OP Unit)
(9,671
)
 
(174,100
)
 
—

 
(183,771
)
CAPITAL BALANCE SEPTEMBER 30, 2015
$
167,539

 
$
3,010,361

 
$
(6,598
)
 
$
3,171,302


6.           Borrowings

The weighted average interest rate at September 30, 2016 for the $3.43 billion of debt outstanding was 3.6%, compared to the weighted average interest rate of 3.7% on $3.43 billion of debt outstanding at December 31, 2015. Our debt consists of an unsecured credit facility, unsecured term loans, senior unsecured notes, a secured credit facility with Fannie Mae, 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. More details on our borrowings can be found in the schedules presented later in this section.

At September 30, 2016, we had $2.0 billion of senior unsecured notes and term loans fixed at an average interest rate of 3.8% and a $750 million variable rate credit facility with an average interest rate of 1.5% with $205.0 million borrowed at September 30, 2016. Additionally, we had $115.0 million of conventional, secured variable rate debt outstanding at an average interest rate of 1.0% and $75.0 million of capped conventional, secured variable rate debt at an average interest rate of 1.0%. The interest rate on all other secured debt, totaling $1.0 billion, was hedged or fixed at an average interest rate of 4.0%.



18


Unsecured Credit Facility

We maintain a $750.0 million unsecured credit facility with a syndicate of banks led by KeyBank National Association, or the KeyBank Facility. The KeyBank Facility includes an expansion option up to $1.5 billion. The KeyBank Facility bears an interest rate of LIBOR plus a spread of 0.85% to 1.55% based on an investment grade pricing grid and is currently bearing interest at an all-in rate of 1.47%. The KeyBank Facility expires in April 2020 with an option to extend for an additional six months. At September 30, 2016, we had $205.0 million actually borrowed under this facility, and another approximately $3.3 million used to support letters of credit.

Unsecured Term Loans

We also maintain three term loans with a syndicate of banks, led by KeyBank National Association, Wells Fargo Bank, N.A., and U.S. Bank National Association, 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 loan has a balance of $250.0 million and matures in 2018. The U.S. Bank term loan has a balance of $150.0 million and matures in 2020. Both the Wells Fargo and U.S. Bank term loans have variable interest rates of LIBOR plus a spread of 0.90% to 1.90% based on our credit ratings.

Senior Unsecured Notes

As of September 30, 2016, we have approximately $1.2 billion of publicly issued notes and $310.0 million of private placement notes. These senior unsecured notes have maturities ranging from five to twelve years, averaging 7.6 years remaining until maturity as of September 30, 2016.

Secured Credit Facility

We maintain a $240.0 million secured credit facility with Prudential Mortgage Capital, which is credit enhanced by Fannie Mae, or the Fannie Mae Facility. The Fannie Mae Facility provides for both fixed and variable rate borrowings and has Fannie Mae rate tranches with maturities from 2016 through 2018. The interest rate on the majority of the variable portion renews every 90 days and is based on the Fannie Mae discount mortgage backed security rate on the date of renewal, which, for us, has historically approximated three-month LIBOR less an average of 0.17% over the life of the Fannie Mae Facility, plus a fee of 0.62%. Borrowings under the Fannie Mae Facility totaled $240.0 million at September 30, 2016, consisting of $50.0 million under a fixed portion at a rate of 4.7%, and the remaining $190.0 million under the variable rate portion of the facility at an average rate of 1.2%. The available borrowing capacity at September 30, 2016 was $240.0 million.

Secured Property Mortgages

At September 30, 2016, we had $1.0 billion of fixed rate conventional property mortgages with an average interest rate of 4.0% and an average maturity in 2019.

On February 1, 2016, we paid off a $13.4 million mortgage associated with the Colonial Village at Matthews apartment community. The loan was scheduled for maturity in March 2016.

On March 1, 2016, we paid off a $20.2 million mortgage associated with the Verandas at Southwood apartment community. The payoff was at scheduled maturity of the loan.

In addition to these payoffs, we have paid $5.9 million associated with property mortgage principal amortizations during the nine months ended September 30, 2016.

Guarantees

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

•
$240.0 million of the Fannie Mae Facility, of which $240.0 million has been borrowed as of September 30, 2016; and
•
$310.0 million of senior unsecured notes, all of which has been borrowed as of September 30, 2016.





19


Total Outstanding Debt

The following table summarizes our indebtedness at September 30, 2016, (dollars in thousands):

 
Borrowed
Balance
 
Effective
Rate
 
Average Contract
Maturity
Fixed Rate Secured Debt
 
 
 
 
 
Individual property mortgages
$
972,948

 
4.0
%
 
8/21/2019
Fannie Mae conventional credit facility
50,000

 
4.7
%
 
3/31/2017
Total fixed rate secured debt
$
1,022,948

 
4.0
%
 
7/11/2019
 
 
 
 
 
 
Variable Rate Secured Debt (1)
 

 
 

 
 
Fannie Mae conventional credit facility
190,000

 
1.0
%
 
8/26/2017
Total variable rate secured debt
$
190,000

 
1.2
%
 
8/26/2017
 
 
 
 
 
 
Fair market value adjustments and debt issuance costs
25,220

 
 
 
 
Total Secured Debt
$
1,238,168

 
3.5
%
 
3/25/2019
 
 
 
 
 
 
Unsecured Debt