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, 2017
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, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Mid-America Apartment Communities, Inc.
 
 
 
 
Large accelerated filer  ý
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
Emerging growth company o
                                                                               (Do not check if a smaller reporting company)
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Mid-America Apartments, L.P.
 
 
 
 
Large accelerated filer o
Accelerated filer o
Non-accelerated filer  ý
Smaller reporting company o
Emerging growth company o
                                                                              (Do not check if a smaller reporting company)
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
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 23, 2017
Common Stock, $0.01 par value
113,627,014



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.
 
 
 
 
 
 
Mid-America Apartments, L.P.
 
 
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 PART II – OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 

1


Explanatory Note

This periodic report on Form 10-Q, or this Report, combines the quarterly reports for the quarter ended September 30, 2017 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 96.4% 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, all 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 common units of limited partnership interest in the Operating Partnership are referred to as "OP Units" and the holders of the OP Units are referred to as "common unitholders".

As of September 30, 2017, MAA owned 113,627,014 OP Units (or 96.4% of the total number of OP Units). 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.

MAA is a multifamily focused, self-administered and self-managed real estate investment trust, or REIT. Management operates MAA and the Operating Partnership as one business. The management of the Company is comprised of individuals who are officers of MAA and employees of the Operating Partnership. We believe it is important to understand the few differences between MAA and the Operating Partnership in the context of how MAA and the Operating Partnership operate as a consolidated company. MAA and the Operating Partnership are structured as an "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 limited partnership interests, 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 partnership 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' common capital and preferred capital, limited partners' noncontrolling interests, accumulated other comprehensive income and redeemable common units. Redeemable common units represent the number of outstanding limited partnership units as of the date of the applicable balance sheet, valued at the greater of the closing market price of MAA's common stock or the aggregate value of the individual partners' capital balances. Holders of OP Units (other than MAA and its entity affiliates) may require the Operating Partnership to redeem their OP Units, from time to time, in which case the Operating Partnership may, at its option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of MAA’s common stock on the New York Stock Exchange, or NYSE, over a specified

2


period prior to the redemption date) or by delivering one share of MAA's common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.
In order to highlight the material differences between MAA and the Operating Partnership, this 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 Condensed Consolidated Financial Statements, including Note 3 - Earnings per Common Share of MAA and Note 4 - Earnings per OP Unit of MAALP; Note 5 - MAA Equity and Note 6 - MAALP Capital; and Note 10 - Shareholders' Equity of MAA and Note 11 - Partners' Capital of MAALP; 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
(Unaudited)
(Dollars in thousands, except share data)
 
September 30, 2017
 
December 31, 2016
Assets:
 
 
 
Real estate assets:
 
 
 
Land
$
1,828,637

 
$
1,816,008

Buildings and improvements
10,801,863

 
10,523,762

Furniture, fixtures and equipment
339,039

 
298,204

Development and capital improvements in progress
156,938

 
231,224

 
13,126,477

 
12,869,198

Less accumulated depreciation
(1,967,481
)
 
(1,656,071
)
 
11,158,996

 
11,213,127

 
 
 
 
Undeveloped land
57,285

 
71,464

Corporate properties, net
12,367

 
12,778

Investments in real estate joint ventures
45,096

 
44,493

Assets held for sale
5,315

 
—

Real estate assets, net
11,279,059

 
11,341,862

 
 
 
 
Cash and cash equivalents
47,851

 
33,536

Restricted cash
80,253

 
88,264

Deferred financing costs, net
3,906

 
5,065

Other assets
120,493

 
134,525

Goodwill
1,239

 
1,239

 
 
 
 
Total assets
$
11,532,801

 
$
11,604,491

 
 
 
 
Liabilities and equity:
 

 
 

Liabilities:
 

 
 

Unsecured notes payable
$
3,382,861

 
$
3,180,624

Secured notes payable
1,109,973

 
1,319,088

Accounts payable
17,275

 
11,970

Fair market value of interest rate swaps
2,602

 
7,562

Accrued expenses and other liabilities
439,662

 
414,244

Security deposits
18,998

 
18,829

Total liabilities
4,971,371

 
4,952,317

 
 
 
 
Redeemable common stock
10,804

 
10,073

 
 
 
 
Shareholders' equity:
 

 
 

Preferred stock, $0.01 par value per share, 20,000,000 shares authorized; 8.50% Series I Cumulative Redeemable Shares, liquidation preference $50 per share, 867,846 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively
9

 
9

Common stock, $0.01 par value per share, 145,000,000 shares authorized; 113,627,014 and 113,518,212 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively(1)
1,134

 
1,133

Additional paid-in capital
7,117,829

 
7,109,012

Accumulated distributions in excess of net income
(802,835
)
 
(707,479
)
Accumulated other comprehensive income
790

 
1,144

Total MAA shareholders' equity
6,316,927

 
6,403,819

Noncontrolling interests - operating partnership units
231,393

 
235,976

Total Company's shareholders' equity
6,548,320

 
6,639,795

Noncontrolling interests - consolidated real estate entity
2,306

 
2,306

Total equity
6,550,626

 
6,642,101

Total liabilities and equity
$
11,532,801

 
$
11,604,491

(1) 
Number of shares issued and outstanding represents 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, 2017 and December 31, 2016 are 101,081 and 103,578, respectively.
See accompanying notes to condensed consolidated financial statements.

4


Mid-America Apartment Communities, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share data)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Operating revenues:
 
 
 
 
 
 
 
Rental revenues
$
357,619

 
$
254,161

 
$
1,064,628

 
$
749,153

Other property revenues
26,931

 
22,737

 
81,621

 
68,997

Total operating revenues
384,550

 
276,898

 
1,146,249

 
818,150

Property operating expenses:
 

 
 

 
 

 
 

Personnel
35,640

 
27,236

 
103,655

 
78,290

Building repairs and maintenance
12,663

 
9,377

 
34,287

 
23,156

Real estate taxes and insurance
52,597

 
34,282

 
160,733

 
104,182

Utilities
30,175

 
24,690

 
84,599

 
69,070

Landscaping
4,809

 
4,021

 
18,376

 
15,016

Other operating
13,295

 
7,040

 
34,771

 
20,768

Depreciation and amortization
117,928

 
76,959

 
374,285

 
227,829

Total property operating expenses
267,107

 
183,605

 
810,706

 
538,311

Acquisition expenses
—

 
1,033

 
—

 
2,167

Property management expenses
10,281

 
7,908

 
32,007

 
25,221

General and administrative expenses
8,361

 
6,661

 
30,735

 
20,257

Merger related expenses
128

 
3,901

 
3,977

 
3,901

Integration related expenses
4,002

 
—

 
10,521

 
—

Income from continuing operations before non-operating items
94,671

 
73,790

 
258,303

 
228,293

Interest and other non-property income
4,303

 
64

 
7,632

 
159

Interest expense
(39,940
)
 
(32,168
)
 
(115,005
)
 
(96,418
)
Gain on debt extinguishment
828

 
—

 
3,168

 
3

Net casualty gain (loss) after insurance and other settlement proceeds
564

 
(75
)
 
233

 
738

Gain on sale of depreciable real estate assets
58,844

 
47,749

 
59,045

 
48,572

(Loss) gain on sale of non-depreciable real estate assets
(6
)
 
—

 
42

 
2,170

Income before income tax expense
119,264

 
89,360

 
213,418

 
183,517

Income tax expense
(641
)
 
(454
)
 
(1,910
)
 
(1,200
)
Income from continuing operations before joint venture activity
118,623

 
88,906

 
211,508

 
182,317

Gain from real estate joint ventures
335

 
—

 
1,021

 
27

Net income
118,958

 
88,906

 
212,529

 
182,344

Net income attributable to noncontrolling interests
4,249

 
4,627

 
7,600

 
9,508

Net income available for shareholders
114,709

 
84,279

 
204,929

 
172,836

Dividends to MAA Series I preferred shareholders
922

 
—

 
2,766

 
—

Net income available for MAA common shareholders
$
113,787

 
$
84,279

 
$
202,163

 
$
172,836

 
 
 
 
 
 
 
 
Earnings per common share - basic:
 
 
 

 
 

 
 

Net income available for common shareholders
$
1.00

 
$
1.12

 
$
1.78

 
$
2.29

 
 
 
 
 
 
 
 
Earnings per common share - diluted:
 

 
 

 
 

 
 

Net income available for common shareholders
$
1.00

 
$
1.12

 
$
1.78

 
$
2.29

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.87

 
$
0.82

 
$
2.61

 
$
2.46


See accompanying notes to condensed consolidated financial statements.

5


Mid-America Apartment Communities, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(Dollars in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
118,958

 
$
88,906

 
$
212,529

 
$
182,344

Other comprehensive income:
 
 
 
 
 
 
 
Unrealized gain (loss) from the effective portion of derivative instruments
90

 
1,179

 
(1,252
)
 
(3,840
)
Reclassification adjustment for net (gains) losses included in net income for the effective portion of derivative instruments
(33
)
 
1,042

 
884

 
3,359

Total comprehensive income
119,015

 
91,127

 
212,161

 
181,863

Less: comprehensive income attributable to noncontrolling interests
(4,251
)
 
(4,743
)
 
(7,586
)
 
(9,483
)
Comprehensive income attributable to MAA
$
114,764

 
$
86,384

 
$
204,575

 
$
172,380

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements.



6



Mid-America Apartment Communities, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 
Nine months ended September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
212,529

 
$
182,344

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

 
 

Retail revenue accretion
(292
)
 
(130
)
Depreciation and amortization
374,947

 
228,073

Stock compensation expense
8,431

 
5,977

Redeemable stock expense
489

 
412

Amortization of debt premium and debt issuance costs
(8,035
)
 
(7,546
)
Gain from investments in real estate joint ventures
(1,021
)
 
(27
)
Gain on debt extinguishment
(4,753
)
 
—

Derivative interest credit
(9,298
)
 
(1,883
)
Settlement of forward swaps
(1,547
)
 
—

Gain on sale of non-depreciable real estate assets
(42
)
 
(2,170
)
Gain on sale of depreciable real estate assets
(59,045
)
 
(48,572
)
Net casualty gain and other settlement proceeds
(233
)
 
(738
)
Changes in assets and liabilities:
 

 
 

Restricted cash
(2,580
)
 
(4,955
)
Other assets
(6,264
)
 
(501
)
Accounts payable
5,305

 
3,158

Accrued expenses and other
44,353

 
35,183

Security deposits
164

 
597

Net cash provided by operating activities
553,108

 
389,222

Cash flows from investing activities:
 

 
 

Purchases of real estate and other assets
(63,774
)
 
(262,268
)
Normal capital improvements
(82,030
)
 
(65,351
)
Construction capital and other improvements
(7,171
)
 
(5,569
)
Renovations to existing real estate assets
(36,692
)
 
(29,554
)
Development
(142,530
)
 
(42,611
)
Distributions from real estate joint ventures
—

 
1,823

Contributions to joint ventures
(750
)
 
—

Proceeds from disposition of real estate assets
90,040

 
187,425

Return of escrow for future acquisitions
10,591

 
—

Net cash used in investing activities
(232,316
)
 
(216,105
)
Cash flows from financing activities:
 

 
 

Net change in credit lines
(240,000
)
 
130,000

Proceeds from notes payable
597,480

 
—

Principal payments on notes payable
(345,053
)
 
(114,753
)
Payment of deferred financing costs
(5,355
)
 
(141
)
Repurchase of common stock
(4,782
)
 
(1,811
)
Proceeds from issuances of common shares
1,007

 
(216
)
Exercise of stock options
432

 
—

Distributions to noncontrolling interests
(10,999
)
 
(10,234
)
Dividends paid on common shares
(296,441
)
 
(185,704
)
Dividends paid on preferred shares
(2,766
)
 
—

Net cash used in financing activities
(306,477
)
 
(182,859
)
Net increase (decrease) in cash and cash equivalents
14,315

 
(9,742
)
Cash and cash equivalents, beginning of period
33,536

 
37,559

Cash and cash equivalents, end of period
$
47,851

 
$
27,817

 
 
 
 
Supplemental disclosure of cash flow information:
 

 
 

Interest paid
$
123,735

 
$
96,271

Income taxes paid
$
2,256

 
$
1,571

Supplemental disclosure of noncash investing and financing activities:
 

 
 

Conversion of OP Units to shares of common stock
$
1,133

 
$
780

Accrued construction in progress
$
15,787

 
$
8,742

Interest capitalized
$
5,884

 
$
1,095

Mark-to-market adjustment on derivative instruments
$
12,035

 
$
1,402

See accompanying notes to condensed consolidated financial statements.

7



Mid-America Apartments, L.P.
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except unit data)
 
September 30, 2017
 
December 31, 2016
Assets:
 
 
 
Real estate assets:
 
 
 
Land
$
1,828,637

 
$
1,816,008

Buildings and improvements
10,801,863

 
10,523,762

Furniture, fixtures and equipment
339,039

 
298,204

Development and capital improvements in progress
156,938

 
231,224

 
13,126,477

 
12,869,198

Less accumulated depreciation
(1,967,481
)
 
(1,656,071
)
 
11,158,996

 
11,213,127

 
 
 
 
Undeveloped land
57,285

 
71,464

Corporate properties, net
12,367

 
12,778

Investments in real estate joint ventures
45,096

 
44,493

Assets held for sale
5,315

 
—

Real estate assets, net
11,279,059

 
11,341,862

 
 
 
 
Cash and cash equivalents
47,851

 
33,536

Restricted cash
80,253

 
88,264

Deferred financing costs, net
3,906

 
5,065

Other assets
120,493

 
134,525

Goodwill
1,239

 
1,239

Total assets
$
11,532,801

 
$
11,604,491

 
 
 
 
Liabilities and Capital:
 

 
 

Liabilities:
 

 
 

Unsecured notes payable
$
3,382,861

 
$
3,180,624

Secured notes payable
1,109,973

 
1,319,088

Accounts payable
17,275

 
11,970

Fair market value of interest rate swaps
2,602

 
7,562

Accrued expenses and other liabilities
439,662

 
414,244

Security deposits
18,998

 
18,829

Due to general partner
19

 
19

Total liabilities
4,971,390

 
4,952,336

 
 
 
 
Redeemable common units
10,804

 
10,073

 
 
 
 
Operating Partnership Capital:
 

 
 

Preferred Units: 867,846 Preferred Units outstanding at September 30, 2017 and at December 31, 2016
66,840

 
64,833

Common Units:
 
 
 
General partner: 113,627,014 OP Units outstanding at September 30, 2017 and 113,518,212 OP Units outstanding at December 31, 2016 (1)
6,249,190

 
6,337,721

Limited partners: 4,200,032 OP Units outstanding at September 30, 2017 and 4,220,403 OP Units outstanding at December 31, 2016 (1)
231,393

 
235,976

Accumulated other comprehensive income
878

 
1,246

Total operating partners' capital
6,548,301

 
6,639,776

Noncontrolling interests - consolidated real estate entity
2,306

 
2,306

Total capital
6,550,607

 
6,642,082

Total liabilities and capital
$
11,532,801

 
$
11,604,491

(1) 
Number of units outstanding represents total OP Units regardless of classification on the condensed consolidated balance sheets. The number of OP Units classified as redeemable units on the condensed consolidated balance sheets at September 30, 2017 and December 31, 2016 are 101,081 and 103,578, respectively.
See accompanying notes to condensed consolidated financial statements.

8


Mid-America Apartments, L.P.
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per unit data)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Operating revenues:
 
 
 
 
 
 
 
Rental revenues
$
357,619

 
$
254,161

 
$
1,064,628

 
$
749,153

Other property revenues
26,931

 
22,737

 
81,621

 
68,997

Total operating revenues
384,550

 
276,898

 
1,146,249

 
818,150

Property operating expenses:
 

 
 

 
 

 
 

Personnel
35,640

 
27,236

 
103,655

 
78,290

Building repairs and maintenance
12,663

 
9,377

 
34,287

 
23,156

Real estate taxes and insurance
52,597

 
34,282

 
160,733

 
104,182

Utilities
30,175

 
24,690

 
84,599

 
69,070

Landscaping
4,809

 
4,021

 
18,376

 
15,016

Other operating
13,295

 
7,040

 
34,771

 
20,768

Depreciation and amortization
117,928

 
76,959

 
374,285

 
227,829

Total property operating expenses
267,107

 
183,605

 
810,706

 
538,311

Acquisition expenses
—

 
1,033

 
—

 
2,167

Property management expenses
10,281

 
7,908

 
32,007

 
25,221

General and administrative expenses
8,361

 
6,661

 
30,735

 
20,257

Merger related expenses
128

 
3,901

 
3,977

 
3,901

Integration related expenses
4,002

 
—

 
10,521

 
—

Income from continuing operations before non-operating items
94,671

 
73,790

 
258,303

 
228,293

Interest and other non-property income
4,303

 
64

 
7,632

 
159

Interest expense
(39,940
)
 
(32,168
)
 
(115,005
)
 
(96,418
)
Gain on debt extinguishment
828

 
—

 
3,168

 
3

Net casualty gain (loss) after insurance and other settlement proceeds
564

 
(75
)
 
233

 
738

Gain on sale of depreciable real estate assets
58,844

 
47,749

 
59,045

 
48,572

(Loss) gain on sale of non-depreciable real estate assets
(6
)
 
—

 
42

 
2,170

Income before income tax expense
119,264

 
89,360

 
213,418

 
183,517

Income tax expense
(641
)
 
(454
)
 
(1,910
)
 
(1,200
)
Income from continuing operations before joint venture activity
118,623

 
88,906

 
211,508

 
182,317

Gain from real estate joint ventures
335

 
—

 
1,021

 
27

Net income
118,958

 
88,906

 
212,529

 
182,344

Dividends to preferred unitholders
922

 
—

 
2,766

 
—

Net income available for Mid-America Apartments, L.P. common unitholders
$
118,036

 
$
88,906

 
$
209,763

 
$
182,344

 
 
 
 
 
 
 
 
Earnings per common unit - basic:
 
 
 
 
 

 
 

Net income available for common unitholders
$
1.00

 
$
1.12

 
$
1.78

 
$
2.29

 
 
 
 
 
 
 
 
Earnings per common unit - diluted:
 
 
 
 
 

 
 

Net income available for common unitholders
$
1.00

 
$
1.12

 
$
1.78

 
$
2.29

 
 
 
 
 
 
 
 
Distributions declared per common unit
$
0.87

 
$
0.82

 
$
2.61

 
$
2.46


See accompanying notes to condensed consolidated financial statements.

9


Mid-America Apartments, L.P.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(Dollars in thousands)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
118,958

 
$
88,906

 
$
212,529

 
$
182,344

Other comprehensive income:
 
 
 
 
 
 
 
Unrealized gain (loss) from the effective portion of derivative instruments
90

 
1,179

 
(1,252
)
 
(3,840
)
Reclassification adjustment for net (gains) losses included in net income for the effective portion of derivative instruments
(33
)
 
1,042

 
884

 
3,359

Comprehensive income attributable to Mid-America Apartments, L.P.
$
119,015

 
$
91,127

 
$
212,161

 
$
181,863

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See accompanying notes to condensed consolidated financial statements.


10


Mid-America Apartments, L.P.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 
Nine months ended September 30,
 
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
212,529

 
$
182,344

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

 
 

Retail revenue accretion
(292
)
 
(130
)
Depreciation and amortization
374,947

 
228,073

Stock compensation expense
8,431

 
5,977

Redeemable units expense
489

 
412

Amortization of debt premium and debt issuance costs
(8,035
)
 
(7,546
)
Gain from investments in real estate joint ventures
(1,021
)
 
(27
)
Gain on debt extinguishment
(4,753
)
 
—

Derivative interest credit
(9,298
)
 
(1,883
)
Settlement of forward swaps
(1,547
)
 
—

Gain on sale of non-depreciable real estate assets
(42
)
 
(2,170
)
Gain on sale of depreciable real estate assets
(59,045
)
 
(48,572
)
Net casualty gain and other settlement proceeds
(233
)
 
(738
)
Changes in assets and liabilities:
 
 
 
Restricted cash
(2,580
)
 
(4,955
)
Other assets
(6,264
)
 
(501
)
Accounts payable
5,305

 
3,158

Accrued expenses and other
44,353

 
35,183

Security deposits
164

 
597

Net cash provided by operating activities
553,108

 
389,222

Cash flows from investing activities:
 

 
 

Purchases of real estate and other assets
(63,774
)
 
(262,268
)
Normal capital improvements
(82,030
)
 
(65,351
)
Construction capital and other improvements
(7,171
)
 
(5,569
)
Renovations to existing real estate assets
(36,692
)
 
(29,554
)
Development
(142,530
)
 
(42,611
)
Distributions from real estate joint ventures
—

 
1,823

Contributions to joint ventures
(750
)
 
—

Proceeds from disposition of real estate assets
90,040

 
187,425

Return of escrow for future acquisitions
10,591

 
—

Net cash used in investing activities
(232,316
)
 
(216,105
)
Cash flows from financing activities:
 

 
 

Net change in credit lines
(240,000
)
 
130,000

Proceeds from notes payable
597,480

 
—

Principal payments on notes payable
(345,053
)
 
(114,753
)
Payment of deferred financing costs
(5,355
)
 
(141
)
Repurchase of common units
(4,782
)
 
(1,811
)
Proceeds from issuances of common units
1,007

 
(216
)
Exercise of unit options
432

 
—

Distributions paid on common units
(307,440
)
 
(195,938
)
Distributions paid on preferred units
(2,766
)
 
—

Net cash used in financing activities
(306,477
)
 
(182,859
)
Net increase (decrease) in cash and cash equivalents
14,315

 
(9,742
)
Cash and cash equivalents, beginning of period
33,536

 
37,559

Cash and cash equivalents, end of period
$
47,851

 
$
27,817

 
 
 
 
Supplemental disclosure of cash flow information:
 

 
 

Interest paid
$
123,735

 
$
96,271

Income taxes paid
$
2,256

 
$
1,571

Supplemental disclosure of noncash investing and financing activities:
 
 
 
Accrued construction in progress
$
15,787

 
$
8,742

Interest capitalized
$
5,884

 
$
1,095

Mark-to-market adjustment on derivative instruments
$
12,035

 
$
1,402


See accompanying notes to condensed consolidated financial statements.

11


Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P.
Notes to Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Unaudited)

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

Unless the context otherwise requires, all references to "we," "us," "our," or the "Company" 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, all 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 common units of limited partnership interests in the Operating Partnership are referred to as "OP Units," and the holders of the OP Units are referred to as "common unitholders".

As of September 30, 2017, MAA owned 113,627,014 OP Units (or 96.4% of the total number of OP Units). 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;
•
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both MAA and the Operating Partnership; and
•
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports

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 the Operating Partnership to redeem their OP Units from time to time, in which case the Operating Partnership may, at its option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of MAA's common stock on the NYSE over a specified period prior to the redemption date) or by delivering one share of MAA's common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed.


12


Organization of Mid-America Apartment Communities, Inc.

On December 1, 2016, MAA completed a merger with Post Properties, Inc., or Post Properties. Pursuant to the Agreement and Plan of Merger, or the Merger Agreement, Post Properties merged with and into MAA, with MAA continuing as the surviving corporation, or the Parent Merger, and Post Apartment Homes, L.P, or Post LP, merged with and into MAALP, with MAALP continuing as the surviving entity, or the Partnership Merger. We refer to the Parent Merger, together with the Partnership Merger, as the Merger in this Report. Under the terms of the Merger Agreement, each share of Post Properties common stock was converted into the right to receive 0.71 of a newly issued share of MAA common stock, including the right, if any, to receive cash in lieu of fractional shares of MAA common stock. In addition, each limited partner interest in Post LP designated as a "Class A Unit" automatically converted into the right to receive 0.71 of a newly issued partnership unit of MAALP. Also, each share of Post Properties' 8 1/2% Series A Cumulative Redeemable Preferred Stock, which we refer to as the Post Properties Series A preferred stock, was automatically converted into the right to receive one newly issued share of MAA's 8.50% Series I Cumulative Redeemable Preferred Stock, $0.01 par value per share, which we refer to as MAA Series I preferred stock. Each newly issued share of MAA Series I preferred stock has substantially the same rights, preferences, privileges, and voting powers as those of the Post Properties Series A preferred stock.
As of September 30, 2017, we owned and operated 302 apartment communities, comprising 99,612 apartment units located in 17 states, through the Operating Partnership. As of September 30, 2017, we also owned a 35.0% interest in an unconsolidated real estate joint venture and a 32.0% interest in an unconsolidated limited partnership. As of September 30, 2017, we had five development communities under construction totaling 1,434 apartment units. Total expected costs for the development projects are $305.0 million, of which $235.3 million has been incurred through September 30, 2017. We expect to complete construction on two projects by the fourth quarter of 2017, one project by the first quarter of 2018, one project by the third quarter of 2018, and one project by the fourth quarter of 2018. Twenty-nine of our multifamily properties include retail components with approximately 600,000 square feet of gross leasable area. We also have four wholly-owned commercial properties, which we acquired through the Merger, with approximately 232,000 square feet of combined gross leasable area.

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 92.5% 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, 92.5% to 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, and MAALP is considered a VIE. A VIE is a legal entity in which the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of the equity investment at risk lack the power to direct the activities of a legal entity as well as the obligation to absorb its expected losses or the right to receive its expected residual returns. MAALP is classified as a VIE, since the limited partners lack substantive kick-out rights and substantive participating rights. 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.

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. 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 (see "Investment in Unconsolidated Real Estate Joint Ventures" below).

Noncontrolling Interests

At September 30, 2017, the Company had two types of noncontrolling interests, (1) noncontrolling interests related to the common unitholders of the Operating Partnership (see Note 11) and (2) noncontrolling interests related to its consolidated real estate entities (see "Investment in Consolidated Real Estate Joint Ventures" below).

13


Investment in Unconsolidated Joint Ventures

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

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

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

Investment in Consolidated Real Estate Joint Ventures

In 2015, Post Properties entered into a joint venture arrangement with a private real estate company to develop, construct and operate a 358-unit apartment community in Denver, Colorado. At September 30, 2017, we owned a 92.5% equity interest in the consolidated joint venture. In 2015, this joint venture acquired the land site and initiated the development of the apartment community. The venture partner will generally be responsible for the development and construction of the community and we will continue to manage the community upon its completion. This joint venture was determined to be a VIE with us designated as the primary beneficiary. As a result, the accounts of the joint venture are consolidated by us. At September 30, 2017, our consolidated assets, liabilities and equity included construction in progress of $60.3 million, land of $14.5 million, and accounts payable and accrued expenses of $6.2 million.

Assets Held for Sale

During September 2017, one land parcel was classified as held for sale. The criteria for classifying the land parcel as held for sale were met during June; however, the sale is not expected to close until the fourth quarter of 2017. As a result, the assets and liabilities associated with the land parcel were presented as held for sale in the Condensed Consolidated Balance Sheets.

2.    Business Combination

On December 1, 2016, we completed the Merger. As part of the Merger, we acquired 61 wholly-owned apartment communities comprising 24,138 apartment units, including 269 apartment units in one community held in an unconsolidated entity, and 2,262  apartment units in six communities that were under development at the Merger date. Post Properties had operations in ten markets across the United States. In addition to the apartment communities, we also acquired four commercial properties, totaling approximately 232,000 square feet of combined gross leasable area. The consolidated net assets and results of operations of Post Properties are included in our Consolidated Financial Statements from the closing date, December 1, 2016, going forward.

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

14


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

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

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

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

The purchase price was allocated as follows (in thousands):
Land
$
875,294

Buildings and improvements
3,397,342

Furniture, fixtures and equipment
81,243

Development and capital improvements in progress
183,881

Undeveloped land
24,200

Commercial properties, net
3,610

Investment in real estate joint venture
44,435

Lease intangible assets
53,192

Cash and cash equivalents
34,292

Restricted cash
3,608

Deferred costs and other assets, excluding lease intangible assets
41,803

Total assets acquired
4,742,900

 
 
Notes payable
(595,609)

Fair market value of interest rate swaps
(2,118)

Lease intangible liabilities
(1,661)

Accounts payable, accrued expenses, and other liabilities
(132,613)

Total liabilities assumed, including debt
(732,001
)
 
 
Noncontrolling interests - consolidated real estate entity
(2,306
)
 
 
Total purchase price
$
4,008,593


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

15



We incurred Merger and integration related expenses of $14.5 million for the nine months ended September 30, 2017. These amounts were expensed as incurred and are included in the Condensed Consolidated Statements of Operations in the items titled "Merger related expenses", primarily consisting of severance and professional costs, and "Integration related expenses", primarily consisting of temporary systems, staffing, and facilities costs.

3.    Earnings per Common Share of MAA

Basic earnings per share is computed by dividing net income available for MAA 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, 2017 and 2016, 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,
 
 
2017
 
2016
 
2017
 
2016
 
Shares Outstanding
 
 
 
 
 
 
 
 
Weighted average common shares - basic
113,434

 
75,302

 
113,392

 
75,276

 
Weighted average partnership units outstanding
—

(1) 
—

(1) 
—

(1) 
4,156

 
Effect of dilutive securities
219

 
—

(2) 
270

 
246

 
Weighted average common shares - diluted
113,653

 
75,302

 
113,662

 
79,678

 
 
 
 
 
 
 
 
 
 
Calculation of Earnings per Share - basic
 
 
 
 
 

 
 

 
Net income
$
118,958

 
$
88,906

 
$
212,529

 
$
182,344

 
Net income attributable to noncontrolling interests
(4,249
)
 
(4,627
)
 
(7,600
)
 
(9,508
)
 
Unvested restricted stock (allocation of earnings)
(181
)
 
(254
)
 
(337
)
 
(485
)
 
Preferred dividends
(922
)
 
—

 
(2,766
)
 
—

 
Net income available for common shareholders, adjusted
$
113,606

 
$
84,025

 
$
201,826

 
$
172,351

 
 
 
 
 
 
 
 
 
 
Weighted average common shares - basic
113,434

 
75,302

 
113,392

 
75,276

 
Earnings per share - basic
$
1.00

 
$
1.12

 
$
1.78

 
$
2.29

 
 
 
 
 
 
 
 
 
 
Calculation of Earnings per Share - diluted
 
 
 
 
 

 
 

 
Net income
$
118,958

 
$
88,906

 
$
212,529

 
$
182,344

 
Net income attributable to noncontrolling interests
(4,249
)
(1) 
(4,628
)
(1) 
(7,600
)
(1) 
—

 
Unvested restricted stock (allocation of earnings)
—

 
(254
)
(2) 
—

 
—

 
Preferred dividends
(922
)
 
—

 
(2,766
)
 
—

 
Net income available for common shareholders, adjusted
$
113,787

 
$
84,024

 
$
202,163

 
$
182,344

 
 
 
 
 
 
 
 
 
 
Weighted average common shares - diluted
113,653

 
75,302

 
113,662

 
79,678

 
Earnings per share - diluted
$
1.00

 
$
1.12

 
$
1.78

 
$
2.29

 

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


16


4.    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, 2017 and 2016 is presented below:

(dollars and units in thousands, except per unit amounts)
Three months ended September 30,
 
Nine months ended September 30,
 
 
2017
 
2016
 
2017
 
2016
 
Units Outstanding
 
 
 
 
 
 
 
 
Weighted average common units - basic
117,643

 
79,449

 
117,607

 
79,432

 
Effect of dilutive securities
219

 
—

(1) 
270

 
246

 
Weighted average common units - diluted
117,862

 
79,449

 
117,877

 
79,678

 
 
 
 
 
 
 
 
 
 
Calculation of Earnings per Unit - basic
 
 
 
 
 

 
 

 
Net income
$
118,958

 
$
88,906

 
$
212,529

 
$
182,344

 
Unvested restricted stock (allocation of earnings)
(181
)
 
(254
)
 
(337
)
 
(484
)
 
Preferred unit distributions
(922
)
 
—

 
(2,766
)
 
—

 
Net income available for common unitholders, adjusted
$
117,855

 
$
88,652

 
$
209,426

 
$
181,860

 
 
 
 
 
 
 
 
 
 
Weighted average common units - basic
117,643

 
79,449

 
117,607

 
79,432

 
Earnings per common unit - basic
$
1.00

 
$
1.12

 
$
1.78

 
$
2.29

 
 
 
 
 
 
 
 
 
 
Calculation of Earnings per Unit - diluted
 
 
 
 
 

 
 

 
Net income
$
118,958

 
$
88,906

 
$
212,529

 
$
182,344

 
Unvested restricted stock (allocation of earnings)
—

 
(254
)
(1) 
—

 
—

 
Preferred unit distributions
(922
)
 
—

 
(2,766
)
 
—

 
Net income available for common unitholders, adjusted
$
118,036

 
$
88,652

 
$
209,763

 
$
182,344

 
 
 
 
 
 
 
 
 
 
Weighted average common units - diluted
117,862

 
79,449

 
117,877

 
79,678

 
Earnings per common unit - diluted
$
1.00

 
$
1.12

 
$
1.78

 
$
2.29

 

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


17


5.    MAA Equity

Changes in total equity and its components for the nine-month periods ended September 30, 2017 and 2016 were as follows (dollars in thousands, except per share and per unit data):

  
Mid-America Apartment Communities, Inc. Shareholders' Equity
 
 
 
 
 
 
 
Preferred Stock Amount
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Distributions
in Excess of
Net Income
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest Operating Partnership
 
Noncontrolling Interest - Consolidated Real Estate Entity
 
Total
Equity
EQUITY BALANCE DECEMBER 31, 2016
$
9

 
$
1,133

 
$
7,109,012

 
$
(707,479
)
 
$
1,144

 
$
235,976

 
$
2,306

 
$
6,642,101

Net income attributable to controlling interest
—

 
—

 
—

 
204,929

 
—

 
7,600

 
—

 
212,529

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

 
—

 
—

 
—

 
(354
)
 
(14
)
 
—

 
(368
)
Issuance and registration of common shares
—

 
1

 
153

 
—

 
—

 
—

 
—

 
154

Issuance and registration of preferred shares
—

 
—

 
2,007

 
—

 
—

 
—

 
—

 
2,007

Shares repurchased and retired
—

 
—

 
(4,782
)
 
—

 
—

 
—

 
—

 
(4,782
)
Exercise of stock options
—

 
—

 
218

 
—

 
—

 
—

 
—

 
218

Shares issued in exchange for common units
—

 
—

 
1,133

 
—

 
—

 
(1,133
)
 
—

 
—

Shares issued in exchange for redeemable stock
—

 
—

 
1,482

 
—

 
—

 
—

 
—

 
1,482

Redeemable stock fair market value adjustment
—

 
—

 
—

 
(870
)
 
—

 
—

 
—

 
(870
)
Adjustment for noncontrolling interest ownership in operating partnership
—

 
—

 
54

 
—

 
—

 
(54
)
 
—

 
—

Amortization of unearned compensation
—

 
—

 
8,552

 
(114
)
 
—

 
—

 
—

 
8,438

Dividends on preferred stock
—

 
—

 
—

 
(2,766
)
 
—

 
—

 
—

 
(2,766
)
Dividends on common stock ($2.61 per share)
—

 
—

 
—

 
(296,535
)
 
—

 
—

 
—

 
(296,535
)
Dividends on noncontrolling interest units ($2.61 per unit)
—

 
—

 
—

 
—

 
—

 
(10,982
)
 
—

 
(10,982
)
EQUITY BALANCE SEPTEMBER 30, 2017
$
9

 
$
1,134

 
$
7,117,829

 
$
(802,835
)
 
$
790

 
$
231,393

 
$
2,306

 
$
6,550,626


  
Mid-America Apartment Communities, Inc. Shareholders' Equity
 
 
 
 
 
 
 
Preferred Stock Amount
 
Common
Stock
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Distributions
in Excess of
Net Income
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Noncontrolling
Interest Operating Partnership
 
Noncontrolling Interest - Consolidated Real Estate Entity
 
Total
Equity
EQUITY BALANCE DECEMBER 31, 2015
$
—

 
$
753

 
$
3,627,074

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

 
$
—

 
$
3,157,823

Net income attributable to controlling interest
—

 
—

 
—

 
172,836

 
—

 
9,508

 
—

 
182,344

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

 
—

 
—

 
—

 
(456
)
 
(25
)
 
—

 
(481
)
Issuance and registration of common shares
—

 
1

 
(739
)
 
—

 
—

 
—

 
—

 
(738
)
Shares repurchased and retired
—

 
—

 
(1,811
)
 
—

 
—

 
—

 
—

 
(1,811
)
Shares issued in exchange for common units
—

 
—

 
780

 
—

 
—

 
(780
)
 
—

 
—

Shares issued in exchange for redeemable stock
—

 
—

 
122

 
—

 
—

 
—

 
—

 
122

Redeemable stock fair market value adjustment
—

 
—

 
—

 
(296
)
 
—

 
—

 
—

 
(296
)
Adjustment for noncontrolling interest ownership in operating partnership
—

 
—

 
(38
)
 
—

 
—

 
38

 
—

 
—

Amortization of unearned compensation
—

 
—

 
6,625

 
—

 
—

 
—

 
—

 
6,625

Dividends on common stock ($2.46 per share)
—

 
—

 
—

 
(185,789
)
 
—

 
—

 
—

 
(185,789
)
Dividends on noncontrolling interest units ($2.46 per unit)
—

 
—

 
—

 
—

 
—

 
(10,217
)
 
—

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

 
$
754

 
$
3,632,013

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

 
$
—
<