Mid-America Apartment at Nareit REITweek: Strategic Growth in Sunbelt

On Wednesday, 04 June 2025, Mid-America Apartment Communities Inc. (NYSE:MAA) presented at the Nareit REITweek: 2025 Investor Conference. The company highlighted its strategic focus on bridging valuation gaps and growing earnings despite supply pressures. While Tampa showed strong performance, markets like Austin lagged behind. MAA remains optimistic about leveraging its diversified portfolio in high-demand Sunbelt markets.

Key Takeaways

• MAA aims to bridge the valuation gap between public and private markets.
• Strong demand persists in Sunbelt markets, with Tampa outperforming.
• MAA plans to increase debt to EBITDA to fund growth and development.
• Supply has decreased significantly, with construction starts down 80% from the peak.
• MAA is focused on both internal and external growth through innovation and development.

Financial Results

MAA reaffirmed its initial guidance for operating expenses, with vendor contracts secured through 2026. The company maintains a strong balance sheet, with a current debt to EBITDA ratio of 4x, planning to increase it to 4.5x to 5x for external growth. An A- credit rating supports favorable debt conditions.

Operational Updates

Supply and Demand:

• Construction starts have significantly declined, down 80% from the peak in 2022.
• Absorption has exceeded supply in the last three quarters, indicating strong demand.

Market Performance:

• Tampa is showing positive rent growth, while Austin, Phoenix, and Nashville face challenges.

Renovation Program:

• MAA plans to renovate 5,000 to 6,000 units this year, aiming for rent increases of $100 per unit post-renovation.

Development:

• With a development pipeline of $850 million, MAA plans to expand it to $1 billion to $1.2 billion.
• Development yields are expected to be in the 6% to 6.5% range.

Future Outlook

Supply and Demand:

• Supply is projected to decrease by 40% to 50% this year, with a favorable rent growth scenario expected from 2026 onwards.

Development:

• Developer returns are at 5.5%, with new developments taking up to 18 months to commence.

Q&A Highlights

New Development Landscape:

• Debt capital availability has improved, but equity is retracting from deals.
• MAA evaluated over 40 deals in Q1, advancing with only two, focusing on phase two developments.

Resilience in Economic Downturns:

• The Sunbelt region generally outperforms during economic slowdowns, with MAA’s diverse portfolio providing stability.

For a detailed understanding, readers are encouraged to refer to the full transcript.

Full transcript - Nareit REITweek: 2025 Investor Conference:

Brad Hill, President and CEO, MAA: All right, well, good morning everyone. Appreciate everybody joining us this morning. My name is Brad Hill. I’m the President and CEO of MAA. To my left, we have Tim Argo, who’s our Chief Strategy Officer.

And to my right, I have Clay Holder, who’s our CFO. What I thought I would do is just go through some high level highlights this morning for the company, turn it over to the team members to talk about some specific items and then open it up for any questions that you guys may have. So just as a way of just reminder in terms of MAA, we’re an S and P 500 multifamily focused REIT. We have a thirty one year history of operating exclusively in high demand markets and generally those markets overlap with what’s known as the Sunbelt in The U. S, but we also have focus in other high demand markets across The U.

S. As well. And really our focus is on delivering total shareholder return by growing earnings and dividend. And if you look at our history, we have some slides in the deck, you can see we have a strong long history of performing in both of those areas and outperforming the sector average. I think as we look forward and what the opportunities are for us, I think there’s really two areas of opportunity.

One, think is bridging the gap between the current gap in valuation between the public and private markets. If you look at the private market and what’s transacting in our region of the country, we continue to see good strong pricing on transactions that are occurring. We’ve seen a few portfolios trade in our market, assets very similar to what we have and generally we’re seeing cap rates in the 4.5, four point seven five range consistently across our market. And today we’re trading in the mid to high five cap rate range. So we do think that there’s an opportunity for us to continue to be priced similar to what we’re seeing transactions occur at in our market.

We’ve seen that cap rates remain in that range for some time now. And the second focus for us is on growing earnings. And we’ve got a number of ways that we’re looking to do that, that we’ll walk through this morning. But clearly for the past eighteen months, we faced a lot of pressure from supply coming into our market. And I think we’ve really weathered the fifty year high level of supply coming into our market very well.

If you would have told us years ago that we were going to face the highest level of supply we’ve ever seen in our markets, but our NOI was going to go down 1.4%, we wouldn’t have believed that. But that’s what we’ve seen and we’ve performed quite well in the midst of that. So, you know, as we continue to see high levels of supply this year, especially the first half of the year, we continue to see good trends. The markets demand remains strong, supply continues to come down from where we are at this point and we do think that we are on the path to continue to deliver strong earnings growth the back half of this year and heading into the next few years where the supply demand dynamics will be materially different than what they are today. Our packet, we did include an update.

I do want to point out that the update that we have in the packet is May year to date. We include first quarter information. We also include May year to date. I think from conversations we had yesterday, there’s a little bit of confusion about whether that information was quarter to date or year to date and it’s year to date. So I do want to point that out, we’re not providing monthly information at this point.

We do think that that can be a little bit distracting to the real trends of what we’re seeing in the business. And there seems to be a lot of focus on monthly trends, which can be volatile, especially as you have different lease terms month over month and especially as you’re heading into a different seasonal pattern as we get into the busier summer leasing season. So we’re focused on clearly on year to date numbers performing in line with our expectations. And as we sit here today, the results that we’re seeing and the trends that we’re seeing, we believe we’re still in a good spot to deliver on the earnings, the revenue NOI performance that we laid out for the year. The trends continue to track positively as we do see demand holding up very, very well and the supply picture improving.

In terms of demand, we’ve talked about this for some time. I think that’s one of the things that surprises a lot of folks from the Sunbelt is the demand continues to be very, very strong, very resilient in our region of the country. If you look at absorption in the last three quarters in our region of the country, it’s exceeded supply despite the very high levels of supply that we are seeing. So the units that are being delivered are being absorbed. So the market is not building up an inventory of unoccupied units we are absorbing.

So we think the recovery as we get into a better demand supply picture will be very constructive for us to be able to push on rent growth. Migration trends continue to be positive. They’re definitely not in line with COVID highs, but they’re in line with where we were pre COVID where we’re seeing net migration into our region of the country is about positive 7% or so versus what’s moving out. So we continue to see very good migration trends. The Sunbelt job growth machine just continues to produce jobs.

The job growth in our region of the country is double what we see in other areas of the country, and we really don’t see that slowing down at the moment. Wage growth continues to be strong, again, significantly outperforming other areas of the country. And then the other component of demand that we’re really seeing is the single family affordability and availability is very challenged in our region of the country, And that’s a phenomenon that’s newer to our region of the country really over the last five, six, seven years. You know, it’s a phenomenon that has always existed on the coastal markets where the single family market was relatively unaffordable versus multifamily. Well, phenomenon is newer in our region and I think it’s here to stay.

Over the last five years, we’ve seen housing prices go up over 50% in our region of the country and really no indication that that will decline. So, as we retain more and folks stay with us longer, that’s clearly a demand factor that we think supports our strong renewals and our strong retention rates. And then on the supply side, clearly we’re seeing declining deliveries occur in our markets. The numbers that we show for this year, supply will be down about 40% to 50% versus what we saw last year. And that is predominantly second half of the year drop.

So we’re still in elevated supply now, but as I mentioned a moment ago, we’re still seeing very good trends in our performance. And then the other point I would make is that if you look at the trailing twelve month starts in our region of the country, they are down significantly, they’re close to where we saw in 2010 and 2011 in terms of starts, so again, the picture for supply and demand improving in our region of the country is very, very positive. And again, we feel very good with that with our ability to continue to deliver robust same store NOI growth associated with that. The other thing I would mention is that as the supply and demand picture becomes more in our favor and we’re able to push on rent growth a little bit more, our residents are really in a good spot. They’re very healthy.

If you look at our collections, they’re very strong. Rent to income is consistent with what we’ve seen historically. And as I mentioned a moment ago, the wage growth in our region of the country continues to be very, very strong. So we feel good about where our residents stand and their ability to continue to absorb rent increases as the supply demand improves. And then we have an increased focus on growth, both internally and externally.

We’ve talked for a number of quarters now about increasing our development focus and we continue to do that. Today our pipeline is about $850,000,000 We are on track to start another three to four projects this year which is well on our path to expanding that development pipeline to a billion, billion 2. And the yields we’re able to get on those developments are very accretive given where our cost of capital is and especially very good use of capital given the cap rates that we’re seeing in our markets and the yields we’re getting are calling the six to 6.5% range. So we feel very good about our ability to continue to drive future earnings, especially when anything we start today, we’ll be delivering two years out where the supply pipeline is going to be less than half what the long term average is in our region of the country. So we feel good about that.

We’re also increasing our investment in our internal portfolio. We’re increasing our renovations, interior renovations and redevelopment program. That program does best as the new supply begins to lease up and as we’re getting to the point where that is occurring and the rent gap between our average rent and the new supply that’s coming is over $300 It really supports our ability to push that program. So we’ll certainly be increasing that. And then the last point I’ll make before turning over to these guys is, we are increasing investments in various innovation and technology initiatives, really with the goal there to drive efficiencies, improve customer service, increase our centralization and specialization.

And we’ve got some information in the packet about what that looks like. We have achieved to date in terms of incremental NOI from initiatives, about $50,000,000 is in our run rate today. Over the next five years, we think we’ll add another 50,000,000 to $55,000,000 through other initiatives predominantly property wide Wi Fi. And then we have about another $45,000,000 that we’ll look to add over the next few years as we continue to increase our use of various technology initiatives, increase our shared services, centralization and specialization across the portfolio. So as we sit here today, we feel good about the trends that we’re seeing and the recovery that we’re seeing in this transition year.

We also feel really, really good about the supply demand fundamentals and dynamics over the next few years. And then these other initiatives that we have to drive incremental earnings going forward, we feel really, really good about. So with that, I’ll turn it over to Tim first just to hit on a couple of other areas.

Tim Argo, Chief Strategy Officer, MAA: Yeah, thought I’d follow on a little bit to the supply demand points that Brad was making. Know, one of the questions we get in a lot of our meetings and as we’ve had different meetings over the last several weeks is, you know, what gives us confidence the supply is moderating and the supply demand balance, gets better from here and continues to get better over the next couple years. It’s really it’s really a few different reasons. One, and and Brad touched on a couple of these, but, you know, we look at construction starts and we’ve done a lot of work over the last couple of years to figure out, you know, when when does peak supply pressure occur, you know, when and the way we define that is when are the most units in lease up in a given market and what we’ve what we’ve seen and and even as some of the the lease up times have have sort of gapped out a little bit over the last, you know, call it four to five quarters, what we see is peak pressure is about two years out from construction start. And there’s a there’s a chart on page 11 that that goes through peak starts in our markets and you can see, you know, it really peaked in mid to late twenty twenty two.

And so you move on two years where we’re in the call it two quarters after that period that we’re in now. And we saw construction starts really drop off after that. In fact, the starts in Q1 of twenty five in our markets is about 80% less than it was at that peak. And even well below when we saw, you know, low development occurring right in the middle of the COVID, we’re about half of where we are there. And so if you play out over the next four quarters, what supply would look like or over the next two years, supply would look like based on starts well below the 3.5% of inventory that is typically normal for our market.

So we know the supply picture is getting better. Then you think about on the demand side, all the factors Brad mentioned, job growth, in migration, household formation, still, you know, greatest in our region of the country and much better than than the broader country. And I think, you know, one of the points that goes a little bit underappreciated is the continuing drop in turnover. And so we’ve seen turnover drop every quarter, every year for the last several years. And what that effectively does is that’s creating more demand.

So even though we’re having a lot of supply coming to the market, there’s 2% or 3% lower turnover across the markets as well. So that’s eating in to that inventory as fewer units are coming available. And then the last point I’ll make on that is just the absorption piece that Brad touched on a little bit. We’ve had elevated supply in our markets for the last two or three years, still remains elevated but certainly lower than it has been the last couple of years. But we’ve seen that inventory get absorbed.

The last three quarters, Q3, Q4 of last year and Q1 of this year, we saw actually more units absorbed than what were delivered. So not only absorbing the new supply, but going beyond that and seeing occupancies increase. And that we haven’t seen that level of absorption since going back to early twenty twenty one. So there’s not a there’s not a big, you know, plug of units sitting there that need to get absorbed or need to get occupied. We’re we’re kinda at a at a good spot with occupancy and now as we see supply starting to drop and the demand picture continuing to stay strong and stay steady in our markets, that helps gives us confidence.

We’re seeing it in pricing, we’re seeing new lease pricing continue to accelerate. Our renewals are as good as they’ve ever been going out for the next two or three months. So all those things sort of give us confidence that we’re in a good spot. And then one thing I’ll touch on too and then let Clay give a few comments is another question we get a lot in the meetings just kind of what we’re seeing from a market standpoint. Are there any that are outperforming or doing better than we thought they would or worse than we thought?

And generally, I’d say the markets are performing about as we expected. A lot of the markets that have been strong last year, we expected to continue to be strong have been so, and it’s some of our mid tier markets, Charleston, Savannah, Greenville, Richmond. The DC area has been great for us. Houston continues to hold up well. Tampa is probably one that I would point to on the upside that’s that’s performed a little bit better.

We’re starting to see some positive momentum and rent growth out of Tampa, which is encouraging. It’s a it’s a significant market for us. And then on the the downside, if you will, or some of the struggling markets are continue to be the ones we’ve talked about. It’s Austin, it’s Phoenix, it’s Nashville, with with Austin being the biggest laggard. I mean, we feel great about that market long term.

It has some of the best demand fundamentals of any of our markets, but it has been hit with a ton of supply and particularly throughout the market. So even though supply in that market is dropping probably 30%, forty % this year from where it was last year, it’s still one of our highest supply markets. So but the job machine there is great. We’re we’re seeing a lot of a lot of employers still move there. Population growth is great.

So we feel great about that market long term, but it’s it’s gonna be one of the ones that that struggles for us and probably one of the ones that is a little bit of a laggard as we see this recovery over the next several quarters. With that, I’ll turn it over to Clay.

Clay Holder, CFO, MAA: Yeah, I’ll touch real quick on our operating expenses for the year and kind of what we’re seeing to date. So far this year, we still feel good about our guidance that we’ve initially set for operating expenses. You think about some of the discussion we’ve seen in the headlines around tariffs we’ve been in touch with our vendors understanding exactly what sort of inventory that they have on hand and feel good that they have enough supply of HVAC systems, appliances, that sort of thing that will get us through the course of this year. In fact, we have contracts with certain vendors that are locked in through the remainder of this year and even into 2026. So feel good about repair and maintenance expenses and the personnel expenses as well as another one we still feel good about.

We’ve seen lower turnover this year we likely given some of the uncertainty in some of the economy that’s out there. But we’re holding tight to our folks and that’s really good because that allows us to be able to perform better serving our residents. And then just to touch real quick on property taxes and insurance, both of those we are we’re getting good information right now on those two line items. We’ll have more to say on kind of where both of those fall out as we release second quarter earnings in late July. And then just lastly, then I’ll touch on them, we’ll turn it over to questions is the balance sheet.

As you guys see on Page twenty six and twenty seven of materials that we passed out, we’re very well capitalized, very well laddered debt maturity stack. We’ve got one issuance that will mature in November of this year. It will mature at an effective rate of 4%.

Brad Hill, President and CEO, MAA: We feel like we’re in

Clay Holder, CFO, MAA: a good spot to be able to refinance that whenever the time comes. We’re A minus rating, so we’ll have that benefit as we go through that maturity and get to lean on that credit rating. And then last thing I’ll touch on, Brad mentioned the external growth, our debt to EBITDA today is at four times. We want to move that to 4.5 to five times. And so that would be about another billion, billion and a half of additional dollars that will fund that external growth and that development pipeline that Brad was touching on.

So feel like we’re very well set to be able to continue to grow and operate in this environment and for a number of years to come. With that, we’ll turn it over to questions.

Brad Hill, President and CEO, MAA: Yeah, and Tim, you can jump in here as well. Yeah, so I mean, $300 that we quote includes concessions for the new properties that are coming online. So if a new property is offering a month or two free, that’s included in that number. So ultimately what we’re saying is the gap between our current rents and the effective rents for new product is over $300 a unit. It’s higher in some markets, that’s kind the average.

In some markets is as high as 500 or $600 which really supports our ability to go in and renovate the units and rehab the clubhouse to be able to push those rents. So that’s one of the things that we look at. In the program, what we have found is over time is it works better when that new supply as it stabilizes. So what you’ll see with us this year is we’ll continue to increase that program. I think our plan for this year is about 5,000 to 6,000 units in that program.

And we’ll continue to increase that appropriately as the supply around us continues to stabilize.

Tim Argo, Chief Strategy Officer, MAA: Yeah, and I’ll just add that that is a good gap that we like to see. I mean, that’s compared to our current in place rents and when we do our renovation program, typically we’re raising rents a hundred dollars or so on on average per unit. And so with that 300 or so dollar gap, we can raise it a hundred dollars, create what feels like a new unit for the resident and still have a pretty good, you know, $200, which is in most places a 15, sometimes 20%, gap between the new rents and and still fit in nicely and and give that give that resident, what feels like a new unit without having to pay of those brand new lease ups. Clearly, supplies coming down.

Brad Hill, President and CEO, MAA: In your view, what Yeah, mean we get that question a lot. Last year the limiting factor on new starts was debt capital. Debt capital wasn’t available last year that is available this year. Really what we’re seeing today is a pullback on the equity side. In fact, there’s two ways that we develop, we develop in house and then we develop what we call our pre purchase platform where we’re partnering with some of the largest developers, merchant developers across the country.

And what we’re doing in that platform is we bring all the capital. When the property is stabilized, we own the asset 100%. And so what we’re seeing in that platform right now with some of the largest developers in the country is that equity is backing out of deals. And in the first quarter we looked at over 40 deals through our JV platform where again we can bring all the capital. And generally what we’re seeing is most deals just don’t pencil.

The developer, they’re very optimistic. They normally show returns that are 6%, six point five %. But then when we go through packet and align it more with what our expectations are, they’re generally in the 5.5% range or so. So when you’re looking at cap rates today that are 4.755 in our region of the country, that’s a very small gap and that’s one of the reasons why they’re not getting the capital. So we’ve got to see a material increase in the underwritten yields for these developments for them to really start making sense.

So if you’re trying to go from a 5.5 to 6.5, you’ve got to get 20 or so improvement in your return. And so that’s going to be a combination of Interest rates over the last year, year and a half are significantly increasing the cost of these developments. Construction costs today are not really moving up, but they may be in some markets coming down a little bit as the supply pipeline continues to trail off, but they’re pretty much flat. So we do need to see significant rent growth in order to make some of these developments start to pencil. The other thing I think it’s important to remember is even in the Sunbelt, I think some folks have the misnomer thinking that in the Sunbelt, you can go out and find a piece

Tim Argo, Chief Strategy Officer, MAA: of land and you can

Brad Hill, President and CEO, MAA: be under construction within six months. And that’s just not the case. It’s a year to year and a half process minimum from when you go out and find a piece of property, get your permits before you can really start construction. So there is a ramp up that’s needed in the pipeline. So I think once we start to see better economics in underwriting more broadly, Again, in the first quarter, we underwrote 40 plus deals and we’re moving forward with two of those.

So it’s big miss rate in terms of the economics. And where we’re able to find some of these deals that make sense are one, in house where it’s a phase two for an existing property we already have and we’re not building amenities, so we have some efficiencies there, lower construction costs, things of that nature that help us hit those returns. And two, where we’re partnering with developers or our development partners are also the general contractor, they’re able to get better pricing than what we’re seeing in the market overall today, which is also helping our return. So I think we’ve got to start seeing some rent growth in the numbers before the capital is going to be more comfortable coming in. And then when that occurs, there’s going to be a ramp up process before you can really start to see a ramp up in terms of the new starts.

Tim Argo, Chief Strategy Officer, MAA: Yeah. I mean, the the the latter part of your question, no. I mean, don’t we’re not in a lot of markets that has rent control or certain restrictions on that. In fact, I think it’s, 90% of our NOI comes from states where rent control is is prohibited by law, so not a lot of concerns there. But I I do think, you know, if you if you consider normal to be three, three and a half percent rent growth is kinda what we’ve seen in a in a normal supply demand dynamic, I do think we’re set up, you know, particularly starting in ’26, ’20 ’7, even in ’28 for an above market rent growth sort of scenario with the for all the reasons we’ve laid out with construction starts going down and and demand being strong.

So, know, if if three, three and a half is normal, I think something in the in the mid to high single digits is reasonable for for a couple of years. And then, so we’ve got, know, even if even if development starts pick up over the next couple quarters, there’s there’s a good two and a half, three year window, where we’ve got a we’ve got a pretty good operating environment and and so you add that improving supply demand environment with some of the things Brad mentioned that we’re doing internally to improve our internal growth, it sets it up for a pretty attractive few years for us in terms of FFO growth.

Brad Hill, President and CEO, MAA: Yeah, I mean, think if economy weakens, I mean, think one of the things you can do is you go back and look at historical performance for us. And part of our strategy has always been to focus on full cycle performance, which includes the up part of the cycle as well as the down part of the cycle, which what you’re presenting would presumably be a down part of the cycle. And we’re very well equipped to handle those times. If you go back and look at historical performance for us when there was a downturn, you look at 02/2002, ’2 thousand and ’8, ’2 ’9 or COVID twenty twenty, what you’ll see is in those slowdowns, the Sunbelt generally outperforms other regions of the country. And there’s a couple of reasons for that.

I mean, the diversification of jobs within the Sunbelt is much greater than other regions of the country. And you look at our performance, we outperformed the sector average by over 300 basis points during those times. I think what you also see in the Sunbelt is part of our story is the diversification We’re diversified by product, by price point, by submarket. We’re also diversified in large markets and mid tier markets.

And I think it’s that mid tier exposure that really helps provide somewhat of a stabilizing contribution to earnings and NOI performance that we like and it provides lower volatility of earnings if you look at our full cycle return. So I think that part of our story helps protect us if things get a little bit tougher on the job side. I do think as we go forward, if you look at the demand factors, whether it’s job growth, it’s migration trends, it’s population growth, and then it’s the single family affordability and availability. I think the job growth component of that has been less of a component than it has been historically, because now you’ve got these other components that are very strong demand contributors in our region of the country. So again, if we see a little bit of softness in the job market going forward, it’s not as big of a factor as it maybe has been historically.

And then I think when you couple that with what we’re seeing in the decline in the supply, I think the market will still our market and our portfolio specifically will continue to perform quite well. Yeah, mean I think definitely it could. To Tim’s point, if you see the long term average is 3.5%, if you look at the job growth within our region of the country over the last few years, it has significantly transformed. So I do think that the market’s ability to support if equilibrium historically has been 3.5, I think the market based on demand and job growth that has occurred in the region of the country with new manufacturers moving to the Sunbelt, with various companies relocating their headquarters, the job machine in the Sunbelt continues to produce jobs at a rate that I think is higher than what it has done historically. So I think the market could support a higher than long term average supply.

Do to my comments earlier, you know, the Sunbelt or any market is really never going to go to zero supply. That’s not realistic. I think we do have a set up for the next few years where it’s going to be substantially less, maybe less than half of what long term average has been. But at some point that will increase, new supply will increase, but the market is very strong to be able to withstand that. All right, I think that’s our time.

So we appreciate everybody’s time today. If you have any questions, feel free to follow-up Thank you.

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