MAA(US:MAA)2022-10-27 22:40Financial Data and Key Metrics Changes - MAA reported core FFO per share of $2.19, exceeding the midpoint of guidance by $0.12, driven by stronger-than-expected rental pricing trends and 14.6% same-store revenue growth [41][49] - Same-store operating expense growth was impacted by inflationary pressures, with real estate taxes being the largest contributor to variance from expectations [42][44] - The company increased its full-year core FFO guidance by $0.20 per share to a range of $8.37 to $8.53, representing a 21% growth over the prior year [49][52] Business Line Data and Key Metrics Changes - Same-store performance showed strong pricing, with blended lease-over-lease pricing up 13.9% and effective rent growth at 16.7% year-over-year [18][19] - Average daily occupancy remained strong at 95.8% for the quarter, with expectations for continued strong performance into the fourth quarter [19][20] - The company completed 2,305 interior unit upgrades and installed 652 smart home packages during the quarter, with plans to complete over 6,000 upgrades and approximately 23,000 smart home packages by year-end [24][25] Market Data and Key Metrics Changes - Leasing traffic volume increased by 16% compared to the same quarter last year, indicating strong demand for apartment housing [8] - 15% of new residents relocated to the Sunbelt from coastal markets, consistent with previous trends [11][120] - Rent-to-income ratios remained stable at around 22%, with over 99% of rent being collected, indicating no signs of affordability stress [12][121] Company Strategy and Development Direction - MAA is focusing on development projects, with a total of $444 million in under-construction projects and plans for new developments in Tampa and Raleigh [32][33] - The company is actively monitoring the transaction market, which has slowed due to rising interest rates and economic uncertainty, but remains open to future acquisition opportunities [14][31] - MAA's strategy includes enhancing property value through amenity upgrades and repositioning programs, which are expected to drive additional revenue [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about demand for apartment housing continuing to be strong, barring a severe recession [10][71] - The company anticipates a 6% range for earned rent growth in 2023, with expectations for additional market rent growth on top of that [19][70] - Management is preparing for potential economic downturns by maintaining a strong balance sheet and keeping capital available for opportunities [72][80] Other Important Information - The company acknowledged the planned retirement of Tom Grimes, a long-term executive, and emphasized the strength of its leadership team [15][16] - MAA's balance sheet remains strong, with a net debt adjusted EBITDA ratio of 3.97 times and over $1.2 billion in cash and borrowing capacity available [47][48] Q&A Session Summary Question: Trends in transaction market and cap rates - Management noted that cap rates have increased due to rising interest rates, with current cap rates around 4.5% but expected to rise further [56][58][60] Question: Outlook for rent growth in 2023 - Management remains optimistic about rent growth, projecting a 6% earn-in for 2023, with additional growth expected from strong demand dynamics [70][72] Question: Supply pressures in specific markets - Management indicated that while some markets like Austin and Charlotte may see higher supply, overall supply levels are not expected to significantly impact demand [124][125] Question: Impact of potential rent control in Orlando - Management believes that even if rent control measures pass, they would have a minimal impact on revenue, estimating only an 18 basis point effect on same-store revenue [133]