EXHIBIT 99.1
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PRESS RELEASE
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FROM: Simon R. C. Wadsworth
SUBJECT: Mid-America Apartments Third Quarter Results in Line with Forecast as
Occupancy Improves
DATE: November 6th, 2003
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Memphis, TN, Mid-America Apartment Communities, Inc. (NYSE: MAA) reported Funds
From Operations ("FFO") of $8,655,000 or $0.41 per share/unit for the quarter
ended September 30, 2003, in line with analysts' estimates, and including a
non-cash adjustment related to the redemption of preferred stock. The non-cash
adjustment of ($5,987,000), or ($0.28) per share/unit, which was discussed in
the second quarter report, represents the issuance costs incurred in 1996, 1997
and 1998 for preferred stock that was redeemed during the third quarter. This
adjustment has no impact on cash flow, AFFO, or fixed charge coverage, and is in
response to the SEC's July 31st Staff Policy Statement relating to EITF Topic
D-42 concerning the calculation of earnings per share for the redemption of
preferred stock. FFO before this adjustment was $14,642,000, or $0.69 per
share/unit, which compares to FFO of $14,212,000, or $0.69 per share/unit, for
the same period last year. FFO is the generally accepted measure of operating
performance for real estate investment trusts. Discussions on FFO and the other
non-GAAP performance measures can be found on the last page of this release.
The net loss available for common shareholders for the quarter ended September
30, 2003, after the ($5,987,000), or ($0.28) per share non-cash adjustment for
the preferred stock that was redeemed in the third quarter, was ($3,062,000), or
($0.17) per common share, as compared to ($231,000), or ($0.01) per common
share, for the same quarter of last year. Reconciliations of FFO and other
non-GAAP performance measures to their respective GAAP counterparts can be found
later in this release.
After the non-cash adjustment for redemption of preferred stock, on a
year-to-date basis FFO was $38,248,000 or $1.83 per share/unit ($44,235,000, or
$2.11 per share/unit without considering the adjustment). This compares to
$42,481,000 or $2.06 per share/unit for the same period in 2002. The net loss
year-to-date is ($1,481,000), or ($.08) per common share after the ($5,987,000),
or ($.28) per share non-cash adjustment for preferred issuance costs, compared
to net income of $982,000, or $.06 per common share in 2002.
Highlights for the quarter were:
o Same store physical occupancy improved to 94.7% from 92.6% at the end of
the second quarter, and up from 93.9% a year ago.
o September revenues were the highest monthly revenue performance for any one
month since the company's IPO.
o Fixed charge coverage improved to 2.42 from 2.36 a year ago.
o The successful sale of $155 million Series H preferred stock and redemption
of the Series A, B, and C preferred shares will result in annual preferred
dividend savings of $0.04 per share/unit.
o The Company purchased Blackstone's two-thirds' interest in its $117 million
joint venture which is immediately accretive to FFO.
o During the quarter the company acquired Los Rios, a 498-apartment community
in Dallas, and completed the sale of the Crossings, an 80-unit apartment
community in Memphis.
o Balance sheet capacity was enhanced by the sale of 1.365 million common
shares to two institutional investors, generating net proceeds of $39.4
million.
Eric Bolton, Chairman and CEO said, "We're delighted with the strong improvement
in occupancy generated during the third quarter. Markets are showing early signs
of improvement, but the bulk of the occupancy improvement was due to the success
of our marketing programs and our seasonal push for occupancy. While pricing
leverage continues to be several quarters away in some of our larger markets, we
were pleased with our ability to achieve this solid improvement in occupancy
while holding leasing concessions essentially flat on a same-store basis for the
quarter as compared to last year. It is also important to note that our average
rent per unit for the same store portfolio at quarter end of $657.20 was down
only 0.3% from last year. While we expect that leasing traffic will slow over
the traditionally slower winter months, we are in position to generate stronger
year over year revenue performance over the next two quarters and enter the
spring leasing season next year in solid shape.
"During the quarter we were able to take several important steps to improve
dividend coverage. Especially gratifying was the satisfactory conclusion of our
negotiations with Blackstone to buy their two-thirds interest in our 10-property
joint venture; when all of these assets are refinanced by August 2004, we expect
a pick up in our quarterly FFO run rate of almost 2 cents per share/unit. We're
also continuing to add quality assets in targeted high growth markets. While the
acquisitions market clearly remains very competitive, we're pleased with the
progress we have made to date in carefully deploying capital and positioning the
portfolio for stronger performance as the economy and market conditions improve.
Mid-America continues to post one of the best performances for the apartment
REIT sector as our unique market strategy, conservative financing and strong
operating capabilities generate steady results.
"Same-store results for the quarter reflect our aggressive push for occupancy.
On a sequential quarter-over-quarter basis, same-store revenues increased by
0.7%, while occupancy rose by a significant 2.1% (as of the end of the quarter)
to 94.7%. Compared to the same quarter a year ago, occupancy increased by 0.8%,
but same-store revenues were down 1.6%, as the occupancy gain occurred late in
the quarter and some short term concessions were incurred that will expire in
Q4. Our same-store operating expenses were up by 5.9% as we positioned the
portfolio for stronger occupancy and revenue performance over the slower winter
months and also in part because we were comparing to an exceptionally low
expense performance a year ago when property controlled expenses posted a 1.8%
increase. We expect to see property operating expenses reduce in the fourth
quarter and thereafter resume a modest year over year increase which has
characterized our operation for years. Our same-store NOI, down 3.7% from last
quarter, should now improve as a result of continued market improvements and the
progress we made in building occupancy."
Simon Wadsworth, Executive Vice-President and CFO said, "We completed a very
successful sale of 6.2 million shares of our new 8.3% Series H Preferred Stock
shares during the quarter with the underwriters exercising their full
over-allotment option. The sale was followed by our redemption of all of our
Series A, B, and C Preferred Stock. We expect our preferred dividends to be
reduced by $874,000 ($0.04/share) on an annualized basis compared to Q2 2003. As
we discussed in last quarter's conference call, we've followed EITF D-42 and
reduced net income by 28 cents per share/unit for the one-time, non-cash
adjustment of the original issuance costs of the redeemed preferred stock. We
also reduced FFO by a like amount.
"We were very pleased with all of our capital transactions during the quarter.
Our direct placement of 1.365 million common shares with two institutions was
accomplished on a very cost-effective and accretive basis for our existing
owners. We expect to increase our Fannie Mae credit facilities to $800 million
during this quarter, which we will use for refinancings scheduled for 2004. We
have reduced our interest rate risk by locking the interest rate on $40 million
of our scheduled April 2004 refinancing at 5.45%.
"We are adding 6 cents to our FFO forecast for the fourth quarter of this year
taking it to a range of $0.75 to $0.77 per share/unit to reflect the impact of
the purchase of Blackstone's interest in our joint venture. This increase
results from marking the value of the assumed debt to market, and amortizing the
resultant liability as a credit to interest expense until the debt is refinanced
next year, as prescribed by EITF 98-1. For the same reason we need to add 7
cents per share/unit to next year's forecast, taking it to a range of $2.89 to
$2.97. We anticipate that 5 cents of this adjustment will fall in the first
quarter and 2 cents in the second quarter. Since these are non-cash adjustments,
they will not impact AFFO; however, we continue to emphasize that the Blackstone
transaction is forecast to be accretive to AFFO once our refinancing is complete
in April and August next year."
The Company provides guidance on FFO and does not forecast net income. It is not
possible to reasonably predict the timing and certainty of acquisitions and
dispositions that would materially affect depreciation, capital gains or losses
and minority interest, or to forecast extraordinary items, which, combined,
generally represent the differences between net income and FFO.
MAA is a self-administered, self-managed apartment-only real estate investment
trust which currently owns or has ownership interest in 35,233 apartment units
throughout the southeast and southcentral U.S. For further details, please refer
to our website at www.maac.net or contact Simon R. C. Wadsworth at (901)
682-6668, ext. 105. 6584 Poplar Ave., Suite 300, Memphis, TN 38138.
Certain matters in this press release may constitute forward-looking statements
within the meaning of Section 27-A of the Securities Act of 1933 and Section 21E
of the Securities and Exchange Act of 1934. Such statements include, but are not
limited to, statements made about anticipated market conditions, anticipated
acquisitions, redevelopment opportunities, and property financing. Actual
results and the timing of certain events could differ materially from those
projected in or contemplated by the forward-looking statements due to a number
of factors, including a downturn in general economic conditions or the capital
markets, competitive factors including overbuilding or other supply/demand
imbalances in some or all of our markets, shortage of acceptable property
acquisition candidates, changes in interest rates and other items that are
difficult to control, as well as the other general risks inherent in the
apartment and real estate businesses. Reference is hereby made to the filings of
Mid-America Apartment Communities, Inc., with the Securities and Exchange
Commission, including quarterly reports on Form 10-Q, reports on Form 8-K, and
its annual report on Form 10-K, particularly including the risk factors
contained in the latter filing.
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CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share data)
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Three months ended Nine months ended
September 30, September 30,
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2003 2002 2003 2002
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Property revenues $ 59,919 $ 59,235 $ 175,034 $ 173,765
Property operating expenses 26,213 23,933 73,033 68,912
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Net operating income 33,706 35,302 102,001 104,853
Interest and other non-property income 203 169 666 471
Management and fee income, net 215 191 729 570
Property management expenses 2,233 2,297 6,784 7,247
General & administrative 1,733 1,686 5,333 4,643
Interest expense 11,689 12,657 34,096 37,381
Loss (gain) on debt extinguishment (101) (1) 104 32
Depreciation and amortization 14,827 14,214 42,685 41,295
Amortization of deferred financing costs 464 690 1,592 2,011
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Income from continuing operations before loss from
investments in unconsolidated entities and minority
interest in operating partnership income 3,279 4,119 12,802 13,285
Loss from investments in unconsolidated entities (8) (204) (316) (417)
Minority interest in operating partnership income (778) (28) (1,117) (361)
Net gain (loss) on insurance settlement proceeds and
disposition of assets 2,075 (128) 2,682 437
Discontinued operations:
Property operations (19) 38 (71) 123
Gain on sale 1,921 - 1,921 -
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Net income 6,470 3,797 15,901 13,067
Preferred dividend distribution 3,545 4,028 11,395 12,085
Original issuance costs associated with the
redemption of preferred stock 5,987 - 5,987 -
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Net income (loss) available for common shareholders $ (3,062) $ (231) $ (1,481) $ 982
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Weighted average common shares - Diluted 18,302 17,579 17,961 17,714
Net income (loss) available for common shareholders ($0.17) ($0.01) ($0.08) $0.06
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FUNDS FROM OPERATIONS (in thousands except per share data)
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Three months ended Nine months ended
September 30, September 30,
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2003 2002 2003 2002
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Net income $ 6,470 $ 3,797 $ 15,901 $ 13,067
Addback: Depreciation and amortization real estate assets 14,487 13,905 41,656 40,430
Subtract: Net gain (loss) on insurance settlement
proceeds and disposition of assets 2,075 (128) 2,682 437
Addback: Depreciation and amortization real estate assets
of discontinued operations - 38 78 113
Subtract: Gain on sale of discontinued operations 1,921 - 1,921 -
Addback: Depreciation and amortization real estate assets
of unconsolidated entities 448 344 1,481 1,032
Subtract: Preferred dividend distribution 3,545 4,028 11,395 12,085
Addback: Minority interest in operating partnership income (778) (28) (1,117) (361)
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Funds from operations before original issuance costs
associated with the redemption of preferred stock 14,642 14,212 44,235 42,481
Original issuance costs associated with the
redemption of preferred stock 5,987 - 5,987 -
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Funds from operations $ 8,655 $ 14,212 $ 38,248 $ 42,481
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Weighted average common shares and units - Diluted 21,324 20,646 20,922 20,606
Funds from operations before original issuance costs
associated with the redemption of preferred stock
per shares and units - Diluted $ 0.69 $ 0.69 $ 2.11 $ 2.06
Funds from operations per shares and units - Diluted $ 0.41 $ 0.69 $ 1.83 $ 2.06
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CONSOLIDATED BALANCE SHEETS (in thousands)
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September 30, December 31,
2003 2002
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Assets
Gross real estate assets $ 1,621,423 $ 1,452,362
Accumulated depreciation (323,683) (283,277)
Other real estate assets, net 21,992 23,454
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Real estate assets, net 1,319,732 1,192,539
Cash and cash equivalents, including restricted cash 15,940 18,057
Other assets 30,786 28,871
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Total assets $ 1,366,458 $ 1,239,467
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Liabilities
Bonds and notes payable $ 911,696 $ 803,703
Other liabilities 67,534 64,188
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Total liabilities 979,230 867,891
Shareholders' equity and minority interest 387,228 371,576
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Total liabilities & shareholders' equity $ 1,366,458 $ 1,239,467
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OPERATING RESULTS (Dollars and shares in thousands except per share data)
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ROA Three Months Ended Trailing
September 30, 2003 4 Quarters
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Net income $ 6,470 $ 18,975
Net gain on insurance settlement proceeds
and disposition of assets (2,075) (2,642)
Gain on sale of discontinued operations (1,921) (1,921)
Depreciation and amortization 14,827 56,500
Amortization of deferred financing costs 464 2,293
Interest expense 11,689 46,163
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EBITDA $ 29,454 $ 119,368
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Annualized Trailing
3Q03 4 Quarters
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Gross Real Estate Assets, Average $1,646,751 $1,532,783
EBITDA $ 117,816 $ 119,368
EBITDA/Gross Real Estate Assets 7.2% 7.8%
Three Months Ended September 30,
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2003 2002
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EBITDA/Debt Service 2.37x 2.31x
EBITDA/Fixed Charges 2.42x 2.36x
Total Debt as % of Gross Real Estate Assets 55% 55%
MAA portion of JV debt $14,884 $27,958
AFFO Three Months Ended September 30, Nine Months Ended September 30,
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2003 2002 2003 2002
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FFO $ 8,655 $ 14,212 $ 38,248 $ 42,481
Original issuance costs associated with
the redemption of preferred stock 5,987 - 5,987 -
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FFO before original issuance costs associated
with the redemption of preferred stock 14,642 14,212 44,235 42,481
Recurring Capex 3,374 1,762 9,590 7,157
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AFFO $ 11,268 $ 12,450 $ 34,645 $ 35,324
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Average Common Shares and Units - Diluted 21,324 20,646 20,922 20,606
AFFO per Shares and Units - Diluted $ 0.53 $ 0.60 $ 1.66 $ 1.71
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COMMUNITY STATISTICS
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Properties are grouped by operational responsibility and exclude the Los Rios
Park apartments purchased on September 30, 2003
At September 30, 2003
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Average
Number of Portfolio Rental Rate
Units Concentration Occupancy Per Unit
------------ --------------- -------------- ---------------------------------------------
Tennessee
Memphis 4,837 14.0% 93.5% $ 638.25
Nashville 1,399 4.0% 94.2% $ 721.71
Chattanooga 943 2.7% 92.5% $ 564.17
Jackson 664 1.9% 95.5% $ 582.98
Florida
Jacksonville 3,130 9.0% 95.2% $ 732.32
Tampa 1,120 3.2% 95.0% $ 764.91
Other 2,518 7.2% 93.6% $ 729.23
Georgia
Atlanta 2,116 6.1% 89.8% $ 749.23
Columbus / LaGrange 1,509 4.3% 97.2% $ 656.04
Augusta / Aiken / Savannah 1,132 3.3% 96.9% $ 641.13
Other 1,742 5.0% 97.0% $ 662.61
Texas
Dallas 2,356 6.8% 90.7% $ 651.69
Houston 1,310 3.8% 91.8% $ 734.94
Austin 1,254 3.6% 93.4% $ 624.82
South Carolina
Greenville 1,492 4.3% 98.4% $ 551.28
Other 784 2.3% 94.0% $ 686.35
Kentucky
Lexington 924 2.7% 92.4% $ 703.24
Other 624 1.8% 97.0% $ 611.38
Mississippi 1,673 4.8% 97.3% $ 593.13
Alabama 952 2.7% 96.7% $ 652.85
Arkansas 808 2.3% 94.7% $ 627.64
North Carolina 738 2.1% 93.6% $ 545.71
Ohio 414 1.2% 93.5% $ 681.46
Virginia 296 0.9% 98.0% $ 739.76
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Total 34,735 100.0% 94.3% $ 666.61
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SAME STORE STATISTICS
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Dollars in thousands except Average Rental Rate
Three Months Three Months Percent Change Three Months Percent Change
Ended Ended From Ended From
Sep 30, 2003 Sep 30, 2002 Sep 30, 2002 Jun 30, 2003 Jun 30, 2003
---------------- --------------- ----------------- --------------- ----------------------------
Revenues $54,102 $55,007 -1.6% $53,702 0.7%
Property Operating Expenses 16,524 15,492 6.7% 14,818 11.5%
RE Taxes and Insurance 6,773 6,558 3.3% 6,951 -2.6%
Other Expenses 207 141 46.8% 169 22.5%
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Total Operating Expenses 23,504 22,191 5.9% 21,938 7.1%
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NOI $30,598 $32,816 -6.8% $31,764 -3.7%
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Units (1) 29,043 29,042 29,043
Average Rental Rate (1) $657.20 $658.87 -0.3% $656.05 0.2%
Average Physical Occupancy (1) 94.7% 93.9% 0.8% 92.6% 2.1%
(1) Values are at September 30, 2003 and 2002.
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DEBT AS OF SEPTEMBER 30, 2003
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Dollars in thousands
Principal Average Years Average
Balance to Maturity(1) Rate
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Conventional - Fixed Rate or Swapped $ 585,851 9.3 6.8%
Conventional - Forward Swapped(2) 65,000 8.3 1.9%
Tax-free - Fixed Rate or Swapped 116,522 24.0 5.4%
Conventional - Variable Rate 126,663 7.6 1.9%
Tax-free - Variable Rate 17,660 27.9 1.8%
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Total $ 911,696 11.2 5.5%
(1) Maturities on swapped balances are calculated using the life of the
underlying variable debt.
(2) As the forward swaps are not yet in effect, the average rate represents the
rate on the underlying variable debt.
FUTURE PAYMENTS Average
Scheduled Rate for
Amortization Maturities Total Maturities
---------------- ---------------- -------------- -------------------------------
2003 $ 783 $ 20,000 $ 20,783 1.6%
2004 3,543 71,168 74,711 7.0%
2005 3,810 5,922 9,732 3.3%
2006 4,052 4,459 8,511 8.8%
2007 4,251 - 4,251
Thereafter 106,898 686,810 793,708 5.4%
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Total $ 123,337 $ 788,359 $ 911,696 5.5%
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OTHER DATA
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Shares and units in thousands except per share data
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- --------------------------------
2003 2002 2003 2002
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Weighted average common shares and units - Basic 21,020 20,432 20,690 20,404
Weighted average common shares and units - Diluted 21,324 20,646 20,922 20,606
Weighted average common shares - Diluted 18,302 17,579 17,961 17,714
Number of apartment units with ownership interest
(excluding development units not delivered) 35,233 33,923 35,233 33,923
Apartment units added during period, net 418 464 1,310 512
PER SHARE DATA
Dividend declared per common share $ 0.585 $ 0.585 $ 1.755 $ 1.755
DIVIDEND INFORMATION (latest declaration) Payment Payment Record
per Share Date Date
--------------- ---------------- --------------------------------
Common Dividend - quarterly $ 0.5850 10/31/2003 10/24/2003
Preferred Series F - monthly $ 0.1927 11/14/2003 11/1/2003
Preferred Series H - quarterly $0.11277(1) 9/23/2003 9/13/2003
(1) This first dividend represents the partial period from the original
issuance date through August 31, 2003. The full quarterly dividend rate on
the Company's Series H Cumulative Preferred Stock is $0.51875.
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NON-GAAP FINANCIAL DEFINITIONS
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Funds From Operations (FFO)
FFO represents net income (computed in accordance with accounting
principles generally accepted in the United States of America, or GAAP)
excluding extraordinary items, minority interest in Operating Partnership
income, gain or loss on disposition of real estate assets, plus
depreciation and amortization of real estate and adjustments for joint
ventures to reflect FFO on the same basis. This definition of FFO is in
accordance with the National Association of Real Estate Investment Trust's
definition. Our calculation of FFO may differ from the methodology for
calculating FFO utilized by other REITs and, accordingly, may not be
comparable to such other REITs. FFO should not be considered as an
alternative to net income.
The Company believes that FFO is helpful in understanding the Company's
operating performance in that FFO excludes depreciation expense on real
estate assets. The Company believes that GAAP historical cost depreciation
of real estate assets is generally not correlated with changes in the value
of those assets, whose value does not diminish predictably over time, as
historical cost depreciation implies.
While the Company has included the amount charged to retire preferred stock
in excess of carrying values in its FFO calculation in response to the
SEC's July 31st Staff Policy Statement relating to EITF Topic D-42
concerning the calculation of earnings per share for the redemption of
preferred stock, the Company believes that FFO before amount charged to
retire preferred stock in excess of carrying values is also an important
measure of operating performance as the amount charged to retire preferred
stock in excess of carrying values is a non-cash adjustment representing
issuance costs in prior periods for preferred stock.
Adjusted Funds From Operations (AFFO)
For purposes of these computations, AFFO is composed of FFO less recurring
capital expenditures plus the original issuance costs of preferred stock
that was redeemed. As an owner and operator of real estate, we consider
AFFO to be an important measure of performance from core operations because
AFFO measures our ability to control revenues, expenses and recurring
capital expenditures.
Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)
For purposes of these computations, EBITDA is composed of net income before
net gain on disposition of assets and insurance settlement proceeds, plus
depreciation and amortization, interest expense, and amortization of
deferred financing costs. EBITDA is a non-GAAP financial measure we use as
a performance measure. As an owner and operator of real estate, we consider
EBITDA to be an important measure of performance from core operations
because EBITDA does not include various income and expense items that are
not indicative of our operating performance. EBITDA should not be
considered as an alternative to net income as an indicator of financial
performance. Our computation of EBITDA may differ from the methodology
utilized by other companies to calculate EBITDA.