EXHIBIT 99.1
Mid-America Apartment Communities, Inc.
Investor Update
Investor Summary
- - 8th largest apartment REIT: 35,233 apartments in 12 states in the Southeast
and Texas
- - Recession-resistant business and strategy:
- Upper and upper-middle market segments
- Large, mid-size and small markets
- Diversified markets
- No development
- Quality, well-maintained properties
- - Limited partnering in JVs boosts IRR
Less risky and more stable business strategy
- - Total debt and equity capitalization of $1.75 billion
- - Less risky & more recession-resistant business strategy:
- High quality well-maintained assets
- Geographic diversity (45 markets)
- Exited development in 2000 - before the market softened
- Proven less earnings volatility than peers as AFFO grows in 2002 and
2003 YTD
- - Aggressive hands-on operators
Geographical diversification reduces risk
[map highlights market presence in the following states]
Ohio
Virginia
Kentucky
North Carolina
Tennessee
Arkansas
South Carolina
Georgia
Alabama
Mississippi
Texas
Florida
Performance
Annual Returns
- -----------------------------------------------------------------------------
I yr 3 yr 5 yr Since IPO
- -----------------------------------------------------------------------------
MAA 42.6% 23.1% 15.3% 14.4%
Sector Median 32.7% 12.7% 13.2% 11.7%
2003 2002 2001 2000
- ------------------------------------------------------------------------------------------
Fixed charge coverage 1.77 1.67 1.64 1.58
FFO growth 2003
- -------------------------------------------------------------------------------
Mid-America* 2%
Sector Median -12%
Before Preferred issuance costs (-$0.28) & Debt write -up (+$0.06)
Dividend Pay-out ratios - apartment REITs
- ---------------------------------------------------
Dividend payout ratios 2003* Dividend
as % of AFFO Cut
- ---------------------------------------------------
AEC 126% Yes
AIV 117% No
AML 104% No
ASN 106% No
GBP 118% No
HME 103% No
MAA 107% No
PPS 105% Yes
SMT 94% Yes
TCR 127% Yes
Median, all apts 103%
Source: Morgan Stanley
Strategy
- - Focus on growing value for public shareholders:
- Build dividend coverage
- Position company for faster growth:
- Asset recycling
- Higher growth markets
- Conserve cash
- Reliable source of investor cash flow and value growth
- - Grow through lower risk strategies:
- Acquisition, not development
- Add-on revenue sources
- Improved efficiencies
Strategy
- - Heavy operational focus:
- Maximizes value of existing assets
- Leader in competitive markets
- - Be low-cost provider in upper-middle market segment targets broadest market
sector
- - Maintain balance sheet and financial position that fits business strategy:
- Appropriate leverage
- Lowest cost debt sources
- Build capacity to take advantage of real estate cycle
Strategy
- - Invest in cross-section of markets:
- Smaller markets provide stability
- Larger markets offer growth
- Increase focus on larger markets at this point in the cycle
- - Maintain focus in Southeast:
- More rapid growth
- Existing management and investment base
High quality assets protects share value
- - Portfolio continuously improved with steady capital infusion:
- $300 MM of new development 1998 - 2001
- New high quality acquisitions
- Continuous upgrades at existing properties
- - Sold $110mm of properties 2000 - 2002; average age of 20 years,at very
attractive prices
- - Acquired Jefferson Pines (1999) & Los Rios (2000) in 2003
Increased earnings potential - new development
Reserve at Dexter Lake
Memphis, TN
740 units
Grande View
Nashville, TN
433 units
Increased earnings potential - new development
Grand Reserve
Lexington, KY
370 units
Kenwood Club
Katy, TX
320 units
Preston Hills: JV Acquisition
- - Opportunity
- New development with troubled lease up; motivated seller.
- High quality asset located in high growth market and sub-market.
- - Value Creation
- Purchased at well below replacement cost.
- In need of "hands on operations" to provide stronger cash
flows...lease expiration management, expense control.
Focus on profit improvement:
- - Utility initiatives
- Sub-metering of water
- 3rd party billing of ancillary services (including trash pick-up)
- Other initiatives recapture "lost" expenses
- - Productivity:
- Lease expiration management
- Service tech utilization
- Purchasing efficiencies and opportunities
Technology
- - New property management system to be installed in 2004 (MRI):
- web-technology
- facilitates amenity pricing
- significant control improvements across 130+ sites
- Improves efficiency & communication in numerous areas
- - Internet-based training programs
- highly effective
- in-place and rapidly expanding
Financing
- - Slightly higher leverage than sector:
- Debt: 49% of market cap, vs sector median of 46%
- Preferred: 9.5% of market cap vs sector median of 8%
- Refinancing (August 03) saves 4 cents/share
- - Reflects lower business risk compared to sector:
- No development
- Stable markets
- Diversified markets
- Broad market appeal
Positioned for successful refinancing program in 2004:
- - $200 million of refinancing
- $165 million of conventional refinancing:
- Current rate averages 7.7%
- Locked $40 million at 5.45%
- $35 MM of refinancing opportunities tax-free bonds
- $4MM potential savings
- - Expanded Fannie Mae credit facility to $800MM
- - Probable $100 million Freddie Mac credit facility
- - 85% of debt is fixed, swapped, forward-swapped or capped; fixed rate
maturities are laddered
Strategy implementation
- - Grow AFFO to improve dividend coverage over short & long term
- Return to normal market environment can add 30 - 40 cents share in
revenue
- Expand in markets with potential for faster growth
- Add assets carefully which are immediately accretive and will add to
AFFO over the long term
- Manage balance sheet to maintain flexibility while growing AFFO
Corporate Governance
- - Insiders own 10.8% of shares/units
- - 7 of 9 directors are non-management
- - 6 of 9 have significant public company experience
- - 6 of 9 are independent
- - Recent addition: Alan Graf, CFO of FedEx, Chairman of Audit Committee
Current Value Assessment (Cap Rate Method)
[bar chart represents the following data]
Cap rate at 7.5% $30.00
Cap rate at 7.0% $35.00
- - Cap Rate Value- next 12 mths proj. NOI less 4% mgmt fee and $350/unit
capital less liabilities & preferred
MAA value
- - Stock price is cheaper than sector average:
- current dividend yield of 7.25% vs 6.3% (sector avg)
- AFFO multiple of 15.1 vs 15.7 (sector avg)
- - Defined goal of dividend coverage improvement:
- Dividend payout ratio of AFFO only slightly above sector median (107%
vs 103%)
- - Balance sheet retains capacity for further accretive acquisitions
- - Expansion in growth markets
- - 30 to 50% of dividend not currently taxable
Investment summary
- - Proven performance thru the recession
- - Conservative strategy
- No development
- Sound debt strategy
- Balance sheet matched to business risk
- - Committed to improvement of dividend safety
- - Positioned to generate earnings growth.
- - Attractive current market pricing
Mid-America Apartment Communities
www.maac.net