Mid-America Apartment Communities, Inc. (MAA) Earnings

Management highlights

### Demand and Market Fundamentals - Inbound migration to MAA properties in the second quarter posted the strongest quarterly increase on record, reflecting broad appeal of MAA's high-demand markets. - First half 2026 unit absorption significantly outpaced new unit deliveries, with second quarter absorption reaching 1.8x new supply deliveries across the portfolio. Almost 80% of MAA's markets posted positive blended lease rates in the second quarter, and two-thirds of markets outperformed the portfolio average. - Persistent affordability and availability challenges for single-family housing support ongoing demand for high-quality, affordable multifamily rental housing, MAA's core operating segment. - Stronger performing markets in the quarter included Virginia, South Carolina (Norfolk, Richmond, Charleston, Greenville), the DC area, Atlanta, Dallas, Austin and Orlando; Phoenix, Charlotte, Raleigh and Savannah still face headwinds from elevated recent supply. Most underperforming high-supply markets are showing gradual improvement. ### Operational and Capital Initiatives - Interior renovation and repositioning programs were accelerated: 2,118 unit upgrades were completed in the second quarter, bringing year-to-date volume to 3,504 units, 30% higher than first half 2025. The program delivers an average 25% cash-on-cash return, exceeding the 19% original target, with upgraded units leasing 10 days faster on average than non-upgraded units. Management expects to further expand the program in 2027. - Common area amenity repositioning is progressing: the first group of 6 repositioned properties is 98% repriced with an average 13% cash-on-cash return, and expansion of this program is planned for 2027. - The property-wide Wi-Fi initiative continues to scale: 28 properties are live, with 38 additional properties being added in 2026. Quarterly revenue from the initiative grew from $500,000 in the first quarter to $850,000 in the second quarter, with accelerating resident adoption. - Development pipeline: MAA is on track to complete 4 new development starts in 2026, matching its annual target. As of quarter end, the development pipeline totaled $598 million, and will grow to approximately $804 million after the two third-quarter starts, working toward a long-term target of a $1 billion pipeline. Total development and pre-development spending in the quarter was $81 million. - Portfolio recycling: MAA completed one older property disposition in Raleigh in the second quarter, with two additional dispositions (a 42-year-old property in Dallas and the firm's only DC property) expected to close in the second half of 2026, completing 2026's planned disposition program. - Share repurchases: MAA repurchased 383,000 shares for $50 million in the quarter at a weighted average price of $130.66 per share. ### Balance Sheet Strength - At quarter end, MAA held over $880 million in combined cash and available revolving credit capacity, with a net debt to EBITDA ratio of 4.5x. - Outstanding debt has an average maturity of six years at an effective average interest rate of 3.9%. MAA closed a $350 million unsecured delayed draw term loan during the quarter, with $100 million drawn at quarter end.

Guidance

- Full year 2026 core FFO guidance midpoint is maintained at $8.53 per diluted share, as favorable expense and non-same-store performance offset slightly lower revenue assumptions. - Full year same-store effective rent growth and average occupancy guidance were modestly reduced, reflecting a slower-than-expected pace of new lease pricing recovery relative to initial projections. - Same-store full year 2026 expense growth guidance was also reduced, driven by better-than-expected cost control, lower projected real estate taxes, and a favorable 12% total premium reduction on the July 2026 insurance renewal, resulting in a projected 6% year-over-year decline in full year insurance costs. - Management expects third quarter 2026 blended lease rates to improve sequentially from the second quarter, a break from the trend of the prior four years where third quarter blended rates typically trailed second quarter levels. Full year blended rent growth is projected to be ~50 basis points, implying ~0.6% blended growth for the second half of 2026, with Q4 performance expected to be stronger than Q1 2026 and see a much smaller seasonal drop-off than occurred in Q4 2025. - Non-same-store lease-up properties are projected to deliver over $25 million in incremental year-over-year NOI in 2026, in line with or slightly ahead of prior projections.

Segment performance

MAA operates as a single-sector multifamily residential real estate investment trust, so separate product segment financials are not provided. Core FFO for the second quarter 2026 came in at $2.08 per diluted share, 2 cents ahead of prior guidance. Same-store operating expense growth was just 80 basis points year-over-year, which outperformed expectations. Same-store revenues came in slightly below projections, partially offsetting expense outperformance. Net delinquency remained low at 0.3% of billed rent, consistent with prior quarters, and the rent-to-income ratio improved to 18%. New lease-over-lease growth improved 170 basis points sequentially from the first quarter of 2026, 20 basis points ahead of the 2025 first-to-second quarter acceleration. Blended lease-over-lease rates were up 100 basis points from the first quarter of 2026 and 20 basis points year-over-year. Turnover fell to a record low 39.6%, and renewal retention improved 50 basis points year-over-year with renewal lease-over-lease rates of 5.2% for the quarter.

Risks & headwinds

- Elevated new supply deliveries over the past two years in a subset of high-concentration MAA markets (Phoenix, Charlotte, Raleigh, Savannah) continue to pressure pricing and occupancy, with a slower-than-expected pace of pricing recovery driven by cautious consumer sentiment in these markets. - Two lease-up properties in Charlotte remain near-term challenged, with concessions reaching 8 to 10 weeks for certain floor plans, though management still expects these projects to hit original underwritten yield targets long-term as supply pressures moderate. - Broader consumer caution in high-supply markets has led to more shopping around, later decision-making for new leases, and higher near-term pricing volatility, which slowed new lease rate recovery in the second quarter. - Acquisition of high-quality properties that fit MAA's investment profile remains slow due to unfavorable cap rate spreads for target assets relative to available alternative capital uses.

Analyst Q&A

• Q: Management cut 2026 revenue guidance but expects accelerating momentum in the back half of the year. What gives you confidence further guidance cuts won't be needed? /

  A: July pricing is expected to be similar to the second quarter, with occupancy growing steadily through the month. 98% of Q3 2026 renewals are already locked in, with retention rates and renewal lease growth well above both Q2 2026 and Q3 2025 levels. Pre-leasing for August and September is running 70-80+ basis points higher year-over-year, with lead volume up 10-15% and visit volume up close to 10%, pointing to an extended prime leasing season. The recovery is broad-based, with 80% of markets posting positive blended rates, and high-supply markets are still showing gradual progress, so management sees continued but slower acceleration than originally projected. (338 characters)

• Q: With high-quality acquisition cap rates in the 4.5-4.9% range, and slower market recovery, why prioritize development and acquisitions over larger share repurchases? /

  A: Target acquisition assets are new, high-quality properties in high-growth markets, while MAA is selling older, higher-CapEx properties that trade at mid-5% to low-6% cap rates, creating a favorable spread for recycling capital into development. Management's balanced capital allocation approach prioritizes long-term total shareholder return without excessive earnings volatility. Development and redevelopment deliver NOI growth 50-100 basis points above the existing portfolio average, and new supply projections remain below long-term averages for the next three years, creating favorable long-term fundamentals for new projects. (357 characters)

• Q: What is the current capital allocation priority with 2026 dispositions nearly complete and few attractive acquisition targets? /

  A: Development remains the top capital priority, followed by accelerated accretive internal growth initiatives: the Wi-Fi program, and interior and common area renovation/repositioning. These programs are outperforming return targets and have meaningful room to scale as new supply stabilizes. Disposition proceeds will continue to be balanced between share repurchases and these growth initiatives, maintaining the firm's balanced approach to near-term and long-term opportunities. (267 characters)

• Q: For current and new development projects, what are the expected net effective cash yields after accounting for current concessions? /

  A: The current in-progress lease-up pipeline has an average underwritten net cash yield of 6% at stabilization; due to current elevated concessions, current yields are running around 5% today. Concessions are already burning off, with lease-over-lease renewal growth of 9-10% for lease-up properties, giving management confidence original underwritten targets will be met. New projects underwritten today target net yields of 6.25% to 6.5%, including 4% construction cost contingency and conservative rent growth trending that is 2-4% below sub-market forecasts through stabilization. (302 characters)