Mid-America Apartment Communities, Inc.

Good morning, ladies and gentlemen. Welcome to the MAA fourth quarter and full year 2020 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, the companies will conduct a question and answer session. As a reminder, this conference is being recorded today, February 4th, 2021. I will now turn the conference over to Tim Argo, Senior Vice President, Finance for MAA.

Thank you, Ashley, and good morning, everyone. This is Tim Argo, Senior Vice President of Finance for MAA. With me are Eric Bolton, our CEO, Al Campbell, our CFO, Rob DelPriori, our General Counsel, Tom Grimes, our COO, and Brad Hill, our Head of Transactions. Before we begin with our prepared comments this morning, I want to point out that as part of the discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34-act filings with the SEC, which describe risk factors that may impact future results. These reports, along with a copy of today's prepared comments and an audio copy of this morning's call, will be available on our website. During this call, we will also discuss certain non-GAAP financial measures, a presentation of the most directly comparable GAAP financial measures, as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data, which are available on the For Investors page of our website at www.mac.com. I will now turn the call over to Eric.

Thanks, Tim. We appreciate everyone joining us this morning. As detailed in our fourth quarter earnings report, MAA ended 2020 on a positive note. Results were ahead of expectations, and we carried good momentum into calendar year 2021. During the fourth quarter, leasing traffic was strong, and we captured 6% higher move-ins as compared to prior year. And despite the normal seasonal slowdown during the holidays, we were able to capture positive blended lease-over-lease rent growth that equaled the prior third quarter, with particularly strong renewal lease pricing averaging 5.2% in Q4. Average physical occupancy also remained strong at 95.7% in the fourth quarter, a slight improvement from the performance in Q3. We believe these trends, supported by improving employment conditions and the positive migration trends across our footprint, positions MAA for continued outperformance into the coming spring and summer leasing season. Overall, conditions are setting up for a solid recovery cycle for apartment leasing fundamentals across the Sunbelt over the next three years or so, as demand recovers and supply levels moderate a bit into 2022. I believe for several reasons that MAA is in particularly strong position as we head into the recovery part of the cycle. First, we expect that our Sunbelt markets will continue to capture job growth, migration trends, and demand for apartment housing that will be well ahead of national trends. While there were clearly favorable Sunbelt migration trends by both employers and households prior to COVID, this past year the trends accelerated. The primary reasons behind these favorable migration trends, including enhanced affordability, favorable business climates, and lower taxes, will still be with us well past the point we get the pressures associated with COVID behind us. Secondly, the efforts we have underway this past year implementing change to a number of our processes involving new technology and web-based tools will continue to drive more opportunity for margin expansion. Specifically, steps taken to automate aspects of both our leasing and maintenance service operations will drive more efficiency with personnel cost. We expect to begin harvesting some of those early benefits later this year. Our redevelopment operation aimed at upgrading and repositioning many of our existing properties continues to capture very attractive rent growth and returns on capital. The higher levels of new apartment supply introduced into a number of markets over the past year will actually expand this redevelopment opportunity for us over the next couple of years. As outlined in the supplemental schedules to the earnings release, we also expanded our new development pipeline in the fourth quarter with just over 2,600 units now underway. Our external growth pipeline, executed through in-house development, pre-purchase of joint venture development projects and the acquisition of existing properties will continue to expand over the next year. In addition to the projects outlined in our current pipeline schedule included in our earnings release, we have pre-development activity currently underway with sites we own or have tied up in Denver, Tampa, Raleigh, and Salt Lake City. Finally, and importantly, our balance sheet remains in a very strong position with ample capacities to support both our redevelopment and our new growth initiatives. Calendar year 2020 was certainly not the year we expected, but MAA's full cycle strategy with a uniquely diversified portfolio across the Sunbelt, supported by a strong operating platform and balance sheet, positioned the company to hold up well. Before turning the call over to Tom, I want to also say thank you to our MAA associates for a tremendous year of service and support to our residents, our shareholders, and to each other. Our strategy is working, and our platform capabilities are strong. However, it's your intensity and passion for serving those who depend on our company that enables us to truly excel.