Mid-America Apartment Communities, Inc.

Good morning, ladies and gentlemen, and welcome to the MAA third quarter 2021 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterward, the company will conduct a question and answer session. As a reminder, this conference call is being recorded today, October 28, 2021. I will now turn the call over to Tim Argo, Senior Vice President of Finance of MAA for opening comments.

Tim Argo Thank you, Mallory, 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'll now turn the call over to Eric.

Thanks, Tim, and we appreciate everyone joining us this morning. Our third-quarter results were well ahead of expectations. Growing demand across our Sunbelt markets continues to drive strong rent growth and high occupancy. Steady job growth, favorable migration trends, wage growth, and escalating pricing of single-family housing are all driving strong performance for apartment rents across our portfolio. We're carrying significant pricing momentum into calendar year 2022. Resident turnover remains low, collections remain strong, occupancy is high, and rent-to-income ratios remain very affordable. This all suggests to us that we have good capacity in the market for the pricing trends that we are currently capturing. As we think about next year, we believe leasing conditions across our markets will remain favorable. Our Sunbelt markets continue to capture good job growth, driving positive migration trends. New move-ins year-to-date from households relocating to our Sunbelt markets constitute 14% of our new leases as compared to just over 10% in the same timeframe of 2020. High pricing trends associated with single-family housing are further supporting strong demand for apartment housing. In the third quarter, move-outs among our resident base to buy a home were down 12% as compared to prior year. and move outs to rent a home were down 38%. We continue to keep an eye on pressure surrounding supply chain challenges and inflation trends. Year to date, our biggest pressure on operating expenses is building repairs and maintenance costs, which are up just over 6%. Pressure is associated with both materials and labor. We expect year-over-year increases in repair and maintenance expenses will likely hold in this 6% range through the end of the year. Our current development pipeline remains on budget for both development costs and timing for unit deliveries. We're working into our planning and performance more cost and unit delivery contingencies as we expect the supply chain challenges to be with us through next year. But again, at this point, our current pre-development pipeline remains fully on track and we expect to start several additional new projects in 2022. In summary, our markets continue to capture strong demand, driving robust rent growth that will carry into 2022. MAA's uniquely diversified approach across the Sunbelt region, supported by a very strong balance sheet, has the company well positioned to take advantage of the outlook for continued strong leasing fundamentals in our markets. We continue to build strength in our technology platform and their operating capabilities. Our redevelopment program and several repositioning projects will drive higher earnings opportunity from our existing portfolio. We expect to capture meaningful expansion in our operating margins over the next couple of years. In addition, our external growth pipeline continues to expand and will deliver meaningful value accretion over the coming years. MAA is well-positioned heading into 2022, and we're excited about the prospects for continued outperformance in the coming year. I'd like to thank the MAA team for the tremendous progress this year and the very positive results. I'll turn the call over to Tom.