Mid-America Apartment Communities, Inc.

Good morning, ladies and gentlemen, and welcome to the MAA Second Quarter 2022 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, July 28, 2022. I will now turn the call over to Andrew Schaffer, Senior Vice President, Treasurer, and Director of Capital Markets of MAA, for opening comments.

Thank you, Gretchen, and good morning, everyone. This is Andrew Schaefer, Treasurer and Director of Capital Markets for MAA. Members of the management team also participating on the call with me this morning are Eric Bolton, Tim Argo, Al Campbell, Rob Del Prory, Joe Fracchia, Tom Grimes, and Brad Hill. Before we begin with our prepared comments this morning, I want to point out that as part of this 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 statement section in yesterday's earnings release and our 34-act filings with the SEC, which describe risk factors that may impact future results. 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. Our earnings release and supplement are currently available on the For Investors page of our website at www.maac.com. A copy of our prepared comments and an audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. I will now turn the call over to Eric.

Thanks, Andrew, and good morning. Leasing conditions remain strong across our Sunbelt portfolio. Job growth, positive migration trends, and the higher cost of single-family home ownership continue to fuel strong demand. Roughly halfway through the busy leasing season, we do not see any indication that demand is slowing. Leasing trafficker leads were up 11% in the second quarter as compared to prior year, generating a 7% jump in lease applications. New move-ins during the quarter from households migrating into our Sunbelt footprint increased slightly from last year and drove 15% of our new move-ins. Further supporting the strength of the leasing market and the prospects for continued rent growth, it's worth noting that the rent-to-income ratio of the new leases executed in the second quarter was 22%. It remains in a very affordable range. Collections also remain strong, with 99.5% of the rent billed in the second quarter collected, which is actually up slightly from 99.4% collected in the preceding first quarter. Al will touch on this, and while we see no near-term indications that leasing conditions are poised to change, and we expect the strong occupancy and rent growth trends to continue. We do anticipate that we will see some year-over-year moderation in rent growth over the back half of the year as the prior year performance comparisons become more difficult. But current rent levels continue to hold up well and are increasingly fueling solid revenue momentum for the start of the next calendar year. Pressure on operating expenses from the competitive labor market, inflationary and supply chain pressures, and real estate taxes continued in the second quarter. We expect these pressures will likely persist over the balance of the year with some relief beginning in 2023 as we begin to harvest increasing benefits from our new tech and margin expansion initiatives. On balance, given the strong top line performance, our NOI margin continues to expand And as noted in our earnings release, we once again increased our expectations for growth and same store net operating income for the year. We are seeing increasing opportunity within the transaction market and are very pleased with our Tampa property acquisition completed earlier this month. This new property acquisition is actually located directly adjacent to one of our existing properties, providing an opportunity to consolidate onsite operations to drive a very attractive investment return. Our new development pipeline continues to expand as we continue to find attractive opportunities to drive value and yields well above our overall cost of capital. Our pipeline of existing construction projects remains on budget, and our lease-up projects are outperforming our pro formas. We remain very encouraged by the current leasing conditions and the early momentum and key variables that will define calendar year 2023's initial performance. There are, of course, growing concerns surrounding the broader economy and concerns surrounding a potential recession. Should we find ourselves facing a weaker economic backdrop later this year or in 2023, we believe that MAA is very well positioned for such an environment. First, we believe that the well-diversified and more affordable nature of our markets will continue to enable our Sunbelt portfolio to better weather an economic slowdown as compared to other regions. MAA's balance sheet and coverage ratios are very strong and better than at any point in our company's history. We continue to introduce new technology and changes to our operating practices that will drive more efficiency and higher margins over the next couple of years. MAA has an established performance record of responding well to down cycles, and I'm confident that we will again demonstrate that resilience should we find ourselves in such an environment. Meanwhile, our outlook remains positive, and current leasing conditions are very strong. That's all I have in the way of prepared comments, and I'll now turn the call over to Brad.