Mid-America Apartment Communities, Inc.

Good morning, ladies and gentlemen, and welcome to the MAA fourth quarter and full year 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, February 22nd, 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. Please go ahead.

Thank you, Nikki, 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 DelFrori, Joe Fracchia, 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 difference between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data. 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, everyone. MAI wrapped up calendar year 2022 with fourth quarter results for core FFO that we're ahead of expectations as higher fee income, along with continued growth in average rent per unit and strong occupancy, more than offset pressure from higher real estate taxes. Looking ahead to the coming year, there's clearly some uncertainty surrounding the outlook for the employment markets, the pace of inflation, and the broader economy. In addition, while we do know that new supply deliveries in 2023 broadly will be higher than in 2022, We continue to believe that MAA is well-positioned for the coming year as the leasing market returns to more normalized conditions. Our expectations for the coming year are built in a lease-over-lease pricing environment of 3%. This performance assumption, coupled with the earn-in from 2022's rent growth, should drive growth in effective rent per unit of around 7% over the coming year. We will, of course, see conditions vary some by market and sub market location, but we believe that our portfolio is in a uniquely solid position to weather expected moderation from the historically high rate growth of last year. This view is really supported by three key variables. First, we continue to believe that our Sunbelt footprint maintains an advantageous position for capturing demand, given the stronger and more stable employment markets in the Sunbelt states. We continue to see job growth, positive migration trends, affordable rent-to-income ratios, and low resident turnover. Secondly, MAA's unique diversification across the Sunbelt region, including both large and high-growth secondary markets, provides exposure to a good range of employment sectors and works to help soften some of the pressures surrounding new supplier levels in a number of our larger markets. And thirdly, With a rent price point average for our portfolio that appeals to our broad segment of the rental market, and it is around 20% below the price point of the mostly high-end new product being delivered, we believe we will capture more stability and top-line performance as leasing conditions normalize in 2023. In the event that we do find ourselves later in the year headed towards a more severe contraction in the economy or a recession, As MAA has consistently demonstrated over the past 20 years, we expect to perform with a lower level of volatility than what generally is seen with more concentrated portfolios and or those concentrated in large coastal markets. The transaction market remains very quiet and we are likewise remaining patient with what opportunities we do see. I expect it will be the second half of the year before pricing data becomes more readily available. We do have plans to initiate development on four new projects in 2023 associated with sites that we already own or that are under our control. These projects will, of course, not actually start delivering units for another couple of years. In conclusion, I want to give a big thank you to our MAA associates for their tremendous service and record performance in 2022. We have the company well positioned for the next cycle, as a number of new tech initiatives will positively impact performance over the coming years. Our external growth pipeline continues to expand, and the balance sheet provides a good, strong foundation for supporting our current portfolio operations, as well as active pursuit of new growth opportunities. That's all I have on the way to prepare comments, and I'll turn the call over to Tim.