Mid-America Apartment Communities, Inc.

Good morning, ladies and gentlemen, and welcome to the MAA second quarter 2023 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 27, 2023. I will now turn the call over to Andrew Schaefer, Senior Vice President, Treasurer, and Director of Capital Markets of MAA for opening comments.

Thank you, Aaron, 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 DelPriori, 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 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.mac.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. Leasing conditions across the MAA portfolio continue to reflect our steady employment markets, strong positive migration trends, and continued low resident turnover. As a result, we are seeing good demand for apartment housing and are absorbing the new supply deliveries while supporting solid rent growth. In line with normal seasonal patterns, new lease pricing improved in the second quarter and the spread between new lease pricing and renewal pricing narrowed. Rents for new move-in residents jumped 100 basis points higher on a sequential basis as compared to the preceding first quarter. Renewal lease pricing in the second quarter remained strong, growing by 6.8%, driving overall blended pricing performance in Q2 to 3.8%, which is ahead of the original projections we had for the year. Occupancy remains steady, with average physical occupancy in the second quarter at 95.5%, which is consistent with the preceding first quarter, this despite a higher number of lease expirations during the second quarter. While we are working through a higher level of new supply deliveries across our markets for the next few quarters, with the demand trends holding up as they are, we expect to continue to drive top-line results that will exceed our long-term historical averages. As has been the case in prior cycles of higher supply, we see the demand-supply dynamic holding up slightly better in our mid-tier markets, and this component of our strategy continues to bring support to overall portfolio performance during this part of the cycle. As described in our first quarter report, We do expect to see moderation in year-over-year growth in operating expenses as inflation pressures ease a bit, and some of the efficiencies we expect to capture from new tech initiatives increasingly make an impact. As Al will cover in his comments, we do now also expect to see some relief on property taxes coming out of Texas, which further supports our ability to reduce our outlook for expense growth over the back half of the year. The transaction market remains quiet. We continue to underwrite a few deals, but the limited number of properties coming to market combined with strong investor interest continues to support low cap rates and strong pricing. We continue to expect that more compelling opportunities will emerge later this year and into 2024 and believe it's important to remain patient with our balance sheet capacity. Our new lease up, new development, and redevelopment pipelines will all continue to make solid progress and will provide attractive incremental additional earnings over the next few years. I did want to take a moment and express my deep appreciation to our onsite property teams for all their hard work and great service to our residents during these busy summer months. And with that, I'll now turn the call over to Brad.