Mid-America Apartment Communities, Inc.

Good morning, ladies and gentlemen, and welcome to the MAA Second Quarter 2026 Earnings Conference Call. During the presentation, all participants will be in listen-only mode. Afterward, the company will conduct a question-and-answer session. As a reminder, this conference call is being recorded today, July 30, 2026, and in consideration of time, we have a one-question limit. I will now turn the call over to Andrew Schaefer, Senior Vice President, Treasurer, and Director of Capital Markets at MAA for opening comments.

Andrew Schaefer Thank you Regina and good morning everyone. This is Andrew Schaefer, Treasurer and Director of Capital Markets for MAA. Members of the management team participating on the call this morning are Brad Hill, Tim Argo, Clay Holder, and Rob DelPriore. Before we begin with 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 relief 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 be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. We will limit questions to one per analyst. We ask that you rejoin the queue if you have any follow-up questions or additional items to discuss. I will now turn the call over to Brad.

Well, thanks, Adrian. Good morning, everyone. Core FFO results were ahead of our expectations, with the sequential improvement in new resident and blended lease-over-lease rates exceeding the prior year's sequential improvement. While recovery in new resident lease rates is showing improvement, The pace is slower than we would like, given cautious consumer sentiment, as we continue to work through the unprecedented high levels of new supply deliveries over the past couple of years in a few of our high-concentration markets. We are seeing solid demand, including job growth, household formation, and population and wage growth. And the increase in inbound migration to our properties in the second quarter was the strongest quarterly increase we have seen since we began tracking the metrics. reflecting the broad appeal of our high demand markets. As a result, units absorbed in the first half of the year significantly outpaced new units delivered. As demand remains resilient and new deliveries continue to decline, we expect the recovery to expand and accelerate. Additionally, we're benefiting from our scale and operating discipline. We continue to focus on expense control and with second quarter year over year same store operating expense growth of just 80 basis points, The teams are excelling in this area. At the same time, the persistent single-family affordability and availability challenges are supporting resident demand for affordable and high-quality rental housing, two areas where MAA excels. Our customer service focus continues to differentiate the MAA experience, driving increased resident loyalty and contributing to our record low turnover and strong renewal rate growth, improving 50 basis points year over year. We continue to invest in strategic areas of the business to drive future earnings growth, including various new technology initiatives to support our centralization and specialization efforts that will further strengthen our customer service and drive future margin expansion. As Tim will talk about, we are expanding our interior renovation and repositioning programs, which are supported by the new deliveries in our market stabilizing. We are on average the effective monthly rent per unit and New Community is over 30% higher than our existing rents, giving us substantial room to expand these highly accretive initiatives. Our property-wide Wi-Fi initiative is in high demand from our residents and is performing well. On the external growth front, the improving demand-supply dynamic combined with the decreased availability of capital for new projects makes disciplined investing in new developments an attractive capital allocation option. In addition to the Kansas City project we started construction on in the second quarter, we started construction on a project in Nashville, Tennessee in July. And next month, we expect to start construction on a project on the land we recently purchased in Northern Virginia. With one more start later in the year, we are on track to hit our four development starts for the year. The acquisition market remains slow with cap rates in the mid to upper 4% range for high quality communities that fit our profile. But should more compelling opportunities materialize, we have the balance sheet capacity to support growth in this area. Together, these initiatives reflect a disciplined approach to deploying capital across multiple growth opportunities while maintaining flexibility as market conditions evolve. This same discipline is also evident in our ongoing portfolio recycling efforts, which remain focused on enhancing portfolio quality and supporting long-term earnings growth. In the second quarter, we sold a high-cap ex-30-year-old property in Raleigh and have two additional properties that should close in the back half of the year, a 42-year-old property in Dallas and our one property in the District of Columbia. These transactions will wrap up our planned dispositions for 2026. With a track record of successfully navigating economic cycles for over 30 years, we remain confident in our ability to emerge from this recovery period with a stronger, more efficient, and higher growth operating platform. We believe our focus on high demand and high growth markets will continue to lead to higher earnings and lower volatility over the full cycle, while our investments in accretive growth initiatives are well positioned to deliver increasing value and earnings contribution as the demand supply balance improves. We are encouraged by the building blocks in place, resilient demand, strong absorption, potentially growing migration trends and a financially strong resident base, all with the backdrop of decreasing supply pressure. As we wrap up July and head into August and September, we see the opportunity for growing momentum and remain confident in our ability to deliver compounding revenue and earnings performance as the recovery continues to accelerate. To all associates across our properties and in our corporate offices, thank you for your continued dedication and focus during this pivotal leasing season. Good morning, everyone.

For the second quarter, same story at OI beat our expectations with continued lower-than-projected property operating expenses more than offsetting slightly lower average daily occupancy. From a pricing standpoint, new lease-over-lease growth improved 170 basis points sequentially from the first quarter, 20 basis points ahead of the acceleration achieved from the first quarter to second quarter of 2025. As Brad mentioned, new lease rates have been slower to recover due to lower consumer sentiment and still elevated but moderating due supply in some markets. But we are encouraged by forward-looking trends. Renewal retention rates and lease rates remain strong. Turnover once again moved lower to 39.6% and renewal lease over lease rates were 5.2% for the quarter. As a result, blended lease over lease rates were up 100 basis points from the first quarter and I'm 20 basis points from the blended rates of the second quarter of 2025. Our resident health remains strong as reflected in an improvement in our rent to income ratio to 18% and continued strong performance in collections with net delinquency representing just 0.3% of bill grants consistent with what we achieved in the last several quarters. Broadly, our stronger performing markets remain relatively consistent with the last few quarters. and we are starting to see some pockets of momentum in other markets. We continue to see strong performance in Virginia and South Carolina with Norfolk, Richmond, Charleston, Greenville and the D.C. area markets continuing to outperform the broader portfolio from a pricing standpoint. As with last quarter, our two largest concentration markets, Atlanta and Dallas, outperformed the portfolio in the second quarter in terms of blended lease over lease prices. Austin, though still an underperforming market, showed good momentum and achieved blended lease or release pricing that was 300 basis points better and occupancy that was 40 basis points better than the second quarter of 2025. Orlando is another improving market with blended pricing up 130 basis points from the second quarter of 2025. Phoenix, Charlotte, Raleigh, and Savannah are high concentration markets for us that are still facing challenges and the wake of heavy supply pressure despite continued strong demand. During the quarter, MAA Cathedral Arts in Dallas stabilized and MAA Plaza Midwood in Charlotte completed construction and moved into our reset portfolio. MAA Val Vista will officially stabilize in the third quarter, though it achieved over 90% occupancy during the second quarter. We moved up the stabilization date of MAA Breakwater in Tampa by two quarters due to strong leasing velocity at rents well ahead of our pro forma expectations. We have an additional two properties under construction that are actively leasing. Given the supply pressure in Charlotte, our two lease-ups in this market remain the most challenged in the near term, with concessions running up to eight to 10 weeks on certain floor plans. But with the overall lease-up portfolio, we expect to achieve our underwritten yields as markets continue to improve, retaining the expected long-term value creation opportunity. Interlock contributions from this group will continue to build through the rest of this year and into 2027. As Brad mentioned, we continue to accelerate and exceed expected returns on our various targeted redevelopment and repositioning initiatives.

During the second quarter of 2026, we completed 2,118 interior unit upgrades, bringing our year-to-date total to 3,504 units, 30% higher than the number of units renovated in the first half of 2025.

With year-to-date rent increases of $110 above non-upgraded units and average per-unit spend of $5,134, the average cash-on-cash return is approximately 25% versus expected returns of 19%. These units continue to leach faster than non-renovated units when adjusted for the additional turn time, averaging about 10 days quicker. We would expect to further accelerate this program in 2027. For our common area and amenity repositioning program, we have six properties that are wrapping up the repricing phase, five properties that are just starting the repricing phase, and six additional that are in the early construction phase and will begin the repricing phase in the spring of 2027. The first group is 98% repriced with average cash-on-cash returns of 13%. We expect similar returns from the remaining active projects, and we'll look to expand our scope of this initiative in 2027. Our community-wide Wi-Fi initiative that began in 2020 continues to expand. We have 28 live properties where the service is rolling out to residents as leases are signed, and we are further expanding the initiative this year to an additional 38 properties. Resident adoption of the first 28 properties is accelerating, with revenues quickly increasing from $500,000 in the first quarter to $850,000 in the second quarter and will continue to grow from here. Looking forward to the third quarter, we are encouraged by the early momentum we see in pricing and occupancy and early signs of potentially later seasonal peak. Our strategic decision to push new lease pricing where possible in late second quarter and into July has allowed us to maintain momentum in renewal pricing and new lease pricing. Combined with declining supply pressure, strong demand, and the broad market level absorption that occurred in the first and second quarters, Our approach sets us up to capture momentum in new lease or release pricing later in the season and achieve renewal rates consistent with the second quarter and well above what we achieved in the third quarter of last year. With an assumed backdrop of steady demand, fewer units in lease up, and current pricing trends continuing, we expect third quarter blended pricing to be better than the second quarter, a trend not seen in the last four years since third quarter blended pricing typically trails the second quarter. That's all I have in the way of prepared comments. Now I'll turn the call over to Clay.

Thank you, Tim, and good morning, everyone. We reported quarter to quarter on $2.08 per diluted share, which was two cents ahead of our second quarter guidance. The outperformance was driven primarily by continued strength in expense management, with same-store expenses coming in one and a half cents favorable to our expectations and then a lot from our non-same-store portfolio contributing an additional penny. partially offset by same-store revenues that were slightly below our expectations. As Brad and Tim highlighted, our teams continue to demonstrate an ability to control cost by maintaining strong resident retention and high resident satisfaction. That consistent execution remains a key strength of our operating platform and contributed meaningfully to our second quarter outperformance. Repair and maintenance of personnel costs were the primary drivers of our expense favorability during the quarter. We funded approximately $81 million in development and pre-development costs during the quarter. At June 30th, our development pipeline totaled $598 million, leaving $237 million of remaining funding commitments over the next three years. Combined with the two projects that Brad referenced as starting in the third quarter, our development pipeline will total approximately $804 million. Looking ahead, we expect to add additional projects to the pipeline during the balance of the year and into early 2027. Supporting our objective of building and sustaining a development pipeline of approximately $1 billion and reinforcing development as an important driver of long-term earnings growth. Our balance sheet is solid and is set to support our development pipeline, any acquisitions that may emerge, along with the other growth initiatives Tim discussed. At the end of the quarter, we had over $880 million in combined cash and borrowing capacity under our revolving credit facility, and our net debt to EBITDA ratio was 4.5 times. At June 30th, our outstanding debt had an average maturity of six years at an effective rate of 3.9%. During the quarter, we continued our measured approach to share repurchases and repurchased 383,000 shares of our common stock at a weighted average share price of $130.66 for a total of $50 million. In June, we entered into an unsecured delayed term loan with a committed principal amount of $350 million with $100 million outstanding under the loan at quarter end. Turning to our outlook for the year, we have maintained our core FFO guidance and have updated our sink store revenue and expense guidance to reflect our current view of leasing conditions for the balance of the year. While underlying demand remains healthy, the pace of recovery in new lease pricing has been somewhat slower than assumed in our prior guidance. We continue to prioritize long-term revenue performance through disciplined pricing decisions, which we believe support renewal performance and position as well to capture the coming new lease pricing momentum. As a result, we have slightly reduced our expectations for both effective rent growth and average occupancy for the year. As we updated our revenue assumptions for the balance of the year, we also recognized favorable trends developing in other areas of the business. Expense performance has remained strong, driven by continued discipline across our operating platform, lower projected real estate taxes, and favorable anticipated insurance costs given our recent coverage renewal. In addition, our non-same-store portfolio continues to perform well with lease-up communities performing in line with, and in some cases slightly ahead of, our expectations in contributing incremental earning support. In 2026, we project over $25 million in incremental year-over-year NOI from the properties represented in this portfolio. Collectively, these favorable trends offset the revisions for our revenue outlook and support our maintained full-year core portfolio midpoint of $8.53 per diluted share. That is all that we have in the way of prepared comments. So, Regina, we will now turn the call back to you for questions.

We will now open the call up for questions. If you'd like to ask a question, please press star then 1 on your touchtone phone. If you'd like to withdraw your question, press star 1 again. Our first question will come from the line of Jamie Feldman with Wells Fargo. Please go ahead.

Great. Thanks for taking the question. I mean, just comparing some of your comments on July and thoughts on the third quarter versus what you delivered in the second quarter and then the revenue cut, you know, can you give us some comfort or maybe talk us through how you decided to cut now, how much you decided to cut the revenue guide now and What gives you comfort that this won't be the same situation, you know, third quarter, fourth quarter, in terms of needing to pull back?

Yeah, this is Tim. I mean, I'll talk a little bit about what we're seeing in July in Q3, and I think that's really what is driving our optimism as we are starting to see some momentum as we look out into Q3. You know, July itself we expect will be pretty similar in terms of pricing to what we saw in Q2 with occupancy building as we have moved through July and ending in a good spot with July, I can see. But where we see the optimism and where we think we've made the right decisions is what we're seeing for August, September. First, if we look at renewals for the entire Q3, We have retention rates well above what we saw this time last year, well above what we saw in Q2, and we're continuing to see renewal rates in that 5-plus range. I mean, we have visibility pretty much into all of Q3 at this point. Probably 98% of our renewals we have locked in at this point. And then when we look at where we stand with new lease pricing and what we've done on the pre-lease side, obviously still more to come in the rest of the quarter. We've We probably still have about, you know, 40% of our new leases or so will still come over the next two months. But when we look at the pre-leasing for August, we're running 70, 80 basis points better than we were this time last year. And we look at September, even running higher than that. So we think with this continued demand, what we're seeing, lead volume is up, you know, 10, 15% this time compared to this time last year. Visit volume is up close to 10%. So we do think all these factors lead to what essentially could be a little bit of an extended prime leasing season.

Jamie, I'll just touch on the guide change. I mean, the one thing that Tim's pointing, we're still seeing very strong acceleration as we work into the back half of the year. What I would say is just not quite at the same pace as what we had initially expected coming into the year. So still seeing the trajectory change. move in the direction we expected, just not quite to the same pace that we had seen then.

And, Jane, not to be left out here, I'm going to add a couple of comments to this one as well. This is Brad, what the guys have said here a little bit. And I think it really starts with what we're seeing on the demand side in terms of our view for the back half of the year. Across the board, we're seeing really good demand really across our markets. And in the markets where we do have heavier supply, you think of a Phoenix, a Charlotte, a Raleigh, Savannah, Nashville, you know, those markets are a little bit more difficult for us right now. We have a bigger hole that we have to dig out of for those, but we are showing progress. I mean, if you look at our entire portfolio for the second quarter, almost 80% of our markets posted positive blends in the second quarter. So you can see the recovery is pretty broad-based. Two-thirds of our markets are showing blends above our portfolio average. So if you look at what is below average for us, a third of our portfolio, those are predominantly some of these higher supply markets. So again, we have a bigger hole that we have to dig out for those, but we're doing it. On the demand piece, you look at absorption the first half of the year that Tim talked about. Second quarter absorption across our markets was 1.8 times new delivery. So we're seeing really strong demand. And as we continue through the balance of this year, we certainly believe that more of those power markets start to show some of that stronger pricing power, particularly as we look at the blended rates in the third and fourth quarter.

Our next question will come from the line of Eric Wolf with Citi. Please go ahead.

Hey, good morning. Maybe just to follow up on Jamie's question, can you just discuss your guidance in the second half from a blended rent growth perspective, so what you're forecasting in the second half specifically? And just to make sure I understood sort of the components of what you're seeing right now, you expect your August in September blends to increase from July because renewals are higher and your retention is higher. I just wanted to make sure I heard that correctly.

Yeah, this is Tim, and to confirm on your second point, yeah, I mean, we would expect August, September pricing to get a little bit better from what we had in July for all the reasons we just talked about and the trends we're seeing so far, but if you think about our We're at positive 0.3 blended year to date through June and our full year forecast is somewhere in the 50 basis point range blended for the full year. So with a little more of our leases skewed to the back half of the year, somewhere around 0.6% blended is what we're tracking for the back half of the year. Maybe put that in a little bit of perspective, what that would look like from a blended standpoint is our Q3 blended performance to be a little bit better than what our Q2 performance was, and then our Q4 performance to look a little bit better than what our Q1 performance was. So that's kind of a way to think about it, and it's the expectation that August, September show the strength that we're seeing right now, and then you see a little bit less of a moderation in Q4 based on, again, the demand, the monitoring supply, and everything we're seeing, and not experience the same level of drop-off that we saw in Q4 of last year.

Our next question will come from the line of Nick Ulico with Scotiabank. Please go ahead.

Oh, thanks. Good morning. I just wanted to, I guess, go back to some of the commentary that you guys gave on the pricing for assets. I think, Brad, you were saying cap rates below 5% you're still seeing in your markets. And I guess my question is, if that's the case and we're still dealing with a slow recovery in certain markets, why not buy back more stocks, sell assets, Well, thanks, Nick.

Yeah, I mean, I think, first of all, what you have to consider, those four and a half to, you know, call it upper four cap rate range. are from the types of assets that we want to buy. So those are brand new assets in some of our higher growth markets. You know, on average, what we purchased the last few years has been a one year old, a lot of times in lease up. So that's a little bit different type of product than what we generally are looking to sell. The assets that we have sold this year, the property that we sold, as I mentioned in my opening comments, In the second quarter was an older asset, had a lot of CapEx needs. The market cap rates that we're getting for those are probably in the mid to upper six range on average. I would say we've got four properties that we're selling this year. Those will be in the high fives to low sixes in terms of cap rates. So there's a little different math on what we're selling. But in terms of share buybacks, we've talked about this a lot. Our overall focus is about driving long-term TSR performance without introducing a lot of earnings volatility. And so it's very balanced. You've seen that in terms of what we've repurchased. We continue to believe in the merits of Thank you for joining us today. The NOI margins we've been able to, or excuse me, NOI growth we've been able to generate from those on average exceeds what our overall portfolio delivers by 50 to 100 basis points. And especially given the fact that supply continues to be lower than long-term averages this year and projected to be that way for the next three years at least, we'll be delivering into a pretty strong operating fundamental market So we continue to believe that's the way that we want to allocate capital for long-term TSR performance at the moment.

Our next question will come from the line of Yana Gallen with Bank of America. Please go ahead. Thank you. Good morning.

I was hoping you could talk a little bit about the better than expected performance from the lease-up properties. Has there been any shift in strategy on pricing, concession usage, or job growth in those markets? and then maybe if you could just talk to, you know, concession activity overall in your markets.

Yeah, this is Tim. I'll touch on that. So on the lease-up portfolio, I mean, not really any change in strategy. I mean, we're starting to see some momentum. We're starting to see some good demand. If you look at, you know, some of the properties in our lease-up portfolio, Nixie gained over 20% of all I can see over the last quarter, Liberty Row over 30%, Plaza Midwood over 20%. You know, I think as we're seeing with the broader portfolio, the number of units in lease up and the pressure on supply is starting to moderate and we're starting to see that with the lease up portfolio. The two Charlotte assets, as I mentioned, are the ones that are still a little bit behind in terms of where Charlotte is in the supply pipeline. So those are the ones that we're watching, but we've seen Really good momentum with the Leeside portfolio, as you mentioned. And then on the broader concession market, not a lot of change from what we talked about last quarter. If you think about our overall portfolio, you know, broadly four to five weeks is pretty consistent across most of our markets. We are seeing some improving concession activity in Orlando and Charleston are two markets down with 0.2 that we're seeing concessions down. and then, you know, Charlotte, Austin are still where, not necessarily up from where they've been, but probably the broadest usage of what we're seeing is still in Charlotte and Austin. But overall, pretty consistent picture from what we've seen in the last few months.

Our next question will come from the line of Brad Heffern with RBC. Please go ahead.

Yeah, everybody, thanks. You mentioned in the prepared comments that second quarter in migration was, I think you said, the strongest ever or strongest since you started tracking it. Are there any numbers that you can put around that or additional color?

Yeah, I mean, the numbers that we could put around that, you know, we saw in migration go from, call it, 10% in the first quarter to about 13%. in the second quarter. And that, you know, it's not really one market that we can point to that's really driving that. It was generally an overall increase just in general. So, you know, we have seen absolute levels of migration and migration that's been higher than that, but we've never seen a quarterly increase that's matched that in the past. So, you know, certainly one quarter doesn't make a Our next question comes from the line of Austin Worshmuth with KeyBank Capital Markets. Please go ahead. Thanks. Good morning, everyone.

Tim, I just wanted to clarify, is the expectation for blended rate growth in the third quarter specifically from the lower turnover and stable renewal rate growth, or are you also seeing new lease rate growth improve? Because I know you had talked about the easier comps earlier in the year being a benefit. And then can you also share what new lease rate growth and occupancy were for July? Thanks.

Yeah.

Awesome. To answer the first part of your question, I mean, it's a little bit of both. Obviously, the renewals are a huge part, and we're seeing, as I mentioned, the retention rates be higher in Q3 than it was both in Q2 of this year and Q3 of last year. So, obviously, more of those blending in, and we're running 5-plus percent, whereas Q3 of last year, we were in the 4.5 percent range. So, that obviously played a big part. We are seeing, as mentioned, the momentum on the new lease side as well. With everything we've seen on demand and what we've seen with pre-leasing, the August-September new lease pricing looks better than it did at the same time last year. Your point about the comps as well, we really saw pricing drop off pretty significantly around this time last year. Last year, July to August, new lease pricing dropped about 70 basis points, and then August-September, dropped 140 basis points, and we don't expect that to recur this year for all of the things we mentioned. But for July, I expect we'll end July around 95.4 in terms of occupancy, and I think the newly sublended pricing probably looks pretty similar to what we reported for Q2.

Our next question will come from the line of Adam Kramer with Morgan Stanley. Please go ahead.

Hey, thanks for the time. Just wanted to ask on the capital allocation side, it sounds like dispositions maybe wrapped up for the year. Seems like acquisitions for the type of stuff you guys want to buy, probably not, shouldn't expect much here, you know, for the next little while at least. So just wondering, you know, should we expect sort of more share repurchases, maybe just an update sort of on the debt side? I know there's some moving pieces there, but I guess just more generally sort of what is capital allocation priorities here? for the next little bit.

This is Brad. I can certainly kick that off. I mentioned a moment ago our approach is to have a pretty balanced approach about taking advantage of near-term opportunities as well as taking advantage of long-term opportunities. To your point, our disposition plans for the year are are close to being wrapped up. We have sold two properties. We've got two more that should sell by the end of the year. You know, that puts our proceeds, you know, by the way, one of those properties is in a JV, the one that's in the DC market. But the proceeds we'll get from those will be pretty similar to what we've used so far to repurchase shares. So very balanced in terms of how we're looking to allocate capital there. But our priority continues to be You know, development, that's number one. And as Tim talked about, continuing to invest in our Wi-Fi initiative, which is highly accretive use of capital for us. We're growing our redevelopment and repositioning to drive earnings performance over the next year or so. That initiative continues to perform better as the new supply coming into the market stabilizes with rents that are over $500 a unit higher than our rents on average, that program continues to perform quite well. So you'll see us continue to lean into that as well. Our property reposition continues to be an area of focus for us. So that's kind of the prioritization that we have in terms of capital allocation. Clay, I don't know if there's anything you want to add on the debt piece you mentioned.

Yeah. Thank you. Thank you. Thank you.

Our next question will come from the line of Handel St. Just with Mizuho Securities. Please go ahead.

Hey, guys. Good morning. Thanks for taking the question. I wanted to go back to the markets that were underperforming. You outlined Charlotte, Raleigh, Nashville, where supply still seems to be a factor. In contrast that with some of the Sunbelt markets where you're seeing some improvement. You mentioned Austin a few times. I think you mentioned Orlando. I guess I'm curious if that's down to sub-market locations, is it something else, and also maybe some color on the, you mentioned the top two-thirds of the portfolio blends are better than the bottom thirds, maybe some color on the top two-thirds blends versus the bottom. Thank you.

Yeah, and this is Tim, and I'll touch on the first part of that. I mean, for the markets that are performing pretty well, it's generally We've talked a lot about the stronger markets here for several quarters, so I would say those continue to be broad-based in most of the sub-markets. I think where we're starting to see some momentum and some green shoots is some of these improving markets where it's popping up in sub-markets. Austin is a perfect example of that, where Some of the near south submarkets, we've seen some momentum over the last couple quarters. And then I would say into the second quarter, some of the round rock and even some of the northern assets started to show some momentum where you had some of those properties that were mid to high teens, negative new lease pricing just a couple quarters ago that are now at the mid to the mid negative single digits. So thousand basis point types of Improvement in new lease pricing, and that's where the opportunity lies in a lot of these highly supplied sub-markets. As those concessions burn off, that's where you start to see some pretty quick momentum. But we're still seeing broadly in our larger markets more of the urban sub-markets do well, particularly in Dallas and Atlanta. Even in Tampa, that's been a little bit weaker. We're seeing some good performance there. And then on the weaker markets, it's more broad-based. So Charlotte and Raleigh, some of those is... They were a little further along in the supply, or a little bit later in the supply pipeline and got an extreme amount of supply. So those are ones where if you have a market that's overall underperforming, it's because we're seeing it more broadly across a lot of submarkets. I think those have become more of a story as we head into next year.

And now this is Brad. I'll just add one comment there on your question about the top two I think in general what you see playing out there is an indication of our overall diversification strategy where we are allocating capital between large markets as well as mid-tier markets. And generally what you'll see on the top portion of that graph, so to speak, are a lot of our mid-tier markets. A higher proportion of those certainly are above the portfolio average, and generally that's what you would expect right now is they face less supply pressure than some of these other markets, some of the larger markets that you mentioned and we've mentioned. And so the demand-supply balance weighs more to the demand. We're seeing strong demand in those markets, so you see obviously stronger performance out of those right now. That's what we would expect to occur as demand continues, absorption continues in some of these more supplied markets like a Charlotte, a Phoenix, a Raleigh, as that new supply continues to get absorbed. But that's what I would say characterizes that breakdown to some degree.

Our next question will come from the line of Alexander Goldfarb with Piper Sandler. Please go ahead.

Hey, morning down there. Just sort of question on markets overall. Clearly, Sunbelt has a long history of strong growth over time. The amount of oversupply is clearly a lot to deal with for anyone. But the lack of supply just nationally is How is that affecting your thoughts on other markets? We've seen the Midwest become more popular from some of the coastal guys. And just as you guys look to allocate capital, are there other markets that maybe previous cycles you would have said no, but now you're increasingly interested in? or is it sort of the basic reality that there's just a lack of supply of product on the market and therefore even markets that you'd like to enter, it's just hard to see a path to establishing a presence that's economic?

Well, thanks, Alex. This is Brad. I mean, we've talked about it in the past. We do continue to look at new markets and evaluate new markets, and I think certainly The key component of that is we want to maintain what our overall strategy is, and that's allocating capital to markets that have high demand. And if you look across our portfolio, our markets generally have that, particularly when you're comparing to other markets. I don't think we want to go into a market just because it's a Thank you for joining us. Similar dynamics. Columbus, Ohio, we talked about that before, is a market that we've considered given some of the dynamics there. We want certainly a business-friendly environment, and low taxes continues to be part of that. But I think it's also important to remember, if you look at the demand drivers really across our markets, I think it was in the second quarter, 18 markets across the country showed greater than 1% job growth. 11 of those markets were in our footprint. Only five markets showed greater than 2% job growth and four of those were in our markets. If you look at population growth, whether you're looking at one year, five year, 10 year, 14 of the top 15 markets are MAA markets. So I think we continue to be in the right markets and continue to allocate capital to the right markets for long-term performance. It has The comment we were making about our markets and the number of markets that are performing above average and are showing positive blended lease rates being so broad, the recovery is coming. And so as the new supply continues to get absorbed in some of these other markets, this high demand that we continue to see, will pay off and we'll continue to see the long-term performance dynamics, I think, that we've seen historically that you mentioned at the beginning of your question.

Our next question comes from the line of Amy Proband with UBS. Please go ahead.

Hi, thanks. The Census Bureau data has shown an uptick in permits across a handful of Sunbelt markets. Recognizing that some of these might not be directly competitive to your portfolio, I'm still wondering, is this a sign that developers are starting to get more comfortable with the trajectory of rent growth moving forward and getting back in and ramping up starts again?

Well, I definitely think developers... want to develop. And from the developers that we talk to as part of our pre-purchase platform, we have relationships with the top developers in the country. I would say broadly, we're not seeing an uptick in starts coming. In fact, we continue to find opportunities to partner with those developers on additional projects because their equity partners have backed out of projects. I think the ability to find capital equity capital in particular for new developments continues to be challenged and we're not seeing that really change at the moment I think it to your point you know permits kind of ebb and flow a bit and the relationship between permits and construction starts can ebb and flow but we're not seeing from the folks we're talking to and the data we're looking at we're certainly not seeing an uptick if you go back and you look at New starts for the last 13 quarters have trended below long-term averages. So we see that trend continue as we look out over the foreseeable future. We don't see a material pickup from this point right now.

Our next question will come from the line of Anthony Pallone with J.P. Morgan. Please go ahead.

Good morning, guys. You have now I'm on for Tony. Thanks for taking my question. Going back a little bit, I think, Brad, in your prepared remarks, you mentioned the cautious consumer. Was there anything, I guess, you guys were seeing specifically from a consumer perspective point of view that caused the slowdown in new lease pricing? I guess, were you seeing tenants shop around a bit more? Just curious on any color you could give as to what's driving that shift.

Yeah, this is Brad. I can start. Tim can give any other details. But yeah, I mean, I think, you know, what we've seen is A very healthy resident, a very healthy prospect. Our rent-to-income ratios continue to be the decline. They're the best that we've seen in a long, long time at 18%. Our collections continue to be really, really strong. But I think in markets where there are a lot of options, there is a lot of supply, we do see folks shopping around a bit more, looking at all their options in the market. and, you know, taking a little bit longer to make decisions. So we have seen that. I think the good news is, even to the point that Tim was mentioning earlier about the momentum we have in August and September, I think in part that does indicate a little bit more optimism from the prospects' perspective as they look out over the next couple of months. There is a level of, I think, optimism that we're seeing as we sign those pre-leases out for the next couple of months. Tim, anything you'd add to that?

Yeah, I think just your point about the impact on new lease pricing, I mean, I think for Q2, we did see, you know, people just taking longer, shopping more. As Brad mentioned, our pre-leasing was down a little bit in Q2 relative to last year. That's more of an indication of people that are, you know, making decisions and feeling confident where they are. I think when people shopping around longer, they're making their decisions later. They're doing more immediate type of move-ins, and that is kind of the most volatile part of the new lease pricing curve. So I think that plays into it. But to Brad's point, we're seeing that change a little bit in Q3. We're seeing a little more pre-leasing and a little more momentum that gives us confidence for the rest of the year.

Our next question will come from the line of Steve Sokla with Evercore ISI. Please go ahead.

Yeah, thanks. I just wanted to touch on expenses, which has obviously been a bright spot for the company this year. Are there things that we should be thinking about as we think about 27 expense growth? Any kind of one-timers or things that may not repeat that help this year that may not be there next year?

I see this is Clay. I'll touch on that for a second. I mean, I think what you're seeing here this year is just our continued focus, as you alluded to, our continued focus on controlling expenses. And we've shown a long history of that and continue to show that even in the current environment. As we look forward to next year, I don't see anything on the horizon at this point that would make me think that there are some one-time savings or any one-time large items coming our direction. I would expect next year to look somewhat similar. It could be a little bit higher growth rate just given where we are today, but I would expect generally it would look not too far different than what we're seeing at the moment.

Our next question will come from the line of Michael Gorman with BTIG. Please go ahead.

Yeah, thanks. Good morning. Maybe going back to Alex's question on markets for a second and take the flip side of it. As you've gone through this cycle, looking at any of your market exposure, maybe especially some of the smaller exposures, are there any markets that have changed structurally in your view or operated in such a way that your view of either expansion or even existing in those markets to begin with has changed? I'm thinking maybe even specifically like a Denver where the regulatory environment's gotten tougher. So any commentary there would be helpful. Thanks.

Yeah, this is Brad. You know, I would say broadly not really. You know, I would say you mentioned the one market that we've seen the most change from a regulatory perspective. We've seen it in Nevada, but we only have two properties there which aren't core for us long term. But there's been certainly some talk in Virginia. I think some of that got pushed off another year or so. The District of Columbia, a lot of things going on in that market. But with us selling our one property in the district, should be exposed to that. So not a lot of change. We, you know, from just overall portfolio perspective, you know, we still have some markets where we'd have one asset or two assets, which, you know, from a long-term perspective, aren't properties that we want to hold. But I would say those markets also continue to do quite well. You know, another market that We'll have to consider long-term that continues to perform very, very well from a demand perspective. It can get some supply, but demand continues to be really, really strong as Dallas, but it's also one of our largest markets. So that's a market that we could potentially look at adding to and certainly recycling capital out of longer term. But for the most part, we're not seeing big changes in any market broadly. Our next question will come from the line of Alex Kim with Zellman and Associates. Please go ahead. Hey guys, thanks for taking my question. I wanted to drill

a little further into the same storage expense growth guide, you know, to reduce by 90 basis points at the midpoint. You know, I'm curious how much of the improvement reflects sustainable operating efficiencies versus timing items, and was wondering if you could discuss the outlook for some of the cost buckets, specifically insurance as well with the, I believe, the repricing occurring in July at some point.

Yeah, Alex, this is Clay. Yeah, as we're going to, you know, as you mentioned, the total expense growth for the year for our same-store portfolios, well, about 1.75%, excuse me. And what we're seeing there, where we're seeing some good benefits there is really across the board. You know, we talked a little bit about repair and maintenance costs, personnel costs that we saw in the second quarter. We're expecting that to continue out through the back half of the year. The teams have done a really good job of Thank you for joining us. And then I'll go back to the personnel costs real quick. We continue to pod some property, so we are continuing to see some benefit there. I expect that benefit to continue on over the course of the year and potentially even into next year as we look to do more of that. You mentioned insurance costs. We did have a renewal on July 1st, and it was a very successful renewal. We had premiums that in a total declined by over 12%. As you kind of layer that through, what the impact is for this year, for the back half of the year, for the full year, we're expecting a little over a 6% decline in insurance costs year over year. That marks our third year of a reduction in premium in insurance costs, so continuing to see really, really good performance from that standpoint. And then the last one I'll call out is property taxes. Given just the environment that we're operating in, the NOI decline that we've seen and others have seen in our markets, obviously having an impact on real estate valuations. And so we are getting a little bit of benefit there. We continue to focus a lot on that area. It's one of the largest – it is the largest expense line in our area. We spend a lot of time focusing on that, making sure that the valuations that are assigned to us are appropriate and pushing back when we need to. So we'll continue to do that to match that aspect of it.

Our next question will come from the line of John Pawlowski with Green Street. Please go ahead.

Hey, good morning. Thanks for the time. My question's on understanding the development economics for your pipeline right now in an environment where there's a potentially a pretty big wide spread between yields when you quote and others quote kind of gross yield based off of face rents and then net yields once you factor in concessions. So let's just take a lease up pipeline. When these four or five projects actually stabilize second half of this year, early next year, what's like the true net effective cash yield in this vintage of Deliveries, assuming no change in market rents. Just today, net effective rents. What kind of yields are we looking at?

Hey, John, this is Brad. I think Clay's looking up some rankings now. But I'll tell you, for our current lease-up pipeline, on average, the projected NOI yield, cash yields on those, is a 6%. I would say to date, what are those delivering? Probably close to a 5% yield because of the higher concessions that we have. I would say the good news about that is on our renewals for really across the board of all of our lease-up properties, We're getting about 9% to 10% lease-over-lease increases, all those lease-up renewals. So the concessions are burning off, which that's what gives us confidence in our ability to hit those yields that we originally underwrote, which were, call it, about a 6%. If you look at a new underwriting that we're doing today for a new project, we think the yields are somewhere in the 6.25% to 6.5%. That will include about 4% or so contingency on construction costs. Today, we're delivering projects 2% to 3% below cost of what our expectations are. That also does include some trending. Generally, what we do is we'll trend rents from today until today's market rents. We'll trend those to the stabilization period, which is three to four years, somewhere call it in the 2% or so range a year. If you go and look at where we're trending rents versus sub-market expectations, we're normally two, three, 4% below market expectations in terms of rent growth over that period of time. So that gives you a little bit of a sense of where our Our next question will come from the line of John Kim with BMO Capital Markets. Please go ahead.

Thank you. I know you talked about this a bit, but I think there's still some confusion on your assumption that the rents will accelerate in August and September because July, you mentioned, is similar to the second quarter of the year or second quarter. So can you just clarify what momentum you saw in June and July and what gives you confidence that it will accelerate towards the end of the quarter given in a normal seasonal year rents typically peaked in August?

Hey, John. This is Tim. Yeah, I mean, what we're seeing is, one, the demand side. We talked about, you know, on the ground, lead volume, visit volume is significantly higher this time this year compared to this time last year. And, you know, with some of the strategic decisions we made, like Q2, I was really geared towards maximizing pricing as we could in Q3 and I think we're we're seeing that play out first is on the renewal side as we talked about where again retention is higher and the actual renewal rates that we're getting are significantly higher than what we got in Q3 of last year and then we you know we spent a lot of time just looking at what our leasing velocity is and what are the leases on the books that we have for Q3 so far obviously still a lot of time to go with New boot ends over the next couple months, but when we compare where we are this time compared to the same time last year, you know, the rates we're getting in the August-September new lease rates are pretty significantly better than, again, the same time last year. So you combine that with moderating supply, you know, the absorption that we saw in the first half of the year, but it frankly was a little bit easier comp at this time last year. So All those factors play into what we're seeing and the momentum that we're seeing and that we expect to play out in the back half of the year.

We have no further questions. I'll turn the call back to MAA for closing comments.

All right. Well, no other comments from us. Certainly, if you guys have any follow-up questions, feel free to reach out. Thanks for joining us today.

This concludes today's program. Thank you for joining. You may disconnect at any time.