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.