Andrew Schaeffer, Treasurer and Director of Capital Markets for MAA, introduces the management team and reminds listeners of the forward-looking statements and non-GAAP financial measures that will be discussed. He also notes that the earnings release and supplemental financial data are available on the company's website. Eric Bolton, CEO, then discusses the fourth quarter results, which exceeded expectations due to higher non-same-store NOI and lower interest expense. He also mentions that new supply and a seasonal slowdown in leasing traffic affected new resident lease pricing during the quarter.

In January, there was some improvement in new lease pricing and the pressure from new supply deliveries is expected to moderate later this year. MAA has recently marked its 30-year anniversary and has consistently delivered strong returns to shareholders. The outlook for interest rates and the economy is more positive compared to a year ago, with steady demand for apartment housing and a decline in inflation pressures. There is also increasing visibility that new supply will moderate.

In the third paragraph, the speaker discusses their company's strong track record and experienced team, expressing confidence in their ability to take advantage of growth opportunities. They also thank their retiring Chief Financial Officer for their contributions and mention two successful acquisitions made during the fourth quarter. These acquisitions were made at a lower cost and fit the company's criteria for future investments. The speaker attributes their success in securing these properties to their strong relationships with sellers and ability to act quickly without a financing contingency.

The paragraph discusses two new mid-rise properties that MAA expects to deliver high NOI yields and achieve further expansion through the adoption of advanced revenue management and technology. Despite a decline in transaction volume, MAA remains optimistic about the potential for increased acquisition opportunities later in the year. The company's two stabilized new developments and current leasing projects are performing better than expected, generating higher NOI and earnings. However, there is some pressure on new lease rates, but the properties are still achieving rents above initial expectations.

The company's four currently leasing developments are expected to yield an average stabilized NOI of 6.5%. Due to delays and expected decreases in construction costs, the company has pushed back the start dates for three projects into 2024. They plan to start 3-4 projects this year and have seen success in reducing construction costs. The company owns or controls 13 sites for future development, with the option to start projects at a later date. The team is evaluating additional opportunities and is well-positioned with a diverse portfolio. They are excited for the upcoming year as activities ramp up in 2024.

In the fourth quarter, the company saw solid demand and absorption of new supply in their markets, and expects pricing trends to improve in late 2021 and into 2022. They are also working on initiatives to improve their leasing platform. Same-store NOI growth was in line with expectations, with lower operating expenses offsetting slightly lower lease pricing. The company intentionally repriced only a small percentage of leases in the fourth quarter, resulting in a blended lease-over-lease pricing decline of 1.6%. Average occupancy was 95.5% and collections were strong. In the fourth quarter, many of the company's mid-tier markets performed well.

In the fourth quarter, our strategy of investing in a diverse range of markets has led to strong performance in Savannah, Richmond, Charleston, and Greenville. However, markets such as Austin and Jacksonville have been negatively impacted by an oversupply of new units. We have completed numerous interior unit and smart home upgrades, and have plans for more repositioning projects in 2025. Looking ahead to 2024, we are seeing positive pricing trends, with an improvement in new lease and renewal pricing and stable occupancy. However, new supply remains a challenge in many of our markets.

The article discusses the impact of new supply on pricing in the rental market for 2024. While the increase in supply is expected to pressure pricing, the outlook is better for late 2024 and 2025. Job growth and in-migration are key factors driving demand, and the cost gap between owning and renting has widened. Reported core FFO for the quarter exceeded expectations, driven by favorable interest rates and recent acquisitions. Same-store operating performance for the quarter was in line with expectations.

In the fourth quarter, same-store revenues were slightly lower than expected due to lower lease pricing. Operating expenses were favorable, and the company invested in redevelopment and development projects. The balance sheet is strong, with low leverage and a large cash and borrowing capacity. The company also issued public bonds and provided earnings guidance for 2024, with projected same-store revenue growth of 0.9%.

The company expects blended rental pricing to be a mix of lower new lease processing due to increased supply and renewal pricing in line with historical levels. They project a 0.9% effective rent growth and an occupancy rate between 95.4% and 96%. Other revenue items are expected to grow in line with effective rent, while same-store operating expenses are projected to grow by 4.85%. This is mainly due to real estate taxes and insurance. The company's development pipeline is expected to dilute core FFO by $0.05 in 2024, but is expected to turn accretive to core FFO after stabilization. They also anticipate external growth through acquisitions and development opportunities, with a projected range of $350 million to $450 million in acquisitions and $250 million to $350 million in development investments. This growth will be partially funded by asset sales and debt financing, and is expected to be slightly dilutive to core FFO in 2024 before becoming accretive after stabilization.

The company projects a 4.9% increase in total overhead expenses for the upcoming year, largely due to a planned refinancing of $400 million in bonds. This is expected to result in a dilution of $0.04 to core FFO compared to the previous year. The call then opens up for questions, with the first one focusing on the company's same-store revenue growth outlook. The speaker notes that they feel comfortable with the renewal rates, but new lease rates will be a determining factor in reaching the high or low end of their guidance. This will depend on factors such as job growth, demand, and migration.

The company is expecting a decline in new lease rates for the year, with a projected negative 3% to 3.25% in Q1 and a 4.5% to 5% range for renewals. The $400 million in acquisitions will have a drag on earnings, with a 4.5% NOI yield contribution at the time of closing. The CEO is confident that new lease pricing will improve this year, but peak deliveries are not expected until midyear.

The speaker believes that leasing rates will improve in the back half of the year due to normal seasonal patterns and a decrease in supply. They expect leasing traffic to pick up in the summer and for new lease pricing to perform better in Q2 and Q3. The pressure surrounding supply is expected to persist, but will be met with stronger demand patterns. The speaker also mentions that supply will likely moderate in Q4.

The speaker discusses the impact of supply pressure on new lease-over-lease performance in 2023 and 2024, and mentions that new lease pricing may start to improve in the latter half of 2024 due to easier prior year comparisons. They also mention that new lease pricing may not turn positive until 2025 and that the underlying assumptions for same-store revenue guidance have likely changed.

The speaker discusses the changes in their earnings and lease pricing in November and December, which caused their earn in to be lower than expected. They attribute this to a decrease in new lease pricing and a higher proportion of renewals, rather than new leases. They anticipate this trend to continue throughout 2024.

The company has seen an improvement in new lease pricing and expects blended lease to be positive in 2024. They calculate earn-in by taking the total rents at the end of December and applying it to the entire year. The company has acquired properties at 55 and 59 yields, but hasn't seen many opportunities for acquisitions. They expect volume to pick up as the year progresses.

The speaker discusses the current state of the multifamily market and the potential opportunities for investment. They mention the pressure on developers to execute transactions and the potential for equity sponsors to have liquidity needs, creating opportunities for investment. However, the pricing expectations of sellers are still lower than desired, so the market may not pick up until there is movement in cap rates. The speaker also mentions the construction starts peaking around mid-2022 in their weakest and most supply-challenged markets.

The paragraph discusses the consistency of supply waves in various markets, with some markets receiving more supply than others. Austin is currently the weakest market due to a high amount of supply, but it is also a strong job growth market. The cadence of supply is consistent across most markets, but there are differences in the percentage of new supply and demand drivers. Dallas is also experiencing a lot of supply and job growth.

The speaker discusses the potential for different markets to experience varying levels of performance and the importance of diversification in their portfolio. They mention that mid-tier markets are holding up better than others and that the speed at which a market recovers from the supply pipeline will depend on demand factors. They also mention that Austin may experience the most pain for the longest period due to high supply and lower job growth.

The speaker discusses the company's willingness to increase leverage in order to pursue acquisition opportunities. They are comfortable taking leverage up to 4.5-5% and estimate this would equate to roughly $1.5 billion. The speaker also mentions positive demand drivers such as job growth and population growth, as well as a decline in move-outs to buy a home due to affordability and availability.

The cost of buying a home in the region has increased significantly in the past few years, making homeownership less affordable compared to renting. This has led to a decline in construction of single-family homes and an increase in demand for multifamily housing. The average tenure of residents in multifamily housing has also increased, as there is a preference for living alone among rental demographics. Job growth will likely be the determining factor for demand in both the high and low-end housing markets. Overall, demand for apartment rentals continues to be strong in the region, driven by traditional factors such as job growth and in-migration, as well as the preference for living alone.

The company expects to add 400,000 new jobs in 2024, which is slightly lower than their expectations for 2023. This is still a positive sign and the national job growth numbers from January are also encouraging. The company has 3-4 development starts planned for this year, with two in the first half in Charlotte and Phoenix. They are also working on two other projects in Denver and Atlanta. The company is aiming for a mid-6% yield on these developments and has already seen success in reducing construction costs for the project in Charlotte.

The company is hopeful that yields will increase for Phase 2 projects as construction costs decrease. Windmill Hill in Austin performed well, with higher than expected rents and good execution. While the largest amount of supply is expected to deliver in the middle of the year, the company believes that comps will start recovering later in the year due to a steady level of supply and demand.

The speaker discusses how absorption has remained strong despite an increase in supply. They attribute this to a combination of factors, such as the strong demand in the middle of the year and the timing of new lease pricing. They also mention how they stagger lease expirations to account for seasonal patterns and expect to see improvement in the back half of the year. The speaker acknowledges the variability of market conditions but believes they have accounted for it in their strategies.

The speaker believes that there will be a decrease in supply pressure in certain markets towards the end of the year, leading to a potential recovery in new lease pricing in 2025. They also mention that the middle of 2024 will still see negative 2.5% pricing, but with the demand components, it may be slightly better. They clarify that the "earn in" is based on leases in place at the end of 2023 and that the loss to lease is about a negative 1% looking at all leases effective in January. The next question asks about the January effect and the speaker gives two reasons for the recovery in January.

The speaker discusses two factors that may have contributed to a slower period in the real estate market in January. First, the holidays may have affected people's interest in moving. Second, developers may have been under pressure to meet year-end goals, leading to more aggressive lease-up practices. The speaker believes that these factors may have moderated in February, leading to an increase in traffic. The speaker also mentions the possibility of accelerating development to take advantage of a potentially strong market in 2026.

Brad Hill, responding to a question from Rich, discusses the company's pipeline of projects and explains that they are currently focused on working on reducing costs before starting new projects. He also mentions that they are looking into opportunities in the prepurchase area. Alexander Goldfarb asks about renewals and new rents, and Brad responds that they expect renewals to be around 5% while new rents are down 3%, resulting in an 8% spread.

The speaker, Tim Argo, explains that the current 8% spread between renewal pricing and new lease pricing is wider than historical data, but it is consistent with previous years. This is due to factors such as the cost and hassle of moving, the high level of customer service provided, and the dedicated efforts of the company's teams. However, the gap is expected to narrow as new lease pricing accelerates in the spring and summer. In February, March, and April, the average spread is around 5%.

The speaker, Tim Argo, explains that the company's performance can improve as lease rates increase in the future. When asked about the pressure on new rent in markets without supply issues, Argo mentions that the company is seeing strength in mid-tier markets such as Greenville, Savannah, Richmond, and Charleston. He also notes that supply is more concentrated in larger markets like Austin, Charlotte, and Dallas, which may be impacting the overall portfolio. However, he points out that across all markets, deliveries in 2023 are expected to be between 4% and 4.5% of inventory, with store leverage around 3% to 3.5%.

The operator introduces the next question from Michael Goldsmith of UBS. Goldsmith asks about expense trends, and Brad Hill explains that uncontrollable expenses like real estate taxes and insurance are driving growth. Tim Argo adds that controllable expenses are expected to moderate in 2024, with marketing costs possibly being the exception. Goldsmith's follow-up question is about concessions and competing properties.

The speaker discusses the concessions being offered at their stabilized property, which are minimal at around 0.5% of rents. They mention that concessions have increased slightly in some markets, but are still within the 1-2 month range. They also mention a 5% renewal rate and the potential impact on creating a gain to lease, but have not seen any signs of this yet.

The company typically has an average stay of 20 months for its leases, with some tenants renewing and some moving out. This creates a gap that is expected to narrow in the spring. The CEO expects the company's performance to continue to be strong despite potential drops in renewal rates next year, as new lease pricing is expected to improve. The company has historically seen new lease pricing in the 4-5% range, and expects this to continue. The overall performance is expected to remain strong due to a balance between renewal and new lease pricing.

Tim Argo, speaking on behalf of the company, provided color on the building box of same-store revenue. He mentioned that bad debt will remain consistent, turnover will stay low, and ancillary income will grow in line with overall effective rent growth. There has been a slight gap between A and B rental pricing, with suburban properties outperforming urban ones. The portfolio is made up of 55% A properties and 45% B properties, with B properties performing slightly better. Suburban assets are also outperforming due to less supply in those areas.

Brad Heffern from RBC Capital Markets asks about the pace of lease-ups and market rent growth in the company's portfolio. Brad Hill, the operator, responds that the lease-ups are in line with expectations and market rent growth is expected to be flat. Tim Argo, the operator, adds that the company's blended growth is expected to be 1%. Adam Kramer from Morgan Stanley asks about potential opportunities for acquisitions or developments, taking into account the company's balance sheet leverage.

The speaker is asking about the possibility of share buybacks and what would need to happen for it to be considered. The speaker responds by saying that they believe investing in new properties and technology initiatives will provide better long-term returns and support dividend growth. They also mention that they are monitoring the pricing of their existing portfolio and may consider share buybacks if there is significant dislocation between public and private pricing.

The company has previously invested in technology and would do so again if necessary, but for now they are focused on holding onto their resources. Some of their current tech investments include a CRM platform, potting of properties, updating their website, and implementing property-wide WiFi. These investments are aimed at improving their leasing process and driving traffic through their website.

The speaker discusses the benefits of providing seamless Wi-Fi for residents across their property, which can lead to increased revenue. They also mention their expectations for rental decline and their exposure to floating rate debt. They clarify that they have paid down their commercial paper facility and are expecting rates to decrease throughout the year. They also mention a $0.05 drag from non-stabilized developments, but clarify that some may be capitalized.

During the earnings call, MAA discussed their capital and interest capitalized, noting a slight increase year-over-year due to the timing of developments and the rate at which they are capping interest. They also clarified that their blended rent assumption is 1%, but their overall effective rent growth is 0.85%. The call concluded with MAA thanking participants and ending the call.

This summary was generated with AI and may contain some inaccuracies.