The paragraph introduces a conference call for MAA's First Quarter 2025 Earnings, taking place on May 1st, 2025. The call is in a listen-only mode, but there will be a Q&A session afterward. Andrew Schaeffer, the Senior Vice President, Treasurer, and Director of Capital Markets for MAA, introduces the management team involved in the call and highlights that the discussion will include forward-looking statements, with a reminder to refer to risk factors from their SEC filings. Non-GAAP financial measures will also be discussed, with related information available in the earnings release on the company's website. The call will also be recorded and available online later. Brad Hill is then handed over the call to continue.

The paragraph highlights that MAA's first-quarter performance exceeded expectations due to strong demand in occupancy, collections, and pricing trends, despite new supply challenges in some markets. Renewal pricing and retention rates have been strong, contributing to favorable lease pricing. The portfolio has shown resilience against unprecedented new supply levels. There's optimism for stable occupancy and improved lease rates, as predicted in prior guidance. Despite growing macroeconomic uncertainties, MAA's focus on high-growth markets and broad diversification has historically helped it outperform in downturns. In the first quarter, MAA improved occupancy rates and maintained effective rent levels close to those of the previous year, with no significant change in customer behavior observed.

The paragraph highlights the strong performance in lease and leasing traffic, supported by solid collections and positive migration trends. Despite challenges with single-family home availability, retention rates are improving due to strong customer service and new leasing tools. The company is investing in technology and renovations to enhance efficiency and support growth. With a $1.5 billion pipeline in lease-ups and developments, and plans for new projects in areas like Charleston, the company sees potential for strong earnings growth amidst declining new starts and reduced equity capital available for projects. The development pipeline is expected to remain between $1 billion and $1.2 billion, leveraging the company's platform capabilities for long-term returns.

The paragraph highlights the company's strategic efforts and positive outlook. In the first quarter of 2025, they sold two properties in Columbia, South Carolina as part of their portfolio optimization. With a strong track record, experienced leadership, and a more diverse portfolio, the company is well-positioned for future growth. They expect new supply to decline and leasing conditions to improve, fostering job growth and investor interest in high-growth markets. The company acknowledges the hard work of its associates and reports favorable first quarter trends in pricing, occupancy, and collections. They are optimistic about the future and hand over the discussion to Tim Argo, who echoes the positive operating trends.

In the first quarter of 2025, there was a notable increase in new lease-over-lease pricing growth by 180 basis points from the previous quarter, despite a negative 6.3% in new lease pricing. Renewal rates rose by 4.5%, contributing to a blended lease-over-lease pricing of negative 0.5%, an improvement from the fourth quarter of 2024. Average occupancy increased to 95.6%, and net delinquency remained low at 0.3% of billed rents, supporting a same-store revenue growth of 0.1%. Strong leasing performance was observed in mid-tier markets like Virginia, Charleston, Savannah, and Greenville, while Tampa showed pricing recovery. Houston remained stable, Atlanta showed improvement, but Austin, Phoenix, and Nashville were affected by supply issues. Additionally, the MAA Optimus Park property achieved stabilization during the quarter.

The paragraph outlines progress and future plans for several property initiatives. The company's seven lease-up properties show competition against new market supply, with most expected to stabilize by 2025. Rent levels are exceeding expectations, and significant renovation efforts are underway, with 1,102 unit upgrades completed in Q1 2025, leading to higher rents and lower vacancy durations. The company plans to renovate around 6,000 units in 2025 and more in 2026. For repositioning projects, NOI yields are nearing 10%, while six additional projects are near completion. Wi-Fi retrofitting is advancing across multiple properties. Encouraging trends in April support company guidance, with improved leasing metrics compared to prior periods.

The paragraph discusses the company's strong performance and strategic positioning in the real estate market. It highlights a decrease in exposure to 8.4% for April, favorable demand with record absorption rates, and high lease renewal acceptance, indicating a robust market recovery and pricing power. The company's core FFO for the quarter was $2.20 per diluted share, exceeding guidance due to better than expected same-store NOI performance and favorable timing of expenses, while personnel, repair, maintenance, and marketing costs were in line with expectations. Real estate tax expenses were also favorable due to earlier settlements of tax litigation.

During the quarter, the company funded approximately $67 million in development costs out of a $852 million pipeline, with $305 million remaining to be funded over the next two to three years. An additional $17 million was invested in redevelopment and other initiatives. The balance sheet is strong, with $1 billion in cash and borrowing capacity, and a low net debt-to-EBITDA ratio of 4 times. At the end of the quarter, 94% of debt was fixed with an effective rate of 3.8% and an average maturity of seven years. Despite the uncertain macroeconomic environment, the company is maintaining its core FFO and same-store guidance for the year. The expected core FFO for Q2 2025 is projected to be between $2.05 and $2.21 per diluted share, with a midpoint of $2.13. This guidance considers the timing impact of a real estate tax litigation settlement and seasonal leasing and maintenance expenses. The floor is then opened for questions, starting with Eric Wolfe from Citigroup, who inquires about the visibility of new lease spreads.

In the conversation between Tim Argo and Eric Wolfe, Tim discusses their current visibility into lease renewals and new leases, noting improved insight compared to the previous year. He mentions that they have clarity on April new leases, understand about half of May's, and roughly 25% of June's. Eric asks about the prospects for rent growth, given that the first quarter results are similar to last year's. Tim responds by highlighting the acceleration in new lease rates, with a shift from nearly -9% in December to -4.6% in April, suggesting a positive trend likely to continue into Q2 and potentially further in Q3, depending on the economic climate. Overall, Tim expresses confidence in the current trajectory of their lease activity.

The paragraph is a discussion between various speakers during a call. Daniel Tricarico follows up on another question about the confidence level regarding lease rates and how concessions impact the comparisons in upcoming quarters. Tim Argo responds by explaining that lease-over-lease rates are calculated net of concessions and mentions factors such as easier comparisons, seasonality, and declining supply pressure that boost confidence in current standings. Daniel then asks about lease-up expectations for development properties and the supply impact into 2026. Brad Hill answers, stating their comfort with current lease-up timelines and emphasizing their focus on revenue and rent performance, which allows them to be patient with slower lease-ups.

The paragraph discusses the rental performance and construction cost management in real estate developments. The speaker mentions that rental yields are exceeding expectations and emphasizes confidence in the lease-up strategy. Cooper Clark from Wells Fargo asks about development and redevelopment costs. Brad Hill explains that in pre-purchase developments, costs are guaranteed and locked in through agreements, minimizing potential cost pressures. For in-house developments, costs are approximately 95% locked in once construction begins, with quick buyouts from general contractors. Overall, they are not experiencing significant impacts on construction costs from tariffs or immigration changes affecting labor.

In the discussed paragraph, contractors are experiencing better pricing due to reduced new starts and an improved supply pipeline, with general contractors and development partners showing increased eagerness for new projects. Tim Argo highlights that redevelopment hasn't faced any significant pressure, partly because of locked-in appliance pricing until next year and diverse sourcing for countertops. While future tariff concerns could impact redevelopment, there's no immediate pressure anticipated until potentially late this year into 2026. Additionally, Cooper Clark inquires about urban versus suburban performance, with Tim Argo suggesting more upside potential for urban areas as supply normalizes, although urban and suburban performance in their portfolio currently shows minimal differences in occupancy and pricing.

The paragraph discusses the performance of the suburban real estate market, noting that it had been significantly outperforming urban markets for the past couple of years, but this gap is narrowing as supply pressures decrease. It specifically highlights Atlanta, where better performance is still observed in suburban areas compared to urban Midtown and Buckhead. Tim Argo from the company mentions that while Atlanta is not one of their top-performing markets, there has been an improvement since 2024, with new lease pricing and occupancy rates showing positive trends compared to the previous year. Jana Galan and Adam Kramer ask questions regarding market improvements and concessions, with Argo noting an improvement in Atlanta both in lease pricing and occupancy, despite it still lagging behind the broader portfolio.

In the paragraph, Tim Argo discusses how concessions across markets have been generally consistent over recent quarters, with slight decreases compared to the previous year, often ranging from half a month to two months. Adam Kramer then questions the company’s capital allocation and cost of capital strategies. Brad Hill responds, explaining that given the company’s current leverage of 4 times, they prioritize using debt to fund developments due to its advantageous cost. The company is comfortable with increasing debt by $1 billion to $1.5 billion, staying within credit metric limits, and plans to continue leveraging debt and property sales to fund growth.

Michael Goldsmith from UBS asked about the outlook for new lease growth, noting a recent improvement but questioning whether the positive growth expected this year is still achievable given the current economic environment. Tim Argo responded optimistically, expecting a slight positive growth by mid-third quarter, although acknowledging some uncertainty. Goldsmith also inquired about the strategic decision to sell assets in less scalable markets like Columbia, South Carolina, and the potential benefits of reallocating resources to more scalable markets. Brad Hill confirmed that the company aims to drive efficiencies by selling assets in smaller markets, mentioning existing properties in Panama City, Gulfport or Gulf Shores, and Las Vegas as examples.

The paragraph discusses a strategy of reallocating resources by selling certain properties in markets with limited assets to improve efficiency across the portfolio. An evaluation process is conducted annually in the fourth quarter to assess and prioritize properties for disposition based on factors such as insufficient growth rates or increasing CapEx needs. During a Q&A session, Julien Blouin from Goldman Sachs inquires about concerns regarding a potential recession's impact, given current supply and vacancy challenges. Brad Hill responds, expressing confidence that, based on historical performance during previous downturns, their region's demand fundamentals would continue to support resilience and outperform peers even in an economic slowdown.

The paragraph discusses the resilience and growth of high-growth markets, especially in the Sunbelt region, even during economic slowdowns. This resilience is attributed to the diversification of industries, affordable employment costs, and knowledge-based job growth in the area. The strength of local governments in the Sunbelt is also highlighted, as they support pro-business policies and offer incentives for job creation and relocation. The region is positioned well for potential onshoring. In addition to job growth, other demand drivers like positive migration trends and challenges in single-family housing availability and affordability contribute to the region's economic performance.

The paragraph discusses a newer challenge in a specific region that is improving retention rates, evidenced by a reduction in turnover from 46% to 41.5% over two years. The speaker anticipates continued strong performance in the Sunbelt region and their diversified portfolio. Julien Blouin concludes with thanks, and the operator introduces John Kim from BMO Capital Markets for the next question. Kim asks about achieving a 2.5% to 3% increase in FFO per share, attributing it to rent seasonality and other factors. Clay Holder responds, highlighting lease-up properties, increased pricing power, and NOI yield as key contributors to performance improvement. Kim also notes the ongoing rollout of Wi-Fi in 23 projects for the year.

In the paragraph, Tim Argo discusses the contribution of their construction projects to same-store revenue for the year. He mentions that they completed four projects late last year and have 23 projects under construction, totaling between $1 million and $1.5 million in combined contributions for 2025. Once fully rolled out, these projects are expected to contribute nearly $6 million. The 23 projects underway this year might prompt acceleration of the rollout in 2026. The rollout is part of a multiyear strategy to extend over four to five years, aiming to include most or all of the portfolio. In response to Wes Golladay's question, Tim notes that Tampa and Atlanta are markets currently exceeding their initial expectations, with Tampa showing notable improvement recently.

The paragraph discusses the performance and expectations for various regional markets. Jacksonville, previously among the weaker markets, is showing improvement and could be surprising in its strength. In contrast, Austin, Phoenix, and Nashville continue to lag due to excess supply. Regarding insurance renewals, discussions are positive, with more details to be shared in the next earnings release. The question from an analyst seeks insight into expected trends for blended spreads and same-store rent. Tim Argo explains that despite a negative start in Q1, the outlook for Q2 and Q3 remains positive, with strong renewal trends projected to continue.

The paragraph discusses trends in the real estate market, particularly focusing on lease renewals and new leases. There is a stronger renewal rate compared to the previous year, indicating a preference for renewals over new leases. Immigration policy changes are not currently impacting operations or construction in the Sunbelt markets, though there is potential for future impacts. Concerning the competitive supply, there is a gradual moderation in the supply of new properties, with 2024 still seeing a higher-than-normal delivery rate. However, a significant decrease is expected in 2026, where the supply is anticipated to fall below the long-term average.

In the paragraph, there is a discussion about the strength of the market projected for late 2025, with significant acceleration expected in 2026. Alexander Goldfarb questions whether leasing is a strong leading indicator of market trends, considering potential job disruptions and economic tightening. Tim Argo responds by stating that leasing is a better leading indicator now due to increased transparency, data, and analysis. He mentions that new lease rates are significant indicators, along with collections, move-outs, and the reasons behind them. Argo notes that job losses or financial difficulties often cause early move-outs or delinquency upticks, but currently, there are no concerns in these areas. The operator then transitions to Rob Stevenson from Janney Montgomery Scott, who asks Brad about changes in acquisition volumes and pricing expectations amid market turmoil and potential tax cut issues.

The paragraph discusses the real estate market trends observed by Brad Hill, noting a significant decline in the volume of deals in April compared to the first quarter. Despite this reduction, pricing remains consistent with sub-5% cap rates. Brad attributes market uncertainty as a factor impacting deal volume but not prices. Rob Stevenson then inquires about year-over-year comparison patterns, particularly around same-store revenue. Tim Argo responds by explaining that the fourth quarter will offer the easiest comparisons due to low new lease pricing, though Q2 and Q3 of the previous year did not experience typical rate accelerations, making comparisons for those periods still relatively favorable. The best lease rates were seen mid-year in 2024, but despite high rates, the comparison remains decent due to slower accelerations compared to usual patterns.

The paragraph details a discussion during an earnings call, focusing on issues with the lease-up of MAA Vale in Raleigh. Tim Argo attributes a decline in occupancy to seasonal traffic slowdowns and flooding issues, which have now been resolved. Over the past 45 days, there has been a notable increase in leads and net leases, indicating improvement and a trend towards 70% occupancy. Ann Chan inquires about potential deviations from expense guidance, to which Clay Holder responds that they expect expenses to align with initial projections. Doug Horne is introduced but his question is not included in the provided text.

In the paragraph, Tim Argo discusses the decline in move-outs to buy a home, noting a significant drop from the previous year, primarily due to affordability issues stemming from high single-family home prices and elevated mortgage rates. He mentions that even with moderated rent prices, the cost of purchasing a home remains prohibitive, particularly when factoring in taxes and insurance. Additionally, economic uncertainty is causing people to stay put rather than make significant life changes. Tim also observes a cultural shift towards preferring the flexibility and lifestyle offered by apartments. He predicts that while the move-out rates may not remain this low indefinitely, they are unlikely to return to previous levels. Finally, he notes a decrease in move-outs to rent single-family houses as well. Doug Horne concludes the conversation with a final quick question.

In the paragraph, Tim Argo discusses the energy sector's impact on Texas markets, particularly Houston, and how job growth trends might evolve. He notes that Houston has diversified its economy, reducing its reliance on the energy sector, and remains a strong market with low supply, good household formation, job growth, and population growth. He expresses confidence in Texas markets as strong job generators. Additionally, Argo addresses a question from Alex Kim regarding the rent growth gap between renewals and new move-ins, explaining that while the gap has narrowed recently, it is not as large when measured in dollar terms. Despite a prolonged period of a higher-than-normal gap, renewal rent growth has remained strong.

The paragraph discusses the company’s performance in terms of renewals and rental rates for May and June, noting high acceptance rates compared to the previous year. The speaker emphasizes the detailed analysis and customer service involved in determining renewal rates, as well as their high Google scores. They mention that renewal acceptance and rental rates remain strong into July and that market conditions are relatively consistent across most areas. A follow-up question about market variability is addressed, with the response indicating little significant deviation. Additionally, Brad Heffern from RBC Capital Markets questions the projection of a -1.5% average for new lease spreads, given that current trends suggest higher acceptance rates and possible adjustments to forecasts.

The company is maintaining its guidance on blended pricing but has made slight adjustments, with a heavier focus on renewals and slightly reduced expectations for new leases due to economic uncertainty. In the D.C. market, where the company has limited exposure, indicators such as move-outs have decreased, and occupancy is over 96%. Although there are concerns about layoffs and buyouts, these have not yet impacted the market. The company's properties in Tysons Corner and Fredericksburg are performing well, with Tysons experiencing a balance between job loss and tech jobs returning to work. Overall, the D.C. market remains strong for the company despite the low level of concentration.

The call ended with the operator confirming no further questions, and Brad Hill expressing openness to future queries and anticipation for an upcoming meeting. The program concluded, and participants were thanked for joining, with an option to disconnect.

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