Mid-America Apartment Communities, Inc. (MAA) Q3 2026 Earnings Call Transcript

Operator: Good morning, ladies and gentlemen, and welcome to the MAA Third Quarter 2026 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterward, the company will conduct a question-and-answer session. In consideration of time, we have a one-question limit. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. As a reminder, this conference call is being recorded today, October 29, 2026. I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer, and Director of Capital Markets of MAA, for opening comments. Andrew, please go ahead.

Andrew Schaeffer: Thank you, Samantha, and good morning, everyone. This is Andrew Schaeffer, 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 statements section in yesterday's earnings release and our '34 Act filings with the SEC, which describe risk factors that may impact future results. During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures, as well as reconciliations of the differences between non-GAAP and comparable GAAP measures, can be found in our earnings release and supplemental financial data. Our earnings release and supplement are currently available on the For Investors page of our website at www.maac.com. A copy of our prepared comments and an audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. When we get to Q&A, please be respectful of everyone's time. In an attempt to complete our call within one hour due to other earnings calls today, 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.

Brad Hill: Thank you, Andrew, and good morning, everyone. As highlighted in our earnings release, our third quarter core FFO results met our expectations. While expense discipline supported third quarter results, the later recovery in new lease pricing is reflected in our revised full-year outlook that Clay will walk through. As we move further into the fourth quarter, we continue to see evidence of recovery across our markets. Based on current trends, we are optimistic we will see year-over-year improvement in new resident lease-over-lease rates for the full fourth quarter, slightly later than the previously expected third quarter. While the timing has shifted slightly, the underlying drivers of recovery remain intact. Robust demand continues to absorb the elevated supply delivered over the past few years, and we are encouraged by the early signs of firming market conditions. Our renewal performance strengthened further, with year-over-year improvement accelerating 80 basis points in the third quarter from 50 basis points in the second quarter, supporting our blended lease-over-lease and revenue performance as new resident pricing continues to recover. With more stable occupancy, we are seeing a strong start to the fourth quarter, with preliminary October new resident lease-over-lease pricing improving sequentially from September. This improved new lease performance, combined with sustained strong renewals, results in preliminary October blended lease-over-lease rates improving by more than 100 basis points compared to October 2025. We are optimistic this leasing momentum will continue to build into the busier spring leasing season. Demand fundamentals across our footprint remain healthy and continue to outperform non-MAA markets. Job growth, household formation, inbound migration, and population growth, along with persistent single-family affordability challenges, continue to support demand for rental housing across our footprint. The Sun Belt remains an attractive destination for employers and employees, supported by the high quality of life and relative affordability. These advantages reinforce our conviction in the long-term appeal of the Sun Belt, even as the near-term pace of recovery has been impacted by temporary supply pressure. Robust demand, coupled with lower supply levels, is beginning to translate to a more balanced operating environment. Performance varies depending on the stage of the local supply cycle, but year-to-date absorption across our markets has exceeded new supply deliveries, reducing the number of communities in lease-up and supporting a gradual reduction in concessions. As lease-up communities stabilize and new starts remain low, the impact of elevated supply eases, and the balance between supply and demand shifts more toward demand. That process is occurring and provides a foundation for improving leasing conditions and ultimately should lead to stronger pricing power. Our focus during this transition is to best position MAA to capture the benefits of that improvement. Our priorities remain disciplined expense management, investments in technology to support a stronger platform with increased centralization and specialization, and enhancements to our communities through redevelopment, repositioning, and property-wide Wi-Fi. Together, these initiatives are aimed at strengthening the resident experience to support our sector-leading renewals, improving operating efficiency, and expanding our earnings growth opportunity as the operating environment further improves. In addition to these initiatives to strengthen our operating platform, we remain focused on creating long-term shareholder value through disciplined capital allocation. Our strategy balances investments in our existing portfolio with selective external growth opportunities while maintaining financial flexibility. During the quarter, we started construction on three projects, wrapping up our four plan starts for the year. These projects include an 88-unit, wholly-owned phase II development in Kansas City, a 306-unit pre-purchase joint venture development in Northern Virginia, and a 312-unit pre-purchase joint venture development in Nashville, Tennessee. All three projects should reach stabilization in a much lower supplied environment and with stronger operating fundamentals in 2029, and are expected to deliver long-term shareholder returns above our current elevated cost of capital, even under conservative underwriting assumptions. Looking ahead to 2027, we are optimistic that the balance will continue to shift more broadly from supply-driven competition toward demand-led improvement, supporting an acceleration in operating fundamentals. The timing and pace will vary by market, but with healthy demand, absorption exceeding new deliveries, and markets gradually firming, we see a favorable foundation for the next phase of recovery. As supply pressures ease, we believe the strength of our operating platform and the capabilities we've been building should become more evident to our performance. To all of our associates across our communities and corporate and regional offices, thank you for your continued service to our residents and to MAA. With that, I'll turn the call over to Tim.

Tim Argo: Thanks, Brad, and good morning, everyone. For the third quarter, same-store NOI was in line with our expectations, with continued lower than projected property operating expenses offsetting lower than projected revenue, which was driven primarily by slightly weaker new lease pricing. As Brad mentioned, October and early fourth quarter trends for new lease pricing are encouraging, but while positive absorption is occurring, we continue to see consumers being selective in the third quarter, resulting in downward pressure on new lease rates. Despite these trends in new lease pricing, renewal retention rates and lease rates remain strong. Turnover remained at record lows, with 39.6% turnover on a rolling 12-month basis, and renewal lease-over-lease rates up 5.3% for the quarter. As a result, blended lease-over-lease rates were up 10 basis points from the blended rates of the third quarter of 2025. Our sector-leading net delinquency performance continued with just 0.3% of billed rents outstanding, a level that has remained consistent for several quarters. Our average residents' financial health remains strong, with our rent-to-income ratio at 18%, matching the second quarter, continuing at the lowest level we have seen since pre-COVID. Individual market fundamentals broadly look similar to last quarter, with a lot of consistency in markets that are showing pricing strength and pricing improvement. Most of our markets in South Carolina and Virginia continue to outperform our broader portfolio from a pricing standpoint, with the Charleston and Norfolk, Virginia blended lease-over-lease pricing performance. Sorry, with the Charleston and Norfolk, Virginia markets gaining even more momentum and leading the portfolio in third quarter blended lease-over-lease pricing performance. Dallas continues to outperform our portfolio, and Austin, though still an underperforming market on an absolute basis, continued its relative improvement with a 420 basis point year-over-year increase in blended pricing. Orlando is another improving market, with blended pricing up 100 basis points from the third quarter of 2025. Phoenix, Charlotte, and Savannah are relatively high concentration markets for us that are still working through heavy supply pressure and struggling to gain new lease momentum despite continued strong demand. During the quarter, MAA Val Vista in Phoenix and MAA Breakwater in Tampa stabilized, and MAA Milepost II in Denver completed construction and moved into our lease-up portfolio. Two additional lease-up properties, MAA Nixie in Raleigh and MAA Liberty Row in Charlotte, are expected to stabilize in the fourth quarter of this year. As with some of our same store portfolio properties, working through the excess supply is still a challenge, particularly in a market like Charlotte, where 19% of inventory was delivered into the market over the last three years. Our two Charlotte lease-up properties have seen the heaviest concession usage, with up to 10 to 12 weeks offered on certain floor plans. But as with the overall lease-up portfolio, we feel good about the long-term NOI growth and value proposition as markets continue to improve. NOI contributions from this group will continue to build through the rest of this year and into 2027. We continue to execute on our various targeted redevelopment and repositioning initiatives in the third quarter with strong results. During the third quarter of 2026, we completed 2,040 interior unit upgrades, bringing our year-to-date total to 5,544 units, 16% higher than the number of units renovated in the first three quarters of 2025. Through the third quarter year to date, we have achieved rent increases of $114 above non-upgraded units on an average per unit spend of $5,926, and average cash on cash return is approximately 23%, versus expected returns of 19% and prior year returns of 20%. These units also continue to lease faster than non-renovated units when adjusted for the additional turn time. We would expect to further accelerate this program in 2027. We also continue to make progress on our common area and amenity repositioning program. The last of six completed properties wrapped up the repricing phase in the third quarter. Five properties are early in the repricing phase, and six additional are in the construction phase and will begin the repricing phase in the spring of 2027. The completed group achieved an average cash-on-cash return in excess of 11%. We expect similar returns from the remaining active projects and are evaluating eight to 12 additional projects for this initiative in 2027. Our community-wide Wi-Fi initiative that began in 2024 continues to expand. The existing 28 live properties where the service is rolling out to residents as leases are signed, continue to gain momentum, and the additional 38 properties that commenced in 2026 will start going live this quarter. Revenue from the currently live properties is quickly increasing from $850,000 in the second quarter to $1.35 million in the third quarter and will continue to grow from here. As Brad referenced, we are encouraged by what we have seen so far in October, with only a few days left to close out the month. Additionally, the early pre-leasing pricing trends so far for November and December relative to last year are positive as well. While blended lease-over-lease pricing for each of the first three quarters of 2026 was higher than each of the three quarters of 2025, new lease-over-lease performances continue to lag the prior year. However, we expect October new lease-over-lease pricing will exceed last October, which would represent the first year-over-year improvement in new lease pricing this year. Furthermore, pre-leasing volume for November and December is ahead of the same time last year, with stronger lease-over-lease rates as well. The strong renewal trends continue into the fourth quarter also. With decisions made on over 90% of our fourth quarter renewals, we are once again exceeding 5% lease-over-lease growth on accepted renewals and achieving higher accept rates than the prior year. These trends set us up to capture growing occupancy and carry a positive earn-in into 2027 for the first time in three years. As I'll have in the way of prepared comments, I'll turn the call over to Clay.

Clay Holder: Thank you, Tim, and good morning, everyone. We reported core FFO for the quarter of $2.10 per diluted share, which was in line with our third quarter guidance. Same-store revenues were approximately $0.02 below our expectations, primarily related to pricing and occupancy, while same-store expenses were approximately $0.02 favorable, driven primarily by real estate taxes. Below same-store operations, favorability in overhead and other income and expense was offset by slightly lower than expected non-same-store NOI. On the capital allocation front, we funded approximately $84 million of development and pre-development costs during the quarter. At quarter end, we had approximately $367 million of remaining funding commitments on our development pipeline and expect to spend approximately $320 million on total development costs for the full year. Our balance sheet remains well-positioned to support our development pipeline and other growth initiatives. At September 30, we had approximately $661 million of combined cash and capacity under our revolving credit facility, and net debt to adjusted EBITDA was 4.7 times. Our outstanding debt had an average effective interest rate of 4.1% and an average maturity of 5.6 years. During the quarter, we borrowed the remaining $250 million available under the delayed draw term loan we established in June, bringing total borrowings under that facility to $350 million at quarter end. The proceeds were used to help refinance $300 million of bonds that matured in September. We also continued our measured approach to share repurchases through purchasing approximately 400,000 shares of common stock at a weighted average price of $126.72 per share for a total investment of $50 million. In addition, during September, we settled a forward sale agreement under our ATM program and issued approximately 300,000 shares at a forward sale price of $130.34 per share. Those proceeds were used on October 1 to fund the approximately $43.4 million redemption of our Series I preferred shares. Turning to our outlook for the remainder of the year, we have lowered the midpoint of our full-year core FFO guidance by $0.04-$8.49 per diluted share and established a revised range of $8.43-$8.55. The change primarily reflects the impact of third quarter same-store revenue performance, along with lower projected non-same-store NOI, partially offset by favorable expense performance and lower projected overhead. Within same-store operations, we reduced our full-year revenue growth midpoint by 35 basis points to negative 0.25%, primarily reflecting third quarter results. New lease pricing during the quarter was below our expectations, and while we built occupancy during the quarter, average occupancy for the quarter was also modestly lower than anticipated. As Brad discussed, more recent leasing trends support our view that the recovery we anticipated is developing, but approximately one quarter later than we originally expected. Accordingly, we reduced our expected full-year effective rent growth midpoint by 20 basis points to negative 0.1%, and our expected average physical occupancy midpoint by 10 basis points to 95.4%. We also lowered our same-store expense growth midpoint by 35 basis points to 1.4%, driven primarily by lower projected real estate taxes. Together, the revisions to our revenue and expense outlook resulted in a 35 basis points reduction in our full-year same-store NOI growth midpoint to negative 1.25%. We also lowered projected full-year overhead by $1.5 million, reflecting our third quarter performance and expectations for the balance of the year. For the fourth quarter, we expect core FFO to be in the range of $2.12-$2.24 per diluted share, or $2.18 at the midpoint. The sequential increase from the third quarter primarily reflects normal seasonal decline in operating expenses, along with higher contributions from our non-same-store portfolio and lower overhead cost, partially offset by higher interest expense. That is all that we have in the way of prepared comments. Samantha, we will now turn the call back to you for questions.

Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please limit yourself to one question. If you have a follow-up question, the option to rejoin the queue is available. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your first question comes from the line of Nick Joseph with Citi. Nick, your line is open. Please go ahead.

Eric Wolfe: Hey, it's Eric here with Nick. You mentioned in your prepared remarks that you were confident that the improving trends in October would translate all the way through, I think you said next year's peak leasing season. I think you also said that November and December pre-leasing was better. Could you just explain what you mean by that and also share what you're expecting for the fourth quarter in terms of blended rate growth, just so we can see if the October trends are translating to better November and December as well?

Tim Argo: Yeah, Eric. This is Tim. I'll hit on some of the details there. For October, as we mentioned, we're seeing it trend better than both last October, both in terms of new lease and renewals, and a little bit better than September as well on new lease and renewals. When we talk about pre-leasing, what we really mean there is units that are on notice to move out. We've pre-leased those units and captured better pricing than we had this time last year. When we look at October trends and we look forward to November and December trends, both our pre-lease volume for November and December and our pre-lease rates for November and December are trending better than they were this time last year. Obviously, it'll be dependent on the rest of the leasing we do. Still early for November and December, but the trends we're seeing are good. I think the other point I'll make there is contrasted with what we saw early in Q3, is that we're seeing better pre-lease volume, better pre-lease rates, occupancies in a stable position. We have fewer lease expirations in Q4 and more renewals in Q4. So we're less reliant on leasing as many. We're not building occupancy, we're less reliant on leasing as many of those current vacant units, which obviously have the most pricing pressure. So feel good with the trends we're seeing thus far. Obviously, a little more time to go. Then hitting on the guidance for Q4. If we look at what Q3 was, new lease pricing was about negative 6% or so. We typically see a 300-plus basis point moderation in new lease rates from Q3 to Q4. We expect probably half of that in Q4 for the full quarter. We're seeing a little bit better than that for October, but we expect a little bit of moderation in November and December. Then continue to see renewals in the 5%-plus range as well.

Operator: Your next question comes from the line of Jamie Feldman with Wells Fargo. Jamie, your line is open. Please go ahead.

Jamie Feldman: Great. Thanks for taking the question. We were taking a closer look at Atlanta specifically, which is a big market, and was also kind of leading the Sun Belt recovery for a while. But if you look at the 3Q numbers, you had NOI down, occupancy down. I guess the question for you is just, A, is there something specific about Atlanta in the third quarter, but more importantly, is this a sign that some of these markets are stalling out already? What gives you confidence that they are not? I think Jacksonville is another one that seemed like it was kind of ahead of the pack, and then it slowed down pretty meaningfully. If you could just provide some more color just on where your head is there, and then also what should give us confidence that these really are going to restart. Also urban versus suburban, maybe that is part of the issue in Atlanta. We are just curious if there is something playing out there between your urban versus suburban markets.

Tim Argo: Yeah. This is Tim. I will touch on that. For Atlanta, I think it was really sort of a temporary blip, if you will. We did see in early 3Q, really the month of July, we saw traffic moderate a little bit. We saw concessions jump up, particularly in some of our more heavily supplied or our more heavily concentrated sub-markets. Looking at Brookhaven and Duluth specifically. We saw concession spike, and we were holding on to pricing a little bit, so saw occupancy dip a little bit there. But it quickly recovered. We are above 95% in Atlanta now as we sit here in early 4Q. Actually, when we look at new lease pricing for Atlanta, we have seen a little bit of acceleration from September to October new lease pricing. Nothing we see in Atlanta to be long-term trends. We are still seeing good performance in the more in town Buckhead, Midtown, Downtown still leading the way there. We are still seeing the trend in Atlanta and other markets where the urban sub-markets are tending, for the most part, to still outperform the more suburban sub-markets as that supply came a little bit earlier, and they are working through that. Nothing long-term, we believe in Atlanta. Expect that to bounce back. Jacksonville has been a relatively weak market for us for a while. It seems to have stabilized a little bit. We are seeing the pricing in Q3 for Jacksonville was about 70 basis points better than it was in Q3 of last year. While it is still a laggard, and the portfolio is still a laggard to some of the Florida markets, we think it is sort of stabilized and trending. It is a little bit flat, but trending a little bit up. We do not feel like any of these have stalled out. Most of these are, there is something unique in the market temporarily that is driving little blips from month to month.

Brad Hill: Yeah, Jamie, this is Brad. Further context I would just add to that is if you look at all of our markets in context, and you kind of rank those markets in terms of performance, about 60% of our markets are kind of above portfolio average trend line. If you look at those, 90% of those markets that are above the trend line are more than two times the trend in terms of our blended performance. In terms of the strength of performance and improvement that we are seeing, it is pretty broad-based across our portfolio. It really depends on where the market is in terms of its supply cycle, because we are seeing strong demand really across the portfolio. If you look at the markets clearly that are below the trend line for us, clearly those are the high supply markets that continue to drag down the total portfolio performance. The other piece I would just add of those markets that are toward the bottom of the list in terms of high supply, we are seeing improved performance there. You look at a Nashville and certainly in Austin, it is still showing pretty good year-over-year improvement. I would say we are seeing improvement across the portfolio that is pretty broad based.

Operator: Your next question comes from the line of Austin Wurschmidt with KeyBanc. Austin, your line is open. Please go ahead.

Austin Wurschmidt: Great. Thanks. Good morning, everybody. You guys have referenced now a few times that the strong demand trends are providing some optimism around kind of the recent improvement in the lease rate growth, but during a period where there is really low lease expirations. I guess, how do you connect the dots that that translates into during a period of higher lease expirations, improving fundamentals, and more specifically, what have you seen historically that it will take for pricing power to meaningfully improve? Is there some vacancy threshold across the market that you need to cross? Just trying to understand, given the sluggishness in the recovery up until this point.

Tim Argo: Yeah, Austin, this is Tim. On your first point, certainly fewer lease expirations in Q4, so it is less impactful when you think about the broader portfolio. There is obviously less traffic this time of year as well. I think on a relative basis, the strength we are seeing relative to what we typically see this time of year is encouraging. I think to be able to be building occupancy, which we did through Q3, and we expect to build a little bit more into Q4, and see better pricing trends, and see it is all the different components. It is the renewals, it is the pre-leasing, it is the occupancy. All of those seem to be trending in the right direction. To do that, for all those to be moving in the same direction, to do that in a quarter with less demand in general from a seasonal perspective, I think that is encouraging for us. On the second point, for us being in that 95.5% range, somewhere around there is kind of where we want to be or where we think we can start pushing on price and balancing that trade-off a little bit. When we look at market level occupancies broadly across the board, they are pretty much back to the sort of pre-supply glut levels. We think the number of units in lease up, we think there are 50,000 fewer units available in our markets than there were at the beginning of the year than now. So there are less units to be absorbed. So all those factors kind of lead us to believe that the trends are real, and we'll start to see some real recovery as we get into 2027.

Operator: Your next question comes from the line of Nick Yulico with Scotiabank. Nick, your line is open. Please go ahead.

Nick Yulico: Thanks. Good morning. I guess for either Clay or Brad, I want to ask about the balance sheet, make sure we're understanding this correctly. So you guys took out the bond maturity with floating rate debt, so your floating rate debt exposure went up this quarter. And so I guess what I'm wondering is a couple things. Are you planning on reducing that floating rate debt exposure via doing some sort of fixed rate issuance or swaps? And then the other thing is, I want to make sure we're sort of looking at this right. In terms of the effective interest rate that you guys have in the supp, I know there's like a mix of different debt in that floating rate debt. Is it possible just to get what the overall spread is on that $1.2 billion? Because I know it's a mix of again, like commercial paper, other forms of debt. And then just lastly as well, if you had any high level thoughts on capitalized interest next year, just as we're thinking about modeling interest expense going forward. Thanks.

Clay Holder: Yeah, Nick, this is Clay. I'll take that. I'll make sure I hit them all for you. I think going back to the beginning of the year, we had talked about that we would expect there to be a couple of bond issuances this year. As we sit here today, we probably expect that to still be the case. The term of that issuance would probably be a little different than what we thought at the beginning of the year. But as we sit here today, it's probably going to be probably around a five or so, something lower than a 10 for sure, just given where rates are today. I think that would play itself out over the remaining course of the year. Whenever you look at our floating rate debt, and think about the weighted piece of that, our commercial paper all in, it's about a little over 4% for it. So, our CP program is a little over 4%, and it's about $750 million. We've got the $350 million term loan at about a 4.7, and the revolver being the difference there, about a 4.5%. So it's all weighted as about 4.5%, a little lower than 4.5% there. On CapEx interest, as we think about next year. As we sit here today, we've had the four starts this year. Of course, we've had a couple of deliveries here recently. That's part of the driver of the increased impact of interest expense that we're seeing in the fourth quarter. I would expect CapEx interest for next year to be a little lower than what we're seeing this year, just given the timing of some of the deliveries, plus some of the timing of the starts that we're expecting for next year. So, it'll be a small headwind for us as we go into 2027.

Operator: Your next question comes from the line of Brad Heffern with RBC Capital Markets. Brad, your line is open. Please go ahead.

Brad Heffern: Yeah, thanks. Good morning, everybody. Can you go through the capital priorities right now? Kind of been doing a bit of everything this year. I'm wondering if higher rates and a lower stock price maybe shift things in the favor of repurchases or how you rank things otherwise.

Brad Hill: Yeah. Hey, Brad, this is Brad. I think our strategy in that area hasn't changed. Certainly trying to drive a long-term compounded earnings performance. I think, based on where we are and where interest rates and things of that nature, our priorities, I'd say number one continues to be investing in our operating platform. We've done that certainly in a number of ways. We have talked about the Reimagine initiative that we're focused on. That's strengthening our operating platform. You've seen the benefit of that on the personnel side. This year, we see about $25 million improvement in margins in our run rate by the end of next year. We'll continue to do that. As Tim talked about in his comments, we continue to reinvest in our existing portfolio through our redevelopments. Pretty strong returns there. Our Wi-Fi initiative will continue to do that as well. I'd say on the external growth front, that's really going to depend on where values go. I'd say if cap rates continue to be in the range of where they are now. They moved up in the third quarter about 25, 30 basis points versus where they were in second quarter. If cap rates kind of hang in there or move up another, call it 25 basis points, we'll continue to favor development in that equation. I think, the returns we continue to get from our development platform continues to exceed even our current elevated cost of capital from an IRR perspective. So we feel really good about what we're able to achieve there, the longer term growth rates as well. If we see the capital markets change a bit and force cap rates to move up a bit more, we'll get more active in the acquisition space. We're pretty opportunistic in terms of our deployment of capital in that area. We've been pretty disciplined the last few years. We've only purchased one project in the last two years because cap rates have been so low. If you go back to the GFC period, we bought 10,000 units in one-off transactions over a three-year period there. So, we want to really protect our balance sheet. We want to be flexible in terms of where we're able to lean in to drive long-term shareholder value. I'd say given where our current leverage is and our dispositions for the year that we've executed at about $150 million net to us, we have reinvested that $150 million into share repurchases. We don't have dispositions planned for the last part of the year, so probably not going to see us active in the share repurchase area right now, given where our dispositions and leverage are.

Operator: Your next comes from the line of John Kim with BMO Capital Markets. John, your line is open. Please go ahead.

John Kim: Thank you. I wanted to ask what your primary metric that you look at when you determine your dividend policy. When you look at your funds available for distribution and you add back redevelopment CapEx, year to date, it is down 4% year over year. The payout ratio is 99%. It does not really leave that much capital for reinvestment, and maybe you can make the case that it should be reset lower if this continues. On the flip side, CapEx is variable, especially revenue enhancing CapEx, so this number may improve from that and other measures. Just wanted to get your thoughts on dividend policy.

Clay Holder: Yeah. John, this is Clay. You are hitting on all the things that we look at. In a given year, to your point, CapEx can be variable from time to time. You have to consider that, especially when you think about the potential for some casualty events to come into play. That is the way we think about it, is that we are looking at it on a kind of pre-redevelopment cap spend basis, given the fact that those items are typically going to provide some sort of return that is higher than our cost to capital. I think you have kind of hit on it. It has obviously been down a little bit this past year versus last year to your point. It is running right around flat to slightly positive. We are going to continue to manage that to at least that level, if not better, just given the fact that we do not want to be leveraging up to fund other capital needs that have to be funded.

Operator: Your next question comes from the line of Adam Kramer with Morgan Stanley. Adam, your line is open. Please go ahead.

Adam Kramer: Great. Thanks. Maybe just want to talk about the sort of cadence of lease growth in the quarter on a monthly basis. I know you guys have sort of shifted away from that, but I think it would be helpful just to understand sort of the degree of improvement you saw over the course of the quarter. Then I guess sort of bridging from that into the 4Q commentary, would love to hear October metrics to the extent you are comfortable disclosing, at least directionally. Then maybe just sort of occupancy target for 4Q as we get into what is typically been the seasonally slower months. Although it seems like this year has an element of sort of contra-seasonality to it as well.

Tim Argo: Yeah, Adam, this is Tim. As far as Q3 goes, renewals were pretty consistent in that 5.2%, 5.3%, 5.4% range. On the new lease side, we saw the typical seasonality, I would say. It was a little bit less than normal, but the typical seasonality where July was a little better than August. August was a little better than September, and it averaged out to the 6% over the full quarter. September was a little bit over 7%. If we think about October, I will say October preliminarily with a few days left, trending slightly better than September. Then on the occupancy side, we were 95.3% for Q2 and Q3. We would expect something better than that in Q4. So we are slowly building occupancy through the quarter. So I think closer to that 95.5% range, give or take. For some of the reasons I mentioned earlier, we have better retention, fewer lease expirations, and better pre-lease volumes. So we think occupancy will slowly build throughout the quarter and put us in a good position as we head into 2027 to take advantage of improving fundamentals.

Operator: Your next question comes from the line of Jana Galan with Bank of America. Jana, your line is open. Please go ahead.

Jana Galan: Thank you. Good morning. Just wanted to follow up on the positive earn-in comment. Are there any other building blocks for 2027 that you can talk to? Sounds like occupancy can be a slight benefit. Just curious if there's any initiatives to increase the other revenues. The bad debt is excellent, so not sure if that can get better from here.

Tim Argo: Yeah. You hit the points. We'll have a slightly positive earn-in heading into 2027, and obviously rate growth will be highly dependent on pricing for what we do in 2027. Occupancy, we would expect to be something similar, if not a little bit better. I've mentioned earlier, 95.5% is kind of our sweet spot where we think we can balance out the pricing and occupancy component. As far as other income, the big one would be our Wi-Fi initiative that we continue to roll out. We had $1.35 million of revenue from those projects in Q3. I think the full run rate for that group of properties is probably close to $2 million or so, which we'll get to later next year. We have 38 properties or so that we're finishing up or starting to go live on right now. I know those will play out over the course of the next 12-15 months in terms of the ramp up. That full run rate for those projects is closer to $3 million, representing about 14,000 units. Obviously take a long time to get to that run rate. If you can get a feel for what the opportunity is on the Wi-Fi side, that would be the big win in terms of other income.

Operator: Your next question comes from the line of Haendel St. Juste with Mizuho. Haendel, your line is open. Please go ahead.

Mike: Good morning. This is Mike on with Haendel at Mizuho. How would you characterize demand and your pricing power here? How do you think concessions and consumer AI agents are impacting renter psychology and willingness or ability to negotiate in real time?

Tim Argo: On the first part, demand, Brad talked a lot about this in his comments where we're continuing to see strong demand. Think that will continue the in-migration, job growth, household formation. All those macro-level things that we look at are certainly more positive and trending well relative to other parts of the country. So expect that to continue. When we look at more of our internal metrics, lead volume, those sorts of things are up quite a bit over last year. We've been seeing lead volume run 10%-15% higher this year over last year. Now it's taking more leads to generate those leases as people are taking longer to make decisions. But, not really seeing anything concerning and actually optimistic on the demand side. As far as the second part of your question, I know you mentioned concessions. I think concessions has been the limitation, if you will, from seeing the quicker recovery that we'd hoped and anticipated and still think is starting to show its head now where we've had three years now of kind of less than normal leasing performance due to all the supply. A lot of operators have gotten very comfortable and very used to only being in operating environments where there's heavy concession usage. So I think that is what can create the opportunity going forward where with now occupancy stabilized and fewer units in lease up, I believe operators start to get more comfortable to bring those concessions down. We started to see that a little bit in late Q3 and into early Q4 where concessions have ticked down slightly. I think that's been more of a function of the leasing environment in the last two or three years and the working this supply than anything else.

Operator: Your next question comes from the line of Rich Anderson with Cantor Fitzgerald. Rich, your line is open. Please go ahead.

Rich Anderson: Thanks. Good morning. Just thinking big picture here, Brad, I remember we had an event, I think it was June of 2025, and maybe it was 2024. I cannot remember. They all blend together. We have been trying to pinpoint this recovery in the Sun Belt for a long time now. Similar views of improvement in the following year have been expressed and then ultimately missed, because of this sort of biblical nature of oversupply. What do you think people should be thinking about, in terms of how this will ultimately recover? I mean, it does not sound like you are looking at a hockey stick-ish type of opportunity. It is sort of going to be more of a gradual sort of improvement over the course of the next several years. Would that be the right way to think about it? Maybe we transition next year, but it is not going to be anything sort of earth shattering or sudden. Is that a fair way to say it? If so, why would that be the case? Besides supply, what other factors are making it so sort of slow in its recovery? Thanks.

Brad Hill: Well, thanks, Rich. I think in terms of the pace of recovery next year, from a portfolio level perspective, I mean, it really depends on where each individual market is on that kind of supply curve. Because overall what we are seeing across our markets is this is not a demand issue. This is a supply issue and it is taking time to certainly work through that supply. As I mentioned earlier, for the markets that have worked their way through the supply pipeline, we are seeing some very good results there. I think in some of those markets you are seeing a hockey stick type of year-over-year recovery. You look at an Austin, for example, it is still a challenged market right now. It's seen the most supply, but it's also got tremendous demand, and we continue to see blended rate performance year-over-year be the strongest in our portfolio. I wouldn't rule out a hockey stick type of recovery, in certain markets, depending on where it is in that supply pipeline. That's obviously where each of those and how they overlay each other is going to determine how the overall portfolio reacts. But broad demand, I think is pretty strong in our market. Certainly, job growth has been a little bit underwhelming this year, versus what we had hoped it would be. But we've got other things that are tremendously positive, from population growth, migration trends, household formation. We're also, at this moment, we've got one of the higher levels of doubling up that we've seen in the last few years. If we can get to the point where these markets, market level occupancies continue to improve, we've seen that. Tim gave the numbers about the excess absorption versus new supply coming into the market. That sets us up for a pretty good recovery trajectory as we get into the spring, next year. We've said for a few quarters now that it's hard to see a significant improvement in the numbers, even if the supply-demand dynamics improve in the fourth quarter and first quarter. It's really going to be the spring leasing season before you see that. We do expect that recovery could be pretty significant, depending on where markets are in that supply cycle. There are other things that I think could improve that. If the economy improves, I think that job growth improves, that unbundling begins to happen, and that's a significant demand factor as well that we'll need to keep our eyes on.

Operator: Your next question comes from Rich Hightower with Barclays. Rich, your line is open. Please go ahead.

Rich Hightower: Hey, good morning, guys. I guess it's a bit of a follow-up on Rich Anderson's question and also Adam Kramer's question before, but just thinking about what happened during the third quarter and the fact that you were able to give guidance in late July, having an understanding of what the following couple of months that would complete the quarter would look like, and then the miss and the guide down for the full year. I mean, was there something isolated in August and September that just played out simply unexpected. As we think about next year, do you think a wider range to start the year is warranted just as you think about the risk calibration to the outlook that you're hinting at for next year?

Brad Hill: Yeah, Rich, this is Brad. I'll start, and certainly Tim can add some details. I think if you look at third quarter and where we were in July and what we expected to happen, at that point, certainly we had pre-leasing results out for August and September, and those were screening quite well versus the year-over-year. Obviously, what we saw is a little bit more pressure on the new lease rate side, leasing up vacant units as we built occupancy through the quarter and a higher percentage of the units that we were leasing were in that kind of vacant bucket. You saw a slight uptick in our concessions in our portfolio in the third quarter as a result of us having to compete more with some of that new supply that's out there in order to gain residents in that quarter. We're at a more stable occupancy point at this point, but I'd say that's what caused the pressure point in the third quarter. In terms of setting guidance for next year, we have a very thorough process. Our team does a great job in preparing that guidance every year. As we do every year, we'll go back and look at what were our expectations for the year, and how did that manifest in our forecast, and is there anything that we need to improve in that area? But as we set out this year, there were certainly some things that we expected to occur this year that didn't. We expected there to be less economic uncertainty in the market this year. We expected the consumer sentiment to improve throughout the year, and those two things really ultimately impact new lease pricing and the confidence in the ability for us to push a little bit more on the new lease rate side, and that didn't materialize like we had expected. We'll review all of those things as we get ready to put our forecast out for next year.

Operator: Your next question comes from the line of Steve Sakwa with Evercore ISI. Steve, your line is open. Please go ahead.

Steve Sakwa: Yeah, thanks. A lot of questions have been asked and answered. I guess real quick on expense growth, just thinking about the containment you've had the last couple of years, anything that we should be thinking about going into 2027 on that front?

Clay Holder: Hey, Steve. This is Clay. I think what you'll see going into 2027, we'll talk probably more about this at NAREIT in a couple of weeks as far as what 2027 begins to look like. As I sit here today, yeah, I think personnel will still continue to be a positive for us, probably below kind of your typical market level increases there, just as we continue to push on our Reimagine initiative and are able to continue to specialize and centralize some of our roles at the properties. That also being a head from us continuing to be able to pod some of our properties as well. That should continue to trend well for us. Insurance will get the benefit of our recent renewal over the first half of the year, then we'll start again next year. But as we sit here today, claims activity has been very strong and positive for us. I would not expect a significant increase in insurance like we saw a couple of years ago. Property taxes will be one, obviously the biggest line on the expense ladder. I think with valuations continuing to be depressed a little bit over these past couple of years, I would not expect to see an outsized growth there in property taxes. Again, I also think that jurisdictions just have the nature of wanting to push on revenue as much as possible, and it will be on us to combat that as we need to make sure that we are getting a reasonable and a fair rate there. I would say the one that has been high this year is marketing, for all the reasons we have been talking about. You may see that come down a little bit as some of the supply gets absorbed, but I would not expect that to continue to run at the same rate that it has been running this past year. It could be a little bit elevated in the first half of the year, and I would expect it to continue to kind of fall off over the course of the year. R&M utilities, I think that is going to be mostly dependent on inflationary cost, and we will see how that continues to balance out over the next few months as we get ready to set guidance for next year.

Operator: Your next question comes from the line of Anthony Paolone from JPMorgan. Anthony, your line is open. Please go ahead.

Anthony Paolone: Hey, guys. Thanks for taking the question. You have Nahum on for Tony this morning. Maybe shifting gears a bit, I think you guys noted move-outs to homeownership hit a record low in the quarter at about 10%, but I guess what is your sense as to how much competition you are seeing these days from the single-family rental side as opposed to homeownership?

Tim Argo: Yeah, this is Tim. As far as single-family rental, it is a very minimal part of our reasons for move-out and therefore, not a huge competition for us. We look at Q3, for example, move-outs to rent a house was only about 3%, down from 4% a year ago. So, really minimal at this point. I think it's more of a difference, a change in somebody's lifestyle in terms of having a family or that sort of thing that really drives that versus really a direct competition for us. We continue to not be concerned or really see a lot of competition due to rental housing.

Operator: Your next question comes from the line of Alec Feygin with Baird. Alec, your line is open. Please go ahead.

Alec Feygin: Hi, thanks for taking my question. Maybe on the big picture, you talked about acquisitions and share buybacks and maybe your thinking around them. But as the cost of capital rises, how does it change or shift your views on development, whether it's from ground up or expansions?

Brad Hill: Yeah. Hey, Alec, this is Brad. I think we've always been pretty conservative in the way that we've approached development, either through our return requirements, being sure that they meet our current cost of capital, or in our underwriting assumptions. If you look, for example, where our current underwritings are, we've got a number of deals that are certainly under pressure in the Charlotte market in terms of the lease-up pressure. But yet, we're still hitting our underwritten returns on our development pipeline. I think we're doing a pretty good job in the development world in terms of weighing the risk and the reward, despite where our current cost of capital is. We'll continue to look at development. I think, the reality is our cost of capital is up, so we need to be sure that we're doing a good job of capturing that in delivering returns and shareholder value that exceed our current cost of capital. We continue to believe in development. The long-term growth opportunities that comes from development continues to be higher than what our existing portfolio delivers. We'll continue to allocate capital to development, but obviously, we need the yields to perhaps increase a little bit.

Operator: Your next question comes from the line of Ami Probandt with UBS. Ami, your line is open. Please go ahead.

Ami Probandt: Hi, thanks. Across your portfolio, how has market rent trended? Maybe a way to look at this is, for your portfolio, how have new lease versus new lease spreads been trending? If we think about the ongoing widespread between new and renewal rents, do you think that we could see turnover start to tick higher if the consumer backdrop remains challenging?

Tim Argo: Ami, this is Tim. As far as new lease rents, it's kind of another variation of lost lease and all that, but our new lease prices for September, for example, on an absolute basis, were about 2% higher than they were in December. Obviously, that ebbs and flows throughout the year based on seasonality and time of year. I think one other point I'll make on new lease rents there is that while we've reported year to date, I think our new lease over lease rates is about negative 5.3% or so, which is all new leases. If you look at just leases where a resident moved out, a new resident moved in, and they lived with us one term. So really, somebody coming in and shopping for the best deal, they move out, somebody else shopping. Our new lease over lease rate in those scenarios is only negative 1.9%, which is consistent with what it was last year. To me, that's a better proxy for really what overall long-term market rents are doing is those prospects that are shopping and coming off a one-term lease versus you have a lot of different mix of time that people stayed with us when you have that overall new lease over lease rate. What was the second part of her question?

Brad Hill: I think the follow-up question was on renewal.

Tim Argo: Oh, yeah. The spread on new lease for renewals, it's been wider, I would say, wider than normal for really going on 12 quarters at this point. We've continued to see 5%+ renewals. We've continued to see turnover go down. The other point is that gap has kind of stabilized. So on a pure dollar basis, it's been between $190, $200. The dollar gap between new leases, renewals, it's been that way for about four straight quarters now, which, when you think about over the term of 12-month lease is really not that big of a difference. You think about cost to move out and hassle and all that. So we really don't see any pressure there. We monitor reasons for move-out. Obviously, we monitor the different tranches of people, where they are relative to market and ones that are moving out and not seeing any changes there. So don't anticipate any pressure on that side.

Operator: Your next question comes from the line of Alexander Goldfarb with Piper Sandler. Alexander, your line is open. Please go ahead.

Alexander Goldfarb: Hey, thank you, and good morning down there. Brad, just a question on sort of the macro and the political. Certainly, the midterms are proving a lot more competitive for the Democrats in markets that were traditionally red. You guys have long focused on the Sun Belt, which has been mostly red. Are you seeing a rise now that there's a number of potential upsets where you could suddenly see those policies like rent control, things that were formerly in the coast, but policies that could infiltrate into your markets? Are you seeing a rise of that or you're not? I'm just trying to understand how the shifting landscape may filter in on the regulatory front in your markets.

Brad Hill: Yeah. Hey, Alex. No, I would say in general, we're not seeing that broadly in our markets. Certainly, you're seeing in a couple of markets like a Colorado where you've got some different legislative actions that are impacting fee disclosures and all-in pricing and things of that nature. But broadly across our footprint, we continue to believe that the regulatory landscape in those markets is pretty positive for us. They still generally have more of a business-friendly environment than other regions of the country, and we don't really see that changing. I'd say, despite what the headlines and what things that are going on the ground, we're not seeing much of that change from a regulatory risk perspective within our footprint.

Alexander Goldfarb: Thank you.

Operator: Your next question comes from the line of Michael Lewis with Truist Securities. Michael, your line is open. Please go ahead.

Michael Lewis: Thank you. You've said, I think a couple of times on this call that it's not a demand issue, and I understand why. But I'd say U.S. job growth's been disappointing the last 12-18 months. It sounds like you agree with that. My real question is the migration to the U.S., and these numbers are kind of all over the place, but I pulled up the US Census Bureau. They said 2.7 million in migration in 2024, and that's forecasted to be about zero this year. I know these migrants might not be your core renter cohort, but they tend to be renters. Is it wrong to think that between the jobs and the demographics of 18–34-year-olds and the immigration, which is a big number, it seems to me like maybe there are some demand headwinds that have been kind of under the surface. What kind of gives you the confidence in demand going forward the next few years?

Brad Hill: Yeah. Hey, Michael. This is Brad. I think those are all valid points that we're all looking at and trying to see if there's any impact of it and things of that nature. We really have not seen much impact associated with the immigration side of things in our asset quality and asset types. I'd say what gives us confidence in that is if you look broadly across the board, all of the other demand factors that we talk about continue to be quite strong. The population growth, the migration numbers that we have from people coming to our properties and then leaving our property is still pretty positive within our footprint. I think the other piece is just if you look at the broad absorption numbers that we continue to see across our footprint, we're seeing more units year to date be absorbed than it's being supplied into the market. I think that's certainly a positive demand and factor not only right now, but also as we look forward and we get back to a more equal supply and demand and then transition into, as I said in my opening comments, we come into more of a demand-led environment, we'll see things strengthen a little bit. Again, I think immigration is certainly out there, but we're not seeing it in our portfolio broadly.

Operator: Your next question comes from the line of Alex Kim with Zelman & Associates. Alex, your line is open. Please go ahead.

Alex Kim: Hey, guys. Thanks for taking my question here. You guys have previously talked about targeting stabilized yields in that 6.25%-6.5% range on new developments, with underwriting generally incorporating around 2% rent growth through stabilization. Just given that new lease pricing across the portfolio remains negative and the recovery's been slower than anticipated, have you adjusted those underwriting assumptions for projects you're evaluating today, and how much flexibility do you have on those stabilized yields if market rents remain relatively flat for another year?

Brad Hill: Hey, Alex. This is Brad. I think as I mentioned earlier in one of my comments, we are pretty conservative in the way that we underwrite these projects. I think if you look at the two deals, for example, that just came out of our lease-up portfolio. You look at Breakwater and Val Vista, those two combined have actual yields in the upper 6% range. We certainly did not underwrite that. If you look at the projects that we have, the Charlotte ones, as I mentioned, are definitely under pressure. But overall, generally what we find is the rents on our development deals, if you look over the last five years, have outperformed the expectations that we have and the way that we have underwritten these deals. The other piece of that is the construction costs have consistently come in below what we expected. Generally, the yields we deliver are in excess of what we underwrite. I feel good about our process in terms of how we approach the development from a conservative standpoint.

Operator: Your next question comes from the line of John Pawlowski with Green Street. John, your line is open. Please go ahead.

John Pawlowski: Hey, thanks for keeping the call going. I have a follow-up on the suburban versus urban conversation with just how much supply pipelines have shifted suburban over the last several years. Tim, can you give us a sense for full year 2026, what new lease spreads, how they compare within your urban versus suburban new lease spreads?

Tim Argo: Yeah. On a blended basis, our urban is running probably 40 basis points better than our suburban. On the new lease, it is more like 100 basis points. It is a little bit closer to our renewal for a lot of the reasons we have talked about. So about 100 basis point spread on new lease and 40 overall blended, and then probably about five basis points or so higher occupancy. Obviously, our urban footprint is not huge, but it probably represents 25% or so of our overall portfolio. But for all the reasons we talked about, just supply coming a little bit quicker in those urban sub-markets, we have seen those areas start to recover a little bit. And although that gap is probably narrowed a little bit, I think it widened to more like a little over 100 basis points late last year, early into this year. We have seen it narrow a little bit as we have seen a few pockets of recovery in some of the more suburban sub-markets.

Operator: Your final question comes from the line of Peter Abramowitz with Deutsche Bank. Peter, your line is open. Please go ahead.

Peter Abramowitz: Yeah. Thank you for taking the question. I know you mentioned, I think, in your prepared remarks about some of the supply impacting some of your developments in Charlotte still, and overall, some of the pressures in the portfolio still. I know we can kind of look at CoStar, whatever data sources we have, and they have their estimates for supply next year. But just curious, kind of maybe from a more qualitative perspective, any considerations or anything nuanced to the supply picture that we are thinking about for 2027? And just kind of curious your overall thoughts about how you are feeling about supply there.

Brad Hill: Yeah. Hey, Peter. This is Brad. I think as we look at the supply picture, we're pretty encouraged by what we see for a few reasons. As you mentioned, you could look at three different third-party data sources and get three different projections for what next year looks like. I think the reality is, if you go back and look at the starts that we've seen now for three and a half years, the past three and a half years, quarterly starts have been below long-term average in our footprint. We feel really, really good about that. We feel really good about this year is the first year where we've seen new deliveries below long-term averages. Over the last three years, we had five years' worth of supply. If you look at absorption numbers, we continue to have positive absorption that is now coming in and helping market-level occupancies improve. We're seeing, as Tim mentioned, concessions are starting to tick down a little bit. Hard to see that improvement in the fourth quarter and first quarter. As we look into next year, some sources show, in our footprint, new deliveries declining. Some show them flat; some show them up. I think the point is, in all of those instances, the supply deliveries in our markets next year will be below the long-term average. We're getting to the point where in more of our markets, as I've mentioned in a comment earlier, more of our markets are getting past that supply/demand equilibrium point, where demand is really starting to show in our blended performance. That'll occur to a larger degree next year as absorption continues and demand continues to remain strong. We're pretty optimistic about what the next few years look like. Again, we've got three and a half years of below average starts. That will continue, I think, for some period of time, especially with costs where they are and certainly interest rates where they are. The hurdle to start a new development for someone in the market is a lot higher today. The access to capital is more constrained. That supply pipeline will continue to decline. We're pretty encouraged by what that looks like next year. No matter the source, the deliveries will be below long-term average, which is a positive.

Operator: This concludes the question-and-answer session. I will now turn the call back to MAA for closing remarks.

Tim Argo: Well, no more questions from us. If anything comes up, don't hesitate to reach out. Otherwise, we'll see you guys all in Atlanta in May.

Operator: This concludes today's program. Thank you for your participation. You may disconnect at any time.