Mid-America Apartment Communities (NYSE:MAA)

Alan Chu, Eli Pikus, Lawrence Lee, Melody Wang

Pitched Price: 138.61 | Target Price: 169.40 | Implied Upside 22.3%

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Meet Our Team

Lawrence Lee

Class of 2028 Finance and Management

Melody Wang

Class of 2028 Finance and Accounting

Alan Chu

Class of 2028 Finance and Data Science

Eli Pikus

Class of 2028 Finance and Data Science

1

REIT Industry

Agenda

I

III

II

IV

Sunbelt Region

MAA Overview

V

VI

Theses and Catalysts

Risks and Mitigants

Valuation

2

Market Overview

Housing Affordability

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

Multifamily is the most resilient CRE asset class, supported by affordability gaps and capital inflows

• The cost of homeownership has surged, with monthly mortgage payments still 30-40% higher than renting on average
• Homeownership rate stalled around 65%, keeping households in the rental market
• The affordability gap has reinforced multifamily housing as the more accessible option for households

Capital Flows

• Development financing has become more restrictive as lenders tighten standards stricter DCSR lower LTVs
• Institutional capital has shifted toward stabilized, income-producing assets rather than speculative development

Institutions have increased real estate target allocations by 20%

3

Sunbelt Region Overview

Recent Trends

• Completions & deliveries have hit a multi-decade high (2022-2024), especially in the Sunbelt
• Sunbelt population growth has been 3.5x faster than non-Sunbelt regions from 2014-2023, fueled by migration and corporate relocations
• Sunbelt vacancies have risen across the region, reaching highs of 14% compared to the national average of 6%
• Sellers began offering incentives and cutting prices, to adapt to the tightening market

Current Outlook

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• Rent growth forecast remains positive but slightly below average: Orlando (+4.2%), Nashville (+3.8%), Charlotte (+3.6%), Phoenix (+3.5%) through 2026
• Two-thirds of Sun Belt metros still have average rents below the national median
• In 2024, Sunbelt region recorded net absorption of 552,292 units with rates projected to increase in 2025 and 2026 due to sustained population and job growth

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

4

Company Overview: MAA

• MAA is a Sunbelt-focused REIT owning ~100,000 apartment units across 16 states (Dallas, Austin, Atlanta, Orlando, Charlotte)
• Founded in 1977, headquartered in Memphis, TN; among largest publicly traded REITs
• Owns, manages, and develops multifamily communities with focus on Class A/B properties in Suburban areas
• Scale advantage with strong operating margins (~40%)

Geographic Presence

Austin,

Texas

Orlando, 

Florida

Company Description

Financial Snapshot

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

5

Historical Stock Performance

Stock Performance Context

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

2021-2022 Sunbelt migration surged, driving record rent growth and strong stock performance

Spring 2022 Fed's fastest rate hikes drive borrowing costs higher and triggered REIT selloffs 

2023-2024 Rising rates and new supply drive rent softness, pushing valuations to trough levels

2025 Small rebound as investors price in supply cliff, stock drifts because vacancies and rent growth lag

2020 Leasing froze and demand collapsed in early lockdowns, but rent collections held up and recovery began

6

Investment Thesis Summary

Buy residential REITs at the late-2025 trough while a collapsing supply pipeline and resilient demand set up a 2026 rebound

While the market fixates on today's rent softness, we focus ahead on the 2026 supply shortage

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

7

Thesis 1: Supply & Demand

Supply Context

• Multifamily starts collapsed ~40% after 2022 as financing tightened and construction costs stayed elevated
• Record deliveries: 585k units delivered in calendar 2024, largest wave since 1980s, but it's the tail end of projects financed in 2021-22
• Developers were greenlighting deals at 3% interest rates and record rent growth, which is no longer the case
• Projects breaking ground today arrive with a 18-30 month lag, so the hole in starts from early 2024 to now is a hole in completions in 2026
• Falling deliveries and steady absorption will reduce vacancies, setting up a tightening market

Resilient Demand

• Millennial and Gen Z household formation sustaining long-term demand tailwinds
• Tax and policy advantages drive corporations and their workers to the Sunbelt

Oversupply today creates a supply cliff tomorrow, positioning REITs for a sharp rent recovery in 2026-27

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

8

Thesis 1: Supply & Demand Cont.

Why the Deep NAV Discount?

• MAA trades at an 18% NAV discount, CPT at 19%, and IRT at 29%, despite all three benefiting from Sunbelt growth
• Rent growth in the Sunbelt turned negative in 2023-24 and investors are extrapolating this softness beyond 2025
• The Fed's post-COVID rate hikes drove cap rates higher and lowered property values, leading to asset-write downs and dragging multiples lower

• Investors are anchored to today's oversupply, but the number of starts has collapsed which guarantees fewer deliveries and tightens the market even without high demand
• Investors misinterpret high vacancies and heavy concessions as structural weakness in renter demand when they are really the result of short-term supply timing
• Absorption rate has proven intact with net 2024 absorption at 552,292, so the issue is the timing of supply digestion
• Property tax and insurance are rolling off from the 2022-24 spike, which allows expenses to normalize in 2026
• Public REITs imply cap rates 100-125 bps wider than private market transactions showing public investors are lagging in recognizing the long-term value of Sunbelt assets

MAA, along with the entire REIT industry, is priced with pessimism, trading at a discount. Institutional investors have yet to price in environmental shifts

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

9

What Investors are Missing

Thesis 2: MAA’s Advantage in Sunbelt Multifamily

Why Not Others?

• CPT: Texas-heavy footprint (Houston, Dallas, Austin) with exposure to the most oversupplied multifamily markets; NOI pressure expected to persist longer due to elevated supply
• IRT: Smaller-cap REIT with higher leverage and a concentrated portfolio; higher beta profile offers more upside in strong markets but comes with greater financial risk

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Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

• Largest Sunbelt REIT, spanning 16 states and 300+ communities
• National platform enables cost efficiencies in property management and capital sourcing
• Cushions against localized oversupply, preventing overly high beta
• Liquidity premium: better access to capital markets, more attractive to institutional investors

Portfolio Diversity & Size

• Lowest leverage among peers: LTM Net Debt/EBITDA at 4.0x vs CPT 4.3x vs IRT 6.2x, giving MAA more room to strategically increase operating leverage
• Credit strength: It's one of the only 10 U.S. REITs rated A- or higher, ensuring low cost of debt capital
• Dry powder for growth: With $20B equity base and strong credit, MAA can add leverage and play offense when rent growth accelerates
• Unsecured debt base: ~92% unsecured debt = flexibility and no asset encumbrance

Strategic Leverage = Higher Earnings Torque

10

Thesis 3: Trump-onomics

Overview

• Past Policies: Permanently preserved the 20% REIT dividend deduction under § 199A via OBBBA; raised the taxable REIT subsidiary (TRS) asset cap from 20% → 25%;, extended bonus depreciation for qualified property, and allowed real estate firms to opt out of strict interest deduction limits

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• Asymmetric Payoff: Limited downside risk, but potential FFO uplift if favorable tax treatment continues

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• Unpriced by Market: REIT valuations are currently driven by supply/demand and elevated interest rates, which have pushed cap rates higher. Favorable tax policies provide cash flow benefits but are largely overlooked in today’s pricing

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• Lag to realization: Historical trends show that tax-driven benefits often take time to flow through financials, with FFO uplift typically realized on a lag as accounting treatments catch up

Most investors tend to view politics as background noise. However, if policy shifts turn more favorable, for example, through accelerated depreciation schedules or more advantageous dividend tax treatment, it could unlock upside that the market is currently overlooking. A Trump administration, given his background in real estate and alignment with REIT-friendly rules, would likely provide a supportive policy environment for the sector.

 Policy Details

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

Tax Policy Impacts on REITs

Section 199A Deduction

Bonus Depreciation

TRS Asset Cap Change

Increased FFO

Increased FFO

Increased

Valuation

11

Catalysts

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

Population & Migration Tailwinds

Lease-Up Conversions

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• Stabilizing new developments boosts occupancy and incremental NOI
• Since many buildings are new, earnings appear low, but MAA needs more time to stabilize
• Currently 2100+ Units in the lease-up process with 80% occupancy, meaning more NOI to come

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• Sustained inflows into the Sunbelt drive structural housing demand. The Sunbelt population grew more than 3.5x the growth rate of non-Sunbelt regions from 2014-2023, including 2.5 million out of state migrations
• Among the 15 fastest-growing metros in the U.S., 11 of the were in Sunbelt regions serviced by MAA
• Younger generations make up the majority of the move-ins, preferring the flexibility and affordability of rental properties compared to traditional homes

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• Fed rate cuts (Sep 2025) ease financing costs, lowering cap rates, and supporting valuations for embedded NOI growth
• Low cap rates make MAA's existing properties more valuable, offering the opportunity to recycle them for liquidity

12

Cap Rate Normalization

Risks and Mitigants

REIT multiple compression and higher financing costs

Sector leverage and debt service strain could weigh on valuations

Weak NOI could pressurize dividend payments

Slower population growth than expected

MAA has less refinancing risk compared to peers due to its balance sheet strength

MAA carries the lowest Net Debt/EBITDA ratio among peers, reducing solvency risk

MAA has a sustainable payout ratio (~70%) giving it a buffer to protect dividends even if NOI slows down

Migration remains positive, and MAA targets job-growth markets that support resilient demand

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

13

Risks

Mitigants

Valuation – NAV Model

MAA's implied cap rate is much wider than private-market transactions (5.33%), signaling material undervaluation of assets

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

Methodology and Assumptions

• Used latest reported operating community NOI, annualized; adjusted for replacement reserves (3% of NOI)
• Applied regional cap rates based on CBRE cap rate survey using proxy cities with a 25-50 bps premium for unlisted cities based on size
• MAA/IRT used CIP at 110% of book, land at 105% of book
• CPT CIP and land reported together valued at 107.5% of book (blended assumption)
• NAV/Share derived after adjusting for JV investments, cash, debt, and liabilities

14

Valuation – Public Comps

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

MAA trades in line with peers on valuation multiples (EV/EBITDA, Price/FFO) despite superior Sunbelt exposure

Balance sheet strength stands out with Net Debt/EBITDA at 4.0x, the lowest in the group

Near-term growth drivers from Sunbelt migration and job inflows at valuations comparable to coastal peers

15

Final Recommendation

Sunbelt

REITS

MAA

Theses & Catalysts

Risks & Mitigants

Valuation

16

Sustained Demand and Operations

Our recommendation is a BUY for Mid-America Apartment Communities (MAA)

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• We recommend a holding period through 2026 and 2027 to capture the anticipated recovery fully
• This timing aligns with the expected market inflection once the multifamily supply-demand imbalance corrects
•  The holding period allows investors to benefit from normalization in re-leasing activity and tightening supply conditions
• Supportive policies under the current administration add further potential upside to returns within this timeframe

16-24 Month Holding Period

• MAA faces near-term softness in rents and oversupply concerns in the Sunbelt multifamily market
• Well-positioned to capitalize on a projected supply shortage in 2026-2027 as completions peak in 2024-25 and new construction starts collapse
• Total in-state move-ins continue to rise while absorption rates remain at consistently high levels
• The company enjoys scale advantages in operations and maintains a strong balance sheet with low leverage

Appendix-MAA NAV Model Base Case

Appendix-MAA NAV Model Base Case Cont.

Appendix-Sensitivity Table

Each cell shows implied NAV/share under different cap rate (+/-50 bps) and replacement reserve 2-6% of NOI) assumptions.

Upside persists across all reasonable sensitivity scenarios reinforcing the margin of safety in today's valuation.

Appendix-Management Overview

Tenured and Experienced Management

Shareholder Alignment

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ESG Mission-Oriented

CEO – Bradley Hill

EVP Investments – David Ward

• 15+ years with MAA, including CIO of Multifamily Investing

• Over 20 years in the industry, and 10+with MAA

• The majority of executives serve on the board for influential real estate organizations, including: The National Association of Home Builders, The National Multifamily Housing Council, and The Urban Land Institute

• MAA executives' compensation is directly tied to the share price performance through FFO/share and TSR

• MAA has achieved a ~25% reduction in energy use intensity and a 35% reduction in greenhouse gas emissions intensity, since 2018