Good morning, ladies and gentlemen, and welcome to the MAA Fourth Quarter and Full Year 2024 Earnings Conference Call. Operator instructions: If you would like to ask a question, please press star followed by the number one on your touch-tone phone. If you would like to withdraw your question, you may press the pound key. As a reminder, this conference call is being recorded today, February 6, 2025. I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer and Director of Capital Markets of MAA for opening comments.

Thank you, Ian, 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 Eric Bolton, 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. I will now turn the call over to Eric.

Thanks, Andrew, and good morning. As reported in our earnings release, MAA finished calendar year 2024 in line with our expectations and is in a great position for the recovery cycle for apartment leasing that should be increasingly evident over the course of this year. While we are still working through the impact of record high levels of new supply delivered over the past year, we are encouraged with some of the early recovery trends that we are capturing with lease-over-lease pricing performance. While it will take some time for the recovery momentum to build, it seems clear the tide is starting to turn, and we look forward to a productive spring and summer leasing season when the improving trends will have a more obvious compounding impact on overall portfolio results late this year and into 2026. Before turning the call over to Brad, I did want to take just a few minutes this morning and tell you why I'm excited and confident about the prospects for MAA's earnings outlook over the emerging recovery cycle. It starts with my confidence in our leadership team. As we disclosed in December, effective April 1, we plan to execute on the next step in our CEO succession planning program. Brad will assume the role of President and CEO. I'll remain active in supporting Brad and our Board as Executive Chairman. Brad and his executive leadership team have an average tenure of six years with our company. I know this leadership team well, and I have a lot of confidence in them. Brad and his team have a deep understanding of our strategy and our approach to executing on that strategy, which has delivered sector-leading long-term results for shareholder capital. Beyond my confidence in our leadership team, while our markets have more recently been challenged with a 50-year high record of new supply deliveries, there is increasing evidence that the worst of the pressure from this new supply is poised to materially moderate, especially as we get into the summer leasing season. As we have discussed, we historically have seen the actual delivery and leasing pressure from competing new development at roughly two years after the start of construction. Based on our analysis, the volume of new construction started in calendar year 2023, or two years ago, dropped 39% from the peak of starts during the extraordinary low interest rate environment in calendar year 2022 and then started to sequentially drop another 50% in calendar year 2024. So this is expected to result in a significant decline in actual unit deliveries starting this year and into 2026 and 2027. Given where we are currently with interest rates and construction costs, we continue to see challenges in the market's ability to meaningfully restart and increase new projects. Taken together, we believe these conditions will manifest in a sharp drop in new supply delivery starting this year and continuing for several years. In addition to the supply dynamic and the impact on leasing conditions, we believe that our portfolio is uniquely well positioned to capture the benefits from job growth, population growth and high single-family housing costs. This continues to drive a resulting growth in the demand for apartment housing across our markets that will outpace national trends over the long haul. This strong positioning for the demand side of the equation coupled with the material drop in new supply this year and beyond, we believe will have a significant impact on market rent growth across the portfolio for the next few years. Furthermore, I'm excited about the various new tech initiatives we have underway, aimed at driving enhanced services for our residents and more efficiencies within our operating platform. Several new initiatives that we have more recently implemented, coupled with new projects that will launch over the coming year, we expect will further increase our margin and accelerate earnings over the next few years. And finally, our external growth pipeline is stronger and larger than at any time in our company history. We have several new projects slated to deliver over the emerging recovery cycle with other new sites already lined up. And importantly, the balance sheet is strong and well positioned to continue to support this growth. So in summary, the experience and proven capabilities of our leadership team, our orientation toward the strongest growth in housing demand markets in the country, the strength of our operating platform with growing efficiencies and the more robust external growth pipeline we have in place that is supported by a sector-leading strong balance sheet all combine to drive much enthusiasm and confidence in my outlook for MAA over the next few years. As this will serve as my last earnings call prior to the transition of the CEO role, I'd like to extend my appreciation and thanks to our shareholders and to the analyst community for your trust in our company and our team. It's truly been an honor to serve the public capital markets over the past thirty years here at Mid-America Apartment Communities, Inc. Our culture at Mid-America Apartment Communities, Inc. is grounded in a strong belief that our stewardship of Mid-America Apartment Communities, Inc. assets and shareholder capital is at all times focused on creating value for the benefit of our residents, our shareholders, our associates, and the communities where we operate. I am proud of our associates at Mid-America Apartment Communities, Inc. I appreciate their hard work and support, and I look forward to Mid-America Apartment Communities, Inc. delivering even higher value in the future for those that we serve. I will now turn it over to Brad.

Eric, good morning, everyone. As expected, during the fourth quarter, our focus on occupancy combined with higher new supply and the typical seasonal slowdown in leasing traffic weighed on new resident lease pricing during the quarter. But the seasonal decline in lease-over-lease rates was less than we have seen in previous years. Encouragingly, this pressure continued to moderate in January, with blended pricing improving more from the fourth quarter's performance than in previous years, predominantly due to improvement in our new lease pricing. I share Eric's optimism for our growth prospects and momentum toward delivering strong long-term earnings. As Tim will discuss in more detail, we are seeing encouraging signs that indicate leasing conditions are poised to support improvement in blended lease rates and have a compounding impact on revenue performance throughout the year. Continued strong absorption, occupancy and exposure, improved seasonal performance, and an expected more meaningful reduction in supply pressure all contribute to a favorable outlook for our existing portfolio. Additionally, we are continuing to invest in several key areas that will significantly impact future earnings, including various technology initiatives that will support our centralization efforts and enhance efficiencies. In 2025, we will begin to more aggressively roll out property-wide Wi-Fi across our portfolio, and we will ramp up the rollout over the next couple of years as a number of our properties transition off of our legacy bulk Wi-Fi program. We also plan to increase our investments in the interior renovation and repositioning programs, both of which benefit from the higher-priced new supply that has delivered into the market recently. On the external growth front, we are committed to maintaining an active development pipeline of around $1 billion. In 2024, we invested in a record five projects expected to deliver average NOI yields at stabilization of 6.3%, ending the year with seven projects under construction representing over 2,300 units at a cost of $850 million. We expect to start construction on another three to four projects in 2025. As the transaction market begins to open later this year, we will continue to opportunistically deploy capital into acquisitions that are in their initial lease-up. During the fourth quarter, we closed on a 386-unit property early in its lease-up in the Dallas market. This property was 44% occupied at the end of the fourth quarter and is expected to stabilize in early 2026. This brings our total acquisitions in 2024 to three properties, which were on average 65% occupied at closing and projected to deliver NOI yields of 5.9% upon reaching stabilization in 2025 and 2026. During the fourth quarter, we sold two properties with an average age of 29 years: a 216-unit property in Charlotte, North Carolina, and a 272-unit property in Richmond, Virginia, delivering a combined investment period IRR of approximately 19%. We have two additional properties in Columbia, South Carolina under contract and expect those to close in the first quarter of 2025. We will continue our focus on strengthening our overall earnings quality by recycling capital out of some of our older, higher CapEx properties and redeploying that capital into newer assets with a higher earnings growth profile, particularly on an after-CapEx basis. We expect to execute on the balance of our $325 million disposition plan late in the year. At the end of the fourth quarter, we had eight communities in lease-up, four acquisitions, and four developments, with an end-of-the-year occupancy of 69.7%. We expect the acquisitions to average NOI yields at stabilization of 5.9% and the developments to average NOI yields of around 6.4%. Due to the high level of competition in many of our markets, and our intent to hold firm on our rent pricing expectations, we pushed the expected stabilization dates back slightly on a few of our lease-up properties by one quarter. However, rents continue to exceed our pro forma expectations and are significantly above our original expectations. Our existing portfolio is well-positioned to benefit from the improving demand and supply trends with our various growth initiatives providing additional earnings over the recovery cycle. To all of our associates at the properties and our corporate and regional offices, thank you for your commitment, hard work, and dedication that you show every day to our prospects, residents, and fellow associates. Before turning the call over to Tim, I do want to take a moment to say a few words in recognition of Eric ahead of his transition to the executive chairman role. Over his thirty years of service to Mid-America Apartment Communities, Inc., with twenty-three years as our chief executive officer, Eric has been instrumental in so many ways to this company. His dedication to serving our various stakeholders is second to none. We are grateful for his vision, wisdom, courage, and discipline in leading this company to unmatched performance. His mentorship and counsel over the years to so many in the industry, and especially to Mid-America Apartment Communities, Inc.'s executive leadership team, and to me exemplify the tremendous leader that he is. Eric, for all you have given to our company and to the industry, we thank you. With that, I will turn the call over to Tim.

Thanks, Brad, and good morning, everyone. As noted by Brad, in the fourth quarter, we prioritized achieving portfolio-level occupancy that positions us well for the improving supply-demand dynamic in 2025. We particularly focused on the higher exposure markets, which came at the expense of slightly weaker new lease pricing performance but achieved the occupancy goals for which we were striving. The moderation in new lease pricing showed less seasonal deceleration than we saw in 2023 and less than we typically see from the third to fourth quarter. As a result of this strategy, new lease pricing on a lease-over-lease basis for the fourth quarter was down 8%, a 260 basis point decline from the third quarter but favorably comparable to a 470 basis point decline over the same period in 2023. Renewal rates for the quarter stayed strong, growing 4.2% on a lease-over-lease basis, which was a 10 basis point increase sequentially over the third quarter. The resulting lease-over-lease pricing on a blended basis was down 2%, which represented a 140 basis point improvement in sequential moderation as compared to the same period in 2023. Average physical occupancy was 95.6%, up 10 basis points from the third quarter. And collections continued to outperform expectations with net delinquency representing just 0.3% of billed rents. All these factors drove the resulting same-store revenue down 0.2% for the quarter and up 0.5% for the full year of 2024. As was true for most of 2024, several of our mid-tier markets continued to hold up better than the broader portfolio in the fourth quarter from a blended lease and release pricing standpoint. Richmond, Norfolk, Charleston, Greenville, and our Frederick and other Northern Virginia properties all stood out. Tampa and Orlando are two larger markets that started to show some relative pricing recovery. Also, as was true for most of 2024, Austin, Atlanta, and Jacksonville are markets that continue to be more negatively impacted by the absolute level of supply being delivered into those markets, with Austin continuing to be the toughest challenge of all the markets. We continued our various redevelopment and repositioning initiatives in the fourth quarter. And as Brad mentioned earlier, we expect to accelerate these programs over the course of 2025 and into 2026. For the fourth quarter of 2024, we completed 1,130 interior unit upgrades, bringing our year-to-date total to 5,665 units, achieving rent increases of $106 above non-upgraded units. Despite this more competitive supply environment, these units lease about ten days quicker on average than a non-renovated unit when adjusted for the additional turn time. We expect to renovate closer to 6,000 units in 2025 with an even larger increase expected in 2026. For our repositioning program, we have two active projects that are most of the way through the repricing phase with NOI yields approaching 10%. We have an additional six projects underway with a plan to complete construction between April and June and begin repricing in what we believe will be a strengthening leasing environment. We are also now live on the four property-wide Wi-Fi retrofit projects we began in 2024 and expect to begin an additional 23 projects in 2025. January wrapped up, we are seeing encouraging trends that are aligned with our outlooks for 2025. New lease and blended pricing in January improved as compared to both December and the full fourth quarter with stable occupancy of 95.6%. Our 60-day exposure at the end of January was 7%, 70 basis points lower than this time last year, and should serve to keep occupancy stable through the remainder of the quarter and allow for more pricing power as seasonal demand starts to increase. The 95.6% January average daily physical occupancy was 25 basis points higher than January of 2024. As Brad noted, absorption remains strong in our markets with the fourth quarter representing the second consecutive quarter that units absorbed exceeded units delivered. The excess absorption as compared to new supply in the fourth quarter was the largest gap since the third quarter of 2021. With new lease pricing improving, we are also encouraged by the lease-over-lease rates achieved on non-acceptive renewals through April with the average increases in the 4.25% range. Improving new lease rates should help support continued strong renewal performance into the busier spring and summer leasing season. New supply deliveries continue to be a headwind in many of our markets, but the trends support expected improvement throughout 2025, laying the groundwork for an even stronger 2026. Following on Eric's comments with construction starts peaking in mid to late 2022 in most of our markets, we believe we have passed the maximum pricing pressure period of two years or so after the peak of construction. The slowly moderating supply pressure, increasing spring and summer leasing traffic, and our current occupancy and exposure portfolio position have us excited about the recovery to come. That is all the way I have in prepared comments. We will now turn the call over to Clay.

Thank you, Tim, and good morning, everyone. We reported core FFO for the quarter of $2.23 per share, which was in line with our fourth quarter guidance and contributed to core FFO for the full year of $8.88 per share, in line with our original guidance for the year. Our same-store revenue results for the quarter were relatively in line with expectations. As Tim mentioned, same-store revenues benefited from strong results from our initiatives. Our same-store expense performance was slightly unfavorable compared to our guidance due to personnel costs and other property expenses. Favorable interest expense and non-operating income offset the increase in same-store expenses. During the quarter, we funded approximately $64 million of development costs of the current $852 million pipeline leaving an expected $374 million to be funded on our current pipeline over the next two to three years. We also invested approximately $18 million of capital through our redevelopment and repositioning programs during the quarter, which we expect to continue to enhance the quality of our portfolio and produce solid returns upon completion. Our balance sheet remains in great shape. We ended the quarter with over $1 billion in combined cash and borrowing capacity under our revolving credit facility, providing significant opportunity to fund future investments. Our leverage remains low with net debt to EBITDA at four times, and at quarter end, our outstanding debt was approximately 95% fixed at an effective rate of 3.8%. During December, we issued $350 million of ten-year public bonds at an effective rate of just over 5% using proceeds to pay down our outstanding commercial paper. These proceeds provide an accretive use of capital given the expected stabilized NOI yield approaching 6% or greater on our recent acquisitions and current developments that Brad previously mentioned. Finally, we provided initial earnings guidance for 2025 with our release, which is detailed in the supplemental information package. FFO for 2025 is projected to be $8.61 to $8.93, or $8.77 at the midpoint. As has been outlined in the prior comments, expect the momentum in rental pricing to grow over the course of the year and to drive improving year-over-year performance in core FFO over the back half of the year. The proposed 2025 same-store revenue growth midpoint of 0.4% results from a rental pricing earn-in of negative 0.4% combined with a blended rental pricing expectation of 1.7% for the year. We expect blended rental pricing to be comprised of new lease pricing, which will continue to be impacted by elevated supply levels, and renewal pricing in line with historical levels. We expect the impact of these elevated supply levels to improve over the course of the year. For the same-store portfolio, we expect effective rent growth for the year to be approximately 0.2% at the midpoint of our range. Occupancy to average between 95.3% and 95.9% for the year, or 95.6% at the midpoint, and other revenue items, primarily reimbursement and fee income, to grow at 2.5%. Same-store operating expenses are projected to grow at a midpoint of 3.2% for the year; personnel and repair and maintenance costs are expected to grow just over 3%. We expect some continued pressure from marketing costs and insurance expense. These expense projections combined with the revenue growth of 0.4% results in a projected decline in same-store NOI of 1.15% at the midpoint. We currently have nine communities actively leasing and an additional community stabilized in late 2024. Given the interest carry and leasing velocity of these recently acquired and completed developments, we anticipate our lease-up pipeline being slightly diluted to core FFO in the first half of the year before turning accretive later in the year as more projects stabilize, contributing about $0.03 to core FFO for the year, net of the interest carry. We expect continued external growth in 2025, both through acquisitions and development. We anticipate a range of $350 million to $450 million in acquisitions, all likely to be in lease-up and not yet stabilized, and a range of $250 million to $350 million in development investments for the year. This growth will be partially funded by asset sales; we expect dispositions of approximately $325 million with the remainder to be funded by debt financing and internal cash flow. This external growth is expected to be slightly diluted to core FFO in 2025 and then turn accretive to core FFO after stabilization. We project total overhead expenses, a combination of property management expenses and G&A expenses, to be $134.5 million at the midpoint, a 4.5% increase over 2024 results. We also expect to refinance $100 million on bonds maturing in November 2025. These bonds have an effective rate of 4.2% and we are forecasting to refinance at 5%. Anticipated refinancing coupled with our 2024 refinancing activities will result in $0.03 dilution to core FFO as compared to the prior year. Combined with financing to support our expected growth for 2025, we project interest expense to increase by approximately 13% for the year. That is all that we have in the way of prepared comments. We will now turn the call back to you for any questions. Thank you. Once again, we will now open the call up for questions.

Our first question comes from the line of Jamie Feldman with Wells Fargo. Your line is open.

Great. Thanks for taking the question.

I was hoping you could put a finer point on the 1.7% blend outlook for 2025. Can you talk exactly about what you are thinking for new versus renewal? And then is there a point in the year where you think new spreads actually turn positive? Maybe talk a little bit more about the cadence throughout the year of that 1.7%. Yeah. This is Tim. I will give a little bit of detail on the guidance, the pricing guidance. So for the year, we are expecting new lease pricing on a lease-over-lease basis somewhere in the negative 1.5% range with that obviously playing out seasonally, with the lowest point where we are right now getting slightly positive as we get into Q3 and then start to trend back down seasonally a little bit as we get into Q4. Renewals, pretty steady in that 4.25% to 4.5% range where we are right now. We do not expect much movement there. That tends to stay pretty consistent. So it is the new lease pricing that drives the variance throughout the quarters.

Okay. I am sorry. Do you think you will see any months or quarters with positive new lease?

Yeah. I would say, typically what we see if you think about normal seasonality is new lease pricing accelerating January through about July and then starting to moderate as we get into August. So I would expect, as we get into late Q2, early Q3, we expect to have two or three months where we will be slightly positive on the new lease rate and then trend back down to negative as you get into late Q3 and then Q4.

Okay. And then what are you guys thinking on turnover? How does that trend throughout the year?

Expecting pretty consistent with where we were in 2024. The major reasons people move out are obviously to buy a home or job change; those are the major drivers. Buy-a-home moves are down, I think, about 20% in Q4 compared to where they were last year with interest rates and home prices where they are. We do not expect that to move a lot. In general, we are dialing into our forecast renewal or turnover consistent with where we were in 2024.

Okay. Great. Thanks for the color. And, Eric, congratulations again. Thank you.

Our next question comes from the line of Eric Wolfe with Citi. Your line is open.

Hey. I just wanted to follow up there. When I look at the contribution to your same-store revenue from the 1.7% blend, it looks like it is sort of on the lower end, which suggests that there is probably a good back half waiting for the blended spread. So I was just curious if that is the case. If you could just maybe provide, like, you expect first half to be in, like, a half percent range, and then it steps up to over 2.5%. Or if the difference is really just seasonal, like you just think that seasonally the second quarter and third quarter will be sort of a very normal lift. I am just trying to understand if this is a sort of back half type of prediction for this year.

Not necessarily a back-half prediction. I mean, we expect the normal seasonality as I was talking about and certainly for new lease rates to accelerate as you get to July and then moderate a bit in late Q3 and Q4. So it is really—and another thing to keep in mind is the bulk of our leases expire in mid-Q2 through early Q3, so matching up some of the more positive new lease rates with the maximum number of lease expirations is what drives the weighting. We expect to get slightly positive into the one to one and a quarter percent range for a couple months in the middle of the year and then start to trend back down. So it is the combination of the weighting of lease expirations and the balance between new lease and renewals that really drives the full year number.

Got it. That is helpful. I am not sure if you have this data, but when you look at your renewals, what percent of those renewals are also tenants that renewed the prior year? I am trying to understand what percentage of tenants are taking two years of this sort of 4% to 5% renewal increases in a sort of flat market rate environment. And if you have any sort of limit on where renewal rents can be relative to market or new lease rents.

Another way to characterize that is our average stay is somewhere in the 21 to 22-month range. That has extended a little bit over the last couple of years with lower turnover. Typically, a resident moves in on a 12-month lease, does one renewal, and then on average moves out after that first renewal. So we typically do not see renewal on top of renewal on top of renewal, which tends to prevent that gap from getting too wide. Even with lower turnover, we still turn a good chunk of the portfolio every year, so it balances itself out. And then to Brad's point about a strengthening supply-demand dynamic, we expect new lease rates to accelerate throughout the year, which should in turn help renewal rates narrow the gap and not widen further. That provides some stability and strength on the renewal side as well.

Our next question comes from the line of Nick Yulico with Scotiabank. Your line is open.

Good morning, everyone. It is Dan Tricarico, I am with Nick. Can you help us understand how concessions in your markets have impacted your new lease rate figures and if you see the dissipation of concessionary activity having a compounding effect on the reported numbers?

To answer the last part, the lease-over-lease rates we quote are net of the impact of concessions, so that is considered in there. Broadly, for our portfolio, concessions were down a little bit in Q4 as compared to Q3 in terms of cash concessions. At a market-wide portfolio level, concessions were pretty consistent—around a month free is typical in most markets. In tougher markets with a lot of lease-up, such as downtown Austin, Round Rock, Midtown Atlanta, Uptown Charlotte, you can see concessions of two to two and a half months, even up to three months in a couple spots with a lot of lease-up. So there is still pressure in those markets, but overall concession pressure is steady to perhaps slightly declining.

Great. Thanks for that. And then as a follow-up, do you have a sense of how much competitive supply that you track is declining year over year in 2026 and 2027 and maybe how that compares on a completions-as-a-percent-of-stock basis to prior years before 2020?

For 2025, we think supply is probably down 15% to 20% in terms of absolute units delivered from 2024 to 2025. We think it is down closer to 30% to 40% as you look out into 2026. If you look at starts, Q4 of 2024 starts in our markets were 0.3% of inventory, the lowest it has been for the last several years and well below where it was even during COVID. So that speaks to a pretty long window where we think supply will be moderating. On a completions-as-a-percent-of-stock basis, long-term average in our markets is about 3.5% of inventory; we've been above that the last few years, but we expect 2025 and 2026 to be below that, with 2027 even further below.

Our next question comes from the line of Brad Heffern with RBC Capital Markets. Your line is open.

Thanks. Morning, everyone. You have talked a few times about the start of the year being better than normal. I think you said in the prepared remarks blends are improving more than normal in January on a sequential basis. Those are obviously influenced by comps. I am just curious if you are seeing a real market-level fundamental inflection with market rent trends being better than normal, occupancy rising. You talked about concessions maybe getting a little bit better. How much of that is just comps and the abnormality of where leasing spreads are right now versus a real fundamental change?

It is a combination of those factors. The lessening supply is playing a part; easier comps are also playing a part. But when we think about the sequential trends in January compared to December and Q4—not just the last year or two, but normal periods like 2017–2019—the deceleration from Q3 to Q4 was less than typical, and the acceleration from Q4 to January was more than typical. January new lease pricing being better than the full Q4 is atypical. We expect February and March to accelerate even more. So we feel like we are in a good position and seeing growth strength in the recovery. That piece is tied to an improving overall outlook and higher-than-typical acceleration.

And then can you talk through whether you think changes in immigration policy could have a significant impact on the portfolio either through deportations or through less immigration?

From a same-store perspective, we do not see a whole lot of impact coming from changes in immigration policies. There is nothing we track that indicates we are overly exposed to immigration-related issues from a resident perspective. Where we could see some impact is in new development, where a lot of the labor comes from; there could be labor impacts associated with immigration policy that affect the market's ability to ramp up new construction. That would impact our desire to continue to hold our new developments at the billion-dollar level we are talking about. Given the overall size of our existing portfolio, anything that slows down supply longer term would be a benefit to our existing portfolio. We will continue to monitor this, but we are not seeing a material impact on the horizon at the moment.

Our next question comes from the line of Jeff Spector with Bank of America. Your line is open.

Great. Thank you. Just to follow up to that, pulling in demographics: when you think about your portfolio positioning—Class A, A-, B+, B—split between urban and suburban—from a high-level, five-year view, does any of this change your thinking on portfolio positioning?

I do not think so. One characteristic of our portfolio long-term is to orient toward the highest demand regions of the country, which generally leads to lower volatility in earnings and dividend performance. We think that focus—where we are located, market mix, and allocation between larger and mid-tier markets—continues to be the right focus. That supports a more affordable price point than other portfolios and appeals to the broadest segment of the rental market. I do not see a material change to our strategy or capital allocation targets.

Great. And then can you talk a little more about cap rates between acquisitions, dispositions, and what you are looking for between development and acquisitions?

The dispositions we sold in the fourth quarter had cap rates in the low sixes. On an after-CapEx basis, those 29-year-old assets have higher CapEx needs, and we are recycling capital out of those into acquisitions that are generally in lease-up. Upon stabilization, those acquisitions deliver yields close to 6%. We achieve those yields by focusing on properties in lease-up that are harder for the market to finance, getting better pricing—generally 15% to 20% below current replacement costs. The market cap rates from a few fourth-quarter closings were around 5.5%. Our developments—the five we invested in 2024—averaged a 6.4% NOI yield at stabilization, about a 140 basis point spread to current market cap rates. We feel that is a good place to focus our capital, in the six to six-and-a-half percent range on development.

Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Your line is open.

Great. Thanks, and good morning, everybody. Going back to lease-over-lease pricing expectations, thinking back to when you started to see pricing pressure in the back half of 2023 and the expectation that absorption of peak deliveries will continue through the first half of this year—is it fair to assume you face easier comps in the back half of the year and could see concession pricing begin to abate more quickly, which could lead to even better blended rate growth year-over-year and acceleration in net effective rent growth?

Yes. I think you could see less seasonality as you get into late 2025 because supply pressure is moderating and we saw a peak of that pressure in late 2024. There is an easier comp component that comes with that and we could see less seasonal deceleration in the back part of 2025 as well.

Based on the negative 0.5% year-over-year net effective rent growth in the back half of 2024 and the guidance assuming a 0.2% positive growth this year, when do you expect net effective to turn positive on a year-over-year basis?

It will probably be by the middle part of the year—by Q3 mid—that's when we expect it to turn positive and then continue into Q4 and beyond.

And if you broke out blended rate growth between larger markets and smaller secondary markets, how do those stack up relative to this year versus 2024? Where are you seeing the most improvement?

The gap has narrowed a bit. Secondary or mid-tier markets outperformed over the last couple of years because of generally lower supply in those markets, but we've seen the gap narrow over the last couple of quarters. There's probably about a 50 basis point pricing difference remaining, but it has tightened.

Next question comes from the line of Michael Goldsmith with UBS. Your line is open.

Good morning. The question is on the return of pricing power. Your occupancy levels are elevated, but do you see pricing power returning contingent on occupancy to improve in competing properties, and does the slowdown in supply growth that you are expecting this year support that?

The market level plays into it, but when we look at our current occupancy—which is 25 to 30 basis points better than this time last year—and our exposure, which looks out further, we are in a much better position. We are confident that over the next few months we can start to push pricing as we get into spring. We aim to keep occupancy steady in the mid-95% range where we have room to push on pricing. Combine that with declining supply and we have good confidence occupancy will stay steady and allow us to return pricing power.

And as you think about new lease rents trending through this year, you are going from down 8% today to positive in the third quarter. What does that look like month to month and how does that compare historically?

Our January new lease rates were negative 7.1%, which is where we are starting. We typically see seasonality accelerate to about July, when new leases can be slightly positive—around one to one and a half percent—and then trend back down. The shape of the curve is historical; it is a little steeper getting into spring and summer due to seasonality combined with declining supply pressure.

Our next question comes from the line of Adam Kramer with Morgan Stanley. Your line is open.

Great. Thanks for taking the question. Congrats, Eric. Wanted to ask about the job growth and wage growth assumptions and the higher-level macro assumptions you have embedded in the guide, formally or informally.

From a macroeconomic standpoint, pretty consistent with what we saw in 2024. We are expecting around 600,000 new jobs across our markets for 2025, consistent with 2024. We expect migration, household formation, and population growth to stay consistent and above national levels in our markets. Combined with low turnover and limited buy-a-home moves, macroeconomic assumptions are similar to last year but with a better supply dynamic.

Thank you. Do you mind giving renewal and blended numbers for January as well?

January new lease was negative 7.1%. Renewal was 4.6%. Blend was negative 0.9%.

Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Your line is open.

Good morning. Two questions. First, on cap rates and negative leverage: how long do you think people are tolerating negative leverage, and is this typical compared to prior periods of negative leverage?

Historically, periods of negative leverage have been temporary. This has been one of the longer periods of negative leverage. Buyers are buying down rates a bit to help, and many are underwriting an assumption of an aggressive recovery in 2026 and beyond, which helps them get comfortable with negative leverage and how quickly they can grow out of it. It depends on outlook and underwriting assumptions.

Second, as you underwrite projects, how much of the math comes from other income like Wi-Fi, cell service, waste, and other fees versus pure rent?

It is not much. Wi-Fi is probably the largest component of other income we expect to grow as we roll out property-wide Wi-Fi across the portfolio. We also have bulk cable and some valet trash at properties, but those are not major contributors. Our focus is on adding resident value through services like Wi-Fi, which also support operations like self-touring.

Our next question comes from the line of Richard Anderson with Wedbush. Your line is open.

Good morning. Eric, when you say you'll remain active as Executive Chairman, how do you see the dynamic playing out? Is Brad going to have his fingerprints all over things on day one, or is there a phased approach?

I lean toward a dimmer switch approach. The intent is for my involvement to diminish over time while remaining available to Brad to help think through challenges and opportunities. I will remain tied in at the board level and be helpful where needed. Brad and the team will have increasing influence as my involvement scales back. I plan to stay active in supporting the company and our progress for years to come.

Thanks. Second question: given extraordinary conditions often follow with extraordinary snapbacks, how excited are you for 2026, and is there a chance for significantly outsized growth starting in 2026 because of the preceding events?

I think it is a real possibility. We're coming off a 50-year high in supply—unprecedented—and despite that our NOI and overall performance held up well. That speaks to the appeal of this product and our markets. Demand-side dynamics remain strong and should be aided by a dramatic falloff in supply into 2026 and 2027. Taken together, that sets up demand-supply dynamics that could be hugely positive for our performance in late 2025 into 2026 and 2027.

Our next question comes from the line of Steve Sakwa with Evercore ISI. Your line is open.

Most of my questions have been asked. Clay, one on refinancing bonds: you mentioned a 5% rate. Where do you think spreads are today, given ten-year volatility?

Back in December, we issued bonds and achieved a record-low spread of 78 basis points. Given where the treasury has trended since then, I suspect that spread has ticked up several basis points, but I would still say it is somewhere between 80 and 85 basis points.

Our next question comes from the line of Michael Gorman with BTIG. Your line is open.

Thanks. On the transaction side, how should we think about the timing of investments over the course of the year? Should we expect acquisition opportunities to be front-end loaded before more lease-up opportunities attract more competition later?

Based on what we are hearing, the market is probably going to be slower in the first half of the year and likely tick up midyear into the third quarter. It takes 90 to 120 days to close some of these deals, so I expect it will be the third quarter before we really see transaction volume pick up.

And on collections, what do you have baked into the 2025 guidance for delinquencies?

It is pretty consistent with what we saw last year. We have about 30 to 35 basis points showing for delinquencies in the 2025 guide.

Our next question comes from the line of Haendel St. Juste with Mizuho. Your line is open.

Good morning. Quick question: how much actual rents need to change over the course of this year for new lease rates to be positive—not just the spread improvement but the actual dollar-per-unit change from now until third quarter, and some context comparing to a more normal year?

If you look at January, the absolute new lease rents we put in place compared to January of last year are about negative 1.5% year over year—roughly a $25 gap in that year-over-year look. Typically, by July, new leases are four to five percent above December, and then trend back down, so something less than that is what we have dialed in; that gives you perspective on the gap.

My second question on turnover: you mentioned flat relative to last year. Last year turnover was near record lows. If demand and market rates improve and you push for pricing power, would that cause upward pressure on turnover? How are you thinking about turnover expectations this year?

That could happen, but right now with all the options in the market and the supply, there is more incentive to move. Yet we have not seen turnover pick up. It is more macro-driven—buy-a-home is the largest driver of move-outs—and that remains difficult. So turnover is more a function of macro conditions and life events rather than current pricing position.

Next question comes from the line of Rich Hightower with Barclays. Your line is open.

If you keep a steady development pipeline around $1 billion but see an air pocket in new supply, what is your appetite and capacity to increase development? You have a strong balance sheet—could you flex up development?

Development is one of the best uses of capital today, especially given a diminished supply pipeline going forward. Two years ago our pipeline was about $450 million and today it's close to $900 million. We expect to keep it elevated. We expect another three to four projects to start this year, keeping us at that level. We also have a JV pre-purchase platform where equity-backed deals have backed out; we can potentially step into those deals and quickly add projects. We like to keep development exposure no more than about 5% of enterprise value, roughly in the $1.2 billion range, and we will continue to focus on that.

Our next question comes from the line of Rob DelPriore with Janney. Your line is open.

Rob, you appear to be muted.

We will move on. Next question comes from the line of Wes Golladay with Baird. Your line is open.

Good morning, everyone, and congratulations to both Eric and Brad. Quick question on migration to the Sunbelt: has there been any change in volume or where they are coming from?

Not really. Migration into the Sunbelt continues to hover in the 10% to 13% range of our move-ins. Generally they come from large states like California, New York, and Chicago. Broadly, the trends are consistent with the last year or so.

You are doing a lot of asset recycling this year. Is there any appetite to lever up a little earlier in the cycle?

We will likely use some leverage to fund acquisitions and development if dispositions fall off in the back part of the year, but it would not exceed the leverage guidance we've provided.

Our next question comes from the line of Linda Tsai. Your line is open.

Thanks for taking my question. Clay, you referenced an earn-in of negative 40 basis points going into 2025. Can you provide context on that versus a year ago?

Last year, our earn-in was positive 50 basis points. The midpoint of the NAREIT presentation we provided in November was negative 35 basis points; in November and December we saw additional pressure, bringing it to negative 40 basis points.

And market supply declines—markets like Houston, Atlanta, Orlando—are those declines coming down collectively or is it bumpy by market?

It is relatively consistent across markets. There are a few markets still seeing increasing supply, but on balance the trend is a steady decline, driven by starts that peaked around Q2–Q3 2022 in most markets.

Our next question comes from the line of Ann Chan with Green Street. Your line is open.

First, regarding portfolio allocation, over the next few years do you expect to exit any markets or enter any new ones? If so, which markets are on your shortlist?

We will continue to cycle out one or two assets in markets where we have only a few assets to drive efficiencies, but we are not planning a large-scale repositioning. We like our allocation between large and mid-tier markets. We do have newer markets where we want to grow: Denver has a sizable development pipeline, Salt Lake City is another, and we're studying markets like Columbus, Ohio, which has similar characteristics to our other high-growth markets.

Second, on development and construction costs, have you observed changing trends in labor or material costs over the last few months, and what would you need to see for development yields to be more attractive than lease-up acquisitions?

Construction costs came down through much of 2024 in certain markets by about four to five percent. We are seeing further improvements in more markets, generally in the five percent range, with some labor cost relief. For development to scale up more, we need a combination of construction cost and rent improvement of roughly five to seven percent. We have a pipeline of approved sites that will begin to pencil as costs and rents improve this year.

Our next question comes from the line of Omotayo Okusanya with Deutsche Bank. Your line is open.

Good morning. On distress opportunities: cap rate tracking seems tight and not much distress. How real is the opportunity you described to buy assets near replacement cost or take advantage of distressed developers?

We have not seen a lot of distress broadly. We continue to focus on acquisitions in lease-up, which face pressure and where our operating platform gives us an advantage. Sellers in that space sometimes sell earlier in lease-up, creating opportunities for us to buy at yields near 6% below replacement cost. You may see some distress among older assets with refinancing needs, but most of that is not an area we'd pursue broadly. We also have opportunities to step into JV or pre-purchase deals where equity has backed out.

Quick follow-up on fraud-related issues: what are you seeing and what preventive measures do you have?

Fraud concerns, particularly in some markets like Atlanta, have been managed through tools and training. We use machine-learning tools, training at on-site and corporate levels, and have resources to spot suspicious income documentation or IDs. It may have hurt occupancy a bit in some markets, but delinquency and bad debt are down and it's not a material issue across the portfolio.

Our next question comes from the line of John Kim with BMO Capital Markets. Your line is open.

Thank you. Eric, congrats on your career. Brad, which markets do you feel most bullish about that will drive improvement in blended lease growth this year?

We saw thirteen markets with positive blended results in January. Tampa is one we've seen strong traction in and it has trended above the portfolio. Markets that continue to be strong include DC, Houston, Charleston. Tampa and Orlando are starting to show improvement and we expect better performance from those later in the year. Austin remains a laggard due to supply pressure.

To get to negative 1.5% new lease rate for the year, what market rent growth are you assuming and what is your current gain-to-lease?

Gain-to-lease is about 1% right now, which tends to gap out in weak pricing periods. January market rents were about half a percent higher than December, and we expect that to trend up through the summer. For the full year, new leases negative 1.5% should correlate with market rent growth assumptions embedded in our guidance.

We have no further questions. I will return the call to Mid-America Apartment Communities, Inc. for closing remarks.

No further comments from the company. We appreciate everyone joining us, and we will see many of you at the conferences in February and March. Thank you.

Thank you. This concludes today's program. Thank you for your participation. You may now disconnect at this time.