The following discussion analyzes the financial condition and results of operations of both MAA and theOperating Partnership , of which MAA is the sole general partner and in which MAA owned a 97.3% interest as ofJune 30, 2022 . MAA conducts all of its business through theOperating Partnership and its various subsidiaries. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q. MAA , an S&P 500 company, is a multifamily-focused, self-administered and self-managed real estate investment trust, or REIT. We own, operate, acquire and selectively develop apartment communities primarily located in the Southeast, Southwest and Mid-Atlantic regions ofthe United States . As ofJune 30, 2022 , we owned and operated 290 apartment communities (which does not include development communities under construction) through theOperating Partnership and its subsidiaries, and we had an ownership interest in one apartment community through an unconsolidated real estate joint venture and had five development communities under construction. In addition, as ofJune 30, 2022 , 33 of our apartment communities included retail components. Our apartment communities, including development communities under construction, were located across 16 states and theDistrict of Columbia as ofJune 30, 2022 . We report in two segments, Same Store andNon-Same Store and Other. Our Same Store segment represents those apartment communities that have been owned and stabilized for at least 12 months as of the first day of the calendar year. OurNon-Same Store and Other segment includes recently acquired communities, communities being developed or in lease-up, communities that have been disposed of or identified for disposition, communities that have experienced a significant casualty loss and stabilized communities that do not meet the requirements to be Same Store communities. Also included in ourNon-Same Store and Other segment are non-multifamily activities. Additional information regarding the composition of our segments is included in Note 11 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Note Regarding Forward-Looking Statements
This and other sections of this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Such forward-looking statements include, without limitation, statements regarding expected operating performance and results, property stabilizations, property acquisition and disposition activity, joint venture activity, development and renovation activity and other capital expenditures, and capital raising and financing activity, as well as lease pricing, revenue and expense growth, occupancy, interest rate and other economic expectations. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "forecasts," "projects," "assumes," "will," "may," "could," "should," "budget," "target," "outlook," "proforma," "opportunity," "guidance" and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, as described below, which may cause our actual results, performance or achievements to be materially different from the results of operations, financial conditions or plans expressed or implied by such forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore such forward-looking statements included in this report may not prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved.
The following factors, among others, could cause our actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements:
•
the COVID-19 pandemic and measures taken or that may be taken by federal, state and local governmental authorities to combat the spread of the disease; • inability to generate sufficient cash flows due to unfavorable economic and market conditions, changes in supply and/or demand, competition, uninsured losses, changes in tax and housing laws or other factors; • exposure to risks inherent in investments in a single industry and sector; • adverse changes in real estate markets, including, but not limited to, the extent of future demand for multifamily units in our significant markets, barriers of entry into new markets which we may seek to enter in the future, limitations on our ability to increase or collect rental rates, competition, our ability to identify and consummate attractive acquisitions or development projects on favorable terms, our ability to consummate any planned dispositions in a timely manner on acceptable terms, and our ability to reinvest sale proceeds in a manner that generates favorable returns; • failure of development communities to be completed within budget and on a timely basis, if at all, to lease-up as anticipated or to achieve anticipated results; • unexpected capital needs; • material changes in operating costs, including real estate taxes, utilities and insurance costs, due to inflation and other factors;
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•
inability to obtain appropriate insurance coverage at reasonable rates, or at all, or losses from catastrophes in excess of our insurance coverage; • ability to obtain financing at favorable rates, if at all, or refinance existing debt as it matures; • level and volatility of interest or capitalization rates or capital market conditions; • the effect of any rating agency actions on the cost and availability of new debt financing; • significant change in the mortgage financing market or other factors that would cause single-family housing or other alternative housing options, either as an owned or rental product, to become a more significant competitive product; • ability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, the ability of theOperating Partnership to satisfy the rules to maintain its status as a partnership for federal income tax purposes, the ability of our taxable REIT subsidiaries to maintain their status as such for federal income tax purposes and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules; • inability to attract and retain qualified personnel; • cyber liability or potential liability for breaches of our or our service providers' information technology systems, or business operations disruptions; • potential liability for environmental contamination; • changes in the legal requirements we are subject to, or the imposition of new legal requirements, that adversely affect our operations; • extreme weather, natural disasters, disease outbreaks and other public health events; • impact of climate change on our properties or operations; • legal proceedings or class action lawsuits; • impact of reputational harm caused by negative press or social media postings of our actions or policies, whether or not warranted; • compliance costs associated with numerous federal, state and local laws and regulations; and • other risks identified in this Quarterly Report on Form 10-Q and in other reports we file with theSecurities and Exchange Commission , or theSEC , or in other documents that we publicly disseminate. New factors may also emerge from time to time that could have a material adverse effect on our business. Except as required by law, we undertake no obligation to publicly update or revise forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect events, circumstances or changes in expectations after the date on which this Quarterly Report on Form 10-Q is filed.
Overview of the Three Months Ended
For the three months endedJune 30, 2022 , net income available for MAA common shareholders was$209.8 million as compared to$215.6 million for the three months endedJune 30, 2021 . Results for the three months endedJune 30, 2022 included$21.8 million of non-cash loss related to the fair value adjustment of the embedded derivative in the MAA Series I preferred shares. Results for the three months endedJune 30, 2021 included$13.2 million of non-cash gain related to the embedded derivative in the MAA Series I preferred shares. Revenues for the three months endedJune 30, 2022 increased 13.3% as compared to the three months endedJune 30, 2021 , driven by a 13.7% increase in our Same Store segment. Property operating expenses, excluding depreciation and amortization, for the three months endedJune 30, 2022 increased by 7.7% as compared to the three months endedJune 30, 2021 , driven by an 8.1% increase in our Same Store segment. The drivers of these changes are discussed in the "Results of Operations" section.
Trends
During the three months endedJune 30, 2022 , revenue growth for our Same Store segment continued to be primarily driven by growth in average effective rent per unit. The average effective rent per unit in our Same Store segment continued to increase from the prior year, up 14.3% for the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . Average effective rent per unit represents the average of gross rent amounts, after the effect of leasing concessions, for occupied apartment units plus prevalent market rates asked for unoccupied apartment units, divided by the total number of units. Leasing concessions represent discounts to the current market rate. We believe average effective rent per unit is a helpful measurement in evaluating average pricing; however, it does not represent actual rental revenue collected per unit. In addition, for the three months endedJune 30, 2022 , average physical occupancy for our Same Store segment was 95.7%, as compared to 96.4% for the three months endedJune 30, 2021 . Average physical occupancy is a measurement of the total number of our apartment units that are occupied by residents, and it represents the average of the daily physical occupancy for the period. An important part of our portfolio strategy is to maintain diversity of markets, submarkets, product types and price points primarily in the Southeast, Southwest and Mid-Atlantic regions ofthe United States . This diversity tends to mitigate exposure to economic issues in any one geographic market or area. We believe that a well-balanced portfolio, including both urban and suburban locations, with a broad range of monthly rent price points, will perform well in "up" cycles as well as better weather "down" cycles. Through our investment in 39 defined markets, we are diversified across markets, urban and suburban submarkets, and a variety of product types and monthly rent price points.
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Demand for apartments during the second quarter of 2022 was very strong, as evidenced by the rent growth we achieved. Demand for apartments is primarily driven by general economic conditions in our markets and is particularly correlated to job growth, population growth, household formation and in-migration. While our rent growth and rent collection trends in the second quarter of 2022 were strong, we continue to monitor pressures surrounding supply chain challenges and inflation trends. A worsening of the current environment could contribute to uncertain rent collections going forward and suppress demand for apartments and would likely drive rent growth on new leases and renewals lower than what we achieved in the three and six months endedJune 30, 2022 . Current elevated supply levels could further affect rent growth for our portfolio though we expect the demand side to continue to be more impactful in the short term. Supply chain and inflationary pressures have driven higher operating expenses during the three and six months endedJune 30, 2022 , particularly in personnel and repairs and maintenance, and this trend may continue going forward. Access to the financial markets remains available for high-credit rated borrowers. However, a prolonged disruption of the markets or a decline in credit and financing conditions could negatively affect our ability to access capital necessary to fund our operations or refinance maturing debt in the future. Additionally, rising interest rates could negatively impact our borrowing costs for any variable rate borrowings or refinancing activity.
Results of Operations
Comparison of the three months ended
For the three months endedJune 30, 2022 , we achieved net income available for MAA common shareholders of$209.8 million , a 2.7% decrease as compared to the three months endedJune 30, 2021 , and total revenue growth of$58.1 million , representing a 13.3% increase in property revenues as compared to the three months endedJune 30, 2021 . The following discussion describes the primary drivers of the decrease in net income available for MAA common shareholders for the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . Property Revenues
The following table reflects our property revenues by segment for the three
months ended
Three months ended June 30, 2022 2021 Increase % Increase Same Store$ 472,160 $ 415,403 $ 56,757 13.7 % Non-Same Store and Other 22,880 21,524 1,356 6.3 % Total$ 495,040 $ 436,927 $ 58,113 13.3 % The increase in rental revenues for our Same Store segment for the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 was the primary driver of total property revenue growth.The Same Store segment generated an 13.7% increase in revenues for the three months endedJune 30, 2022 , primarily the result of average effective rent per unit growth of 14.3% as compared to the three months endedJune 30, 2021 . The increase in property revenues from theNon-Same Store and Other segment for the three months endedJune 30, 2022 as compared to three months endedJune 30, 2021 was primarily the result of increased revenues from recently completed development communities.
Property Operating Expenses
Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and other operating expenses. The following table reflects our property operating expenses by segment for the three months endedJune 30, 2022 and 2021 (dollars in thousands): Three months ended June 30, 2022 2021 Increase % Increase Same Store$ 171,922 $ 159,078 $ 12,844 8.1 % Non-Same Store and Other 9,755 9,683 72 0.7 % Total$ 181,677 $ 168,761 $ 12,916 7.7 % 30
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The increase in property operating expenses for our Same Store segment for the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 was primarily driven by increases in real estate tax expense of$3.2 million , building repairs and maintenance of$2.9 million , personnel expense of$2.6 million , utilities expense of$1.5 million , and office operations expense of$0.9 million .
Depreciation and Amortization
Depreciation and amortization expense for the three months endedJune 30, 2022 was$134.1 million , an increase of$2.3 million as compared to the three months endedJune 30, 2021 . The increase was primarily driven by the recognition of depreciation expense associated with our development and capital spend activities completed afterJune 30, 2021 in the normal course of business throughJune 30, 2022 .
Other Income and Expenses
Property management expenses for the three months endedJune 30, 2022 were$15.6 million , an increase of$1.9 million as compared to the three months endedJune 30, 2021 . General and administrative expenses for the three months endedJune 30, 2022 were$15.6 million , an increase of$2.5 million as compared to the three months endedJune 30, 2021 .
Interest expense for the three months ended
For the three months ended
Other non-operating expense (income) for the three months endedJune 30, 2022 was$28.3 million of expense as compared to$20.1 million of income for the three months endedJune 30, 2021 , a decrease of$48.4 million . The expense for the three months endedJune 30, 2022 was driven by$21.8 million of non-cash loss related to the fair value adjustment of the embedded derivative and$20.9 million of non-cash loss from investments, partially offset by$14.4 million in casualty gains due to winter storm Uri. The income for the three months endedJune 30, 2021 was driven by$13.2 million of non-cash gain related to the fair value adjustment of the embedded derivative and$6.3 million of non-cash gain from investments.
Comparison of the six months ended
For the six months endedJune 30, 2022 , we achieved net income available for MAA common shareholders of$319.7 million , a 22.1% increase as compared to the six months endedJune 30, 2021 , and total revenue growth of$109.2 million , representing a 12.7% increase in property revenues as compared to the six months endedJune 30, 2021 . The following discussion describes the primary drivers of the increase in net income available for MAA common shareholders for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 .
Property Revenues
The following table reflects our property revenues by segment for the six months
ended
Six months ended June 30, 2022 2021 Increase % Increase Same Store$ 926,637 $ 820,549 $ 106,088 12.9 % Non-Same Store and Other 44,481 41,383 3,098 7.5 % Total$ 971,118 $ 861,932 $ 109,186 12.7 % The increase in rental revenues for our Same Store segment for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 was the primary driver of total property revenue growth.The Same Store segment generated a 12.9% increase in revenues for the six months endedJune 30, 2022 , primarily the result of average effective rent per unit growth of 13.3% as compared to the six months endedJune 30, 2021 . The increase in property revenues from theNon-Same Store and Other segment for the six months endedJune 30, 2022 as compared to six months endedJune 30, 2021 was primarily the result of increased revenues from recently completed development communities.
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Property Operating Expenses
Property operating expenses include costs for property personnel, building repairs and maintenance, real estate taxes and insurance, utilities, landscaping and other operating expenses. The following table reflects our property operating expenses by segment for the six months endedJune 30, 2022 and 2021 (dollars in thousands): Six months ended June 30, 2022 2021 Increase % Increase Same Store$ 331,757 $ 312,284 $ 19,473 6.2 % Non-Same Store and Other 19,340 18,945 395 2.1 % Total$ 351,097 $ 331,229 $ 19,868 6.0 % The increase in property operating expenses for our Same Store segment for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 was primarily driven by increases in building repairs and maintenance of$4.5 million , personnel expense of$4.4 million , real estate tax expense of$3.6 million , utilities expense of$2.4 million , office operations expense of$2.3 million and insurance expense of$1.5 million .
Depreciation and Amortization
Depreciation and amortization expense for the six months endedJune 30, 2022 was$267.9 million , an increase of$4.6 million as compared to the six months endedJune 30, 2021 . The increase was primarily driven by the recognition of depreciation expense associated with our development and capital spend activities completed afterJune 30, 2021 in the normal course of business throughJune 30, 2022 .
Other Income and Expenses
Property management expenses for the six months endedJune 30, 2022 were$32.2 million , an increase of$5.5 million as compared to the six months endedJune 30, 2021 . General and administrative expenses for the six months endedJune 30, 2022 were$31.9 million , an increase of$5.8 million as compared to the six months endedJune 30, 2021 . Interest expense for the six months endedJune 30, 2022 was$78.0 million , a decrease of$0.5 million as compared to the six months endedJune 30, 2021 . The decrease was primarily due to a decrease in our effective interest rate during the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 .
For the six months ended
Other non-operating expense (income) for the six months endedJune 30, 2022 was$17.5 million of expense as compared to$4.2 million of income for the six months endedJune 30, 2021 , a decrease of$21.7 million . The expense for the six months endedJune 30, 2022 was driven by$9.9 million of non-cash loss related to the fair value adjustment of the embedded derivative and$31.1 million of non-cash loss from investments, partially offset by$22.1 million in casualty gains due to winter storm Uri. The income for the six months endedJune 30, 2021 was driven by the recognition of$7.9 million of non-cash gain from investments, partially offset by$1.9 million of non-cash loss related to the fair value adjustment of the embedded derivative and$1.8 million in casualty losses.
Funds from Operations and Core Funds from Operations
Funds from operations, or FFO, a non-GAAP financial measure, represents net income available for MAA common shareholders (computed in accordance withthe United States generally accepted accounting principles, or GAAP) excluding gains or losses on disposition of operating properties and asset impairment, plus depreciation and amortization of real estate assets, net income attributable to noncontrolling interests and adjustments for joint ventures. Because net income attributable to noncontrolling interests is added back, FFO, when used in this Quarterly Report on Form 10-Q, represents FFO attributable to the Company. FFO should not be considered as an alternative to net income available for MAA common shareholders, or any other GAAP measurement, as an indicator of operating performance or as an alternative to cash flow from operating, investing and financing activities as a measure of liquidity. Management believes that FFO is helpful to investors in understanding our operating performance, primarily because its calculation excludes depreciation and amortization expense on real estate assets. We believe that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. While our calculation of FFO is in accordance with theNational Association of Real Estate Investment Trusts' , or NAREIT's, definition, it may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to such other REITs.
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Core FFO represents FFO as adjusted for items that are not considered part of our core business operations such as adjustments related to the fair value of the embedded derivative in the MAA Series I preferred shares, gain or loss on sale of non-depreciable assets, gain or loss on investments, net casualty gain or loss, gain or loss on debt extinguishment, legal costs and settlements, net, COVID-19 related costs and mark-to-market debt adjustments. While our definition of Core FFO may be similar to others in the industry, our methodology for calculating Core FFO may differ from that utilized by other REITs and, accordingly, may not be comparable to such other REITs. Core FFO should not be considered as an alternative to net income available for MAA common shareholders, or any other GAAP measurement, as an indicator of operating performance or as an alternative to cash flow from operating, investing and financing activities as a measure of liquidity. We believe that Core FFO is helpful in understanding our core operating performance between periods in that it removes certain items that by their nature are not comparable over periods and therefore tend to obscure actual operating performance. The following table presents a reconciliation of net income available for MAA common shareholders to FFO and Core FFO for the three and six months endedJune 30, 2022 and 2021, as we believe net income available for MAA common shareholders is the most directly comparable GAAP measure (dollars in thousands): Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Net income available for MAA common shareholders$ 209,780 $ 215,556 $ 319,660 $ 261,827 Depreciation and amortization of real estate assets 132,333 130,031 264,343 259,783 Gain on sale of depreciable real estate assets (131,965 ) (134,828 ) (131,964 ) (134,828 ) Depreciation and amortization of real estate assets of real estate joint venture 156 154 310 309 Net income attributable to noncontrolling interests 5,858 7,397 8,633 9,068 FFO attributable to the Company 216,162 218,310 460,982 396,159 Loss (gain) from embedded derivative in preferred shares(1) 21,835 (13,168 ) 9,939 1,940 Gain on sale of non-depreciable real estate assets (355 ) (32 ) (378 ) (32 ) Loss (gain) on investments, net of tax(1)(2) 16,489 (4,962 ) 24,566 (6,246 ) Net casualty (gain) loss and other settlement proceeds(3) (14,413 ) (595 ) (22,125 ) 1,760 Loss on debt extinguishment(1) - - - 37 Legal costs and settlements, net(1) (2 ) - 535 (16 ) COVID-19 related costs(1) 105 109 442 419 Mark-to-market debt adjustments(4) 35 83 71 166 Core FFO$ 239,856 $ 199,745 $ 474,032 $ 394,187 (1)
Included in "Other non-operating expense (income)" in the Condensed Consolidated Statements of Operations.
(2)
For the three and six months endedJune 30, 2022 , loss (gain) on investments are presented net of tax benefit of$4.4 million and$6.5 million , respectively. For the three and six months endedJune 30, 2021 , loss (gain) on investments are presented net of tax expense of$1.3 million and$1.7 million , respectively. (3) For the three and six months endedJune 30, 2022 , we recognized gains of$12.8 million and$20.4 million , respectively, from the receipt of insurance proceeds that exceeded our casualty losses related to winter storm Uri. The gain is reflected in "Other non-operating expense (income)" in the Condensed Consolidated Statements of Operations. For the three and six months endedJune 30, 2021 , we incurred$20.4 million and$37.3 million in casualty losses related to winter storm Uri (primarily building repairs, landscaping and asset write-offs). The majority of the casualty losses have been reimbursed through insurance coverage. A receivable was recognized in "Other non-operating expense (income)" for the recorded losses that we expected to recover. Additional costs related to the storm that were not expected to be recovered through insurance coverage, along with other unrelated casualty losses and recoveries, are also reflected in this adjustment. The adjustment is primarily included in "Other non-operating expense (income)" in the Condensed Consolidated Statements of Operations.
(4)
Included in "Interest expense" in the Condensed Consolidated Statements of Operations.
Core FFO for the three months ended
Core FFO for the six months endedJune 30, 2022 was$474.0 million , an increase of$79.8 million as compared to the six months endedJune 30, 2021 , primarily as a result of an increase in property revenues of$109.2 million , partially offset by increases in property operating expenses, excluding depreciation and amortization, of$19.9 million , general and administrative expenses of$5.8 million and property management expenses of$5.5 million .
Liquidity and Capital Resources
Our cash flows from operating, investing and financing activities, as well as general economic and market conditions, are the principal factors affecting our liquidity and capital resources. We expect that our primary uses of cash will be to fund our ongoing operating needs, to fund our ongoing capital spending requirements, which relate primarily to our development, redevelopment and property repositioning activities, to repay maturing borrowings, to fund the future acquisition of assets and to pay shareholder dividends. We expect to meet our cash requirements through net cash flows from 33
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operating activities, existing unrestricted cash and cash equivalents, borrowings under our commercial paper program and our revolving credit facility, the future issuance of debt and equity and the future disposition of assets.
We historically have had positive net cash flows from operating activities. We believe that future net cash flows generated from operating activities, existing unrestricted cash and cash equivalents, borrowing capacity under our current commercial paper program and revolving credit facility, and our ability to issue debt and equity will provide sufficient liquidity to fund the cash requirements for our business over the next 12 months and the foreseeable future.
As of
Cash Flows from Operating Activities
Net cash provided by operating activities was$463.9 million for the six months endedJune 30, 2022 as compared to$397.3 million for the six months endedJune 30, 2021 . The increase in operating cash flows was primarily driven by our operating performance, partially offset by the timing of cash payments.
Cash Flows from Investing Activities
Net cash used in investing activities was$57.8 million for the six months endedJune 30, 2022 as compared to$132.5 million for the six months endedJune 30, 2021 . The primary drivers of the change were as follows (dollars in thousands): Primary drivers of cash (outflow) inflow Increase during the six months ended June 30, (Decrease) 2022 2021 in Net Cash Purchases of real estate and other assets$ (17,238 ) $ (46,028 )$ 28,790 Capital improvements and other (132,849 ) (127,932 ) (4,917 ) Development costs (84,636 ) (119,612 ) 34,976 Contributions to affiliates (9,300 ) (1,114 ) (8,186 ) Proceeds from real estate asset dispositions 165,201 158,136 7,065 Proceeds from insurance recoveries 20,675 3,620 17,055 The decrease in cash outflows for purchases of real estate and other assets was driven by acquisition activity during the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The increase in cash outflows for capital improvements and other was primarily driven by increased redevelopment capital spend during the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The decrease in cash outflows for development costs was primarily driven by decreased development spend during the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . The increase in cash outflows for contributions to affiliates was driven by investments in the technology-focused limited partnerships during the six months endedJune 30, 2022 , while less limited partnership contributions were made during the six months endedJune 30, 2021 . The increase in cash inflows from proceeds from real estate asset dispositions was driven by the nature of the real estate assets sold during the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 . During the six months endedJune 30, 2022 , we sold two apartment communities as compared to four apartment communities during the six months endedJune 30, 2021 . The increase in cash inflows from proceeds from insurance recoveries was driven by insurance reimbursements received for casualty claims related to winter storm Uri during the six months endedJune 30, 2022 .
Cash Flows from Financing Activities
Net cash used in financing activities was$315.0 million for the six months endedJune 30, 2022 as compared to$257.4 million for the six months endedJune 30, 2021 . The primary drivers of the change were as follows (dollars in thousands): Primary drivers of cash inflow (outflow) (Decrease) during the six months ended June 30, Increase 2022 2021 in Net Cash Net change in commercial paper $ - $ 108,000 (108,000 ) Principal payments on notes payable (691 ) (119,481 ) 118,790 Dividends paid on common shares (250,960 ) (234,591 ) (16,369 ) Acquisition of noncontrolling interests (43,070 ) - (43,070 ) Net change in other financing activities (11,478 ) (1,173 ) (10,305 ) The decrease in cash inflows related to the net change in commercial paper resulted from no net borrowings on our commercial paper program during the six months endedJune 30, 2022 as compared to net borrowings of$108.0 million on our commercial paper program during the six months endedJune 30, 2021 . The decrease in cash outflows from principal payments on notes payable primarily resulted from the 34
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retirement of$118.6 million of property mortgages during the six months endedJune 30, 2021 . The increase in cash outflows from dividends paid on common shares primarily resulted from the increase in the dividend rate to$2.175 per share during the six months endedJune 30, 2022 as compared to the dividend rate of$2.0500 per share during the six months endedJune 30, 2021 . The increase in cash outflows from the acquisition of noncontrolling interests resulted from the acquisition of the noncontrolling interest of a consolidated real estate entity for$43.1 million during the six months endedJune 30, 2022 . The increase in cash outflows from the net change in other financing activities was primarily driven by shares of MAA's common stock surrendered by employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted shares during the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 .
Debt
The following schedule reflects our debt outstanding as ofJune 30, 2022 (dollars in thousands): Average Years Principal to Rate Balance Maturity Effective Rate Unsecured debt Fixed rate senior notes$ 4,175,000 6.7 3.3 % Debt issuance costs, discounts, premiums and fair market value adjustments (21,350 ) Total unsecured debt$ 4,153,650 6.7 3.3 % Secured debt Fixed rate property mortgages$ 367,864 26.3 4.4 % Debt issuance costs (3,200 ) Total secured debt$ 364,664 26.3 4.4 % Total debt$ 4,518,314 8.2 3.4 %
The following schedule presents the contractual maturity dates of our
outstanding debt, net of debt issuance costs, discounts, premiums and fair
market value adjustments, as of
Commercial Paper & Revolving Property Credit Facility?¹??²? Senior Notes Mortgages Total 2022 $ -$ 124,921 $ -$ 124,921 2023 - 349,172 - 349,172 2024 - 398,433 - 398,433 2025 - 397,386 4,712 402,098 2026 - 296,816 - 296,816 2027 - 596,155 - 596,155 2028 - 396,391 - 396,391 2029 - 559,749 - 559,749 2030 - 297,369 - 297,369 2031 - 444,654 - 444,654 Thereafter - 292,604 359,952 652,556 Total $ -$ 4,153,650 $ 364,664 $ 4,518,314 (1) There were no borrowings outstanding under MAALP's unsecured commercial paper program as ofJune 30, 2022 . Under the terms of the program, MAALP may issue up to a maximum aggregate amount outstanding at any time of$500.0 million . For the three months endedJune 30, 2022 , average daily borrowings outstanding under the commercial paper program were$16.3 million .
(2)
There were no borrowings outstanding under MAALP's
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The following schedule reflects the interest rate maturities of our outstanding fixed rate debt, net of debt issuance costs, discounts, premiums and fair market value adjustments, as ofJune 30, 2022 (dollars in thousands): Fixed Rate Debt Effective Rate 2022 $ 124,921 3.3 % 2023 349,172 4.2 % 2024 398,433 4.0 % 2025 402,098 4.2 % 2026 296,816 1.2 % 2027 596,155 3.7 % 2028 396,391 4.2 % 2029 559,749 3.7 % 2030 297,369 3.1 % 2031 444,654 1.8 % Thereafter 652,556 3.8 % Total$ 4,518,314 3.4 %
Unsecured Revolving Credit Facility & Commercial Paper
As ofJune 30, 2022 , MAALP had a$1.0 billion unsecured revolving credit facility with an option to expand to$1.5 billion . The revolving credit facility bore an interest rate of the London Interbank Offered Rate plus a spread of 0.75% to 1.45% based on an investment grade pricing grid. The revolving credit facility was scheduled to mature inMay 2023 with an option to extend for two additional six-month periods. As ofJune 30, 2022 , there was no outstanding balance under the revolving credit facility, while$4.0 million of capacity was used to support outstanding letters of credit. InJuly 2022 , MAALP amended its unsecured revolving credit facility, increasing borrowing capacity to$1.25 billion with an option to expand to$2.0 billion . The amended revolving credit facility has a maturity date ofOctober 2026 with two six-month extension options and bears interest at an adjusted Secured Overnight Financing Rate plus a spread of 0.70% to 1.40% based on an investment grade pricing grid, currently at 0.775%. This revolving credit facility serves as our primary source of short-term liquidity. MAALP has established an unsecured commercial paper program, whereby it can issue unsecured commercial paper notes with varying maturities not to exceed 397 days up to a maximum aggregate amount outstanding of$500.0 million . As ofJune 30, 2022 , there were no borrowings outstanding under the commercial paper program.
Unsecured Senior Notes
As of
Secured Property Mortgages
MAALP maintains secured property mortgages with various life insurance
companies. As of
For more information regarding our debt capital resources, see Note 6 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Equity As ofJune 30, 2022 , MAA owned 115,438,832 OP Units, comprising a 97.3% limited partnership interest in MAALP, while the remaining 3,202,377 outstanding OP Units were held by limited partners of MAALP other than MAA. Holders of OP Units (other than MAA) may require us to redeem their OP Units from time to time, in which case we may, at our option, pay the redemption price either in cash (in an amount per OP Unit equal, in general, to the average closing price of MAA's common stock on the NYSE over a specified period prior to the redemption date) or by delivering one share of MAA's common stock (subject to adjustment under specified circumstances) for each OP Unit so redeemed. MAA has registered under the Securities Act the 3,202,377 shares of its common stock that, as ofJune 30, 2022 , were issuable upon redemption of OP Units, in order for those shares to be sold freely in the public markets. InAugust 2021 , MAA entered into two 18-month forward sale agreements with respect to a total of 1.1 million shares of its common stock at an initial forward sale price of$190.56 per share, which is net of issuance costs. Under the forward sale agreements, the forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor equal to a specified daily rate less a spread and will be decreased based on amounts related to dividends on MAA's common stock during the term of the forward sale agreements. No shares had been settled under the forward sale agreements as ofJune 30, 2022 . Subject to certain conditions, we generally have the right to elect cash or net share 36
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settlement under the forward sale agreements, although we expect to settle the forward sale agreements entirely by the full physical delivery of shares of MAA's common stock in exchange for cash proceeds. We intend to use any cash proceeds upon settlement of the forward sale agreements to fund our development and redevelopment activities, among other potential uses. InNovember 2021 , the Company entered into an equity distribution agreement to establish a new at-the-market, or ATM, sharing offering program, replacing MAA's previous ATM program and allowing MAA to sell shares of its common stock from time to time to or through its sales agents into the existing market at current market prices, and to enter into separate forward sales agreements to or through its forward purchasers. Under its current ATM program, MAA has the authority to issue up to an aggregate of 4.0 million shares of its common stock, at such times to be determined by MAA. MAA has no obligation to issue shares through the ATM program. During the six months endedJune 30, 2022 and 2021, MAA did not sell any shares of common stock under its ATM program. As ofJune 30, 2022 , there were 4.0 million shares remaining under the ATM program. For more information regarding our equity capital resources, see Note 8 and Note 9 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Material Cash Requirements As ofJune 30, 2022 , we had$125.7 million in debt obligations maturing in the year endingDecember 31, 2022 as well as interest payments on fixed rate debt obligations of$78.1 million . As ofJune 30, 2022 , we also had obligations to make additional capital contributions to three technology-focused limited partnerships in which we hold equity interests. The capital contributions may be called by the general partners at any time after giving appropriate notice. As ofJune 30, 2022 , we had committed to make additional capital contributions totaling up to$31.7 million if and when called by the general partners of the limited partnerships.
We have other material cash requirements that do not represent contractual obligations, but we expect to incur in the ordinary course of our business.
As ofJune 30, 2022 , we had five development communities under construction totaling 1,759 apartment units once complete. Expected total costs for the five development projects are$444.0 million , of which$230.4 million had been incurred throughJune 30, 2022 . We expect to have additional development projects in the future. In addition, our property redevelopment and repositioning activities are ongoing, and we incur expenditures relating to recurring capital replacements, which typically include scheduled carpet replacement, new roofs, HVAC units, plumbing, concrete, masonry and other paving, pools and various exterior building improvements. For the year endingDecember 31, 2022 , we expect that our total capital expenditures relating to our development activities, our property redevelopment and repositioning activities and recurring capital replacements will be in line with our total capital expenditures for the year endedDecember 31, 2021 . InJuly 2022 , we funded the acquisition of a multifamily apartment community for approximately$73.0 million primarily from the proceeds we received from the sale of two multifamily apartment communities inJune 2022 . We typically declare cash dividends on MAA's common stock on a quarterly basis, subject to approval by MAA's Board of Directors. The current annual dividend rate is$5.00 per common share. The timing and amount of future dividends will depend on actual cash flows from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986 and other factors as MAA's Board of Directors deems relevant. MAA's Board of Directors may modify our dividend policy from time to time.
For information regarding our material cash requirements as of
Inflation
Our resident leases at our apartment communities allow for adjustments in the rental rate at the time of renewal, which may enable us to seek rent increases. The majority of our leases are for one year or less. The short-term nature of these leases generally serves to reduce our risk to adverse effects of inflation on our revenues. 37
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Critical Accounting Estimates
Please refer to our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSEC onFebruary 17, 2022 , for discussions of our critical accounting estimates. During the three months endedJune 30, 2022 , there were no material changes to these estimates.
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