Item 1. Business.

Overview

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 of the United States. As of December 31, 2020, we maintained full or partial ownership of apartment communities across 16 states and the District of Columbia, summarized as follows:

Multifamily		Communities (1)				Units
Consolidated			299				100,221
Unconsolidated			1				269
Total			300				100,490

(1)As of December 31, 2020, thirty-two of the Company’s apartment communities included retail components.

Our business is conducted principally through the Operating Partnership. MAA is the sole general partner of the Operating Partnership, holding 114,373,727 OP Units, comprising a 96.6% partnership interest in the Operating Partnership as of December 31, 2020. MAA and MAALP were formed in Tennessee in 1993.

Business Objectives

Our primary business objectives are to generate a sustainable, stable and increasing cash flow that will fund our dividends and distributions through all parts of the real estate investment cycle. To achieve these objectives, we intend to continue to pursue the following goals and strategies:

	•	create value for our shareholders, residents, associates and the communities in which our properties are located;

	•	effectively operate our existing properties with an intense property and asset management focus;

	•	utilize technology to provide services desired by our residents and generate efficiency in our operations;

	•	take an opportunistic approach to buying, selling, developing and renovating apartment communities;

	•	diversify our portfolio across markets, submarkets and price points in the geographical areas in which we operate to minimize operating performance volatility;

	•	offer attractive work environments, compensation and incentive packages and career development opportunities to attract and retain required talent; and

	•	actively manage our balance sheet and capital structure.

Operations

Our goal is to generate return on investment collectively and in each apartment community by increasing revenues, controlling operating expenses, maintaining high occupancy levels and reinvesting in the income producing capacity of each apartment community as appropriate. The steps taken to meet these objectives include:

	•	providing management information and improved customer services through technology innovations;

	•	implementing programs to control expenses through investment in cost-saving initiatives;

	•	analyzing individual asset productivity performances to identify best practices and improvement areas;

	•	maintaining the physical condition of each property through ongoing capital investments;

	•	improving the “curb appeal”, amenities and common areas of the apartment communities through environmentally-thoughtful landscaping and exterior improvements, and repositioning apartment communities from time to time to enhance or maintain market positions;

	•	effectively utilizing search engine optimization, internet leasing solutions and other internet tools to generate leasing traffic;

	•	managing lease expirations to align with peak leasing traffic patterns and to maximize productivity of property staffing; and

	•	allocating additional capital, including capital for selective interior and exterior improvements.

We believe that our decentralized operating structure capitalizes on specific market knowledge and provides greater accountability than an entirely centralized structure. To support our operational structure, senior management, along with various asset management functions, are proactively involved in supporting and reviewing property management performance through extensive reporting processes and on-site visits. To maximize the amount of information shared between senior management and the properties on a real-time basis, we utilize a web-based property management system. The system contains property and accounting modules that allow for operating efficiencies and continued expense control, provide for various expanded revenue management practices and improve the support provided to on-site property operations. We use a “yield management” pricing program that helps our property managers optimize rental revenues, and we also utilize purchase order and accounts payable software to provide improved controls and management information.

Investment in technology continues to drive operating efficiencies in our business and helps us to better meet the changing needs of our residents. Our residents have the ability to conduct business with us 24 hours a day, 7 days a week and complete online leasing applications, leases and renewals through our web-based resident portal. Interacting with our residents through such technology has allowed us to improve resident satisfaction ratings and increase the efficiency of our operating teams. During 2020, our resident portal also provided a safer way to transact business during the COVID-19 pandemic. During 2020, we additionally invested in technology to enable potential residents to examine their future homes both online (virtual touring) or by self-guided tour (self-touring) in addition to the more traditional guided tour.

Acquisitions and Development

Our external growth strategy is to acquire existing apartment communities, utilize our internal development team to develop our own apartment communities and partner with local developers to develop apartment communities that we will own completely after stabilization, which we refer to as a pre-purchase transaction. Acquisitions and development, along with dispositions, help us achieve and maintain our desired product mix, geographic diversification and asset allocation. Portfolio growth allows for maximizing the efficiency of the existing management and overhead structure. We have extensive experience in the acquisition and development of apartment communities. We will continue to evaluate opportunities that arise, and we will utilize this strategy to increase our number of apartment communities in strong and growing markets.

We acquired the following properties during the year ended December 31, 2020:

Land Acquisitions		Market		Acres		Date Acquired
MAA Windmill Hill		Austin, TX		22		January 2020
MAA Central Park		Denver, CO		27		November 2020
Novel Val Vista (1)		Phoenix, AZ		13		December 2020

(1)	This pre-purchase multifamily community development is being developed through a joint venture with a local developer. We own 80% of the joint venture that owns this property.

Development activities may be conducted through entities we wholly-own, through joint ventures or with our pre-purchase transaction partners. Typically, fixed price construction contracts are signed with unrelated parties to minimize construction risk. We may also engage in limited expansion development opportunities on existing communities in which we typically serve as the developer. During the year ended December 31, 2020, we incurred $201.4 million in development costs and completed one development project.

The following multifamily projects were under development as of December 31, 2020 (dollars in thousands):

Project		Market		Total Units				Units Completed				Cost to Date				Budgeted Cost				Estimated Cost Per Unit				Expected Completion
MAA Frisco Bridges II		Dallas, TX			348				325			$	64,355			$	69,000			$	198			1st Quarter 2021
Novel Midtown (1)		Phoenix, AZ			345			—					72,303				82,000				238			2nd Quarter 2021
Westglenn		Denver, CO			306			—					44,241				84,500				276			4th Quarter 2021
The Robinson		Orlando, FL			369			—					64,650				99,000				268			4th Quarter 2021
Sand Lake (2)		Orlando, FL			264			—					38,859				68,000				258			4th Quarter 2021
Long Point		Houston, TX			308			—					28,933				57,000				185			1st Quarter 2022
MAA Windmill Hill		Austin, TX			350			—					9,279				63,000				180			3rd Quarter 2022
Novel Val Vista (1)		Phoenix, AZ			317			—					12,954				72,500				229			1st Quarter 2023
					2,607				325			$	335,574			$	595,000

(1)	This pre-purchase multifamily community development is being developed through a joint venture with a local developer. We own 80% of the joint venture that owns this property.

(2)	This pre-purchase multifamily community development is being developed through a joint venture with a local developer. We own 95% of the joint venture that owns this property.

Dispositions

We sell apartment communities and other assets that no longer meet our long-term strategy or when market conditions are favorable, and we redeploy the proceeds from those sales to acquire, develop and redevelop additional apartment communities and rebalance our portfolio across or within geographic regions. Dispositions also allow us to realize a portion of the value created through our investments and provide additional liquidity. We are then able to redeploy the net proceeds from our dispositions in lieu of raising additional equity or debt capital. In deciding to sell an apartment community, we consider current market conditions and generally solicit competing bids from unrelated parties for these individual properties, considering the sales price and other key terms of each proposal. We also consider portfolio dispositions when such a structure is useful to maximize proceeds and efficiency of execution. During the year ended December 31, 2020, we disposed of one land parcel totaling approximately 27 acres. We did not dispose of any apartment communities during the year ended December 31, 2020.

Property Redevelopment and Repositioning Activity

We focus on both interior unit upgrades and property amenity and common area upgrades above and beyond routine capital upkeep on our apartment communities that we believe have the ability to support additional rent growth. During the year ended December 31, 2020, we renovated the kitchen and bathroom of 4,211 apartment units at an average cost of $6,201 per apartment unit, achieving average rental rate increases of 9.5% above the normal market rate for similar but non-renovated apartment units.

During the first quarter of 2020, we began installing SmartHome technology (mobile control of lights, thermostat and security, as well as leak monitoring) in some of our apartment units. During the year ended December 31, 2020, we installed smart devices in 23,950 apartment units at an average cost of $1,376 per apartment unit, achieving an average rent increase of $25 per apartment unit.

Also during the first quarter of 2020, we initiated a program to upgrade and reposition the amenity and common areas at select properties. The program includes targeted plans to move all apartment units at the properties to higher rents. For the year ended December 31, 2020, we spent $13.0 million on this program at eight properties.

Portfolio Strategy

Our goal is to maintain a diversified, balanced portfolio that we believe provides the optimal path to maximizing operating performance over the full economic cycle. Maintaining a diverse portfolio includes:

	•	Operating apartment communities in a variety of markets across the Southeast, Southwest, and Mid-Atlantic regions of the United States

	•	Operating apartment communities in a variety of submarkets within our markets (urban, suburban, inner loop, etc.)

	•	Operating apartment communities of different product types such as high-rise, mid-rise and garden style

	•	Offering a variety of different rent price points within a market or submarket

We believe a diverse portfolio performs well during economic up cycles and weathers economic down cycles better than a more homogenous portfolio.

Human Capi****tal

As of December 31, 2020, we employed 2,530 associates. Our associates’ time, energy, creativity and passion are essential to our continued success as a company. With respect to our workforce, we focus on driving diversity and inclusion, providing market-competitive pay and benefits to support our associates’ well-being, encouraging our associates’ growth and development, fostering associate engagement and protecting our associates’ health and safety during this time of the COVID-19 pandemic.

We respect the privilege of providing value to those whose lives we touch. We call this outlook our “Brighter View.” To achieve these objectives, we use our Core Values to guide the way we interact with each other and conduct business by:

	•	appreciating the uniqueness of each individual;

	•	communicating openly and with integrity;

	•	embracing opportunities; and

	•	doing the right thing at the right time for the right reasons.

Diversity, Equity and Inclusion

We strive to recruit, develop and retain a talented and diverse workforce that mirrors the diversity of our residents and the communities where we do business. We are committed to an inclusive working environment that not only values diversity in ideas and opinions, but also fosters a sense of belonging and connection where associates feel recognized and appreciated regardless of individual differences. Our goal through these efforts is to support and promote inclusive diversity, equal opportunity and fair treatment for all those working at the company and as a result create more value for all the constituents we serve. During the year ended December 31, 2020, we established an Inclusive Diversity Council comprised of individuals across all areas of our company whose aim is to cultivate conversations, expand education and examine our practices surrounding diversity and inclusion. This group works collaboratively with our Chief Executive Officer and other members of our executive team to ensure our policies and actions are guided by our culture of inclusivity and are free from discriminatory practices and bias.

We recruit from a diverse range of sources including historically Black colleges and universities as well as technical/trade schools. As of December 31, 2020, ethnic/cultural minorities represented approximately 46% of our workforce, 34% of our leadership positions and 46% of our associates promoted during the year ended December 31, 2020. Also, as of December 31, 2020, females represented approximately 46% of our workforce, 55% of our leadership positions and 56% of our associates promoted during the year ended December 31, 2020, representing a 6% increase from the year ended December 31, 2019. We intend to continue using a combination of targeted recruiting, talent development and internal promotion strategies to expand the diversity of our employee base across all roles and functions.

Well-being and Development

We take a comprehensive approach to supporting our associates’ health, financial and professional well-being. Our associates are eligible for medical, dental and vision insurance, life and disability insurance, various wellness programs, an employee assistance program, for which we pay part or all of the cost, as well as other benefits. We strive to maintain an equitable compensation program for performance, designed to reward competitive levels of compensation based on employee contributions, performance and qualifications. We offer a 401(k) savings plan with an employer match as well as educational support for savings strategies. We also offer discounted rent to associates, parental leave and financial assistance with adoption expenses as well as grant up to three scholarships for associates’ dependents each year. Our training and development programs are designed to provide continuous learning for associates in the flow of their workday. Additionally, we encourage and provide financial assistance to our eligible associates to seek education and certification outside of the company through both apartment associations and accredited educational institutions. We encourage our associates to “embrace opportunities” including developing skills and knowledge needed for increased responsibilities as they promote within the Company.

Communication and Engagement

It is our goal to communicate authentically with our associates in a way that is clear, credible and compassionate. We understand effective communication must flow both ways and we strive to continuously improve our efforts to appropriately engage our associates so that as a team we can successfully complete our mission. Our internal communications function aims to provide associates the information they need in a timely, focused, relevant and consistent manner using the most appropriate channels available. It is also important that we maintain an active dialogue with our associates, and they have multiple channels to be seen and heard. We periodically conduct a comprehensive survey to measure associate engagement and pulse checks to capture topical feedback to guide current programs, projects and progress. We also conduct an annual review process to provide an opportunity for each associate to build mutual understanding with leadership, gain self-discovery and learn about possible avenues for growth. We encourage a work environment where ideas, problems and solutions can be discussed with immediate managers and other management personnel. Associates may also use our company intranet as a means of submitting feedback.

COVID-19 Health and Safety

Our highest priority throughout the COVID-19 pandemic has been the health and well-being of our associates, residents and guests. We have endeavored to provide protection and help with balancing the needs of the business. With our cross-functional COVID-19 task force, we consider the evolving challenges presented to each of our stakeholder groups. In accordance with U.S. Centers for Disease Control and Prevention, or CDC, guidelines and directives from state and local governmental authorities, we established our COVID-19 Workplace Health and Safety Guidelines which includes a requirement for each associate to complete a daily health-screening questionnaire before work. We instruct associates to wear face coverings, frequently wash hands, sanitize high-touch surfaces and practice social distancing while performing job responsibilities at all locations. We introduced contact tracing measures with a dedicated team to manage incidents of associate COVID-19 exposure as additional protection for all associates and the public. While our safety precautions have aimed to protect our associates’ health, we also have implemented several measures to support our associates’ overall well-being. Throughout the pandemic, we provided supplemental leave and sick time policies, flextime, additional COVID-19 paid time off and modifications to health and retirement plans.

Capital Structure

We use a combination of debt and equity sources to fund our business objectives. We maintain a capital structure, focused on maintaining access, flexibility and low costs, that we believe allows us to proactively support normal business operations and source potential investment opportunities in the marketplace. We structure our debt maturities to avoid disproportionate exposure in any given year. Our primary debt financing strategy is to access the unsecured debt markets to provide our debt capital needs, but we also maintain a limited amount of secured debt and maintain our access to both the secured and unsecured debt markets for maximum flexibility. We also believe that we have significant access to the equity capital markets.

As of December 31, 2020, 23.3% of our total market capitalization consisted of debt borrowings, including 20.9% under unsecured borrowings and 2.4% under secured borrowings. We currently intend to target our total debt, net of cash held, to a range of approximately 30% to 36% of the undepreciated book value of our assets. Our charter and bylaws do not limit our debt levels and our Board of Directors can modify this policy at any time. We may issue new equity to maintain our debt within the target range. Covenants for our unsecured senior notes limit our total debt to 60% or less of our adjusted total assets (as defined in the covenants for the bonds issued by MAALP). As of December 31, 2020, our total debt was approximately 31.2% of our adjusted total assets. We continuously review opportunities for lowering our cost of capital. We plan to continue using unsecured debt in order to take advantage of the lower cost of capital and flexibility provided by these markets. We will evaluate opportunities to repurchase shares when we believe that our share price is significantly below our net present value. We also look for opportunities where we can acquire or develop apartment communities, selectively funded or partially funded by sales of equity securities, when appropriate opportunities arise. We focus on improving the net present value of our investments by generating cash flow from our portfolio of assets above the estimated total cost of debt and equity capital. We routinely make new investments when we believe it will be accretive to shareholder value over the life of the investments.

Competition and Market Demand

All of our apartment communities are located in areas that include other apartment communities. Occupancy and rental rates are affected by the number of competitive apartment communities in a particular area. The owners of competing apartment communities may have greater resources than us, and the managers of these apartment communities may have more experience than our management. Moreover, single-family rental housing, manufactured housing, condominiums and the new and existing home markets provide housing alternatives to potential residents of apartment communities. Competition for new residents is generally intense across all of our markets. Some competing apartment communities offer features that our apartment communities do not have or may be deemed to be in a more desirable location within the market. Competing apartment communities can use concessions or lower rents to obtain temporary competitive advantages. Also, some competing apartment communities are newer than our apartment communities, may have different amenities or otherwise be more attractive to a prospective resident. The competitive position of each apartment community is different depending upon many factors including submarket supply and demand. In addition, other real estate investors compete with us to acquire existing properties and to develop new properties. These competitors include insurance companies, pension and investment funds, public and private real estate companies, investment companies and other public and private apartment REITs, some of which may have greater resources, greater ability to utilize leverage or lower capital costs than we do.

We believe, however, that we are generally well-positioned to compete effectively for residents and acquisition and development opportunities. We believe our competitive advantages include:

	•	a fully integrated organization with property management, development, redevelopment, acquisition, marketing, sales and financing expertise;

	•	scalable operating and support systems, which include automated systems to meet the changing technological needs of our residents and associates;

	•	access to a wide variety of debt and equity capital sources;

	•	geographic diversification with a presence in 36 defined markets across the Southeast, Southwest and Mid-Atlantic regions of the United States; and

	•	significant presence in many of our major markets that allows us to be a local operating expert and offer varying location options within a market to meet a variety of prospective resident preferences.

Moving forward, we plan to continue our focus on optimizing lease expiration management, expense control and resident retention efforts and also to align employee incentive plans with our performance. We also plan to continue to make capital improvements to both our apartment communities and individual units on a regular basis in order to maintain a competitive position. We believe this plan of operation, coupled with the portfolio’s strengths in targeting residents across a geographically diverse platform, should position us for continued operational growth.

For information regarding trends in market demand, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Trends” in this Annual Report on Form 10-K.

Environmental Matters

As a part of our standard apartment community acquisition and development processes, we generally obtain environmental studies of the sites from outside environmental engineering firms. The purpose of these studies is to identify potential sources of contamination at the site and to assess the status of environmental regulatory compliance. These studies generally include historical reviews of the site, reviews of certain public records, preliminary investigations of the site and surrounding properties, inspection for the presence of asbestos, poly-chlorinated biphenyls and underground storage tanks and the preparation and issuance of written reports. Depending on the results of these studies, more invasive procedures, such as soil sampling or ground water analysis, may be performed to investigate potential sources of contamination. These studies must be satisfactorily completed before we take ownership of an acquisition or development property; however, no assurance can be given that the studies or additional documents reviewed identify all significant environmental risks. See “Risk Factors – Risks Relating to Our Real Estate Investments and Our Operations - Environmental problems are possible and can be costly” in this Annual Report on Form 10-K.

The environmental studies we received on properties that we have acquired have not revealed any material environmental liabilities. Should any potential environmental risks or conditions be discovered during our due diligence process, the potential costs of remediation will be assessed carefully and factored into the cost of acquisition, assuming the identified risks and factors are deemed to be manageable and within reason. We are not aware of any existing conditions that we believe would be considered a material environmental liability. Nevertheless, it is possible that the studies do not reveal all environmental risks or that there are material environmental liabilities of which we are not aware. Moreover, no assurance can be given concerning future laws, ordinances or regulations, or the potential introduction of hazardous or toxic substances by neighboring properties or residents.

Government Regulations

We must own, operate, manage, acquire, develop and redevelop our properties in compliance with the laws and regulations of the United States, as well as state and local laws and regulations in the markets where our properties are located, which may differ among jurisdictions. In response to the COVID-19 pandemic, federal governmental authorities, as well as state and local governmental authorities in jurisdictions where our properties are located, have implemented laws and regulations which impact our ability to operate our business in the ordinary course, including our ability to charge certain fees, increase rents and evict residents who violate their lease. We are complying with these governmental requirements, but they, along with the COVID-19 pandemic, had a material impact on our business in 2020 and ongoing compliance may materially effect our results of operations for the year ending December 31, 2021. Otherwise, we do not expect that compliance with the various laws and regulations we are subject to will have a material effect on our capital expenditures, results of operations and competitive position for the year ending December 31, 2021, as compared to prior periods.

For additional information, see “Risk Factors – The COVID-19 pandemic and mitigation efforts to control the spread of the disease have materially impacted and are expected to continue to materially impact our business, and our financial condition, results of operations and cash flows could be materially adversely affected by factors relating to COVID-19,” “Risk Factors – Environmental problems are possible and can be costly” and “Risk Factors – Compliance or failure to comply with laws and regulations could have an adverse effect on our operations and the values of our properties” in this Annual Report on Form 10-K.

Qualification as a Real Estate Investment Trust

MAA has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code. To continue to qualify as a REIT, MAA must continue to meet certain tests which, among other things, generally require that our assets consist primarily of real estate assets, our income be derived primarily from real estate assets and that we distribute at least 90% of our REIT taxable income (other than our net capital gains) to our shareholders annually. If MAA maintains its qualification as a REIT, MAA generally will not be subject to U.S. federal income taxes at the corporate level on its net income to the extent it distributes such net income to its shareholders annually. Even if MAA continues to qualify as a REIT, it will continue to be subject to certain federal, state

and local taxes on its income and its property. In 2020, MAA paid total distributions of $4.00 per share of common stock to its shareholders, which was above the 90% REIT distribution requirement and was in excess of REIT taxable income.

Website Access to Our Reports

MAA and the Operating Partnership file combined periodic reports with the SEC. Our Annual Reports on Form 10-K, along with our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, are available on our website at https://www.maac.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Reference to our website does not constitute incorporation by reference of the information contained on the site and should not be considered part of this Annual Report on Form 10-K. All of the aforementioned materials may also be obtained free of charge by contacting our Investor Relations Department, 6815 Poplar Avenue, Suite 500, Germantown, Tennessee 38138.