Item 1. Financial Statements.

Mid-America Apartment Communities, Inc.

Condensed Consolida****ted Balance Sheets

(Unaudited)

(Dollars in thousands, except share and per share data)

		March 31, 2022				December 31, 2021
Assets
Real estate assets:
Land		$	1,978,661			$	1,977,813
Buildings and improvements and other			12,589,537				12,454,439
Development and capital improvements in progress			215,055				247,970
			14,783,253				14,680,222
Less: Accumulated depreciation			(3,981,778	)			(3,848,161	)
			10,801,475				10,832,061
Undeveloped land			29,279				24,015
Investment in real estate joint venture			42,732				42,827
Real estate assets, net			10,873,486				10,898,903
Cash and cash equivalents			60,371				54,302
Restricted cash			12,253				76,296
Other assets			252,965				255,681
Total assets		$	11,199,075			$	11,285,182
Liabilities and equity
Liabilities:
Unsecured notes payable		$	4,172,513			$	4,151,375
Secured notes payable			364,992				365,315
Accrued expenses and other liabilities			531,351				584,400
Total liabilities			5,068,856				5,101,090
Redeemable common stock			26,857				30,185
Shareholders’ equity:
Preferred stock, $0.01 par value per share, 20,000,000 shares authorized;8.50% Series I Cumulative Redeemable Shares, liquidation preference $50.00per share, 867,846 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively			9				9
Common stock, $0.01 par value per share, 145,000,000 shares authorized;115,337,466 and 115,336,876 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively (1)			1,151				1,151
Additional paid-in capital			7,198,474				7,230,956
Accumulated distributions in excess of net income			(1,268,827	)			(1,255,807	)
Accumulated other comprehensive loss			(10,860	)			(11,132	)
Total MAA shareholders’ equity			5,919,947				5,965,177
Noncontrolling interests - OP Units			163,566				165,116
Total Company’s shareholders’ equity			6,083,513				6,130,293
Noncontrolling interests - consolidated real estate entities			19,849				23,614
Total equity			6,103,362				6,153,907
Total liabilities and equity		$	11,199,075			$	11,285,182

(1)

Number of shares issued and outstanding represents total shares of common stock regardless of classification on the Condensed Consolidated Balance Sheets. The number of shares classified as redeemable common stock on the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 are 128,224 and 131,559, respectively.

See accompanying notes to condensed consolidated financial statements.

Mid-America Apartment Communities, Inc.

Condensed Consolidated S****tatements of Operations

(Unaudited)

(Dollars in thousands, except per share data)

		Three months ended March 31,
		2022				2021
Revenues:
Rental and other property revenues		$	476,078			$	425,005
Expenses:
Operating expenses, excluding real estate taxes and insurance			101,117				95,961
Real estate taxes and insurance			68,303				66,507
Depreciation and amortization			133,738				131,503
Total property operating expenses			303,158				293,971
Property management expenses			16,537				12,939
General and administrative expenses			16,323				12,979
Interest expense			39,121				39,672
Loss on sale of depreciable real estate assets			1				—
Gain on sale of non-depreciable real estate assets			(23	)			—
Other non-operating (income) expense			(10,795	)			15,913
Income before income tax expense			111,756				49,531
Income tax benefit (expense)			1,442				(999	)
Income from continuing operations before real estate joint venture activity			113,198				48,532
Income from real estate joint venture			379				332
Net income			113,577				48,864
Net income attributable to noncontrolling interests			2,775				1,671
Net income available for shareholders			110,802				47,193
Dividends to MAA Series I preferred shareholders			922				922
Net income available for MAA common shareholders		$	109,880			$	46,271
Earnings per common share - basic:
Net income available for MAA common shareholders		$	0.95			$	0.40
Earnings per common share - diluted:
Net income available for MAA common shareholders		$	0.95			$	0.40

See accompanying notes to condensed consolidated financial statements.

Mid-America Apartment Communities, Inc.

Condensed Consolidated Statem****ents of Comprehensive Income

(Unaudited)

(Dollars in thousands)

		Three months ended March 31,
		2022				2021
Net income		$	113,577			$	48,864
Other comprehensive income:
Adjustment for net losses reclassified to net income from derivative instruments			279				279
Total comprehensive income			113,856				49,143
Less: Comprehensive income attributable to noncontrolling interests			(2,782	)			(1,681	)
Comprehensive income attributable to MAA		$	111,074			$	47,462

See accompanying notes to condensed consolidated financial statements.

Mid-America Apartment Communities, Inc.

Condensed Consolidated S****tatements of Cash Flows

(Unaudited)

(Dollars in thousands)

		Three months ended March 31,
Cash flows from operating activities:		2022				2021
Net income		$	113,577			$	48,864
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			133,986				131,820
Loss on sale of depreciable real estate assets			1				—
Gain on sale of non-depreciable real estate assets			(23	)			—
(Gain) loss on embedded derivative in preferred shares			(11,896	)			15,108
Stock compensation expense			6,640				5,369
Amortization of debt issuance costs, discounts and premiums			1,510				1,344
Loss (gain) on investments			10,233				(1,622	)
Net change in operating accounts and other operating activities			(74,405	)			(52,772	)
Net cash provided by operating activities			179,623				148,111
Cash flows from investing activities:
Purchases of real estate and other assets			(5,232	)			—
Capital improvements and other			(38,212	)			(49,220	)
Development costs			(42,780	)			(64,291	)
Distributions from real estate joint venture			95				114
Contributions to affiliates			(7,500	)			—
Proceeds from real estate asset dispositions and insurance recoveries			10,097				898
Net cash used in investing activities			(83,532	)			(112,499	)
Cash flows from financing activities:
Net proceeds from commercial paper			20,000				213,000
Principal payments on notes payable			(343	)			(119,154	)
Distributions to noncontrolling interests			(3,484	)			(4,159	)
Dividends paid on common shares			(125,432	)			(117,242	)
Dividends paid on preferred shares			(922	)			(922	)
Acquisition of noncontrolling interests			(43,070	)			—
Net change in other financing activities			(814	)			625
Net cash used in financing activities			(154,065	)			(27,852	)
Net (decrease) increase in cash, cash equivalents and restricted cash			(57,974	)			7,760
Cash, cash equivalents and restricted cash, beginning of period			130,598				35,615
Cash, cash equivalents and restricted cash, end of period		$	72,624			$	43,375

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets:

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents		$	60,371			$	32,620
Restricted cash			12,253				10,755
Total cash, cash equivalents and restricted cash		$	72,624			$	43,375
Supplemental information:
Interest paid		$	30,427			$	26,998
Income taxes paid			—				81
Non-cash transactions:
Conversion of OP Units to shares of common stock		$	193			$	232
Accrued construction in progress			38,191				32,781
Interest capitalized			1,836				2,550

See accompanying notes to condensed consolidated financial statements.

Mid-America Apartments, L.P.

Condensed Consolida****ted Balance Sheets

(Unaudited)

(Dollars in thousands, except unit data)

		March 31, 2022				December 31, 2021
Assets
Real estate assets:
Land		$	1,978,661			$	1,977,813
Buildings and improvements and other			12,589,537				12,454,439
Development and capital improvements in progress			215,055				247,970
			14,783,253				14,680,222
Less: Accumulated depreciation			(3,981,778	)			(3,848,161	)
			10,801,475				10,832,061
Undeveloped land			29,279				24,015
Investment in real estate joint venture			42,732				42,827
Real estate assets, net			10,873,486				10,898,903
Cash and cash equivalents			60,371				54,302
Restricted cash			12,253				76,296
Other assets			252,965				255,681
Total assets		$	11,199,075			$	11,285,182
Liabilities and capital
Liabilities:
Unsecured notes payable		$	4,172,513			$	4,151,375
Secured notes payable			364,992				365,315
Accrued expenses and other liabilities			531,351				584,400
Due to general partner			19				19
Total liabilities			5,068,875				5,101,109
Redeemable common units			26,857				30,185
Operating Partnership capital:
Preferred units, 867,846 preferred units outstanding as of March 31, 2022 and December 31, 2021, respectively			66,840				66,840
General partner, 115,337,466 and 115,336,876 OP Units outstanding as of March 31, 2022 and December 31, 2021, respectively (1)			5,864,191				5,909,700
Limited partners, 3,202,377 and 3,206,118 OP Units outstanding as of March 31, 2022 and December 31, 2021, respectively (1)			163,566				165,116
Accumulated other comprehensive loss			(11,103	)			(11,382	)
Total operating partners’ capital			6,083,494				6,130,274
Noncontrolling interests - consolidated real estate entities			19,849				23,614
Total equity			6,103,343				6,153,888
Total liabilities and equity		$	11,199,075			$	11,285,182

(1) Number of units outstanding represents total OP Units regardless of classification on the Condensed Consolidated Balance Sheets. The number of units classified as redeemable common units on the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 are 128,224 and 131,559, respectively.

See accompanying notes to condensed consolidated financial statements.

Mid-America Apartments, L.P.

Condensed Consolidated S****tatements of Operations

(Unaudited)

(Dollars in thousands, except per unit data)

		Three months ended March 31,
		2022				2021
Revenues:
Rental and other property revenues		$	476,078			$	425,005
Expenses:
Operating expenses, excluding real estate taxes and insurance			101,117				95,961
Real estate taxes and insurance			68,303				66,507
Depreciation and amortization			133,738				131,503
Total property operating expenses			303,158				293,971
Property management expenses			16,537				12,939
General and administrative expenses			16,323				12,979
Interest expense			39,121				39,672
Loss on sale of depreciable real estate assets			1				—
Gain on sale of non-depreciable real estate assets			(23	)			—
Other non-operating (income) expense			(10,795	)			15,913
Income before income tax expense			111,756				49,531
Income tax benefit (expense)			1,442				(999	)
Income from continuing operations before real estate joint venture activity			113,198				48,532
Income from real estate joint venture			379				332
Net income			113,577				48,864
Net loss attributable to noncontrolling interests			(293	)			—
Net income available for MAALP unitholders			113,870				48,864
Distributions to MAALP preferred unitholders			922				922
Net income available for MAALP common unitholders		$	112,948			$	47,942
Earnings per common unit - basic:
Net income available for MAALP common unitholders		$	0.95			$	0.40
Earnings per common unit - diluted:
Net income available for MAALP common unitholders		$	0.95			$	0.40

See accompanying notes to condensed consolidated financial statements.

Mid-America Apartments, L.P.

Condensed Consolidated Statem****ents of Comprehensive Income

(Unaudited)

(Dollars in thousands)

		Three months ended March 31,
		2022				2021
Net income		$	113,577			$	48,864
Other comprehensive income:
Adjustment for net losses reclassified to net income from derivative instruments			279				279
Total comprehensive income			113,856				49,143
Add: Comprehensive loss attributable to noncontrolling interests			293				—
Comprehensive income attributable to MAALP		$	114,149			$	49,143

See accompanying notes to condensed consolidated financial statements.

Mid-America Apartments, L.P.

Condensed Consolidated S****tatements of Cash Flows

(Unaudited)

(Dollars in thousands)

		Three months ended March 31,
Cash flows from operating activities:		2022				2021
Net income		$	113,577			$	48,864
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			133,986				131,820
Loss on sale of depreciable real estate assets			1				—
Gain on sale of non-depreciable real estate assets			(23	)			—
(Gain) loss on embedded derivative in preferred shares			(11,896	)			15,108
Stock compensation expense			6,640				5,369
Amortization of debt issuance costs, discounts and premiums			1,510				1,344
Loss (gain) on investments			10,233				(1,622	)
Net change in operating accounts and other operating activities			(74,405	)			(52,772	)
Net cash provided by operating activities			179,623				148,111
Cash flows from investing activities:
Purchases of real estate and other assets			(5,232	)			—
Capital improvements and other			(38,212	)			(49,220	)
Development costs			(42,780	)			(64,291	)
Distributions from real estate joint venture			95				114
Contributions to affiliates			(7,500	)			—
Proceeds from real estate asset dispositions and insurance recoveries			10,097				898
Net cash used in investing activities			(83,532	)			(112,499	)
Cash flows from financing activities:
Net proceeds from commercial paper			20,000				213,000
Principal payments on notes payable			(343	)			(119,154	)
Distributions paid on common units			(128,916	)			(121,401	)
Distributions paid on preferred units			(922	)			(922	)
Acquisition of noncontrolling interests			(43,070	)			—
Net change in other financing activities			(814	)			625
Net cash used in financing activities			(154,065	)			(27,852	)
Net (decrease) increase in cash, cash equivalents and restricted cash			(57,974	)			7,760
Cash, cash equivalents and restricted cash, beginning of period			130,598				35,615
Cash, cash equivalents and restricted cash, end of period		$	72,624			$	43,375

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets:

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents		$	60,371			$	32,620
Restricted cash			12,253				10,755
Total cash, cash equivalents and restricted cash		$	72,624			$	43,375
Supplemental information:
Interest paid		$	30,427			$	26,998
Income taxes paid			—				81
Non-cash transactions:
Accrued construction in progress		$	38,191			$	32,781
Interest capitalized			1,836				2,550

See accompanying notes to condensed consolidated financial statements.

Mid-America Apartment Communities, Inc. and Mid-America Apartments, L.P.

Notes to Condensed Consoli****dated Financial Statements

(Unaudited)

1. Organization and Summary of Significant Accounting Policies

Unless the context otherwise requires, all references to the “Company” refer collectively to Mid-America Apartment Communities, Inc., together with its consolidated subsidiaries, including Mid-America Apartments, L.P. Unless the context otherwise requires, all references to “MAA” refer only to Mid-America Apartment Communities, Inc., and not any of its consolidated subsidiaries. Unless the context otherwise requires, the references to the “Operating Partnership” or “MAALP” refer to Mid-America Apartments, L.P., together with its consolidated subsidiaries. “Common stock” refers to the common stock of MAA and, unless the context otherwise requires, “shareholders” refers to the holders of shares of MAA’s common stock. The common units of limited partnership interests in the Operating Partnership are referred to as “OP Units,” and the holders of the OP Units are referred to as “common unitholders”.

As of March 31, 2022, MAA owned 115,337,466 OP Units (or 97.3% of the total number of OP Units). MAA conducts substantially all of its business and holds substantially all of its assets, directly or indirectly, through the Operating Partnership, and by virtue of its ownership of the OP Units and being the Operating Partnership’s sole general partner, MAA has the ability to control all of the day-to-day operations of the Operating Partnership.

Management believes combining the notes to the condensed consolidated financial statements of MAA and the Operating Partnership results in the following benefits:

enhances a readers’ understanding of MAA and the Operating Partnership by enabling the reader to view the business as a whole in the same manner that management views and operates the business;

eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both MAA and the Operating Partnership; and

creates time and cost efficiencies through the preparation of one combined set of notes instead of two separate sets.

MAA, an S&P 500 company, is a multifamily-focused, self-administered and self-managed real estate investment trust, or REIT. Management operates MAA and the Operating Partnership as one business. The management of the Company is comprised of individuals who are officers of MAA and employees of the Operating Partnership. Management believes it is important to understand the few differences between MAA and the Operating Partnership in the context of how MAA and the Operating Partnership operate as a consolidated company. MAA and the Operating Partnership are structured as an umbrella partnership REIT, or UPREIT. MAA’s interest in the Operating Partnership entitles MAA to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to MAA’s percentage interest therein and entitles MAA to vote on substantially all matters requiring a vote of the partners. MAA’s only material asset is its ownership of limited partnership interests in the Operating Partnership (other than cash held by MAA from time to time); therefore, MAA’s primary function is acting as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership from time to time. The Operating Partnership holds, directly or indirectly, all of the Company’s real estate assets. Except for net proceeds from public equity issuances by MAA, which are contributed to the Operating Partnership in exchange for limited partnership interests, the Operating Partnership generates the capital required by the business through the Operating Partnership’s operations, direct or indirect incurrence of indebtedness and issuance of OP Units.

The presentations of MAA’s shareholders’ equity and the Operating Partnership’s capital are the principal areas of difference between the condensed consolidated financial statements of MAA and those of the Operating Partnership. MAA’s shareholders’ equity may include shares of preferred stock, shares of common stock, additional paid-in capital, cumulative earnings, cumulative distributions, noncontrolling interests, treasury shares, accumulated other comprehensive income or loss and redeemable common stock. The Operating Partnership’s capital may include common capital and preferred capital of the general partner (MAA), limited partners’ common capital and preferred capital, noncontrolling interests, accumulated other comprehensive income or loss and redeemable common units. Holders of OP Units (other than MAA) may require the Operating Partnership to redeem their OP Units from time to time, in which case the Operating Partnership may, at its 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 New York Stock Exchange, or 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.

Organization of Mid-America Apartment Communities, Inc.

The Company owns, operates, acquires and selectively develops apartment communities primarily located in the Southeast, Southwest and Mid-Atlantic regions of the United States. As of March 31, 2022, the Company owned and operated 292 apartment communities (which does not include development communities under construction) through the Operating Partnership and its subsidiaries and had

an ownership interest in one apartment community through an unconsolidated real estate joint venture. As of March 31, 2022, the Company also had five development communities under construction totaling 1,759 apartment units once complete. Total expected costs for the five development projects are $444.0 million, of which $192.8 million had been incurred through March 31, 2022. The Company expects to complete one of these developments in 2022, three developments in 2023, and one development in 2024. As of March 31, 2022, 33 of the Company’s apartment communities included retail components. The Company’s apartment communities, including development communities under construction, were located across 16 states and the District of Columbia as of March 31, 2022.

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared by the Company’s management in accordance with United States generally accepted accounting principles, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC. The condensed consolidated financial statements of MAA presented herein include the accounts of MAA, the Operating Partnership and all other subsidiaries in which MAA has a controlling financial interest. MAA owns, directly or indirectly, approximately 80% to 100% of all consolidated subsidiaries, including the Operating Partnership. In management’s opinion, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included, and all such adjustments were of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company invests in entities that may qualify as variable interest entities, or VIEs, and MAALP is considered a VIE. A VIE is a legal entity in which the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or, as a group, the holders of the equity investment at risk lack the power to direct the activities of a legal entity as well as the obligation to absorb its expected losses or the right to receive its expected residual returns. MAALP is classified as a VIE because the limited partners lack substantive kick-out rights and substantive participating rights. The Company consolidates all VIEs for which it is the primary beneficiary and uses the equity method to account for investments that qualify as VIEs but for which it is not the primary beneficiary. In determining whether the Company is the primary beneficiary of a VIE, management considers both qualitative and quantitative factors, including, but not limited to, those activities that most significantly impact the VIE’s economic performance and which party controls such activities. The Company uses the equity method of accounting for its investments in entities for which the Company exercises significant influence, but does not have the ability to exercise control. The factors considered in determining whether the Company has the ability to exercise control include ownership of voting interests and participatory rights of investors (see “Investments in Unconsolidated Affiliates” below).

Noncontrolling Interests

As of March 31, 2022, the Company had two types of noncontrolling interests with respect to its consolidated subsidiaries: (1) noncontrolling interests related to the common unitholders of its Operating Partnership; and (2) noncontrolling interests related to its consolidated real estate entities. The noncontrolling interests relating to the limited partnership interests in the Operating Partnership are owned by the holders of the Class A OP Units. MAA is the sole general partner of the Operating Partnership and holds all of the outstanding Class B OP Units. Net income (after allocations to preferred ownership interests) is allocated to MAA and the noncontrolling interests based on their respective ownership percentages of the Operating Partnership. Issuance of additional Class A OP Units or Class B OP Units changes the ownership percentage of both the noncontrolling interests and MAA. The issuance of Class B OP Units generally occurs when MAA issues common stock and the issuance proceeds are contributed to the Operating Partnership in exchange for Class B OP Units equal to the number of shares of MAA’s common stock issued. At each reporting period, the allocation between total MAA shareholders’ equity and noncontrolling interests is adjusted to account for the change in the respective percentage ownership of the underlying equity of the Operating Partnership. MAA’s Board of Directors established economic rights in respect to each Class A OP Unit that were equivalent to the economic rights in respect to each share of MAA common stock. See Note 9 for additional details.

The noncontrolling interests relating to the Company’s four consolidated real estate entities are owned by private real estate companies that are generally responsible for the development, construction and lease-up of the apartment communities that are owned through the consolidated real estate entities with a noncontrolling interest. The entities were determined to be VIE’s with the Company designated as the primary beneficiary. As a result, the accounts of the entities are consolidated by the Company. As of March 31, 2022, the consolidated assets of the Company’s consolidated real estate entities with a noncontrolling interest were $193.2 million, and consolidated liabilities were $15.8 million. As of December 31, 2021, the consolidated assets of the Company’s consolidated real estate entities with a noncontrolling interest were $252.8 million, and consolidated liabilities were $15.9 million. During the three months ended March 31, 2022, the Company paid $43.1 million to acquire the noncontrolling interest of one consolidated real estate entity.

Investments in Unconsolidated Affiliates

The Company uses the equity method to account for its investments in a real estate joint venture and three technology-focused limited partnerships that each qualify as a VIE. Management determined the Company is not the primary beneficiary in any of these investments but does have the ability to exert significant influence over the operations and financial policies of the real estate joint

venture and considers its investments in the limited partnerships to be more than minor. The Company’s investment in the real estate joint venture was $42.7 million and $42.8 million as of March 31, 2022 and December 31, 2021, respectively.

The Company accounts for its investments in the technology-focused limited partnerships on a three month lag due to the timing the limited partnerships’ financial information is made available to the Company. As of March 31, 2022 and December 31, 2021, the Company’s investments in the limited partnerships were $68.5 million and $79.4 million, respectively, and are included in “Other assets” in the accompanying Condensed Consolidated Balance Sheets. The decrease in the Company’s investment in the limited partnerships was driven by the recognition of unrealized losses, which were primarily a result of a decrease in the valuation of an underlying investment that recently became publicly traded. As of March 31, 2022, the Company was committed to make additional capital contributions totaling $33.5 million if and when called by the general partners of the limited partnerships.

Marketable Equity Securities

During the three months ended March 31, 2022, two of the technology-focused limited partnerships that are accounted for as unconsolidated affiliates distributed publicly traded marketable equity securities to the Company and the other limited partners. The Company’s investment in marketable equity securities is measured at fair value based on the quoted share price of the securities, with any related gains and losses, including unrealized gains and losses, recognized in “Other non-operating (income) expense” in the accompanying Condensed Consolidated Statements of Operations. As of March 31, 2022, the Company’s investment in the marketable equity securities was $5.0 million.

Revenue Recognition

The Company primarily leases multifamily residential apartments to residents under operating leases generally due on a monthly basis with terms of approximately one year or less. Rental revenues are recognized in accordance with ASC Topic 842, Leases, using a method that represents a straight-line basis over the term of the lease. In addition, in circumstances where a lease incentive is provided to residents, the incentive is recognized as a reduction of rental revenues on a straight-line basis over the reasonably assured lease term. Rental revenues represent approximately 94% of the Company’s total revenues and include gross rents charged less adjustments for concessions and bad debt. Approximately 5% of the Company’s total revenues represent non-lease reimbursable property revenues from its residents for utility reimbursements, which are generally recognized and due on a monthly basis as residents obtain control of the service over the term of the lease. The remaining 1% of the Company’s total revenues represents other non-lease property revenues primarily driven by nonrefundable fees and commissions.

In accordance with ASC Topic 842, rental revenues and non-lease reimbursable property revenues meet the criteria to be aggregated into a single lease component and are reported on a combined basis in the line item “Rental revenues,” as presented in the disaggregation of the Company’s revenues in Note 11. Other non-lease property revenues are accounted for in accordance with ASC Topic 606, Revenue from Contracts with Customers, which requires revenue recognized outside of the scope of ASC Topic 842 to be recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. Other non-lease property revenues are reported in the line item “Other property revenues”, as presented in the disaggregation of the Company’s revenues in Note 11.

Leases

The Company is the lessee under certain ground, office, equipment and other operational leases, all of which are accounted for as operating leases in accordance with ASC Topic 842. The Company recognizes a right-of-use asset for the right to use the underlying asset for all leases where the Company is the lessee with terms of more than twelve months, and a related lease liability for the obligation to make lease payments. Expenses related to leases determined to be operating leases are recognized on a straight-line basis. As of March 31, 2022 and December 31, 2021, right-of-use assets recorded within “Other assets” totaled $46.5 million and $47.0 million, respectively, and related lease obligations recorded within “Accrued expenses and other liabilities” totaled $29.9 million and $30.3 million, respectively, in the Condensed Consolidated Balance Sheets. Lease expense recognized for the three months ended March 31, 2022 and 2021 was immaterial to the Company. Cash paid for amounts included in the measurement of operating lease liabilities during the three months ended March 31, 2022 and 2021 was also immaterial. See Note 10 for additional disclosures regarding leases.

Fair Value Measurements

The Company applies the guidance in Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, to the valuation of real estate assets recorded at fair value, to its impairment valuation analysis of real estate assets, to its valuation and disclosure of the fair value of financial instruments, principally marketable equity securities and indebtedness, and to its valuation and disclosure of the fair value of its derivative financial instruments. Fair value disclosures required under ASC Topic 820 as well as the Company’s derivative accounting policies are summarized in Note 7 utilizing the following hierarchy:

Level 1 - Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2 - Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs for the assets or liability.

2. Earnings per Common Share of MAA

Basic earnings per share is computed using the two-class method by dividing net income available to MAA common shareholders by the weighted average number of common shares outstanding during the period. All outstanding unvested restricted share awards contain rights to non-forfeitable dividends and participate in undistributed earnings with shareholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per share. Both the unvested restricted shares and other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis with diluted earnings per share being the more dilutive of the treasury stock or two-class methods. OP Units are included in dilutive earnings per share calculations when the units are dilutive to earnings per share.

For the three months ended March 31, 2022 and 2021, MAA’s diluted earnings per share was computed using the treasury stock method as presented below (dollars and shares in thousands, except per share amounts):

		Three months ended March 31,
		2022				2021
Calculation of Earnings per common share - basic
Net income		$	113,577			$	48,864
Net income attributable to noncontrolling interests			(2,775	)			(1,671	)
Unvested restricted stock (allocation of earnings)			(79	)			(54	)
Preferred dividends			(922	)			(922	)
Net income available for MAA common shareholders, adjusted		$	109,801			$	46,217
Weighted average common shares - basic			115,259				114,263
Earnings per common share - basic		$	0.95			$	0.40
Calculation of Earnings per common share - diluted
Net income		$	113,577			$	48,864
Net income attributable to noncontrolling interests (1)			(2,775	)			(1,671	)
Preferred dividends			(922	)			(922	)
Net income available for MAA common shareholders, adjusted		$	109,880			$	46,271
Weighted average common shares - basic			115,259				114,263
Effect of dilutive securities			459				312
Weighted average common shares - diluted			115,718				114,575
Earnings per common share - diluted		$	0.95			$	0.40

(1)

For the three months ended March 31, 2022 and 2021, 3.2 million OP Units and 4.1 million OP Units, respectively, and their related income are not included in the diluted earnings per share calculations as they are not dilutive.

3. Earnings per OP Unit of MAALP

Basic earnings per common unit is computed by dividing net income available for common unitholders by the weighted average number of OP Units outstanding during the period. All outstanding unvested restricted unit awards contain rights to non-forfeitable distributions and participate in undistributed earnings with common unitholders and, accordingly, are considered participating securities that are included in the two-class method of computing basic earnings per common unit. Diluted earnings per common unit reflects the potential dilution that could occur if securities or other contracts to issue OP Units were exercised or converted into OP Units. Both the unvested restricted unit awards and other potentially dilutive common units, and the related impact to earnings, are considered when calculating earnings per common unit on a diluted basis with diluted earnings per common unit being the more dilutive of the treasury stock or two-class methods.

For the three months ended March 31, 2022 and 2021, MAALP’s diluted earnings per common unit was computed using the treasury stock method as presented below (dollars and units in thousands, except per unit amounts):

		Three months ended March 31,
		2022				2021
Calculation of Earnings per common unit - basic
Net income		$	113,577			$	48,864
Net loss attributable to noncontrolling interests			293				—
Unvested restricted units (allocation of earnings)			(79	)			(54	)
Preferred unit distributions			(922	)			(922	)
Net income available for MAALP common unitholders, adjusted		$	112,869			$	47,888
Weighted average common units - basic			118,462				118,318
Earnings per common unit - basic		$	0.95			$	0.40
Calculation of Earnings per common unit - diluted
Net income		$	113,577			$	48,864
Net loss attributable to noncontrolling interests			293				—
Preferred unit distributions			(922	)			(922	)
Net income available for MAALP common unitholders, adjusted		$	112,948			$	47,942
Weighted average common units - basic			118,462				118,318
Effect of dilutive securities			459				312
Weighted average common units - diluted			118,921				118,630
Earnings per common unit - diluted		$	0.95			$	0.40

4. MAA Equity

Changes in MAA’s total equity and its components for the three months ended March 31, 2022 and 2021 were as follows (dollars in thousands):

		Mid-America Apartment Communities, Inc. Shareholders’ Equity
		Preferred Stock				Common Stock				Additional Paid-In Capital				Accumulated Distributions in Excess of Net Income				Accumulated Other Comprehensive Loss				Noncontrolling Interests - Operating Partnership				Noncontrolling Interests - Consolidated Real Estate Entities				Total Equity
EQUITY BALANCE DECEMBER 31, 2021		$	9			$	1,151			$	7,230,956			$	(1,255,807	)		$	(11,132	)		$	165,116			$	23,614			$	6,153,907
Net income (loss)			—				—				—				110,802				—				3,068				(293	)			113,577
Other comprehensive income - derivative instruments			—				—				—				—				272				7				—				279
Issuance and registration of common shares			—				—				21				—				—				—				—				21
Shares repurchased and retired			—				—				(3,162	)			—				—				—				—				(3,162	)
Exercise of stock options			—				—				28				—				—				—				—				28
Shares issued in exchange for common units			—				—				193				—				—				(193	)			—				—
Redeemable stock fair market value adjustment			—				—				—				2,533				—				—				—				2,533
Adjustment for noncontrolling interests in Operating Partnership			—				—				953				—				—				(953	)			—				—
Amortization of unearned compensation			—				—				6,928				—				—				—				—				6,928
Dividends on preferred stock			—				—				—				(922	)			—				—				—				(922	)
Dividends on common stock ($1.0875 per share)			—				—				—				(125,433	)			—				—				—				(125,433	)
Dividends on noncontrolling interests units ($1.0875 per share)			—				—				—				—				—				(3,479	)			—				(3,479	)
Acquisition of noncontrolling interest			—				—				(37,443	)			—				—				—				(5,627	)			(43,070	)
Contribution from noncontrolling interest			—				—				—				—				—				—				2,155				2,155
EQUITY BALANCE MARCH 31, 2022		$	9			$	1,151			$	7,198,474			$	(1,268,827	)		$	(10,860	)		$	163,566			$	19,849			$	6,103,362

		Mid-America Apartment Communities, Inc. Shareholders’ Equity
		Preferred Stock				Common Stock				Additional Paid-In Capital				Accumulated Distributions in Excess of Net Income				Accumulated Other Comprehensive Loss				Noncontrolling Interests - Operating Partnership				Noncontrolling Interests - Consolidated Real Estate Entities				Total Equity
EQUITY BALANCE DECEMBER 31, 2020		$	9			$	1,141			$	7,176,793			$	(1,294,182	)		$	(12,128	)		$	206,927			$	9,848			$	6,088,408
Net income			—				—				—				47,193				—				1,671				—				48,864
Other comprehensive income - derivative instruments			—				—				—				—				269				10				—				279
Issuance and registration of common shares			—				1				133				—				—				—				—				134
Shares repurchased and retired			—				—				(1,730	)			—				—				—				—				(1,730	)
Exercise of stock options			—				—				1,466				—				—				—				—				1,466
Shares issued in exchange for common units			—				—				232				—				—				(232	)			—				—
Redeemable stock fair market value adjustment			—				—				—				(2,158	)			—				—				—				(2,158	)
Adjustment for noncontrolling interests in Operating Partnership			—				—				(116	)			—				—				116				—				—
Amortization of unearned compensation			—				—				5,993				—				—				—				—				5,993
Dividends on preferred stock			—				—				—				(922	)			—				—				—				(922	)
Dividends on common stock ($1.0250 per share)			—				—				—				(117,278	)			—				—				—				(117,278	)
Dividends on noncontrolling interests units ($1.0250 per share)			—				—				—				—				—				(4,156	)			—				(4,156	)
Contribution from noncontrolling interest			—				—				—				—				—				—				633				633
EQUITY BALANCE MARCH 31, 2021		$	9			$	1,142			$	7,182,771			$	(1,367,347	)		$	(11,859	)		$	204,336			$	10,481			$	6,019,533

5. MAALP Capital

Changes in MAALP’s total capital and its components for the three months ended March 31, 2022 and 2021 were as follows (dollars in thousands):

		Mid-America Apartments, L.P. Unitholders’ Capital
		Preferred Units				General Partner				Limited Partners				Accumulated Other Comprehensive Loss				Noncontrolling Interests - Consolidated Real Estate Entities				Total Partnership Capital
EQUITY BALANCE DECEMBER 31, 2021		$	66,840			$	5,909,700			$	165,116			$	(11,382	)		$	23,614			$	6,153,888
Net income (loss)			922				109,880				3,068				—				(293	)			113,577
Other comprehensive income - derivative instruments			—				—				—				279				—				279
Issuance of units			—				21				—				—				—				21
Units repurchased and retired			—				(3,162	)			—				—				—				(3,162	)
Exercise of unit options			—				28				—				—				—				28
General partnership units issued in exchange for limited partnership units			—				193				(193	)			—				—				—
Redeemable units fair market value adjustment			—				2,533				—				—				—				2,533
Adjustment for limited partners’ capital at redemption value			—				946				(946	)			—				—				—
Amortization of unearned compensation			—				6,928				—				—				—				6,928
Distributions to preferred unitholders			(922	)			—				—				—				—				(922	)
Distributions to common unitholders ($1.0875 per unit)			—				(125,433	)			(3,479	)			—				—				(128,912	)
Acquisition of noncontrolling interest			—				(37,443	)			—				—				(5,627	)			(43,070	)
Contribution from noncontrolling interest			—				—				—				—				2,155				2,155
EQUITY BALANCE MARCH 31, 2022		$	66,840			$	5,864,191			$	163,566			$	(11,103	)		$	19,849			$	6,103,343

		Mid-America Apartments, L.P. Unitholders’ Capital
		Preferred Units				General Partner				Limited Partners				Accumulated Other Comprehensive Loss				Noncontrolling Interests - Consolidated Real Estate Entities				Total Partnership Capital
EQUITY BALANCE DECEMBER 31, 2020		$	66,840			$	5,817,270			$	206,927			$	(12,496	)		$	9,848			$	6,088,389
Net income			922				46,271				1,671				—				—				48,864
Other comprehensive income - derivative instruments			—				—				—				279				—				279
Issuance of units			—				134				—				—				—				134
Units repurchased and retired			—				(1,730	)			—				—				—				(1,730	)
Exercise of unit options			—				1,466				—				—				—				1,466
General partnership units issued in exchange for limited partnership units			—				232				(232	)			—				—				—
Redeemable units fair market value adjustment			—				(2,158	)			—				—				—				(2,158	)
Adjustment for limited partners’ capital at redemption value			—				(126	)			126				—				—				—
Amortization of unearned compensation			—				5,993				—				—				—				5,993
Distributions to preferred unitholders			(922	)			—				—				—				—				(922	)
Distributions to common unitholders ($1.0250 per unit)			—				(117,278	)			(4,156	)			—				—				(121,434	)
Contribution from noncontrolling interest			—				—				—				—				633				633
EQUITY BALANCE MARCH 31, 2021		$	66,840			$	5,750,074			$	204,336			$	(12,217	)		$	10,481			$	6,019,514

6. Borrowings

The following table summarizes the Company’s outstanding debt as of March 31, 2022 (dollars in thousands):

		Balance				Weighted Average Effective Rate				Weighted Average Contract Maturity
Unsecured debt
Fixed rate senior notes		$	4,175,000				3.3	%		3/4/2029
Variable rate commercial paper program			20,000				0.6	%		4/3/2022
Debt issuance costs, discounts, premiums and fair market value adjustments			(22,487	)
Total unsecured debt		$	4,172,513				3.3	%
Secured debt
Fixed rate property mortgages		$	368,212				4.4	%		10/2/2048
Debt issuance costs			(3,220	)
Total secured debt		$	364,992				4.4	%
Total outstanding debt		$	4,537,505				3.4	%

Unsecured Revolving Credit Facility

MAALP has entered into a $1.0 billion unsecured revolving credit facility with a syndicate of banks led by Wells Fargo Bank, National Association, and fourteen other banks, which is referred to as the Credit Facility. The Credit Facility includes an expansion option up to $1.5 billion. The Credit Facility bears an interest rate of the London Interbank Offered Rate, or LIBOR, plus a spread of 0.75% to 1.45% based on an investment grade pricing grid. The Credit Facility matures in May 2023 with an option to extend for two additional six-month periods. As of March 31, 2022, there was no outstanding balance under the Credit Facility, while $4.0 million of capacity was used to support outstanding letters of credit. The terms of the Credit Facility allow for the transition to an alternate benchmark interest rate, including the Secured Overnight Financing Rate, to replace any outstanding U.S. dollar (USD) LIBOR borrowings at the time USD LIBOR is no longer published.

Unsecured Commercial Paper

MAALP has established an unsecured commercial paper program whereby MAALP may issue unsecured commercial paper notes with varying maturities not to exceed 397 days up to a maximum aggregate principal amount outstanding of $500.0 million. As of March 31, 2022, MAALP had $20.0 million outstanding under the commercial paper program. For the three months ended March 31, 2022, the average daily borrowings outstanding under the commercial paper program were $13.8 million.

Unsecured Senior Notes

As of March 31, 2022, MAALP had $4.2 billion of publicly issued unsecured senior notes outstanding. The unsecured senior notes had maturities at issuance ranging from 5 to 30 years, with a weighted average maturity in 2029.

Secured Property Mortgages

As of March 31, 2022, MAALP had $368.2 million of fixed rate conventional property mortgages with a weighted average maturity in 2048.

7. Financial Instruments and Derivatives

Financial Instruments Not Carried at Fair Value

Cash and cash equivalents, restricted cash and accrued expenses and other liabilities are carried at amounts that reasonably approximate their fair value due to their short term nature.

Fixed rate notes payable as of March 31, 2022 and December 31, 2021, totaled $4.5 billion and $4.5 billion, respectively, and had estimated fair values of $4.4 billion and $4.8 billion (excluding prepayment penalties) as of March 31, 2022 and December 31, 2021, respectively. The fair values of fixed rate debt are determined by using the present value of future cash outflows discounted with the applicable current market rate plus a credit spread. The carrying value of variable rate debt as of March 31, 2022 totaled $20.0 million and had an estimated fair value of $20.0 million. As of December 31, 2021, the Company had no variable rate debt outstanding. The fair values of variable rate debt are determined using the stated variable rate plus the current market credit spread. The variable rates reset at various maturities, typically less than 30 days, and management concluded these rates reasonably estimate current market rates.

Financial Instruments Measured at Fair Value on a Recurring Basis

As of March 31, 2022, the Company had one outstanding series of cumulative redeemable preferred stock, which is referred to as the MAA Series I preferred stock (see Note 8). The Company has recognized a derivative asset related to the redemption feature embedded in the MAA Series I preferred stock. The derivative asset is valued using widely accepted valuation techniques, including a discounted cash flow analysis in which the perpetual value of the preferred shares is compared to the value of the preferred shares assuming the call option is exercised, with the value of the bifurcated call option as the difference between the two values. The analysis reflects the contractual terms of the redeemable preferred shares, which are redeemable at the Company’s option beginning on October 1, 2026 at the redemption price of $50.00 per share. The Company uses various inputs in the analysis, including trading data available on the preferred shares, coupon yields on preferred stock issuances from REITs with similar credit ratings as MAA and treasury rates to determine the fair value of the bifurcated call option.

The redemption feature embedded in the MAA Series I preferred stock is reported as a derivative asset in “Other assets” in the accompanying Condensed Consolidated Balance Sheets and is adjusted to its fair value at each reporting date, with a corresponding non-cash adjustment to “Other non-operating (income) expense” in the accompanying Condensed Consolidated Statements of Operations. As of March 31, 2022 and December 31, 2021, the fair value of the embedded derivative was $46.4 million and $34.5 million, respectively.

The Company has determined the majority of the inputs used to value its outstanding debt and its embedded derivative fall within Level 2 of the fair value hierarchy, and as a result, the fair value valuation of its debt and embedded derivative held as of March 31, 2022 and December 31, 2021 were classified as Level 2 in the fair value hierarchy.

The fair value of the Company’s marketable equity securities discussed in Note 1 is based on quoted market prices and the valuation of the marketable equity securities were classified as Level 1 in the fair value hierarchy as of March 31, 2022.

Terminated Cash Flow Hedges of Interest

As of March 31, 2022, the Company had $11.1 million recorded in “Accumulated other comprehensive loss”, or AOCL, related to realized losses associated with terminated interest rate swaps that were designated as cash flow hedging instruments prior to their termination. The realized losses associated with the terminated interest rate swaps are reclassified to interest expense as interest payments are made on the Company’s debt and will continue to be reclassified to interest expense until the debt’s maturity. During the next twelve months, the Company estimates an additional $1.1 million will be reclassified to earnings as an increase to “Interest expense.”

Tabular Disclosure of the Effect of Derivative Instruments on the Condensed Consolidated Statements of Operations

The tables below present the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (dollars in thousands):

				Net Loss Reclassified from AOCL into Interest Expense
		Location of Loss Reclassified		Three months ended March 31,
Derivatives in Cash Flow Hedging Relationships		from AOCL into Income		2022				2021
Terminated interest rate swaps		Interest expense		$	(279	)		$	(279	)

				Gain (Loss) Recognized in Earnings on Derivative
		Location of Gain (Loss) Recognized		Three months ended March 31,
Derivative Not Designated as Hedging Instrument		in Earnings on Derivative		2022				2021
Preferred stock embedded derivative		Other non-operating (income) expense		$	11,896			$	(15,108	)

8. Shareholders’ Equity of MAA

As of March 31, 2022, 115,337,466 shares of common stock of MAA and 3,202,377 OP Units (excluding the OP Units held by MAA) were issued and outstanding, representing a total of 118,539,843 common shares and units. As of March 31, 2021, 114,408,949 shares of common stock of MAA and 4,053,106 OP Units (excluding the OP Units held by MAA) were issued and outstanding, representing a total of 118,462,055 common shares and units. Options to purchase 463 shares of MAA’s common stock were outstanding as of March 31, 2022, compared to 963 outstanding options as of March 31, 2021. During the three months ended March 31, 2022 and 2021, MAA issued 350 common shares and 18,882 common shares, respectively, related to the exercise of stock options. These exercises resulted in net proceeds that were negligible during the three months ended March 31, 2022 and $1.5 million during the three months ended March 31, 2021.

Preferred Stock

As of March 31, 2022, MAA had one outstanding series of cumulative redeemable preferred stock, which has the following characteristics:

Description		Outstanding Shares				Liquidation Preference**(1)**				Optional Redemption Date		Redemption Price**(2)**				Stated Dividend Yield				Approximate Dividend Rate
MAA Series I			867,846			$	50.00			10/1/2026		$	50.00				8.50	%		$	4.25

(1)

The total liquidation preference for the outstanding preferred stock is $43.4 million.

(2)

The redemption price is the price at which the preferred stock is redeemable, at MAA’s option, for cash.

See Note 7 for details of the valuation of the derivative asset related to the redemption feature embedded in the MAA Series I preferred stock.

Equity Forward Sale Agreements

In August 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 price 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 of March 31, 2022. MAA generally has the ability to determine the dates and method of settlement (i.e., gross physical settlement, net share settlement or cash settlement), subject to certain conditions and the right of the counterparty to accelerate settlement under certain circumstances, provided that settlement under each forward sale agreement must occur by February 2, 2023. MAA currently expects to fully physically settle each forward sale agreement with the relevant forward purchaser on one or more dates specified by MAA on or prior to the maturity date of the particular forward sale agreement, in which case MAA expects to receive aggregate net cash proceeds at settlement equal to the number of shares underlying the particular forward sale agreement multiplied by the relevant forward sale price. For the three months ended March 31, 2022, approximately 115 thousand shares from the equity forward sale agreements were dilutive to the Company's diluted earnings per share.

At-the-Market Share Offering Program

In November 2021, the Company entered into an equity distribution agreement to establish a new ATM 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 three months ended March 31, 2022 and 2021, MAA did not sell any shares of common stock under its ATM program. As of March 31, 2022, 4.0 million shares remained issuable under the current ATM program.

9. Partners’ Capital of MAALP

Common units of limited partnership interests in MAALP are represented by OP Units. As of March 31, 2022, there were 118,539,843 OP Units outstanding, 115,337,466, or 97.3%, of which represent Class B OP Units (common units issued to or held by MAALP’s general partner or any of its subsidiaries), which were owned by MAA, MAALP’s general partner. The remaining 3,202,377 OP Units were Class A OP Units owned by Class A limited partners. As of March 31, 2021, there were 118,462,055 OP Units outstanding, 114,408,949, or 96.6%, of which were owned by MAA and 4,053,106 of which were owned by the Class A limited partners.

MAA, as the sole general partner of MAALP, has full, complete and exclusive discretion to manage and control the business of MAALP subject to the restrictions specifically contained within MAALP’s agreement of limited partnership, or the Partnership Agreement. Unless otherwise stated in the Partnership Agreement, this power includes, but is not limited to, acquiring, leasing or disposing of any real property; constructing buildings and making other improvements to properties owned; borrowing money, modifying or extinguishing current borrowings, issuing evidence of indebtedness and securing such indebtedness by mortgage, deed of trust, pledge or other lien on MAALP’s assets; and distribution of MAALP’s cash or other assets in accordance with the Partnership Agreement. MAA can generally, at its sole discretion, issue and redeem OP Units and determine the consideration to be received or the redemption price to be paid, as applicable. The general partner may delegate these and other powers granted to it if the general partner remains in supervision of the designee.

Under the Partnership Agreement, MAALP may issue Class A OP Units and Class B OP Units. Class A OP Units are any OP Units other than Class B OP Units, while Class B OP Units are those issued to or held by MAALP’s general partner or any of its subsidiaries. In general, the limited partners do not have the power to participate in the management or control of MAALP’s business except in limited circumstances, including changes in the general partner and protective rights if the general partner acts outside of the provisions provided in the Partnership Agreement. The transferability of Class A OP Units is also limited by the Partnership Agreement.

Net income of MAALP (after allocations to preferred ownership interests) is allocated to the general partner and limited partners based on their respective ownership percentages of MAALP. Issuance or redemption of additional Class A OP Units or Class B OP Units changes the relative ownership percentage of the partners. The issuance of Class B OP Units generally occurs when MAA issues common stock and the proceeds from that issuance are contributed to MAALP in exchange for the issuance to MAA of a number of OP Units equal to the number of shares of common stock issued. Likewise, if MAA repurchases or redeems outstanding shares of common stock, MAALP generally redeems an equal number of Class B OP Units with similar terms held by MAA for a redemption price equal to the purchase price of those shares of common stock. At each reporting period, the allocation between

general partner capital and limited partner capital is adjusted to account for the change in the respective percentage ownership of the underlying capital of MAALP. Holders of the Class A OP Units may require MAA to redeem their Class A OP Units, in which case MAA may, at its option, pay the redemption price either in cash (in an amount per Class A 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 common stock (subject to adjustment under specified circumstances) for each Class A OP Unit so redeemed.

As of March 31, 2022, a total of 3,202,377 Class A OP Units were outstanding and redeemable for 3,202,377 shares of MAA common stock, with an approximate value of $670.7 million, based on the closing price of MAA’s common stock on March 31, 2022 of $209.45 per share. As of March 31, 2021, a total of 4,053,106 Class A OP Units were outstanding and redeemable for 4,053,106 shares of MAA common stock, with an approximate value of $585.1 million, based on the closing price of MAA’s common stock on March 31, 2021 of $144.36 per share. MAALP pays the same per unit distributions in respect to the OP Units as the per share dividends MAA pays in respect to its common stock.

As of March 31, 2022, MAALP had one outstanding series of cumulative redeemable preferred units, or the MAALP Series I preferred units. The MAALP Series I preferred units have the same characteristics as the MAA Series I preferred stock described in Note 8. As of March 31, 2022, 867,846 units of the MAALP Series I preferred units were outstanding. See Note 7 for details of the valuation of the derivative asset related to the redemption feature embedded in the MAALP Series I preferred units.

10. Commitments and Contingencies

Leases

The Company’s operating leases include a ground lease expiring in 2074 related to one of its apartment communities and an office lease expiring in 2028 related to its corporate headquarters. Both leases contain stated rent increases that generally compensate for the impact of inflation. The Company also has other commitments related to immaterial office and equipment operating leases. As of March 31, 2022, the Company’s operating leases had a weighted average remaining lease term of approximately 32 years and a weighted average discount rate of approximately 4.4%.

The table below reconciles undiscounted cash flows for each of the first five years and total of the remaining years to the right-of-use lease obligations recorded on the Condensed Consolidated Balance Sheets as of March 31, 2022 (in thousands):

		Operating Leases
2022		$	2,184
2023			2,885
2024			2,862
2025			2,872
2026			2,920
Thereafter			59,993
Total minimum lease payments			73,716
Net present value adjustments			(43,819	)
Right-of-use lease obligations		$	29,897

Legal Proceedings

In June 2016, plaintiffs Cathi Cleven and Tara Cleven, on behalf of a putative class of plaintiffs, filed a complaint against MAA and the Operating Partnership in the United States District Court for the Western District of Texas, Austin Division. In January 2017, Areli Arellano and Joe L. Martinez joined the lawsuit as additional plaintiffs. The lawsuit alleges that the Company (but not Post Properties - see the description of the Brown class action lawsuit below) charged late fees at its Texas properties that violate Section 92.019 of the Texas Property Code, or Section 92.019, which provides that a landlord may not charge a tenant a late fee for failing to pay rent unless, among other things, the fee is a reasonable estimate of uncertain damages to the landlord that are incapable of precise calculation and result from the late payment of rent. The plaintiffs are seeking monetary damages and attorneys’ fees and costs. In September 2018, the District Court certified a class proposed by the plaintiffs. Additionally, in September 2018, the District Court denied the Company’s motion for summary judgment and granted the plaintiffs’ motion for partial summary judgment. Because the District Court certified a class prior to granting the plaintiffs’ motion for partial summary judgment, the District Court’s ruling applies to the entire class. In October 2018, the Fifth Circuit Court of Appeals accepted the Company’s petition to review the District Court’s order granting class certification. In September 2019, the Fifth Circuit Court of Appeals heard the Company’s oral arguments. In December 2021, the Fifth Circuit Court of Appeals issued its opinion, finding error in the District Court’s analysis of Section 92.019 and remanding the case to the District Court to determine if class certification is appropriate in light of the Fifth Circuit’s determination that Section 92.019 does not require that a landlord engage in a process to arrive at its late fee, so long as the fee is a reasonable estimate at the time of contracting of damages that are incapable of precise calculation. In light of the Fifth Circuit Court of Appeal’s reversal of the District Court’s class certification, in March 2022, the named plaintiffs (on behalf of only themselves) agreed to settle the lawsuit and the case was dismissed by the District Court.

In April 2017, plaintiff Nathaniel Brown, on behalf of a putative class of plaintiffs, filed a complaint against the Operating Partnership, as the successor by merger to Post Properties’ primary operating partnership, and MAA in the United States District Court for the Western District of Texas, Austin Division. The lawsuit alleges that Post Properties (and, following the Post Properties merger in December 2016, the Operating Partnership) charged late fees at its Texas properties that violate Section 92.019. The plaintiffs are seeking monetary damages and attorney’s fees and costs. In September 2018, the District Court certified a class proposed by the plaintiff. Additionally, in September 2018, the District Court denied the Company’s motion for summary judgment and granted the plaintiff’s motion for partial summary judgment. Because the District Court certified a class prior to granting the plaintiff’s motion for partial summary judgment, the District Court’s ruling applies to the entire class. In October 2018, the Fifth Circuit Court of Appeals accepted the Company’s petition to review the District Court’s order granting class certification. In September 2019, the Fifth Circuit Court of Appeals heard the Company’s oral arguments. In December 2021, the Fifth Circuit Court of Appeals issued its opinion, finding error in the District Court’s analysis of Section 92.019 and remanding the case to the District Court to determine if class certification is appropriate in light of the Fifth Circuit’s ruling on the application of Section 92.019 in the Cleven lawsuit, as noted above. In light of the Fifth Circuit Court of Appeal’s reversal of the District Court’s class certification, in March 2022, the named plaintiff (on behalf of only himself) agreed to settle the lawsuit and the case was dismissed by the District Court.

The Company is subject to various other legal proceedings and claims that arise in the ordinary course of its business operations. Matters that arise out of allegations of bodily injury, property damage and employment practices are generally covered by insurance. While the resolution of these other matters cannot be predicted with certainty, management does not currently believe that such matters, either individually or in the aggregate, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows in the event of a negative outcome.

As of March 31, 2022 and December 31, 2021, the Company’s accrual for loss contingencies relating to unresolved legal matters was $2.0 million and $5.2 million in the aggregate, respectively. The loss contingencies are presented in “Accrued expenses and other liabilities” in the accompanying Condensed Consolidated Balance Sheets.

11. Segment Information

As of March 31, 2022, the Company owned and operated 292 multifamily apartment communities (which does not include development communities under construction) in 15 different states from which it derived all significant sources of earnings and operating cash flows. The Company views each consolidated apartment community as an operating segment. The Company’s chief operating decision maker, which is the Company’s Chief Executive Officer, evaluates performance and determines resource allocations of each of the apartment communities on a Same Store and Non-Same Store and Other basis, as well as an individual apartment community basis. The Company has aggregated its operating segments into two reportable segments as management believes the apartment communities in each reportable segment generally have similar economic characteristics, facilities, services and residents.

The following reflects the two reportable segments for the Company:

Same Store includes communities that the Company has owned and have been stabilized for at least a full 12 months as of the first day of the calendar year.

Non-Same Store and Other includes recently acquired communities, communities being developed or in lease-up, communities identified for disposition, communities that have incurred a significant casualty loss and stabilized communities that do not meet the requirements to be Same Store communities. Also included in Non-Same Store and Other are non-multifamily activities.

On the first day of each calendar year, the Company determines the composition of its Same Store and Non-Same Store and Other reportable segments for that year as well as adjusts the previous year, which allows the Company to evaluate full period-over-period operating comparisons. Communities previously in development or lease-up are added to the Same Store segment on the first day of the calendar year after the community has been owned and stabilized for at least a full 12 months. Communities are considered stabilized after achieving 90% average physical occupancy for 90 days.

The chief operating decision maker utilizes net operating income, or NOI, in evaluating the performance of its operating segments. Total NOI represents total property revenues less total property operating expenses, excluding depreciation and amortization, for all properties held during the period regardless of their status as held for sale. Management believes that NOI is a helpful tool in evaluating the operating performance of the segments because it measures the core operations of property performance by excluding corporate level expenses and other items not directly related to property operating performance.

Revenues and NOI for each reportable segment for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

		Three months ended March 31,
		2022				2021
Revenues:
Same Store
Rental revenues		$	451,716			$	402,194
Other property revenues			2,761				2,952
Total Same Store revenues			454,477				405,146
Non-Same Store and Other
Rental revenues			21,399				19,587
Other property revenues			202				272
Total Non-Same Store and Other revenues			21,601				19,859
Total rental and other property revenues		$	476,078			$	425,005
Net Operating Income:
Same Store NOI		$	294,642			$	251,940
Non-Same Store and Other NOI			12,016				10,597
Total NOI			306,658				262,537
Depreciation and amortization			(133,738	)			(131,503	)
Property management expenses			(16,537	)			(12,939	)
General and administrative expenses			(16,323	)			(12,979	)
Interest expense			(39,121	)			(39,672	)
Loss on sale of depreciable real estate assets			(1	)			—
Gain on sale of non-depreciable real estate assets			23				—
Other non-operating income (expense)			10,795				(15,913	)
Income tax benefit (expense)			1,442				(999	)
Income from real estate joint venture			379				332
Net income attributable to noncontrolling interests			(2,775	)			(1,671	)
Dividends to MAA Series I preferred shareholders			(922	)			(922	)
Net income available for MAA common shareholders		$	109,880			$	46,271

Assets for each reportable segment as of March 31, 2022 and December 31, 2021 were as follows (in thousands):

		March 31, 2022				December 31, 2021
Assets:
Same Store		$	9,842,471			$	9,907,740
Non-Same Store and Other			1,138,477				1,106,039
Corporate assets			218,127				271,403
Total assets		$	11,199,075			$	11,285,182

12. Real Estate Acquisition and Disposition

The following table reflects the Company’s acquisition activity for the three months ended March 31, 2022:

Land Acquisition		Market		Acres		Date Acquired
MAA Florida Street Station		Denver, CO		4		March 2022