Mid-America Apartment Communities Annual Report 2003

← All annual reports

FY2003 Annual Report · Mid-America Apartment Communities

Loading PDF…

Mid-America
Apartment Communities

Creating Great Places to LIVE...

2003 ANNUAL REPORT

...Work & Invest

MID-AMERICA APARTMENT COMMUNITIES (MAA:NYSE) is a publicly traded real estate investment trust which currently

owns or has ownership interest in 36,712 apartment homes throughout the southeast and south central United States.

Stability

Consistency

Regional Focus

Mid-America
Apartment Communities

FOCUSED on

Operations…

Paramount to Mid-America’s success is a company culture of supporting our associates working at the properties. We have a firm

understanding that in addition to having superior properties and locations, ultimately, the act of actually “minding the store” is what matters.

All of us at Mid-America are actively involved in supporting our associates working on the front line at the properties. We are constantly

focused on searching for new and creative ways to drive more productivity and efficiency into our operation. This focus is a prominent

component of our company’s philosophy. During 2004 we will be implementing a new web-based revenue and property management

system. This new capability will provide an efficient platform for introducing more “pricing points” in Mid-America’s overall pricing

structure, create enhanced capabilities for more aggressive inventory management practices and generate more efficiencies in both

on-site and corporate level payables and bookkeeping operations.

The Open Arms Foundation is Mid-America’s corporate charity. Since 1994, Open Arms has provided

a home away from home for families in medical crisis by offering fully-furnished and equipped two-bedroom apartment homes

free of charge to families with long-term hospital care needs away from their normal residence. In 2003, Open Arms gave

6,734 nights of comfort to families in need.

Financial HIGHLIGHTS

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

Net income
Preferred dividend distribution
Premiums and original issuance costs associated with the redemption

of preferred stock(1)

Net income (loss) available for common shareholders
Depreciation and amortization real estate assets
Depreciation and amortization real estate assets of unconsolidated entities
Minority interest in operating partnership income
Net gain on insurance settlement proceeds and disposition of assets
(Gain) loss on sale of non-depreciable assets
Depreciation and amortization real estate assets of discontinued operations
Gain on sale of discontinued operations

Funds from operations

Weighted average shares, diluted(2)
Net income (loss) available for common shareholders, diluted(2)
Weighted average shares and units, diluted
Funds from operations per shares and units, diluted
Dividends per share
Real estate owned, at cost
Capital improvements in progress(3)
Investment in real estate joint ventures
Total debt
Shareholders’ equity and minority interest
Market capitalization, shares and units
Number of properties, including ownership interest(4)
Number of apartment units, including ownership interest(4)

Years Ended December 31
2002

2003

2001

20,206
(15,419)

16,141
(16,029)

28,698
(16,113)

(5,987)

(1,200)
57,645
2,345
1,360
(2,942)
—
78
(1,919)

(2,041)

(1,929)
53,753
1,430
388
(397)
(45)
153
—

—

12,585
51,332
1,268
2,417
(11,933)
229
125
—

55,367

53,353

56,023

18,374

17,561

(0.07) $

(0.11) $

21,354
2.59
$
2.34
$
$1,695,111
7,335
$
$
12,620
$ 951,941
$ 393,313
$ 939,581
127
35,734

20,613
2.59
$
2.34
$
$1,478,793
3,223
$
$
15,000
$ 803,703
$ 371,576
$ 673,431
123
33,923

17,532
0.72
20,464
2.74
$
2.34
$
$1,449,720
10,915
$
$
7,045
$ 779,664
$ 442,260
$ 709,224
122
33,411

(1) Original issuance costs represent non-cash charges.
(2) For periods where the Company reported a net loss available for common shareholders, the effect of dilutive shares has been excluded from net loss available for common

shareholders per common shares computations because including such shares would be anti-dilutive.

(3) Total for 2001 includes construction in progress.
(4) Years prior to the period in which the sale of a community classified it as a discontinued operation do not exclude the property from property and apartment unit totals.

ANNUALIZED COMMON SHAREHOLDER RETURNS

As of February 26, 2004

As of December 31, 2003

4
6
9
%

M
A
A
2
0
0
3

2
9
8
%

2
5
3
%

2
8
7
%

2
6
9
%

M
A
A
3
-
Y
e
a
r

D
o
w

J
o
n
e
s
I
n
d
e
x
Y
T
D
2
0
0
3

A
p
a
r
t

m
e
n
t
S
e
c
t
o
r
o
f
M
o
r
g
a
n

S
t
a
n
l
e
y
R
E
I
T
I
n
d
e
x
Y
T
D
2
0
0
3

S
&
P
5
0
0
T
o
t
a
l

R
e
t
u
r
n
Y
T
D
2
0
0
3

1
6
0
%

M
A
A
S
i
n
c
e
I
P
O

9
2
%

M
A
A
Y
T
D
2
0
0
4

1
.
0
%

A
p
a
r
t

m
e
n
t
S
e
c
t
o
r
o
f
M
o
r
g
a
n

S
t
a
n
l
e
y
R
E
I
T
I
n
d
e
x
Y
T
D
2
0
0
4

1
.
2
%

D
o
w

J
o
n
e
s
I
n
d
e
x
Y
T
D
2
0
0
4

3
.
2
%

S
&
P
5
0
0
T
o
t
a
l

R
e
t
u
r
n
Y
T
D
2
0
0
4

DIVIDEND PER COMMON SHARE
(in dollars)

0
3
2
$

2
3
2
$

4
3
2
$

4
3
.
2
$

0
2
2
$

4
1
2
$

4
0
2
$

0
0
2
$

1
2
1
$

’94

’95

’96

’97

’98

’99

’00

’01

’02

’03

Creating Great Places to Live...

Through STABILITY

Mid-America out-performed the apartment

located in desirable neighborhoods, which tar-

REIT sector last year, as well as over 3-year, 5-year

gets the largest segment of the rental market. By

and 10-year timeframes, as a result of several

offering a rental product catering to the large

factors: A diversified regional approach, an

middle market segment, avoiding the risks and

appealing product, an intense focus on property

volatility at both the low end and the very upper

management operations—what we

call “minding the store”—and a

conservative business strategy.

“MID-AMERICA

OUT-PERFORMED THE

In the last few years Mid-America

APARTMENT REIT

end product spectrum, we maintain

more stability in portfolio perform-

ance and greater capability to com-

pete in all market environments.

has concentrated on the acquisition

SECTOR LAST YEAR, AS

Another important aspect of

—not the development—of apart-

WELL AS OVER 3-YEAR,

ensuring stable performance is our

ment properties. We know that new

5-YEAR AND 10-YEAR

focus on property operations and

development is inherently more

risky and less predictable. We will

continue to introduce new prop-

HORIZONS”

our constant push for new produc-

tivity and efficiencies. In addition

to the new web-based revenue and

erties into the portfolio, but we will do so

property management system, this year we are

through opportunistically acquiring them rather

also rolling out a new on-line marketing and

than building them. Our concentration on own-

advertising program focused on leveraging

ing and buying established properties assures

greater use of the internet and our e-commerce

our shareholders a more predictable cash flow

platform. We believe finding new ways to reach

and enables us to generate more stable returns

out to new and existing residents, and making

to investors with lower risk.

their communication and transaction interface

Mid-America’s apartment product focus is

moderate to slightly higher-priced rental housing

with our properties easier, will continue to

deliver stable, positive results.

Creating Great Places to Live...

Mid-America properties continued to earn numerous civic

During 2003 we completed new “revenue enhancing”

and industry accolades throughout 2003, supporting our belief

projects of $9.5 million throughout the portfolio, with

that the Mid-America portfolio of properties represents one

another $5.4 million slated to be completed in 2004. This

of the highest quality portfolios among the apartment REIT

consistent focus on protecting and upgrading property quality

sector. Mid-America’s portfolio has an average age of 12.9

helps to ensure that Mid-America’s properties will continue

years; one of the newer portfolios of any apartment REIT.

to compete well in these highly

Over the course of the last five years Mid-America has

“OUR CONSISTENT

competitive markets, but also

added $267 million of new properties to the portfolio

FOCUS ON PROTECT-

ensures that as market conditions

while selling $126 million of properties with an average age

ING AND UPGRADING

improve, our properties will be

of 21.7 years. Additionally, we have maintained a very dis-

ciplined and steady program of maintenance and capital

reinvestment into our properties.

well poised to recapture, and

then exceed, historically higher

financial performance levels.

PROPERTY QUALITY

HELPS TO ENSURE

THAT MID-AMERICA’S

PROPERTIES WILL

CONTINUE TO

COMPETE WELL”

Through

CONSISTENCY

Creating Great Places to Live...

Mid-America’s portfolio of properties is diversified across the strongest and

most stable job growth sector of the country…the southeast and south central

region states. While this region has certainly felt pressure from the weak economy

of the last couple of years, the southeastern job markets can be counted on to

bounce back sooner and stronger when compared to other regions of the

country. Job formation, immigration growth and migration trends will continue

to significantly favor the southeastern and south central markets.

Mid-America’s overall portfolio of investments is well diversified in not

only larger metropolitan markets, but also in more stable mid-size and small-

tier markets. These three market segments each provide different performance

and value creation opportunities, thus driving an overall more stable and

higher risk-adjusted portfolio performance. By maintaining a well-diversified

focus on each of the market segments, we have demonstrated an ability to

deliver a more predictable, stable and higher risk-adjusted performance

through the full real estate and market cycle. We are currently over-weighting

new growth in the larger metro markets as we expect these markets will offer

attractive year-over-year growth prospects for the next five years as the economy

begins to pick up steam. We believe that the net result of this new growth will be

an even more balanced portfolio allocation and higher levels of stable operating

performance for Mid-America.

Alabama

Arkansas

Florida

Georgia

Kentucky

Mississippi

North Carolina

Ohio

South Carolina

Tennessee

Texas

Virginia

Through REGIONAL FOCUS

Birmingham, Huntsville 2, Montgomery

Little Rock 3

Daytona Beach, Gainesville, Jacksonville 11, Lakeland, Melbourne, Ocala, Orlando,
Panama City Beach, Tallahassee, Tampa Metro 4

Athens, Atlanta Metro 8, Augusta 3, Brunswick, Columbus 2, La Grange,
Macon/Warner Robins 4, Savannah, St. Simons Island, Thomasville, Valdosta

Bowling Green, Florence, Lexington 4, Louisville

Grenada, Jackson 6, Southaven 2

Greensboro, Raleigh, Winston-Salem

Cincinnati

Aiken 2, Anderson, Charleston, Columbia 2, Greenville 5, Spartanburg

Chattanooga 4, Jackson 5, Memphis 10, Nashville 5

Austin 4, Dallas 10, Houston 5

Hampton

Property Locations

T O M Y F E L L O W S H A R E H O L D E R S :

A DECADE OF DISTINCTION. January, 2004 marked a significant mile-

stone for Mid-America Apartment Communities: The 10th anniversary of

the company’s initial public offering. As we move forward with our strategy

and plans to create new value for Mid-America shareholders, we have a

strong sense of pride in the accomplishments that describe our past and

enthusiasm for the opportunities that will define our future. The annual

compounded total investment return of 16% produced over the last

ten years for Mid-America shareholders; the high-quality, well located

and award-winning properties of our company; the enthusiastic and

professional service delivered to Mid-America residents by our associates and the many families that have found
assistance and comfort through Mid-America’s Open Arms(cid:2) Program represent just some of the things that we

all take pride in at our company. And while we reflect on this foundation of performance, we understand that

our energy must be forward-focused. Our eye is securely on the future and all Mid-America associates are working

hard to exceed the expectations of those we serve and to achieve another decade of distinction.

OUT-PERFORMING. The weak job market, along with a very attractive home buying environment, continued to

temporarily dampen demand for apartment housing last year. The low interest-rate environment also helped fuel

a robust pace of new apartment construction, further pressuring apartment owners’ ability to achieve occupancy

and revenue growth performance in line with historical norms. And while our portfolio of properties did not

fully escape the market pressures, Mid-America’s “recession resistant” portfolio and operating strategy did come

through. Your company delivered one of the apartment REIT sector’s top operating performances in 2003. In

addition, Mid-America shareholders captured one of the best total investment returns of any REIT in 2003 at 46.9%.

While we were pleased in the strength of our relative performance during 2003, we believe that the opportunities

to recapture higher performance levels in a return to more normal market conditions, coupled with our improved

platform for generating steady new growth, will continue to deliver attractive returns for our shareholders.

STABLE AND WELL POSITIONED. Despite the challenging operating environment, your company made significant

progress in 2003. Over this past year Mid-America completed a number of equity and debt financings on

advantageous terms, which improved coverage ratios, lowered borrowing costs, lowered preferred stock financing

costs and improved the flexibility of our balance sheet. And importantly, in this very competitive leasing envi-

ronment, our property management group protected your property values by remaining committed to

Mid-America’s resident qualifying standards, protecting rent pricing levels and maintaining the high-quality

condition of our portfolio through steady capital spending and improvement. We believe these actions and

results will be very beneficial as market conditions begin to strengthen.

BALANCE SHEET STRENGTHENED. There were a significant

STRONG GOVERNANCE. You should take pride in the very

number of refinancing transactions and improvements made to

strong and experienced group of independent directors com-

our balance sheet during 2003. In terms of fixed charge cov-

prising Mid-America’s Board of Directors. Your Board possesses

erage ratios and loan covenant compliance, Mid-America’s

extensive experience in apartment operations, real estate

balance sheet is stronger now than it has been in over five

investment, public company governance and capital market

years. Approximately 80% of our debt cost is now fixed,

transactions. Mid-America’s Board is active in review of our

swapped, forward-swapped or capped. During 2004 we will be

strategic plan, operating results and capital deployment trans-

refinancing another $192 million of debt and expect to reduce

actions. The Board’s Nominating and Corporate Governance

borrowing costs another $4–$5 million on an annualized

Committee, Audit Committee and Compensation Committee

basis. After the planned 2004 refinancing transactions, we

are active in their oversight and specific responsibilities. As

will have future maturities laddered in such a way as to have

significant owners of the company themselves, our directors

no more than ten percent of our total debt exposed to high

take their responsibilities seriously and I am grateful for their

cost refinancing over the next five years.

insight and guidance.

During the course of 2003 we were also successful in

POSITIONED FOR GROWTH. While we all take pride in

raising $51.4 million in new common equity capital that was

Mid-America’s record of performance over the last ten years,

immediately invested in new earnings growth that met our

we understand our responsibilities are forward-focused. We

stringent investment hurdle requirements. This new capital

continue to believe that the economy and job growth will

investment provided current earnings and dividend coverage

gain traction late this year and into next year. There are early

improvement for existing shareholders.

signs of such recovery in our larger markets which felt the full

DISCIPLINED GROWTH. We were successful in acquiring

$252 million of real estate in 2003; including the buy-out of

the joint venture that we had with Blackstone Realty Advisors.

The market for acquiring good-quality apartment properties

remains very competitive as investment capital continues to be

very attracted to the sector. Long-term demographics and other

macro-economic factors are expected to generate strong

operating and investment performance results for the multi-

family sector over the next decade and thus the strong attrac-

effect of the market slow down. We are encouraged by the

strengthening performance of our properties and operations.

We believe the southeastern and south central states will gen-

erate some of the best apartment markets in the country as

recovery takes hold. By remaining well diversified across this

solid growth region, Mid-America will be both well positioned

for a continuation of steady results in a very competitive

apartment leasing environment, while also being well poised

for market recovery.

tion for investment capital. We remain disciplined in our

Thank you for your support and confidence in our team.

underwriting and acquisition operations. A key requirement to

We look forward to another decade of exceeding the expecta-

effectively compete against periodic new construction pressures

tions of those we serve.

is to ensure that Mid-America’s investment basis in each of our

properties is appropriate for the market…in other words, it is

Sincerely,

crucial that we have not over-paid for an apartment property.

We understand this principal and remain disciplined with our

shareholders’ capital.

H. Eric Bolton, Jr.

Chairman and
Chief Executive Officer

M A N AG E M E N T D I S C U S S I O N A N D A N A LY S I S

question WHAT ARE YOUR PLANS FOR RAISING THE DIVIDEND?

answer

“Despite a very challenging operating environment, we have made steady progress over the last two years in strengthening the current dividend.
As market conditions improve, we expect that internal earnings growth from our same store portfolio will quickly recover and strengthen. We
see this component of our earnings stream as largely the “recurring” source of funding for a steady and growing dividend. A combination of
improving leasing conditions, new ancillary revenue opportunities and growing operating efficiencies will drive higher levels of profitability
from this portfolio. We are of course also focused on adding new earnings through growing our existing portfolio of properties. While the timing
is difficult to pinpoint, we fully intend to position Mid-America’s balance sheet and operation to support a steady and growing dividend through
full market cyclicality.”
SIMON WADSWORTH, EXECUTIVE VICE-PRESIDENT AND CFO

QUESTIONS

question HOW HAVE VARIOUS ASPECTS OF MID-AMERICA’S OPERATIONS CHANGED OVER THE LAST YEAR OR SO AS A RESULT OF NEW TECHNOLOGIES AND THE EXPANDING

USE OF THE INTERNET?

answer

“We have a significant focus in our company on constantly pushing for improvements in productivity. Advances in technology and
the internet have allowed us to continue to raise the bar and achieve improvement in service and responsiveness for our residents, while
also driving greater efficiency into our operation. The internet serves as a platform for our lease application credit screening and back-
ground check policies. We are able to process applications in a matter of minutes, instead of several hours. Our use of the internet
for attracting and capturing potential renters has also grown tremendously over the last couple of years. During 2004 we will be rolling
out a new web-based revenue and property management system that will open up exciting new opportunities in pricing, asset manage-
ment practices and back-room processing.”
ERIC BOLTON, CHAIRMAN AND CEO

question MID-AMERICA’S PORTFOLIO IS UNIQUE AMONG MOST IN THE APARTMENT REIT SECTOR DUE TO A LARGE ALLOCATION TO SECONDARY AND SOME TERTIARY MARKETS.

LATELY, YOU HAVE BEEN MORE ACTIVE WITH ACQUISITIONS IN THE LARGE METRO MARKETS OF THE SOUTHEAST. IS THIS A CHANGE IN PORTFOLIO STRATEGY OR DIRECTION?

question

SARBANES-OXLEY AND NEW CORPORATE GOVERNANCE GUIDELINES HAVE IMPACTED ALL PUBLIC COMPANIES IN THE LAST YEAR OR SO IN VARIOUS WAYS. HOW

answer

“No, we intend to remain committed to our diversified portfolio strategy based on allocating capital to all three market segments…large,
secondary and select tertiary markets. We believe that our focus on delivering a steady, growing and low-risk dividend stream, through full
economic and market cycles, is based to a large degree on our unique market diversification strategy. As a result of several property sales and
our acquisition of the Flournoy portfolio several years back, we have carried a slight overweight in smaller markets for the last several years. Our
recent acquisitions reflect a move back towards a more equally weighted market segment allocation.”
AL CAMPBELL, SENIOR VICE-PRESIDENT, TREASURER AND DIRECTOR OF FINANCIAL PLANNING

question WHAT EARNINGS UPSIDE IS “EMBEDDED” IN THE CURRENT PORTFOLIO THAT YOU EXPECT TO RECAPTURE AS MARKET CONDITIONS IMPROVE?

answer

“Our same store portfolio generated approximately $134 million of net operating income in 2001, as compared to $125 million in 2003’s
weaker market environment. We believe that most markets are slowly trending towards historically normal market conditions as the economy
continues to recover. The weaker leasing environment of the last two years drove leasing concessions and vacancy loss higher, with some pressure
also felt in collections. And while the Mid-America portfolio was able to avoid some of the pressure felt by other REITs to aggressively reduce
rents, it is clear that rent growth has been anemic at our properties over the last two years. Overall, it will take a resumption of job growth in
the economy and a rising interest rate environment to generate a trend towards normal market conditions. In that environment, we expect to see
occupancy levels move towards a range of 94% to 95%, concessions fall and rent growth resume.”
TOM GRIMES, SENIOR VICE-PRESIDENT, DIRECTOR OF PROPERTY MANAGEMENT

question HOW WILL A RISING INTEREST RATE ENVIRONMENT IMPACT MID-AMERICA?

answer

“We have taken advantage of the low interest rate environment of the last couple of years
to refinance a total of over $430 million of our capital structure. In 2004 we plan to refi-
nance an additional $192 million. Upon completion of the planned refinancings in 2004,
we will have lowered our cost of capital by a total of $15.2 million of FFO on an annu-
alized basis. At this point, we feel that the balance sheet is well positioned for a rising
rate environment. Currently, we have 80% of our debt structure with interest cost that
is fixed, swapped, forward-swapped or capped. In addition, our future debt maturities
have been effectively laddered such that we have no more than 10% of our debt structure
exposed to refinancing in a rising rate environment for each of the next 5 years. Further, a
rising rate environment will serve to reduce some of the operating pressure we have felt at
the properties due to the very attractive home buying environment fueled by the low
mortgage rate environment.”
SIMON WADSWORTH, EXECUTIVE VICE-PRESIDENT AND CFO

HAS MID-AMERICA RESPONDED TO THESE NEW GUIDELINES?

answer

“Mid-America has always maintained a Board of Directors comprised of a majority of independent directors, encompassing significant
experience in real estate, public capital markets and public company governance, thus no changes to the actual membership were
necessary. We have of course implemented all of the new regulatory requirements established by both the SEC and NYSE following
Sarbanes-Oxley. Our Board of Directors maintains an active Nominating and Corporate Governance Committee, an Audit Committee
and a Compensation Committee. Each of these committees has charters and evaluation processes, as does the overall Board of Directors.
While we have always had a significant focus on internal controls and various checks and balances in our reporting processes, in compliance
with the NYSE we will also be formalizing an Internal Audit function in 2004 with direct reporting responsibility to the Audit Committee.
You can find more information relating to our corporate governance guidelines in the Corporate Governance section of our Investors
page on our web-site at www.maac.net.”
ERIC BOLTON, CHAIRMAN AND CEO

ANSWERS

Seated left to right:

TOM GRIMES, SENIOR VICE PRESIDENT, DIRECTOR OF PROPERTY
MANAGEMENT

AL CAMPBELL, SENIOR VICE PRESIDENT, TREASURER AND DIRECTOR
OF FINANCIAL PLANNING

SIMON WADSWORTH, EXECUTIVE VICE PRESIDENT AND CFO

Standing left to right:

JAMES MACLIN, VICE PRESIDENT, DIRECTOR OF ASSET MANAGEMENT

NANCY ROBERTS, SENIOR VICE PRESIDENT, DIRECTOR OF
ORGANIZATIONAL DEVELOPMENT

KEVIN PERKINS, VICE PRESIDENT, DIRECTOR OF CAPITAL
IMPROVEMENTS AND MAINTENANCE OPERATIONS

ERIC BOLTON, CHAIRMAN AND CEO

GINNY DOANE, SENIOR VICE PRESIDENT, OPERATIONS DIRECTOR

DAVID NISCHWITZ, VICE PRESIDENT, DIRECTOR OF LANDSCAPING

2 0 0 3 C I V I C A N D I N D U S T R Y A WA R D S

MID-AMERICA APARTMENT
COMMUNITIES, INC.
2002 ANNUAL REPORT
Gold Award, League of American
Communications Professional Vision
Awards Competition, June 27

GEORGETOWN GROVE
SAVANNAH, GEORGIA
Platinum Award, Savannah Apartment
Association, July 8

KIRBY STATION
MEMPHIS, TENNESSEE
First Place, Plant the Town Red
Competition, City of Memphis, July 10

PARK ESTATE
MEMPHIS, TENNESSEE
First Place, Plant the Town Red
Competition, City of Memphis, July 10

EAGLE RIDGE
BIRMINGHAM, ALABAMA
Beautification Award, Greater
Birmingham Association of Home
Builders Multi-family Council
Beautification Awards, July 10

EAGLE RIDGE
BIRMINGHAM, ALABAMA
Best Seasonal Color Program, Greater
Birmingham Association of Home
Builders Multi-family Council
Beautification Awards, July 10

EAGLE RIDGE
BIRMINGHAM, ALABAMA
Best Seasonal Color Program Manager,
Greater Birmingham Association of
Home Builders Multi-family Council
Beautification Awards, July 10

ABBINGTON PLACE
HUNTSVILLE, ALABAMA
Beautification Award, City of Huntsville,
July 16

THE PADDOCK CLUB
HUNTSVILLE, ALABAMA
Beautification Award, City of Huntsville,
July 16

MID-AMERICA APARTMENT
COMMUNITIES, INC.
COMMUNITY OUTREACH
DEPARTMENT, OPEN ARMS
FOUNDATION
Finalist for the Memphis Business
Journal’s “Health Heroes” Awards for
Community Outreach, July

WOODS OF POST HOUSE
JACKSON, TENNESSEE
City Beautiful Award, City of Jackson
Beautification Committee, July

POST HOUSE NORTH
JACKSON, TENNESSEE
Honorable Mention, City of Jackson
Beautification Committee, July

TOWNSHIP IN HAMPTON WOODS
HAMPTON, VIRGINIA
Best Overall Apartment Community,
Peninsula Apartment Association,
August 16

AMY ARNETT
TOWNSHIP IN HAMPTON WOODS
Leasing Professional of the Year,
Peninsula Apartment Association,
August 16

STONEMILL VILLAGE
LOUISVILLE, KENTUCKY
First Place, Louisville and Jefferson
County Beautification League,
October 15

CROSSWINDS
JACKSON, MISSISSIPPI
First Place Beautification Award,
Mississippi Multifamily Council
Beautification Showcase Awards,
October 21

REFLECTION POINTE
JACKSON, MISSISSIPPI
First Place Beautification Award,
Mississippi Multifamily Council
Beautification Showcase Awards,
October 21

LAKESHORE LANDING
JACKSON, MISSISSIPPI
First Place Beautification Award,
Mississippi Multifamily Council
Beautification Showcase Awards,
October 21

PEAR ORCHARD
JACKSON, MISSISSIPPI
Second Place Beautification Award,
Mississippi Multifamily Beautification
Showcase Awards, October 21

WOODRIDGE
JACKSON, MISSISSIPPI
Third Place Beautification Award,
Mississippi Multifamily Council
Beautification Showcase Awards,
October 21

CROSSWINDS
JACKSON, MISSISSIPPI
Best Playground, Mississippi Multifamily
Council Beautification Showcase Awards,
October 21

MID-AMERICA APARTMENT
COMMUNITIES, INC.
Property Management Company of the
Year, Lexington Apartment Association
Crowne Excellence Awards Gala,
November 1

GRAND RESERVE
LEXINGTON, KENTUCKY
Triple Crowne Award, Lexington
Apartment Association Crowne
Excellence Awards Gala, November 1

THE MANSION
LEXINGTON, KENTUCKY
Triple Crowne Award, Lexington
Apartment Association Crowne
Excellence Awards Gala, November 1

LAKEPOINTE
LEXINGTON, KENTUCKY
Triple Crowne Award, Lexington
Apartment Association Crowne
Excellence Awards Gala, November 1

THE VILLAGE
LEXINGTON, KENTUCKY
Keeneland Award, Lexington Apartment
Association Crowne Excellence Awards
Gala, November 1

SHARON CLARK
THE VILLAGE
Best Support Manager, Lexington
Apartment Association Crowne
Excellence Awards Gala, November 1

JEFF MCKINNEY
THE MANSION
Best Lead Service Technician, Lexington
Apartment Association Crowne
Excellence Awards Gala, November 1

LISA ADAMS
SOUTH REGION
Multi-Site Manager of the Year, Atlanta
Apartment Association, November 20

THE PADDOCK CLUB
MURFREESBORO, TENNESSEE
First Place Beautification Award,
Rutherford County Apartment
Association, November 21

BRENTWOOD DOWNS
NASHVILLE, TENNESSEE
Second Place Beautification Award,
Greater Nashville Apartment Association,
November 22

GRANDE VIEW
NASHVILLE, TENNESSEE
Second Place Beautification Award,
Greater Nashville Apartment Association,
November 22

THE PADDOCK CLUB
MURFREESBORO, TENNESSEE
First Place Beautification Award, Greater
Nashville Apartment Association,
November 22

PARK HAYWOOD
GREENVILLE, SOUTH CAROLINA
First Place for Floral Design, Upper State
Apartment Association Crowne
Excellence Awards, December 2

PARK PLACE
GREENVILLE, SOUTH CAROLINA
First Place for Floral Design, Upper State
Apartment Association Crowne
Excellence Awards, December 2

MID-AMERICA APARTMENT
COMMUNITIES
Finalist—Property Management
Company of the Year
Pillars of the Industry Awards (National
Association of Home Builders), January

JACKIE MELNICK
EAST REGION
Regional/Multi-Site Manager of the Year
Pillars of the Industry Awards (National
Association of Home Builders) March 23

NANCY NANCE
FLORIDA REGION
Regional Property Manager of the Year,
conventional communities
Jacksonville Apartment Alliance,
February 13

THE PADDOCK CLUB
MANDARIN, FLORIDA
Gold Award, Jacksonville Apartment
Association, March 13

WOODBRIDGE AT THE LAKE
JACKSONVILLE, FLORIDA
Silver Award, Jacksonville Apartment
Alliance, March 13

HUNTER’S RIDGE
JACKSONVILLE, FLORIDA
Silver Award, Jacksonville Apartment
Alliance, March 13

WOODHOLLOW
JACKSONVILLE, FLORIDA
Silver Award, Jacksonville Apartment
Alliance, March 13

LAKESIDE APARTMENTS
JACKSONVILLE, FLORIDA
Bronze Award, Jacksonville Apartment
Alliance, March 13

MARSH OAKS
ATLANTIC BEACH, FLORIDA
Bronze Award, Jacksonville Apartment
Alliance, March 13

PARK PLACE
SPARTANBURG, SOUTH CAROLINA
First Place Award, Garden Club of
Spartanburg/Chamber of Commerce,
May 21

WESTSIDE CREEK
LITTLE ROCK, ARKANSAS
Runner up, “Best of Arkansas,”
Arkansas Times, June

NAPA VALLEY
LITTLE ROCK, ARKANSAS
Runner up, “Best of Arkansas,” Arkansas
Times, June

S E L E C T E D F I N A N C I A L DATA

(Dollars in thousands, except per share data)

OPERATING DATA:
Total revenues
Expenses:

Property operating expenses
Depreciation and amortization
Property management and general and

administrative expenses

Interest
Loss (gain) on debt extinguishment
Amortization of deferred financing costs

Income from continuing operations before minority interest
in operating partnership income, loss from investments
in unconsolidated entities and net gain on insurance
settlement proceeds and disposition of assets
Minority interest in operating partnership income
Loss from investments in unconsolidated entities
Net gain on insurance settlement proceeds and

disposition of assets

Income from continuing operations
Discontinued operations:
Property operations
Gain on sale

Net income
Preferred dividend distribution
Premiums and original issuance costs associated with the

redemption of preferred stock(1)

2003

2002

Year Ended December 31
2001

2000

1999

$ 240,906

$ 233,044

$ 232,642

$ 227,022

$ 225,745

100,526
59,018

15,670
46,032
(111)
2,062

17,709
(1,360)
(949)

2,942

18,342

(55)
1,919

20,206
15,419

5,987

92,530
55,110

15,298
49,448
1,444
2,712

16,502
(388)
(532)

397

15,979

162
—

16,141
16,029

2,041

89,224
51,925

16,083
52,598
1,189
2,352

19,271
(2,417)
(296)

11,933

28,491

207
—

28,698
16,113

—

86,038
51,719

14,826
50,736
243
2,758

20,702
(2,587)
(157)

11,587

29,545

242
—

29,787
16,114

—

84,641
49,788

14,479
48,302
79
2,854

25,602
(2,485)
(31)

10,237

33,323

249
—

33,572
16,114

—

Net income available for common shareholders

(1,200)

(1,929)

12,585

13,673

17,458

PER SHARE DATA:

Basic and diluted:
Net income available per common share
Dividends declared

BALANCE SHEET DATA:
Real estate owned, at cost
Real estate owned, net
Total assets
Total debt
Minority interest
Shareholders’ equity
Weighted average common shares (000’s):

Basic
Diluted

OTHER DATA (AT END OF PERIOD):
Market capitalization (shares and units)
Ratio of total debt to total capitalization(2)
Number of properties, including joint venture

ownership interest(3)

Number of apartment units, including joint venture

ownership interest(3)

$
$

(0.07)
2.340

$
$

(0.11)
2.340

$
$

0.72
2.340

$
$

0.78
2.325

$
$

0.93
2.305

$1,695,111
$1,351,849
$1,406,533
$ 951,941
$
32,019
$ 361,294

$1,478,793
$1,192,539
$1,239,467
$ 803,703
$
33,405
$ 338,171

$1,449,720
$1,216,933
$1,263,488
$ 779,664
$
43,902
$ 398,358

$1,430,378
$1,244,475
$1,303,771
$ 781,089
$
50,020
$ 435,356

$1,396,743
$1,248,051
$1,298,823
$ 744,238
$
55,550
$ 464,394

18,374
18,374

17,561
17,561

17,427
17,532

17,544
17,597

18,784
18,808

$ 939,581

$ 673,431

$ 709,224

$ 634,903

$ 639,095

50.3%

54.4%

52.4%

55.2%

53.8%

127

123

122

124

129

35,734

33,923

33,411

33,612

33,901

(1)Original issuance costs represent non-cash charges.
(2)Total capitalization is total debt and market capitalization of preferred shares (value based on $25 per share liquidation preference), common shares and partnership units

(value based on common stock equivalency).

(3)Years prior to the period in which the sale of a community classified it as a discontinued operation do not exclude the property from property and apartment unit totals.

C O N S O L I DAT E D B A L A N C E S H E E T S

(Dollars in thousands)

ASSETS:

Real estate assets:

Land
Buildings and improvements
Furniture, fixtures and equipment
Capital improvements in progress

Less accumulated depreciation

Land held for future development
Commercial properties, net
Investment in and advances to real estate joint venture

Real estate assets, net

Cash and cash equivalents
Restricted cash
Deferred financing costs, net
Other assets
Goodwill, net

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY:

Liabilities:

Notes payable
Accounts payable
Accrued expenses and other liabilities
Security deposits
Deferred gain on disposition of properties

Total liabilities and deferred gain

Minority interest

Shareholders’ equity:

Preferred stock, $.01 par value, 20,000,000 shares authorized, $176,862,500 or $25 per share

liquidation preference:

0 and 2,000,000 shares at 9.5% Series A Cumulative on December 31, 2003 and 2002, respectively
0 and 1,938,830 shares at 8.875% Series B Cumulative on December 31, 2003 and 2002, respectively
0 and 2,000,000 shares at 9.375% Series C Cumulative on December 31, 2003 and 2002, respectively
474,500 shares at 9.25% Series F Cumulative
400,000 shares at 8.625% Series G Cumulative
6,200,000 and 0 shares of 8.30% Series H Cumulative on December 31, 2003 and 2002, respectively

Common stock, $.01 par value (authorized 50,000,000 shares; issued 20,031,614 and 17,840,183 shares

at December 31, 2003 and 2002, respectively)

Additional paid-in capital
Other
Accumulated distributions in excess of net income
Accumulated other comprehensive loss

Total shareholders’ equity

Total liabilities and shareholders’ equity

December 31

2003

2002

$ 142,416
1,481,854
38,812
7,335

$ 124,130
1,290,478
34,531
3,223

1,670,417
(339,704)

1,330,713
1,366
7,150
12,620

1,452,362
(283,277)

1,169,085
1,366
7,088
15,000

1,351,849

1,192,539

10,152
10,728
13,185
14,857
5,762

10,594
7,463
10,296
12,813
5,762

$1,406,533

$1,239,467

$ 951,941
1,696
54,547
5,036
—

$ 803,703
464
55,372
4,406
3,946

1,013,220

867,891

32,019

33,405

—
—
—
5
4
62

20
19
20
5
4
—

200
622,406
(3,711)
(232,224)
(25,448)

361,294

178
558,479
(4,299)
(188,155)
(28,100)

338,171

$1,406,533

$1,239,467

C O N S O L I DAT E D S TAT E M E N T S O F O P E R AT I O N S

(Dollars in thousands, except per share data)

Revenues:

Rental revenues
Other property revenues

Total property revenues
Interest and other non-property income
Management and fee income, net

Total revenues

Expenses:

Property operating expenses:

Personnel
Building repairs and maintenance
Real estate taxes and insurance
Utilities
Landscaping
Other operating
Depreciation and amortization

Property management expenses
General and administrative expenses
Interest expense
Loss (gain) on debt extinguishment
Amortization of deferred financing costs

Total expenses

Income before minority interest in operating partnership income, loss from investments
in unconsolidated entities, net gain on insurance settlement proceeds and disposition
of assets, and discontinued operations

Minority interest in operating partnership income
Loss from investments in unconsolidated entities
Net gain on insurance settlement proceeds and disposition of assets

Income from continuing operations
Discontinued operations:
Property operations
Gain on sale of discontinued operations

Net income
Preferred dividend distribution
Premiums and original issuance costs associated with the redemption of preferred stock(1)

Net income (loss) available for common shareholders

Net income (loss) available per common share:

Basic (in thousands):

Average common shares outstanding
Net income (loss) available per common share—Basic

Diluted (in thousands):

Average common shares outstanding
Effect of dilutive stock options

Average dilutive common shares outstanding

Net income (loss) available per common share—Diluted

(1)Original issuance costs represent non-cash charges.

Year Ended December 31
2002

2003

2001

$230,762
8,483

$223,497
8,035

$222,798
7,779

239,245
839
822

240,906

28,046
9,342
31,839
12,262
6,556
12,481
59,018

159,544
8,435
7,235
46,032
(111)
2,062

223,197

17,709
(1,360)
(949)
2,942

18,342

(55)
1,919

20,206
15,419
5,987

231,532
737
775

233,044

26,166
9,340
28,845
11,334
6,194
10,651
55,110

147,640
8,633
6,665
49,448
1,444
2,712

216,542

16,502
(388)
(532)
397

15,979

162
—

16,141
16,029
2,041

230,577
1,310
755

232,642

24,624
9,405
26,491
11,875
6,262
10,567
51,925

141,149
9,561
6,522
52,598
1,189
2,352

213,371

19,271
(2,417)
(296)
11,933

28,491

207
—

28,698
16,113
—

$ (1,200)

$ (1,929)

$ 12,585

18,374
(0.07)

17,561
(0.11)

17,427
0.72

18,374
—

18,374

17,561
—

17,561

17,427
105

17,532

(0.07)

(0.11)

0.72

I N D E P E N D E N T A U D I T O R S ’ R E P O R T

THE BOARD OF DIRECTORS AND SHAREHOLDERS

MID-AMERICA APARTMENT COMMUNITIES, INC.

We have audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance

sheets of Mid-America Apartment Communities, Inc. and subsidiaries (the “Company”) as of December 31, 2003, and 2002, and the

related consolidated statements of operations, shareholders’ equity and cash flows for each of the years in the three-year period ended

December 31, 2003 (not presented herein); and in our report dated February 9, 2004, we expressed an unqualified opinion on those

consolidated financial statements. As described in Note 1 to those consolidated financial statements, the consolidated financial state-

ments reflect the Company’s adoption of Statements of Financial Standards No. 145, Rescission of FASB Statements No. 4, 44, and 64,

Amendment of FASB Statement No. 13, and Technical Corrections.

In our opinion, the information set forth in the accompanying consolidated financial statements is fairly stated, in all material respects,

in relation to the consolidated financial statements from which it has been derived.

KPMG LLP

Memphis, Tennessee

February 9, 2004

C O R P O R AT E I N F O R M AT I O N

ANNUAL SHAREHOLDERS MEETING

INDEPENDENT AUDITORS

Mid-America Apartment Communities, Inc. will hold its 2004 annual

KPMG LLP, Memphis, TN

meeting of shareholders on Monday, May 24th, at 4:00 p.m. CST in the

clubhouse at The Reserve at Dexter Lake, Memphis, TN.

GENERAL COUNSEL

Bass, Berry & Sims, Memphis, TN

ANNUAL REPORT AND FORM 10-K

A copy of Mid-America’s Annual Report and Form 10-K for the year

STOCK LISTING AND COMMON STOCK PRICE

ended December 31, 2003, as filed with the Securities and Exchange

Mid-America’s stock is traded on the New York Stock Exchange. Its com-

Commission, will be sent without charge upon written request to the

mon stock is listed under the stock symbol MAA. Its Cumulative

corporate headquarters address, attention Investor Relations, and is

Preferred Stock is under the symbols MAA Pr F, and MAA Pr H

available on our web site at www.maac.net.

TRANSFER AGENT AND REGISTRAR

Wachovia Bank

Shareholders who have questions about their accounts or who wish to

change ownership or address of stock; to report lost, stolen or destroyed

certificates; or wish to sign up for our dividend reinvestment plan,

should contact the stock transfer agent at 800-829-8432.
Limited partners wishing to convert units into shares should contact

Mid-America directly at the corporate headquarters.

FISCAL 2003

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

FISCAL 2002

First Quarter
Second Quarter
Third Quarter
Fourth Quarter

Sales Prices

High

$24.98
$27.45
$31.45
$34.29

Low

$23.10
$23.67
$26.74
$30.02

Sales Prices

High

$26.75
$27.42
$26.90
$25.44

Low

$25.10
$25.51
$22.25
$22.00

Dividends
Declared

$0.585
$0.585
$0.585
$0.585

Dividends
Declared

$0.585
$0.585
$0.585
$0.585

B O A R D O F D I R E C T O R S

H. ERIC BOLTON, JR.
Mr. Bolton has served as a director since February 1997. Mr. Bolton is
our Chairman of the Board of Directors, President and Chief Executive
Officer. Mr. Bolton joined us in 1994 as Vice President of Development
and was named Chief Operating Officer in February 1996 and pro-
moted to President in December 1996. Mr. Bolton assumed the position
of Chief Executive Officer following the retirement of George E. Cates in
October 2001 and became Chairman of the Board in September 2002.
Mr. Bolton was with Trammell Crow Company for more than five years,
and prior to joining us was Executive Vice President and Chief Financial
Officer of Trammell Crow Realty Advisors.

SIMON R. C. WADSWORTH
Mr. Wadsworth has been Executive Vice President, Chief Financial
Officer and a director since March 1994. Prior to his position with
Mid-America, Mr. Wadsworth owned a distribution company in the
Memphis area from 1982 until its successful sale in 1993.

GEORGE E. CATES
Mr. Cates has served as a director since 1994 and served as Chairman of
the Board of Directors from the time of its initial public offering in
February 1994 until September 2002. Mr. Cates served as our President
and Chief Executive Officer from February 1994 until his planned retire-
ment in October 2001. Mr. Cates was President and Chief Executive
Officer of The Cates Company from 1977 until its merger with us in
February 1994. Mr. Cates also serves as a director for First Tennessee
National Corporation and The Marketing Alliance.

JOHN F. FLOURNOY
Mr. Flournoy has served as a director since November 1997. Mr.
Flournoy has been the Chairman and Chief Executive Officer of Flournoy
Development Company for 36 years. Flournoy Development Company
has been in multi-family housing development and construction prima-
rily in the Southeastern United States for over 30 years. Mr. Flournoy also
serves as a director of the W.C. Bradley Company and the Columbus
Bank and Trust Company.

ROBERT F. FOGELMAN
Committees: Compensation, Nominating and Corporate Governance
Mr. Fogelman has served as a director since July 1994 and has been the
President of Fogelman Investment Company, a privately owned invest-
ment firm, for more than seven years.

ALAN B. GRAF, JR.
Committees: Audit (Chairman)
Mr. Graf has served as a director since June 2002. Mr. Graf is the
Executive Vice President and Chief Financial Officer of FedEx
Corporation, a position he has held since 1998 and is a member of
FedEx Corporation’s Executive Committee. Prior to that time, he was
Executive Vice President and Chief Financial Officer for FedEx Express,
FedEx’s predecessor, from 1991 to 1998. Mr. Graf joined FedEx in 1980.
He serves as a director for NIKE Inc. and Kimball International, Inc.

JOHN S. GRINALDS
Committees: Audit, Compensation, Nominating and
Corporate Governance
General Grinalds has served as a director since November 1997.
General Grinalds became the President of The Citadel in Charleston,
South Carolina in 1997. Prior to assuming the presidency of The Citadel,
General Grinalds was the headmaster of Woodberry Forest School in
Virginia. From 1989 to 1991, General Grinalds held the rank of Major
General and was the commanding general of the Marine Corps Recruit
Depot in San Diego, California.

RALPH HORN
Committees: Compensation (Chairman), Nominating and Corporate
Governance (Chairman)
Mr. Horn has served as a director since April 1998. Mr. Horn was
elected President, Chief Operating Officer, and a director of First
Tennessee National Corporation (“FTNC”) in July 1991 and Chief
Executive Officer in April 1994. Mr. Horn was elected Chairman of the
Board of FTNC in January 1996. Mr. Horn served as Chief Executive
Officer and President of FTNC until July 2002, and as Chairman of the
Board through December 2003. Mr. Horn is also a director of Harrah’s
Entertainment, Inc., Gaylord Entertainment Corporation and The Church
Health Center.

MICHAEL S. STARNES
Committees: Audit, Compensation, Nominating and Corporate
Governance
Mr. Starnes has served as a director since July 1998. Mr. Starnes founded
M.S. Carriers, Inc., a truckload transportation and logistics company, in
1978 and served as Chairman and Chief Executive Officer until its
merger with Swift Transportation Co., Inc. in June 2001. Since June 2001,
Mr. Starnes has served as President of M.S. Carriers, a subsidiary of Swift
Transportation Co., Inc. He is also a director of Swift Transportation Co.,
Inc. and Union Planters Corporation.

m
o
c
.
s
r
o
n
n
o
c
-
n
a
r
r
u
c
.
w
w
w

.
c
n
I

,
s
r
o
n
n
o
C
&
n
a
r
r
u
C
y
b

d
e
n
g
i
s
e
D

MID-AMERICA APARTMENT COMMUNITIES, INC.

6584 Poplar Avenue, Suite 300

Memphis, TN 38138

901.682.6600