Mid-America Apartment Communities
Annual Report 2006

Plain-text annual report

MID-AMERICA APARTMENT COMMUNITIES, INC. 6584 Poplar Avenue, Suite 300 Memphis, TN 38138 901-682-6600 www.maac.net MID-AMERICA APARTMENT COMMUNITIES, INC. 420 06 Annual Report MID-AMERICA APARTMENT COMMUNITIES, INC. MID-AMERICA APARTMENT COMMUNITIES, INC. 420 06 Annual Report Words that drive us… 2006 ANNUAL REPORT C OR P OR A T E I N F OR M A T IO N CORPORATE HEADQUARTERS Mid-America Apartment Communities, Inc. 6584 Poplar Avenue, Suite 300 Memphis, TN 38138 901-682-6600 www.maac.net INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP, Memphis, TN GENERAL COUNSEL Bass, Berry & Sims, PLC, Memphis, TN ANNUAL SHAREHOLDERS MEETING Mid-America Apartment Communities, Inc. will hold its 2007 Annual Meeting of Shareholders on Tuesday, May 22, 2007, at 1:00 p.m. CST at the Reserve at Dexter Lake apartments in Memphis, TN. STOCK LISTINGS Mid-America’s stock is listed on the New York Stock Exchange (NYSE). Our common stock is traded under the stock symbol MAA. We have two series of publicly traded preferred stock and they are traded under the stock symbols MAA Pr F and MAA Pr H. TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 866-668-6550 shareholder toll-free line www.amstock.com 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 or direct stock purchase plan should contact American Stock Transfer & Trust Company at the shareholder service number listed above or access their account at the web-site listed above. Limited partners of Mid-America Apartments, L.P. wishing to transfer their units or convert units into shares of common stock of Mid-America Apart- ment Communities, Inc. should contact Mid-America directly at the corporate headquarters. 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 ANNUAL REPORT AND FORM 10-K A copy of Mid-America’s Annual Report and Form 10-K for the year ended December 31, 2006, as filed with the Securities and Exchange Commission (SEC) will be sent without charge upon written request to the corporate headquarters address, attention Investor Relations, and is also available on the Investor Relations page of our web-site at www.maac.net. Mid-America’s other SEC filings as well as our corporate governance documents are also available. CEO AND CFO CERTIFICATIONS As is required by Section 303A.12(a) of the NYSE’s corporate governance standards, the CEO Certifi- cation has been previously filed without qualifica- tion with the NYSE. Certifications of the CEO and CFO pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 have been filed as exhibits to Mid-America’s Form 10-K. THE OPEN ARMS FOUNDATION The Open Arms Foundation is Mid-America’s corporate charity that provides fully-furnished two-bedroom apartment homes free of charge to families displaced from their own homes by long-term medical care needs. The Open Arms Foundation currently offers 36 homes to families in medical crisis. MID-AMERICA APARTMENT COMMUNITIES, INC. Growth Quality MID-AMERICA APARTMENT COMMUNITIES’ RECORD OF PRODUCING STRONG AND STEADY RESULTS, THROUGH BOTH THE UPS AND DOWNS OF REAL ESTATE MARKET CYCLES HAS GENER ATED SIGNIFICANT VALUE FOR OUR INVESTORS, LENDERS, RESIDENTS AND EMPLOYEES. BY REMAINING FOCUSED AND COMMITTED TO THE GOALS OF DISCI- PLINED GROWTH, HIGH-QUALITY CREATIVE INNOVATION AND STRONG ACCOUNTABILITY AND COMMUNICATION TO THOSE WE SERVE, WE ARE WELL POSITIONED TO MEET THE HIGH EXPECTATIONS WE HAVE FOR OUR COMPANY IN THE COMING YEARS. Words that drive us… P /1 Community Innovation MID-AMERICA APARTMENT COMMUNITIES, INC. (NYSE: MA A) I S A P U B L I C LY T R A D E D R E A L E S TAT E I N V E S T M E N T T R U S T W H I C H OW N E D O R H A D A N OW N E R S H I P I N T E R E S T I N 138 M U LT I FA M I LY A PA RT M E N T C O M M U N I T I E S W I T H 40,293 A PA RT M E N T H O M E S T H R O U G H O U T T H E S U N B E LT R E G I O N O F T H E U N I T E D S TAT E S AT Y E A R E N D . MID-AMERICA APARTMENT COMMUNITIES, INC. TALUS RANCH AT SONORAN FOOTHILLS Phoenix, Arizona Acquired 2006 P /2 P /3 PRESERVE AT BRIER CREEK Raleigh, North Carolina Phase II Development SILVERADO Austin, Texas Acquired 2006 P /3 Growth Through extensive and disciplined due diligence, Mid-America has added $543 million of newer high-quality properties over the last four years. Steady expansion in high-growth markets is a key focus in our plan to ensure the company is positioned to drive robust earnings performance in the future. Through selective acquisitions, value-added new MID-AMERICA IS COMMITTED development and expansion of existing communities, and TO A STRATEGY OF DISCIPLINED renovation of a number of owned proper ties…and a significantly strengthened balance sheet to support these GROWTH THROUGH LEVERAGING activities…Mid-America is well positioned to capture THE COMPANY’S STRONG OPERATING steady growth over the next few years. PLATFORM AND STEADY PIPELINE OF INVESTMENT OPPORTUNITIES. MID-AMERICA APARTMENT COMMUNITIES, INC. TALUS RANCH AT SONORAN FOOTHILLS Phoenix, Arizona Acquired 2006 P /2 P /3 PRESERVE AT BRIER CREEK Raleigh, North Carolina Phase II Development SILVERADO Austin, Texas Acquired 2006 Through extensive and disciplined due diligence, Mid-America has added $543 million of newer high-quality properties over the last four years. Steady expansion in high-growth markets is a key focus in our plan to ensure the company is positioned to drive robust earnings performance in the future. Through selective acquisitions, value-added new development and expansion of existing communities, and renovation of a number of owned proper ties…and a significantly strengthened balance sheet to support these activities…Mid-America is well positioned to capture steady growth over the next few years. ACQUISITION ACTIVITY AND FFO CONTRIBUTION $192.3 33.4% $154.0 12.7% 24.5% $102.9 $94.1 3.9% 2003 2004 2005 2006 Acquisitions (in millions) Percent of FFO contributed from acquisitions from all years shown Excludes joint venture activity. MID-AMERICA APARTMENT COMMUNITIES, INC. LIGHTHOUSE AT FLEMING ISLAND Jacksonville, Florida Landscape Beautification Award - First Coast Apartment Association P / 4 P / 5 BRENTWOOD DOWNS Nashville, Tennessee Kitchen Renovation Growth MID-AMERICA IS COMMITTED TO A STRATEGY OF DISCIPLINED GROWTH THROUGH LEVERAGING THE COMPANY’S STRONG OPERATING PLATFORM AND STEADY PIPELINE OF INVESTMENT OPPORTUNITIES. LIGHTHOUSE AT FLEMING ISLAND Jacksonville, Florida Landscape Beautification Award - First Coast Apartment Association P / 4 P / 5 BRENTWOOD DOWNS Nashville, Tennessee Kitchen Renovation Growth MID-AMERICA IS COMMITTED TO A STRATEGY OF DISCIPLINED GROWTH THROUGH LEVERAGING THE COMPANY’S STRONG OPERATING PLATFORM AND STEADY PIPELINE OF INVESTMENT OPPORTUNITIES. Quality A commitment to quality in the properties we buy and operate, in the service provided to residents, in the per- formance generated for our shareholders and in support of our fellow associates, is key in defining Mid-America’s culture of quality service and accountability. Creating value is fundamentally tied to a goal of exceeding expectations AT MID-AMERICA WE BELIEVE THAT and we believe that is only achievable through a commit- ment to quality in execution and delivery. A COMMITMENT TO QUALITY IS FUNDAMENTAL TO CREATING LONG-TERM AND STEADY VALUE CREATION FOR THOSE WE SERVE. AVERAGE AGE OF PROPERTY DISPOSITIONS AND ACQUISITIONS OVER LAST FIVE YEARS 29.3 Years 17.4 Years 5.2 Years 4.9 Years Mid-America Mid-America including joint venture transactions Dispositions Acquisitions MID-AMERICA APARTMENT COMMUNITIES, INC. LIGHTHOUSE AT FLEMING ISLAND Jacksonville, Florida Landscape Beautification Award - First Coast Apartment Association P / 4 P / 5 BRENTWOOD DOWNS Nashville, Tennessee Kitchen Renovation Growth MID-AMERICA IS COMMITTED TO A STRATEGY OF DISCIPLINED GROWTH THROUGH LEVERAGING THE COMPANY’S STRONG OPERATING PLATFORM AND STEADY PIPELINE OF INVESTMENT OPPORTUNITIES. A commitment to quality in the properties we buy and operate, in the service provided to residents, in the per- formance generated for our shareholders and in support of our fellow associates, is key in defining Mid-America’s culture of quality service and accountability. Creating value is fundamentally tied to a goal of exceeding expectations and we believe that is only achievable through a commit- ment to quality in execution and delivery. AVERAGE AGE OF PROPERTY DISPOSITIONS AND ACQUISITIONS OVER LAST FIVE YEARS 29.3 Years 17.4 Years 5.2 Years 4.9 Years Mid-America Mid-America including joint venture transactions Dispositions Acquisitions MID-AMERICA APARTMENT COMMUNITIES, INC. MID-AMERICA ASSOCIATES AT WORK P / 6 P /7 BOB WINKLER Quality AT MID-AMERICA WE BELIEVE THAT A COMMITMENT TO QUALITY IS FUNDAMENTAL TO CREATING LONG-TERM AND STEADY VALUE CREATION FOR THOSE WE SERVE. MARY SANDOMIR KIM BROWN JON OWINGS P /7 Community Our company’s record of strong and stable performance is a result of the dedication and superior capabilities of the team of associates working at Mid-America. With a long-established culture of service oriented leadership, Mid-America employees work every day to build a sense of community at each of our properties; an environment that generates value in the service and product that we deliver to our residents. This sense of responsibility is the foundation for the culture that drives our company and the execution of our responsibility to those served by Mid-America’s success. MID-AMERICA’S RECORD OF HONEST, TIMELY AND THOROUGH COMMUNICATION TO RESIDENTS, SHAREHOLDERS, LENDERS AND EMPLOYEES IS A CORNERSTONE OF OUR COMPANY’S CULTURE. MARTHA KILLEN MID-AMERICA APARTMENT COMMUNITIES, INC. MID-AMERICA ASSOCIATES AT WORK P / 6 P /7 BOB WINKLER KIM BROWN JON OWINGS Quality AT MID-AMERICA WE BELIEVE THAT A COMMITMENT TO QUALITY IS FUNDAMENTAL TO CREATING LONG-TERM AND STEADY VALUE CREATION FOR THOSE WE SERVE. MARY SANDOMIR MARTHA KILLEN MID-AMERICA APARTMENT COMMUNITIES, INC. REDUCTION IN COMMUNITY LEADER TURNOVER 33.3% 2006 NMHC Industry Average Our company’s record of strong and stable performance is a result of the dedication and superior capabilities of the team of associates working at Mid-America. With a long-established culture of service oriented leadership, Mid-America employees work every day to build a sense of community at each of our properties; an environment that generates value in the service and product that we deliver to our residents. This sense of responsibility is the foundation for the culture that drives our company and the execution of our responsibility to those served by Mid-America’s success. 21.2% 16.6% 2005 2006 SATISFIED RESIDENT Reserve at Dexter Lake Memphis, Tennessee P / 8 P / 9 Community MID-AMERICA’S RECORD OF HONEST, TIMELY AND THOROUGH COMMUNICATION TO RESIDENTS, SHAREHOLDERS, LENDERS AND EMPLOYEES IS A CORNERSTONE OF OUR COMPANY’S CULTURE. P / 9 TRAINING CENTER Memphis, Tennessee TRACY WEST Leasing Office, Reserve at Dexter Lake Memphis, Tennessee Innovation In 2006 we successfully completed an extensive test and evaluation of new “yield management” pricing processes that we will implement across the portfolio during 2007. We continue to broaden our use of the internet to efficiently attract new residents and manage on-site operations at each of our properties. We believe the enhanced capa- bilities generated from this new technology will create a very positive long-term impact to Mid-America’s ability to out-perform and generate higher levels of value for shareholders. SIGNIFICANT CHANGES AND UPGRADES TO OPERATING SYSTEMS IS GENERATING A MORE RESPONSIVE “LEASING AND LIVING” EXPERIENCE FOR RESIDENTS AND MORE EFFICIEN- CIES IN COMPANY OPERATIONS. MID-AMERICA APARTMENT COMMUNITIES, INC. SATISFIED RESIDENT Reserve at Dexter Lake Memphis, Tennessee P / 8 P / 9 TRAINING CENTER Memphis, Tennessee TRACY WEST Leasing Office, Reserve at Dexter Lake Memphis, Tennessee Community MID-AMERICA’S RECORD OF HONEST, TIMELY AND THOROUGH COMMUNICATION TO RESIDENTS, SHAREHOLDERS, LENDERS AND EMPLOYEES IS A CORNERSTONE OF OUR COMPANY’S CULTURE. In 2006 we successfully completed an extensive test and evaluation of new “yield management” pricing processes that we will implement across the portfolio during 2007. We continue to broaden our use of the internet to efficiently attract new residents and manage on-site operations at each of our properties. We believe the enhanced capa- bilities generated from this new technology will create a very positive long-term impact to Mid-America’s ability to out-perform and generate higher levels of value for shareholders. INTERNET LEASING ACTIVITY 16,730 13,929 20% increase 28% of all leads 116% increase 9% of all applications 3,283 1,518 Internet Traffic Internet Applications 2005 2006 MID-AMERICA APARTMENT COMMUNITIES, INC. TO MY FELLOW SHAREHOLDERS: P /10 P /11 H. Eric Bolton, Jr. Chairman and CEO 2006 was a year of record performance for Mid-America. Our portfolio of high-quality properties located across the Sunbelt region of the country generated the strongest year of same store growth in net operating income in our company’s history. Funds from operations achieved for the year also set a new record of results for Mid-America. With increasing demand for apartment housing, fueled by solid job growth and household formation trends throughout our high-growth region of the country, we are in solid position to capture continued steady and robust performance from Mid-America’s portfolio of property investments. We have made significant changes and improvements in our operating systems over the past couple of years that are really just now starting to make an impact. The introduction of new technologies will allow us to capture more efficiency in our opera- tion, more robust pricing performance for leases written and generate more value from each property. Internet based advertising and leasing is growing rapidly and bringing about significant change in how we capture new residents and better serve our existing residents. We will be rolling out a new yield management pricing program in 2007 that will further revolutionize how we execute our business and holds great potential for continuing to drive higher levels of value from our existing properties. As part of our $192 million of acquisitions completed in 2006, we made an initial investment in the high-growth Phoenix market and are excited about establishing a larger presence there. Like many of our other high-growth markets across the Sunbelt states, we believe the long-term job growth prospects in Phoenix will deliver strong and steady demand for apartment housing over the next ten years. We expect to capture addi- tional growth this year as a result of a very active deal pipeline. The disciplined investment practices that have guided our company so successfully over the past thirteen years continue to ensure that capital deployment is executed in ways that add meaningfully to shareholder value over the long-term. In addition to the growth captured through our acquisition of existing properties, during 2007 we will be under construction and initial lease-up of new development projects in Raleigh, NC, Jacksonville, FL and Dallas, TX which are highly profitable expansions of existing communities. Innovation SIGNIFICANT CHANGES AND UPGRADES TO OPERATING SYSTEMS IS GENERATING A MORE RESPONSIVE “LEASING AND LIVING” EXPERIENCE FOR RESIDENTS AND MORE EFFICIEN- CIES IN COMPANY OPERATIONS. P /11 Mid-America’s balance sheet is in great shape. Debt as a percentage of gross assets was 52% at year-end, down from 56% a year earlier. Our fixed-charge coverage ratio of 2.15x is near the highest in the company’s history. With over $200 million of capacity under our existing credit facilities, we believe the company is in a very strong position to support our steady growth plans. Total shareholder return for the year 2006 was a very solid 23%. Mid-America’s annual total return to shareholders over the last five years is 24.9% and represents one of the strongest five-year shareholder performances among all apartment real estate investment trusts. Of course our company’s history of success and prospects for strong long-term perfor- mance is ultimately a result of the energy, commitment and industry leading capabilities of our team of associates. The average tenure at Mid-America of the senior management team, those with a title of vice-president or above, now stands at 10 years. This dedication is a key component of our company’s ability to deliver strong, stable “out performance” in an industry that is marked with high levels of employee turnover. In addition to the dedication from the team of associates working at Mid-America, our company’s outstanding Board of Directors has been an important part of our success. I am grateful for their wise counsel. Two members of our Board of Directors, Robert Fogelman and Michael Starnes, will be retiring from the Board concurrent with this year’s shareholder meeting. I am grateful for their years of service and the valuable contributions they have provided. On behalf of all of us at Mid-America, thank you for your investment in our company and the trust that you have placed in our team. We are excited about the progress and performance captured over the last few years. Our team is motivated and excited about plans to generate higher value for all our stakeholders at Mid-America. Sincerely, H. Eric Bolton, Jr. Chairman and CEO HISTORICAL FFO AND COMMON DIVIDENDS PAID PER SHARE $3.33 $3.00 $3.20 $2.59 $2.34 $2.59 $2.34 $2.34 $2.35 $2.38 MID-AMERICA APARTMENT COMMUNITIES, INC. FFO per share, diluted Common dividend per share 2002 2003 2004 2005 2006 2006 HIGHLIGHTS P/12 20 0 6 F I N A N C I A L H I G H L I G H T S (Dollars and shares in thousands, except per share data) Net income Preferred dividend distribution Net income available for common shareholders Depreciation of real estate assets Net gain on insurance and other settlement proceeds Gain on disposition within unconsolidated entities Net (gain) loss on insurance and other settlement proceeds of discontinued operations Depreciation of real estate assets of discontinued operations Gain on sale of discontinued operations Depreciation of real estate assets of unconsolidated entities Minority interest in operating partnership income Years Ended December 31, 2006 2005 2004 $ 20,945 13,962 $ 19,744 14,329 $ 6,983 78,048 (84) — — 160 — 500 1,590 5,415 73,067 (749) (3,034) 25 637 — 482 1,571 25,198 14,825 10,373 66,659 (2,683) (3,249) (526) 1,324 (5,825) 1,688 2,264 Funds from operations $ 87,197 $ 77,414 $ 70,025 Weighted average shares, diluted Net income available for common shareholders, diluted Weighted average shares and units, diluted Funds from operations per share, diluted Dividends paid per share Real estate owned, at cost Capital improvements in progress Investments in and advances to real estate joint ventures Total debt Shareholders’ equity and minority interest Market capitalization (shares and units)(1) Number of properties, including joint venture ownership interest(2) Number of apartment units, including joint venture ownership interest(2) 23,698 0.29 26,204 3.33 2.38 $ $ $ $ 2,218,532 20,689 $ $ 3,718 $ 1,196,349 $ 481,666 $ 1,745,674 21,607 0.25 24,227 3.20 2.35 $ $ $ $ 1,987,853 4,175 $ $ 4,182 $ 1,140,046 $ 392,324 $ 1,358,725 20,652 0.50 23,316 3.00 2.34 $ $ $ $ 1,862,850 6,519 $ $ 14,143 $ 1,083,473 $ 378,701 $ 1,145,183 138 40,293 132 38,227 132 37,904 (1) Market capitalization includes all series of preferred shares (value based on $25 per share liquidation preference) regardless of classification on balance sheet, common shares and partnership units (value based on common stock equivalency). (2) Property and apartment unit totals have not been adjusted to exclude properties held for sale. P/13 $82,908 $70,940 R E T U R N O N I N V E S T M E N T Value of $10,000 Investment $100,000 $80,000 $60,000 $40,000 $20,000 $0 IPO 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: SNL Equity Research MAA Investment Peer Group Investment S U N B E L T R E G IO N A L F O C U S Ohio Arizona Arkansas Texas Mississippi Virginia Kentucky Tennessee North Carolina South Carolina Alabama Georgia Florida Represents areas where Mid-America owns communities Represents areas where Mid-America has regional offices MID-AMERICA APARTMENT COMMUNITIES, INC. 2006 HIGHLIGHTS P/14 C O N S OL I DA T E D B A L A N C E S H E E T S (Dollars in thousands, except per share data) 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 Investments 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 Assets held for sale Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY: Liabilities: Notes payable Accounts payable Accrued expenses and other liabilities Security deposits Liabilities associated with assets held for sale Total liabilities Minority interest Shareholders’ equity: Preferred stock, $.01 par value per share, 20,000,000 shares authorized, $166,863 or $25 per share liquidation preference; 9 1/4% Series F Cumulative Redeemable Preferred Stock, 3,000,000 shares authorized, 474,500 shares issued and outstanding 8.30% Series H Cumulative Redeemable Preferred Stock, 6,200,000 shares authorized, 6,200,000 shares issued and outstanding Common stock, $.01 par value per share, 50,000,000 shares authorized; 25,093,156 and 22,048,372 shares issued and outstanding at December 31, 2006, and 2005, respectively Additional paid-in capital Other Accumulated distributions in excess of net income Accumulated other comprehensive income Total shareholders’ equity Total liabilities and shareholders’ equity See Form 10-K for related footnote disclosures. December 31, 2006 2005 $ 206,635 1,921,462 51,374 20,689 $ 179,523 1,740,818 46,301 4,175 2,200,160 (543,802) 1,970,817 (473,421) 1,656,358 2,360 7,103 3,718 1,669,539 5,545 4,145 16,033 38,865 5,051 7,468 1,497,396 1,366 7,345 4,182 1,510,289 14,064 5,534 15,338 29,849 5,051 — $ 1,746,646 $ 1,580,125 $ 1,196,349 2,773 57,919 7,670 269 $ 1,140,046 3,278 38,048 6,429 — 1,264,980 32,600 1,187,801 29,798 5 62 5 62 251 815,941 — (378,090) 10,897 220 671,885 (2,422) (314,352) 7,128 449,066 362,526 $ 1,746,646 $ 1,580,125 C O N S OL I DA T E D S T A T E M E N T S O F OP E R A T IO N S P/15 (Dollars and shares in thousands, except per share data) Operating revenues: Rental revenues Other property revenues Total property revenues Management fee income Total operating revenues Property operating expenses: Personnel Building repairs and maintenance Real estate taxes and insurance Utilities Landscaping Other operating Depreciation Total property operating expenses Property management expenses General and administrative expenses Income from continuing operations before non-operating items Interest and other non-property income Interest expense Loss on debt extinguishment Amortization of deferred financing costs Minority interest in operating partnership income (Loss) income from investments in real estate joint ventures Incentive fee from real estate joint ventures Net gain on insurance and other settlement proceeds Gain on sale of non-depreciable assets Gain on disposition within real estate joint ventures Income from continuing operations Discontinued operations: Income from discontinued operations before asset impairment, settlement proceeds and gain on sale Asset impairment on discontinued operations Net loss on insurance and other settlement proceeds on discontinued operations Gain on sale of discontinued operations Net income Preferred dividend distribution Net income available for common shareholders Weighted average shares outstanding Basic Effect of dilutive stock options Diluted Net income available for common shareholders Discontinued property operations Income from continuing operations available for common shareholders Earnings per share—basic: Income from continuing operations available for common shareholders Discontinued property operations Net income available for common shareholders Earnings per share—diluted: Income from continuing operations available for common shareholders Discontinued property operations Net income available for common shareholders See Form 10-K for related footnote disclosures. MID-AMERICA APARTMENT COMMUNITIES, INC. Years ended December 31, 2006 2005 2004 $ 311,524 14,265 $ 283,650 12,157 $ 254,902 10,645 325,789 210 295,807 325 265,547 582 325,999 296,132 266,129 38,022 12,072 40,878 19,704 8,649 14,991 79,388 213,704 13,077 11,886 87,332 673 (63,512) (551) (2,036) (1,590) (114) — 84 50 — 35,423 10,965 37,341 17,686 7,885 14,363 74,413 198,076 11,871 10,354 75,831 498 (58,442) (409) (2,011) (1,571) 65 1,723 749 334 3,034 31,782 9,838 34,752 15,374 7,176 13,427 68,010 180,359 10,357 9,240 66,173 593 (50,683) 1,095 (1,753) (2,264) (287) — 2,683 — 3,249 20,336 19,801 18,806 609 — — — 211 (243) (25) — 241 (200) 526 5,825 20,945 13,962 19,744 14,329 25,198 14,825 $ 6,983 $ 5,415 $ 10,373 23,474 224 23,698 21,405 202 21,607 20,317 335 20,652 $ 6,983 (609) $ 5,415 57 $ 10,373 (6,392) $ 6,374 $ 5,472 $ 3,981 $ 0.27 0.03 $ 0.26 (0.01) $ 0.20 0.31 $ 0.30 $ 0.25 $ 0.51 $ $ 0.27 0.02 $ 0.25 — 0.19 0.31 $ 0.29 $ 0.25 $ 0.50 2006 HIGHLIGHTS P /16 P /17 R E P OR T O F I N DE P E N DE N T R E G I S T E R E D P U B L I C AC C O U N T I N G F I R M THE BOARD OF DIRECTORS AND SHAREHOLDERS OF MID-AMERICA APARTMENT COMMUNITIES, INC. We have audited the accompanying consolidated balance sheets of Mid-America Apartment Communities, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. The consolidated financial statements of Mid-America Apartment Communities, Inc. for the year ended December 31, 2004 were audited by other auditors whose report dated March 8, 2005 expressed an unqualified opinion on those statements. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall finan- cial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Mid-America Apartment Communities, Inc. at December 31, 2006 and 2005, and the consoli- dated results of its operations and its cash flows for each of the years then ended, in conformity with U.S. generally accepted accounting principles. As discussed in Note 2 of the Notes to Consolidated Financial Statements, effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Mid-America Apartment Communities, Inc.’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2007 expressed an unqualified opinion thereon. Memphis, Tennessee February 27, 2007 P /17 R E P OR T O F I N DE P E N DE N T R E G I S T E R E D P U B L I C AC C O U N T I N G F I R M THE BOARD OF DIRECTORS AND SHAREHOLDERS OF MID-AMERICA APARTMENT COMMUNITIES, INC. We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Mid-America Apartment Communities, Inc. maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Mid-America Apartment Communities, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assess- ment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with gener- ally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assur- ance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstate- ments. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management’s assessment that Mid-America Apartment Communities, Inc. maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Mid-America Apartment Communities, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Mid-America Apartment Communities, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity, and cash flows for the years then ended of Mid-America Apartment Communities, Inc. and our report dated February 27, 2007 expressed an unqualified opinion thereon. Memphis, Tennessee February 27, 2007 MID-AMERICA APARTMENT COMMUNITIES, INC. 2006 HIGHLIGHTS P /18 20 0 6 C I V I C A N D I N D U S T R Y AWA R D S MID-AMERICA: Best Employers in TN—Best Companies Group, Business Tennessee Magazine MID-AMERICA: Best Places to Work—Finalist Large Company Category, Memphis Business Journal MID-AMERICA: American Hero Company, American Values Investments, Inc. MID-AMERICA: Bronze Award—Web Site Design, National Association of Real Estate Investment Trusts HUMAN RESOURCES DEPARTMENT: Best of HR, SHRM—Memphis Chapter CYNTHIA Y. THOMPSON: 50 Women Who Make a Difference, Memphis Woman Magazine JAMES MACLIN: Top 40 Under 40, Memphis Business Journal TOM GRIMES: Meet 20 Up-and-Comers, Multifamily Executive Magazine ABBINGTON: Beautification Award Honor Roll, The City of Huntsville Beautification Board BRENTWOOD DOWNS: Best of the Best Award, Nashville Apartment Association EAGLE RIDGE: Assistant Manager of the Year, Greater Birmingham Apartment Association EAGLE RIDGE: First Place Award—Best Mini Model, Greater Birmingham Apartment Association EAGLE RIDGE: Best Landscape and Color Program, Greater Birmingham Apartment Association EAGLE RIDGE: First Place Beautification Award, Greater Birmingham Apartment Association FOUNTAIN LAKE: Clean Sweep Award, Savannah Apartment Association GEORGETOWN GROVE: Gold Beautification Award, Brunswick Chamber of Commerce GRAND RESERVE: Beautification Award, Lexington Apartment Association GRANDE VIEW: First Place Beautification, Nashville Apartment Association HIDDEN CREEK: First Place Beautification, Chattanooga Apartment Association HIDDEN CREEK: Star Excellence Award, Chattanooga Apartment Association LAKE LANIER CLUB: Landscape Maintenance Award, Georgia Green Apartment Association LAKE LANIER CLUB: Landscape Maintenance Award, Metro Atlanta Landscape and Turf Association LAKESHORE LANDING: Landscape Excellence, Mississippi Multifamily Council LAKESHORE LANDING: Best Entrance Landscape, Mississippi Multifamily Council P /19 LIGHTHOUSE AT FLEMING ISLAND: Property Manager of the Year, First Coast Apartment Association LIGHTHOUSE AT FLEMING ISLAND: Marketing Concept of the Year, First Coast Apartment Association LIGHTHOUSE AT FLEMING ISLAND: Landscape Beautification Award, First Coast Apartment Association OAKS AT WILMINGTON ISLAND: Gold Winner Landscape Award, Savannah Apartment Association PARK PLACE: Honorable Mention Beautification Award, Spartanburg Chamber of Commerce PARK PLACE: First Place—Overall Landscaping, Upper State Apartment Association PARK PLACE: First Place—Floral Design, Upper State Apartment Association PEAR ORCHARD: Landscape Excellence, Mississippi Multifamily Council RESERVE AT DEXTER LAKE: Beautiful Business Award, Memphis City Beautiful Commission SILVERADO: Leasing Consultant of the Year, Austin Apartment Association THE CORNERS AT CRYSTAL LAKE: Property of the Year, Triad Apartment Association THE CORNERS AT CRYSTAL LAKE: NOI Turnaround Award, Triad Apartment Association THE FAIRWAYS: Best Property, Apartment Association of Greater Columbia THE FAIRWAYS: Beautification Award (11-20 y/o category), Apartment Association of Greater Columbia THE MANSION: Beautification Award, Lexington Apartment Association THE OAKS: Civic Pride Award “Keep Jackson Beautiful,” City of Jackson THE PADDOCK CLUB HUNTSVILLE: Mayor’s Beautification Award, City of Huntsville Beautification Board THE PADDOCK CLUB MURFREESBORO: Reader’s Choice—Best Place to Live, Daily News Journal THE TOWNSHIP IN HAMPTON WOODS: Award of Excellence—Property of the Year, Peninsula Apartment Association THE TOWNSHIP IN HAMPTON WOODS: Maintenance Person of the Year, Peninsula Apartment Association THE TOWNSHIP IN HAMPTON WOODS: In recognition of outstanding contributions in commercial beautification and recycling, Virginia Peninsula Clean Business Forum WINDRIDGE: First Place Landscaping, Chattanooga Apartment Association WOODSTREAM: Property of the Year, 2nd Runner-Up, Triad Apartment Association MID-AMERICA APARTMENT COMMUNITIES, INC. 2006 HIGHLIGHTS P /20 B OA R D O F DI R E C T OR S H. ERIC BOLTON, JR. 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, was named Chief Operating Officer in February 1996 and promoted to President in December 1996. Mr. Bolton assumed the position of Chief Executive Officer following the planned retirement of George E. Cates in October 2001 and became Chairman of the Board in September 2002. GEORGE E. CATES A director since 1994, Mr. Cates 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 retirement in October 2001. Mr. Cates was Chief Executive Officer of The Cates Company from 1977 until its merger with us in February 1994. ROBERT F. FOGELMAN Committees: Compensation, Nominating and Corporate Governance. A director since July 1994, Mr. Fogelman has been the President of Fogelman Investment Company, a privately owned investment firm, for more than ten years. In com- pliance with the retirement age in the Company’s Corporate Governance Guide- lines, Mr. Fogelman will not be sitting for re-election at the 2007 Annual Meeting for Shareholders. ALAN B. GRAF, JR. Committees: Audit (Chairman). A direc- tor since June 2002, Mr. Graf is the Execu- tive Vice President and Chief Financial Officer of FedEx Corporation, a position he has held since 1998. 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. REIT portfolio. From 2005 to 2006 Ms. McCormick was a strategy consultant for Hawkeye Partners, an investment man- agement firm. Ms. McCormick has also held a number of leadership positions on a variety of national and regional real estate associations. JOHN S. GRINALDS WILLIAM B. SANSOM Committees: Audit, Compensation, Nominating and Corporate Governance. A director since November 1997, General Grinalds ser ved as the President of The Citadel from 1997 until August 2005. Prior to assuming the presidency of The Citadel, General Grinalds was the head- master of Woodberry Forest School. From 1989 to 1991, General Grinalds held the rank of Major General in the United States Marine Corps. RALPH HORN Committees: Compensation (Chairman), Nominating and Corporate Governance (Chairman). A director since April 1998, Mr. Horn was elected President, Chief Operating Officer, and a director of First Horizon National Corporation (“FHNC”) in July 1991 and Chief Executive Officer in April 1994. Mr. Horn was elected Chairman of the Board of FHNC in January 1996. Mr. Horn served as Chief Executive Officer and President of FHNC until July 2002, and as Chairman of the Board through December 2003. MARY E. MCCORMICK Committees: Audit. A director since March 2006, Ms. McCormick served the Ohio Public Employees Retirement System from 1988 through 2005, most recently directing real estate investments and overseeing an internally managed Committees: Compensation, Nominating and Corporate Governance. A director since November 2006, Mr. Sansom is the Chairman of the Board of Directors, Chief Executive Officer and President of the H.T. Hackney Co. From 1979 to 1981, Mr. Sansom ser ved as the Tennessee Commissioner of Transportation, and from 1981 to 1983 as the Tennessee Com- missioner of Finance and Administration. In 2006, Mr. Sansom was named the Chairman of the Board of the Tennessee Valley Authority. MICHAEL S. STARNES Committees: Audit. A director since July 1998, Mr. Starnes founded M.S. Carriers, Inc., a truckload transportation and logis- tics company, in 1978 and served as Chairman and Chief Executive Officer until its merger with Swift Transportation Co., Inc. in June 2001. Mr. Starnes served as President of M.S. Carriers, a subsidiary of Swift Transportation Co., Inc., from June 2001 until his planned retirement in June 2004. Mr. Starnes has elected not to sit for re-election at the 2007 Annual Meeting for Shareholders. SIMON R. C. WADSWORTH A director since March 1994, Mr. Wadsworth joined us in March 1994 and has served as Executive Vice President and Chief Financial Officer since that time. 2006 ANNUAL REPORT C OR P OR A T E I N F OR M A T IO N CORPORATE HEADQUARTERS Mid-America Apartment Communities, Inc. 6584 Poplar Avenue, Suite 300 Memphis, TN 38138 901-682-6600 www.maac.net INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP, Memphis, TN GENERAL COUNSEL Bass, Berry & Sims, PLC, Memphis, TN ANNUAL SHAREHOLDERS MEETING Mid-America Apartment Communities, Inc. will hold its 2007 Annual Meeting of Shareholders on Tuesday, May 22, 2007, at 1:00 p.m. CST at the Reserve at Dexter Lake apartments in Memphis, TN. STOCK LISTINGS Mid-America’s stock is listed on the New York Stock Exchange (NYSE). Our common stock is traded under the stock symbol MAA. We have two series of publicly traded preferred stock and they are traded under the stock symbols MAA Pr F and MAA Pr H. TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 866-668-6550 shareholder toll-free line www.amstock.com 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 or direct stock purchase plan should contact American Stock Transfer & Trust Company at the shareholder service number listed above or access their account at the web-site listed above. Limited partners of Mid-America Apartments, L.P. wishing to transfer their units or convert units into shares of common stock of Mid-America Apart- ment Communities, Inc. should contact Mid-America directly at the corporate headquarters. 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 ANNUAL REPORT AND FORM 10-K A copy of Mid-America’s Annual Report and Form 10-K for the year ended December 31, 2006, as filed with the Securities and Exchange Commission (SEC) will be sent without charge upon written request to the corporate headquarters address, attention Investor Relations, and is also available on the Investor Relations page of our web-site at www.maac.net. Mid-America’s other SEC filings as well as our corporate governance documents are also available. CEO AND CFO CERTIFICATIONS As is required by Section 303A.12(a) of the NYSE’s corporate governance standards, the CEO Certifi- cation has been previously filed without qualifica- tion with the NYSE. Certifications of the CEO and CFO pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 have been filed as exhibits to Mid-America’s Form 10-K. THE OPEN ARMS FOUNDATION The Open Arms Foundation is Mid-America’s corporate charity that provides fully-furnished two-bedroom apartment homes free of charge to families displaced from their own homes by long-term medical care needs. The Open Arms Foundation currently offers 36 homes to families in medical crisis. MID-AMERICA APARTMENT COMMUNITIES, INC. Growth Quality MID-AMERICA APARTMENT COMMUNITIES’ RECORD OF PRODUCING STRONG AND STEADY RESULTS, THROUGH BOTH THE UPS AND DOWNS OF REAL ESTATE MARKET CYCLES HAS GENER ATED SIGNIFICANT VALUE FOR OUR INVESTORS, LENDERS, RESIDENTS AND EMPLOYEES. BY REMAINING FOCUSED AND COMMITTED TO THE GOALS OF DISCI- PLINED GROWTH, HIGH-QUALITY CREATIVE INNOVATION AND STRONG ACCOUNTABILITY AND COMMUNICATION TO THOSE WE SERVE, WE ARE WELL POSITIONED TO MEET THE HIGH EXPECTATIONS WE HAVE FOR OUR COMPANY IN THE COMING YEARS. Words that drive us… MID-AMERICA APARTMENT COMMUNITIES, INC. 6584 Poplar Avenue, Suite 300 Memphis, TN 38138 901-682-6600 www.maac.net MID-AMERICA APARTMENT COMMUNITIES, INC. 420 06 Annual Report MID-AMERICA APARTMENT COMMUNITIES, INC. MID-AMERICA APARTMENT COMMUNITIES, INC. 

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