Mid-America Apartment Communities Annual Report 2006

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FY2006 Annual Report · Mid-America Apartment Communities

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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.

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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

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.

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

$2.35

$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

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

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

TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
866-668-6550 shareholder toll-free line
www.amstock.com

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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.