Mid-America Apartment Communities Annual Report 2008

FY2008 Annual Report · Mid-America Apartment Communities

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the key to progress…

Annual Report: 2008

Mid-America Apartment Communities, Inc.

NYse: MAA
S&P SmallCaP 600

Company profile: Mid-America Apartment Communities, Inc.

is a publicly-traded real estate investment trust which owned or had an ownership

interest in 145 multifamily apartment communities with 42,554 apartment homes

throughout the Sunbelt region of the United States at year end.

Today’s markets are challenging. Having the right strategy

is necessary in order to capture long-term success from a

real estate investment portfolio. Our track record of strong,

stable and disciplined performance not only reflects the

right locations, but also says a lot about the competitive

advantages of our operating systems, the award-winning

quality of our apartment commu nities, the disciplined nature

in which we deploy capital, the strong service commitment

of our people and the strength of our company culture.

Let us tell you more…

is Through our smart
porTfolio sTraTegy…

1. Mid-America Apartment Communities, Inc.

our goal To deliver now and
in The fuTure strong

and sTable resulTs…

2. 2008 Annual Report

Letter: H. Eric Bolton, Jr.

To The shareholders of Mid-aMerica
aparTMenT coMMuniTies, inc.:

Over the course of 2008 the US experienced deterioration in the economy and

capital markets that was far worse than most anyone imagined was likely to occur.

Unemployment trends reached levels not seen in the last 25 years and the credit

markets simply collapsed. The overall result for Mid-America Apartment Communities,

Inc., or MAAC, was a year with challenges beyond anything we’ve seen in our 15

years as a public company. Despite the pressures in 2008, MAAC still generated

a 5% growth in Funds from Operations, or FFO, per share to $3.73 which was a

record performance for us. Delivering this solid year-over-year growth in FFO that

was largely in line with original expectations, despite the unexpected pressures

brought on by a deteriorating job market and very volatile capital markets, is a

statement about the disciplined approach we take to deploying MAAC’s capital,

the strength of our operating platform and the soundness of our financing strategy.

All signs point towards another tough year for leasing fundamentals in 2009 as

job loss trends continue to put pressure on the demand for apartment housing. Most

forecasters believe that it will be late 2010 before we begin to see meaningful

improvement in the economy and employment markets start to recover. MAAC’s

a2004

a2005

a2006

a2007

ability to hold up comparatively well during down cycles and make steady progress

a2008

in the face of such challenges is grounded in a few key strategies that have guided

our approach to creating value for the last 15 years. In this year’s annual report I’d

like to recap for you what the key variables are that define our strategy and serve

as the foundation for what we believe will be an ability to not only weather this down

cycle in the economy, but also capture new value growth as opportunities emerge.

It starts with capital deployment and how we execute on this important first step in

the value creation cycle. The analysis, judgment and discipline applied in making

investment decisions are the most critical aspect of the value creation cycle. Get this

decision wrong and it is hard to fix it. At MAAC we are guided by principles of

applying realistic underwriting assumptions and a careful approach to investment

modeling. We are committed to a belief that while steady new growth and value

creation is important, and something we work hard to achieve, we avoid setting

aggressive growth goals that can generate pressure to just get deals done. We aren’t

$
3
.
7
3

$
3
.
5
5

$
3
.
3
3

$
3
.
2
0

$
3
.
0
0

FFO
Per Share/Unit

‘04

‘05

‘06

‘07

‘08

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

MAAC’s Portfolio Diversification

Secondary
Markets
42%

Primary
Markets
58%

Sunbelt region

into growth for growth’s sake. Looking back over our 15-year history, I take as much

3. Mid-America Apartment Communities, Inc.

MAAC

SNL

Multifamily

Equity

REITs

S&P

500

Total Annual Investment Returns

on MAAC’s15-Year Anniversary

White House Stimulus Projections: Where the jobs will be

West

791,000

Midwest

781,000

Northeast

629,000

South

1,259,000

Letter: H. Eric Bolton, Jr.

White House Stimulus Projections: Where the jobs will be

West
791,000

Midwest
781,000

Northeast
629,000

South
1,259,000

4.0

3.5

3.0

2.5

2.0

1.5

1.0

gratification from a number of decisions we have made to pass on deals as I have

0.5

from those successful investment decisions that were made.

0.0

a2004

a2005

a2006

a2007

a2008

We believe the Sunbelt region of the country offers the best long-term performance

fundamentals for our business. The Sunbelt markets lead the nation in long-term job

growth performance, positive migration trends and positive immigration trends. It is

important to be invested in markets where demand is going to be strong over the

long haul. You can’t create job growth, driving demand, in a given market…it is

either there or it isn’t. We recognize that a number of Sunbelt region markets are

challenged by lower “barriers to entry” as compared to some of the coastal markets

and too much new construction can take place from time to time. However, we

believe that through disciplined investing, with a focus on buying at a discount to

replacement value, value-oriented investors can generate growth in revenue and

attractive long-term performance that will drive internal rates of return that compete

favorably with other regions and markets. By buying right and then, very importantly,

operating aggressively, we believe MAAC shareholders will realize risk-adjusted

returns on their capital that will compare favorably with portfolio strategies focused

both on other regions and nationally.

We also believe that it is important as a long-term investor to diversify capital

across the Sunbelt region in order to lower volatility and risks. By diversifying capital

across the region in both primary and secondary markets we are able to establish

an earnings platform that over the long haul will better weather down cycles and

also capture strong performance when leasing fundamentals are positive. We invest

for the long haul and we believe a portfolio strategy that considers the full economic

cycle is important to delivering higher risk-adjusted returns to our shareholders and

meeting the dividend paying responsibilities of a REIT platform.

Our focus on steady performance and value growth is a goal for each property in

our portfolio. At our core, MAAC’s culture is all about property management and

operations. We have a relentless focus on innovation and driving higher efficiency

in the way we operate each property. Over the last few years we have trans-

formed essentially every aspect of our operating platform through embracing new

4. 2008 Annual Report

Underlying Economy of the Sunbelt Region

• Positive demographic flows

• Positive migration, immigration flows

• Low business, living costs

• Pro-business regulatory environment

• Increasing port of entry for imports

• Good transportation infrastructure
$
3
.
5
5

$
3
.
7
3

$
3
.
3
3

$
3
.
2
0

$
3
.
0
0

FFO
Per Share/Unit

‘04

‘05

‘06

‘07

‘08

MAAC’s Portfolio Diversification

Secondary
Markets
42%

Primary
Markets
58%

Sunbelt region

1
1
%

9
%

8
%

6
%

MAAC

SNL
Multifamily
REITs

SNL
Equity
REITs

S&P
500

Total Annual Investment Returns

on MAAC’s15-Year Anniversary

our coMMiTMenT To an invesTMenT
process wiTh discipline

esTablishing a foundaTion for
sTrong long-TerM value growTh…

5. Mid-America Apartment Communities, Inc.

our use of Technology To

efficiently
aTTracT new residenTs
and Manage operaTions…

6. 2008 Annual Report

Letter: H. Eric Bolton, Jr.

Debt to Gross Assets (at December 31)

Fixed Charge Coverage

2008

50%

2007

53%

2006

52%

2.47x

2.27x

2.15x

Common per Share Dividends Paid

$ 2.46

$ 2.42

$ 2.38

Adjusted Funds From Operations Per Share/Unit

$ 2.99

$ 2.91

$ 2.59

technologies for capturing and managing resident information and transaction

activity. Through expanded use of the internet we are driving higher levels of leasing

traffic to each of our properties, generating more efficiency in capturing transaction

and lease data, providing more in-depth and timely management information to run

our properties, offering a fully automated leasing process to prospective renters and

enhancing the efficiency of our inventory management practices. The apartment

business is a competitive business. The strength and efficiency of our operating sys-

tems is a significant competitive advantage in our markets and is a very important

component of our steady progress as a company.

Of course, a critical aspect in making steady progress for any company is a strong

financial foundation. I believe this is especially true for REITs who have a responsibility

to pay a high percentage of earnings each year as dividends to shareholders. Over

the last few years of easy access to capital, as many companies and individuals

have taken significantly higher risks with their balance sheets, we have pursued a

different direction. MAAC’s debt as a percentage of gross assets was at an all time

low at December 31, 2008. MAAC’s fixed-charge coverage in the fourth quarter

of 2008 had never been higher over our 15-year history as a public company.

MAAC’s annual common dividend, as a percentage of adjusted funds from operations,

has never been stronger. MAAC has no meaningful refinancing exposure between

now and 2011. MAAC’s balance sheet is well positioned to take advantage of what

will likely be some attractive buying opportunities that will emerge from this current

down cycle in the economy. In summary, we think MAAC’s balance sheet is in a

terrific position.

January 28, 2009 marked the 15-year anniversary since MAAC’s initial public

offering. Over that 15-year span MAAC has grown from 5,976 apartment homes to

42,554 apartment homes located in 145 communities. MAAC’s portfolio of properties

has continued to improve and today is one of the youngest among the publicly-owned

apartment REITs. Over the last 15 years our shareholders have been rewarded.

Even when using the market’s current depressed pricing of MAA, over our first

15 years MAAC shareholders captured a total annual investment return of 11%.

7. Mid-America Apartment Communities, Inc.

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

FFO

Per Share/Unit

‘04

‘05

‘06

‘07

‘08

a2004

a2005

a2006

a2007

a2008

MAAC’s Portfolio Diversification

Secondary

Markets

42%

Primary

Markets

58%

Sunbelt region

Letter: H. Eric Bolton, Jr.

1
1
%

9
%

8
%

6
%

Total Annual Investment Returns
on MAAC’s15-Year Anniversary

MAAC

SNL
Multifamily
REITs

SNL
Equity
REITs

S&P
500

This performance exceeded the S&P 500 by almost 500 basis points, it exceeded

the overall REIT index by 300 basis points and it exceeded the apartment REIT index

by 200 basis points.

At some point the economy will regain its footing and a recovery will begin. The

apartment business will snap back strong. New apartment construction has slowed

significantly and is trending well below the level needed to support the growing

demand for apartment housing. We are on the leading edge of a favorable demo-

graphic trend with the 18 to 35 age group (which has the highest propensity to rent

apartments) projected to grow significantly. This growth in demand from favorable

demographics, coupled with the continued shift of the US housing market back to a

normal balance between households renting versus owning, will combine to create

much higher levels of demand for apartment housing. We think MAAC has the right

investment discipline, portfolio strategy, operating platform and balance sheet to

capture strong value growth from these long-term positive trends.

MAAC’s steady progress and long-term success is a direct result of the hard work

and dedication of our team of associates. I want to thank all the members of our team

for their support and continued commitment to exceed the expectations of our resi-

dents and our shareholders. Our success is also a direct result of the wise counsel

and guidance provided by our Board of Directors. I am very appreciative of their

steady support. And, finally, I want to thank you for your investment in Mid-America

Apartment Communities. These are indeed worrisome times in our economy. While

there can be no way of knowing what challenges lie ahead, I’m confident that we

have our company in a strong position and we look forward to exceeding your

expectations as an owner of MAAC.

Very truly yours,

H. Eric Bolton, Jr.

Chief Executive Officer and Chairman of the Board

8. 2008 Annual Report

and our sTable Tenure of leadership,
The culTure ThaT binds us and
principles

ThaT guide us.

9. Mid-America Apartment Communities, Inc.

Environmental: Mac Green

living green
mid-america’s environMenTal iniTiaTives

recycle and repurpose
Through “green” partnerships with vendors

energy efficiency
Many of our communities, particularly those

water conservation
An average family uses 100 gallons of

like Sherwin Williams, in 2008 we recycled

within our renovation program, carry appli-

water per day for cleaning, cooking and

approximately 80,000 pounds of yarn

ance packages with the Energy Star rating.

bathing. All Mid-America apartment homes

from discarded carpets that would other-

This government rating indicates a product’s

have low flow water devices in place, sav-

wise have gone into the landfill.

superiority in using less energy, saving

ing as much as 30% in water efficiency.

Printed marketing materials are made from

money and protecting the environment.

Mid-America’s Ground Cover Initiative has

20% post-consumer recycled paper and

Exterior community lighting has been

reduced lawn areas by 120,000 square

soy-based inks.

changed from incandescent to more effi-

feet throughout our communities to reduce

Online portals allow our customers to

complete routine transactions with us elec-

cient forms of lighting, such as high pressure

the need for irrigation and fertilization.

sodium vapor, or metal halides.

Ground covers replace grassy areas to

tronically, offering more convenience while

Mid-America’s Austin, TX, communities

reducing the need for paper transactions.

participate in the Austin Multi-Family

New customers can complete the entire

Program, dedicated to improving environ-

application process online, including apply-

mental qualities and energy efficiencies

beautify the community while requiring no

need for irrigation or fertilization after the

establishment period. 55% of plant material

on our communities is now drought tolerant.

ing and submitting payment for their new

in the apartment homes. The collection

“Smart” irrigation systems have been

apartment home. Residents can complete

of programs includes low volume toilet

installed on four apartment communities,

routine tasks online, including service request

replacement, HVAC duct work repairs/

with the plan to expand this system to

submission and electronic rent payment.

sealing, solar screen additions, and com-

more communities in 2009. ET irrigation

Mid-America’s Jacksonville, FL, communities

actively endorse and participate in The

St. Johns Riverkeeper’s “River Friendly Yards

Program.” This program is dedicated to

protecting the St. Johns River eco-system

through “greener” lawn maintenance

practices related to fertilization and

water runoff.

pact florescent light conversions. The

monitors rainfall and atmospheric condi-

“cycling” digital thermostat program allows

tions, along with soil and plant types. The

Austin Energy to cycle the exterior HVAC

expected impact is a 30% reduction in

compressor off during peak electrical

water consumption by customizing water-

usage periods of the day.

ing needs to the plants and automated

alerts when system troubles occur, thereby

avoiding unnecessary watering.

10. 2008 Annual Report

Financial highlights: fiscal year end December 31

The proof is in our results

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

Net income
Preferred dividend distributions
Premiums and original issuance costs associated with the redemption of preferred stock

Net income available for common shareholders
Depreciation of real estate assets
Net casualty (gains) loss and other settlement proceeds
Gains on dispositions within real estate joint ventures
Depreciation of real estate assets of discontinued operations
(Gains) loss on sales of discontinued operations
Depreciation of real estate assets of real estate joint ventures
Minority interest in operating partnership income

Years Ended December 31,

2008

2007

2006

30,249
12,865
—

17,384
88,555
247
(38)
706
120
953
1,822

39,946
13,688
589

25,669
83,532
(589)
(5,388)
1,517
(9,164)
15
3,510

20,945
13,962
—

6,983
76,205
(84)
—
2,003
—
500
1,590

Funds from operations

$ 109,749

99,102

87,197

Weighted average shares, diluted
Net income available for common shareholders, diluted
Weighted average shares and units, diluted
Funds from operations per share and unit, diluted

Dividends paid per share

Real estate owned, at cost
Capital improvements in progress
Investments in real estate joint ventures
Total debt
Shareholders’ equity, redeemable stock 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)

27,046
0.64
29,459
3.73

2.46

$ 2,552,808
25,268
$
$
6,824
$ 1,323,056
$ 444,422
$ 1,293,145

25,462
1.01
27,943
3.55

2.42

$ 2,343,130
12,886
$
$
168
$ 1,264,620
$ 432,398
$ 1,358,100

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

145
42,554

137
40,248

138
40,293

(1) Market capitalization includes all series of preferred shares (value based on $25 per share liquidation preference) and common shares, regardless of classification on

balance sheet, 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.

11. Mid-America Apartment Communities, Inc.

Financial highlights: fiscal year end December 31

consolidaTed balance sheeTs

(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 real estate joint ventures

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
Fair market value of interest rate swaps
Accrued expenses and other liabilities
Security deposits
Liabilities associated with assets held for sale

Total liabilities

Minority interest
Redeemable stock
Shareholders’ equity:
Preferred stock, $0.01 par value per share, 20,000,000 shares authorized,
$155,000 or $25 per share liquidation preference;

8.30% Series H Cumulative Redeemable Preferred Stock, 6,200,000 shares
authorized, 6,200,000 shares issued and outstanding

Common stock, $0.01 par value per share, 50,000,000 shares authorized,

28,224,708 and 25,718,880 shares issued and outstanding at December 31, 2008,
and December 31, 2007, respectively(1)

Additional paid-in capital
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,

2008

2007

$ 240,426
2,198,063
65,540
25,268

$ 214,743
2,044,380
55,602
12,886

2,529,297
(694,054)

1,835,243
1,306
7,958
6,824

1,851,331
9,426
414
15,681
16,840
4,106
24,157

2,327,611
(616,364)

1,711,247
2,360
6,778
168

1,720,553
17,192
3,724
15,219
23,028
4,106
—

$ 1,921,955 $ 1,783,822

$ 1,323,056
1,234
76,961
66,982
8,705
595

1,477,533
30,471
1,805

$ 1,264,620
1,099
16,039
61,213
8,453
—

1,351,424
28,868
2,574

282
954,127
(464,617)
(77,708)

257
832,511
(414,966)
(16,908)

412,146

400,956

$ 1,921,955 $ 1,783,822

(1) Number of shares issued and outstanding represent total shares of common stock regardless of classification on the consolidated balance sheet. The number of shares

classified as redeemable stock on the consolidated balance sheet for December 31, 2008 and December 31, 2007, are 48,579 and 60,212, respectively.

12. 2008 Annual Report

Financial highlights: fiscal year end December 31

consolidaTed sTaTeMenTs of operations

(Dollars 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
Incentive fees from real estate joint ventures
Net casualty (loss) gains and other settlement proceeds
(Loss) gains on sale of non-depreciable assets

Income from continuing operations before minority interest and

investments in real estate joint ventures

Minority interest in operating partnership income
(Loss) income from real estate joint ventures

Income from continuing operations
Discontinued operations:

Income from discontinued operations before gain (loss) on sale
(Loss) gain on sale of discontinued operations

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

redemption of preferred stock

Net income available for common shareholders

Weighted average shares outstanding (in thousands):
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.

13. Mid-America Apartment Communities, Inc.

Years ended December 31,

2008

2007

2006

$ 352,607
17,038

$ 331,788
15,524

$ 304,237
13,923

369,645
206

347,312
34

318,160
210

369,851

347,346

318,370

46,139
13,688
45,652
21,908
9,146
18,617
90,168

245,318
16,799
11,837

95,897
509
(62,010)
(116)
(2,307)
—
(247)
(3)

31,723
(1,822)
(844)

29,057

1,312
(120)

30,249
12,865

42,102
12,900
42,639
20,009
8,594
16,039
84,789

39,137
11,603
39,929
19,123
8,119
14,592
77,545

227,072
17,918
10,808

210,048
13,124
9,877

91,548
195
(63,639)
(123)
(2,407)
1,019
589
534

85,321
663
(62,308)
(578)
(2,036)
—
84
50

27,716
(3,510)
5,330

21,196
(1,590)
(114)

29,536

19,492

1,246
9,164

39,946
13,688

1,453
—

20,945
13,962

—

589

—

$ 17,384 $ 25,669 $ 6,983

26,943
103

27,046

25,296
166

23,474
224

25,462

23,698

$ 17,384
(1,192)

$ 25,669
(10,410)

$ 6,983
(1,453)

$ 16,192 $ 15,259 $ 5,530

0.60
0.05

0.60
0.41

0.24
0.06

0.65 $

1.01 $

0.30

0.60
0.04

0.60
0.41

0.23
0.06

0.64 $

1.01 $

0.29

Financial highlights: fiscal year end December 31

reporT of independenT regisTered public accounTing firM

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, 2008 and

2007, and the related consolidated statements of income, shareholders’

equity, and cash flows for each of the three years in the period ended

December 31, 2008. Our audits also included the financial statement

schedule listed in the Index at Item 15(a). These consolidated financial

statements and schedule are the responsibility of the Company’s manage-

ment. Our responsibility is to express an opinion on these consolidated

financial statements and schedule based on our audits.

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 financial 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, 2008 and 2007, and the

consolidated results of its operations and its cash flows for each of the

three years in the period ended December 31, 2008, in conformity with

U.S. generally accepted accounting principles. Also, in our opinion, the

related financial statement schedule, when considered in relation to the

basic financial statements taken as a whole, presents fairly in all material

respects the information set forth therein.

We also have audited, in accordance with the standards of the Public

Company Accounting Oversight Board (United States), Mid-America

Apartment Communities, Inc.’s internal control over financial reporting as

of December 31, 2008, 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 24, 2009

expressed an unqualified opinion thereon.

Memphis, Tennessee

February 24, 2009

14. 2008 Annual Report

Financial highlights: fiscal year end December 31

reporT of independenT regisTered public accounTing firM

The Board of Directors and Shareholders of Mid-America Apartment Communities, Inc.

We have audited Mid-America Apartment Communities, Inc.’s internal

in accordance with generally accepted accounting principles, and that

control over financial reporting as of December 31, 2008, based on

receipts and expenditures of the company are being made only in accord-

criteria established in Internal Control—Integrated Framework issued by

ance with authorizations of management and directors of the company;

the Committee of Sponsoring Organizations of the Treadway Commission

and (3) provide reasonable assurance regarding prevention or timely

(the COSO criteria). Mid-America Apartment Communities, Inc.’s manage-

detection of unauthorized acquisition, use, or disposition of the company’s

ment is responsible for maintaining effective internal control over financial

assets that could have a material effect on the financial statements.

reporting, and for its assessment of the effectiveness of internal control

over financial reporting included in Management’s Report on Internal

Control Over Financial Reporting. Our responsibility is to express an

opinion on 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 assur-

ance about whether effective internal control over financial reporting

Because of its inherent limitations, internal control over financial reporting

may not prevent or detect misstatements. Also, projections of any evalua-

tion 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, Mid-America Apartment Communities, Inc. maintained,

in all material respects, effective internal control over financial reporting

as of December 31, 2008, based on the COSO criteria.

was maintained in all material respects. Our audit included obtaining an

We also have audited, in accordance with the standards of the Public

understanding of internal control over financial reporting, assessing the

Company Accounting Oversight Board (United States), the consolidated

risk that a material weakness exists, testing and evaluating the design

balance sheets of Mid-America Apartment Communities, Inc. as of

and operating effectiveness of internal control based on the assessed risk,

December 31, 2008 and 2007, and the related consolidated statements

and performing such other procedures as we considered necessary in the

of income, shareholders’ equity, and cash flows for each of the three years

circum stances. We believe that our audit provides a reasonable basis

in the period ended December 31, 2008, of Mid-America Apartment

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 proce-

dures 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

Communities, Inc. and our report dated February 24, 2009, expressed

an unqualified opinion thereon.

Memphis, Tennessee

February 24, 2009

15. Mid-America Apartment Communities, Inc.

Awards: 2008 civic and industry

2008 civic and indusTry awards

MID-AMERICA: 2008 Best Places to Work in
TN, BusinessTN/SHRM

BRADFORD CHASE: Mayor’s Civic Pride
Award, City of Jackson, TN

PRESERvE AT BRIER CREEk: 2008 Property of
the Year, Triad Apartment Association

MID-AMERICA: 2008 Best Places to Work in
Memphis, Memphis Business Journal

BRENTWOOD DOWNS: 1st Place Beautifica-
tion, Nashville Apartment Association

RESERvE AT DExTER LAkE: Best Waterscapes,
Memphis Apartment Association

MID-AMERICA: Gold Award for Website in
the Large Cap Category, NAREIT

BRENTWOOD DOWNS: 2nd Place Flowers,
Nashville Apartment Association

ABBY LLOYD/CALAIS FOREST: Property
Manager of the Year, Little Rock Apartment
Association

DARRELL TOTTEN/GREENBROOk: Outstanding
Maintenance Supervisor, Memphis Apartment
Association

FRANCISCO MATOS/TPC COLUMBIA:
Maintenance Supervisor of the Year,
Apartment Association of Greater Columbia

JEREMIAH MANGRUM/RESERvE AT DExTER
LAkE: Outstanding Leasing Professional,
Memphis Apartment Association

JULIE SMALL/EAST REGION AREA LEADER:
Regional Manager of the Year, Triad
Apartment Association

kATIE SWANSON/GRAND RESERvE: Leasing
Consultant of the Year, The Greater Lexington
Apartment Association

kEvIN STOTZ/LAkEPOINTE: Maintenance
Supervisor of the Year, The Greater Lexington
Apartment Association

LAURA SOTO/GREENBROOk: Outstanding
Housekeeper, Memphis Apartment Association

PAIGE CARPENTER/GREENBROOk:
Outstanding Assistant Property Manager,
Memphis Apartment Association

RACHEL MASCARO/CALAIS FOREST: Leasing
Consultant of the Year, Little Rock Apartment
Association

LExINGTON AREA OPERATIONS TEAM:
Management Company of the Year, The
Greater Lexington Apartment Association

ABBINGTON PLACE: Beautification Award,
City of Huntsville

EAGLE RIDGE: 3rd Place Beautification Award,
Apartment Finders

GEORGETOWN GROvE: 2008 Platinum
Award, Savannah Apartment Association

GEORGETOWN GROvE: Judges Award for
Most Beautiful Landscape, Savannah
Apartment Association

GRAND RESERvE: 3rd Place Beautification
Award, The Greater Lexington Apartment
Association

GRANDE vIEW: Best of the Best Landscape
Award, Nashville Apartment Association

GREENBROOk: Best Landscape in category,
Memphis Apartment Association

HIDDEN CREEk: 1st Place Beautification,
Chattanooga Apartment Association

LAkESHORE LANDING: Beautification Award,
Jackson Apartment Association

LINCOLN ON THE GREEN: Best Website
Property Management, Memphis Apartment
Association

NORTHWOOD PLACE: Community Team of the
Year, Tarrant County Apartment Association

PARk ESTATE: Best Landscape in category,
Memphis Apartment Association

PARk PLACE: 2nd Place Landscape Award,
Spartanburg Area Chamber of Commerce,
Men’s Garden Club

PEAR ORCHARD: Beautification Award,
Jackson Apartment Association

PEAR ORCHARD: Best Entrance, Jackson
Apartment Association

RESERvE AT DExTER LAkE: Outstanding
Maintenance Team, Memphis Apartment
Association

RESERvE AT DExTER LAkE: Outstanding
Management Team, Memphis Apartment
Association

RESERvE AT DExTER LAkE: Memphis’ Most
Finalist, The Commercial Appeal

STEEPLECHASE: 1st Place Beautification,
Chattanooga Apartment Association

STONEMILL vILLAGE: 1st Place Outstanding
Landscaping and Maintenance of Grounds
Award, Beautification League of Louisville
and Jefferson County

THE FAIRWAYS: Beautification Award,
Apartment Association of Greater Columbia

THE OAkS: Gold Landscape Award,
Savannah Apartment Association

THE vILLAGE: Best Overall Maintenance
Team, The Greater Lexington Apartment
Association

THE vILLAGE: 2nd Place Beautification Award,
The Greater Lexington Apartment Association

THE vISTAS: Beautification Award,
Mid-Georgia Apartment Association

TOWNSHIP: 2008 Award of Excellence—
Gold, The Peninsula Apartment Association

TPC HUNTSvILLE: Beautification Award,
City of Huntsville

WESTBURY CREEk: Beautification Award,
Apartment Association of Greater Augusta

16. 2008 Annual Report

CorPorate InformatIon

Corporate Headquarters
Mid-America Apartment Communities, Inc.
6584 Poplar Avenue
Memphis, TN 38138
901-682-6600
www.maac.net

Independent Registered Public
Accounting Firm
Ernst & Young LLP, Memphis, TN

General Counsel
Baker, Donelson, Bearman, Caldwell &
Berkowitz, PC, Memphis, TN

Annual Shareholders Meeting
Mid-America Apartment Communities, Inc.
will hold its 2009 Annual Meeting of
Shareholders on Thursday, May 28, 2009,
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 one outstanding series of publicly
traded preferred stock which is traded under
the stock symbol 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 share-
holder 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 Apartment Communities, Inc. should
contact Mid-America directly at the corpo-
rate headquarters.

Annual Report and Form 10-K
A copy of Mid-America’s Annual Report and
Form 10-K for the year ended December 31,
2008, 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 Certification has been previously
filed without qualification 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
award-winning corporate charity that pro-
vides fully-furnished, two-bedroom apartment
homes free of charge to families displaced
from their own homes by long-term medical
care needs. At the time of printing of this
report, The Open Arms Foundation was
providing 37 homes to families in medical
crisis. In its 15-year history, the foundation
has provided nearly 2,000 families with
almost 12,000 nights of rest away from
home. To find out more about The Open
Arms Foundation please visit
www.openarmshomes.com

Board of directors

H. Eric Bolton, Jr.
Chief Executive Officer and
Chairman of the Board
Mid-America Apartment Communities, Inc.

Alan B. Graf, Jr.
Executive Vice President and
Chief Financial Officer
FedEx Corporation
Committees: Audit (chairman)

Major General John S. Grinalds,
USMC (Ret.)
Past President
The Citadel
Committees: Audit

Ralph Horn
Past President, Chief Executive Officer and
Chairman of the Board
First Horizon National Corporation
Committees: Compensation (chairman),
Nominating and Corporate Governance
(chairman)

Mary E. McCormick
Past Assistant Investment Officer
Ohio Public Employees Retirement System
Committees: Audit

Philip W. Norwood
President and Chief Executive Officer
Faison Enterprises, Inc.
Committees: Compensation, Nominating and
Corporate Governance

William B. Sansom
President, Chief Executive Officer and
Chairman of the Board
H.T. Hackney Co.
Committees: Compensation, Nominating and
Corporate Governance

Simon R.C. Wadsworth
Executive Vice President and
Chief Financial Officer
Mid-America Apartment Communities, Inc.

Designed by Curran & Connors, Inc. / www.curran-connors.com • Cover photography and photography on pages 1, 5 and 6 by Jeffrey Jacobs Photography. • Photography on pages 2

and 8 by Phillip Parker Photography. • Photography on page 9 by Keith Douglas Photography.

Mid-America Apartment Communities, Inc.

Trees

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Energy

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10%

Cert no. SGS-COC-2420

The savings below are achieved when PC recycled fiber is used
in place of virgin fiber. This annual report uses 4337 lbs. of
paper which has a recycled percentage of 10%.

10%

100%

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Water
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Solid Waste
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Atmospheric Emissions
atmosphere.eps

Energy
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Air
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Automobile Miles
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Natural Gas
natural_gas.eps

Trees
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4 trees preserved
for the future

Water
water.eps

Solid Waste
solid_waste.eps

Waterborne Waste
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11 lbs. waterborne waste
not created

Atmospheric Emissions
atmosphere.eps

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Water
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Crude Oil
crude_oil.eps

1,548 gallons waste-
water flow saved

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Solid Waste
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Atmospheric Emissions
atmosphere.eps

Water
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Solid Waste
solid_waste.eps

Atmospheric Emissions
atmosphere.eps

Energy
energy.eps

Air
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Automobile Miles
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Natural Gas
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Energy
energy.eps

Air
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Automobile Miles
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Natural Gas
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Water
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Solid Waste
solid_waste.eps

Water
water.eps

Solid Waste
Atmospheric Emissions
solid_waste.eps
atmosphere.eps

Atmospheric Emissions
atmosphere.eps

171 lbs. solid waste
not generated

337 lbs. net greenhouse
gases prevented

Energy
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2,580,515 BTUs
energy not consumed

Air
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Automobile Miles
auto_miles.eps

Natural Gas
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Waterborne Waste
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Trees Cut Down/Preserved for the Future
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Crude Oil
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Waterborne Waste
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Trees Cut Down/Preserved for the Future
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Crude Oil
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Source: Primary values were derived from information publicly available at:

Air
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Air
Automobile Miles
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Natural Gas
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Automobile Miles
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Waterborne Waste
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Trees Cut Down/Preserved for the Future
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Crude Oil
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Waterborne Waste

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Trees Cut Down/Preserved for the Future
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Crude Oil
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MAA

Mid-America Apartment Communities, Inc.

6584 Poplar Avenue

Memphis, TN 38138

901-682-6600