Mid-America Apartment Communities (MAA)

Total return at 5 years: 11.0%/year = 6.0% appreciation + 5.0% dividend. The target price ($160) is ex-dividend; the $33 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $192 · Multiples $158) exceeds the market price ($120).

Today — fairly valued: at $120 trades ~24.2% below its value discounted to today (~$158); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — Infravalorado: the target price ($160) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$102.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($120) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-7.0%/year) than we project (3.1%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.6 bn of owner earnings in year 5 (vs ~$1 bn of our base case). It recalculates if the DCF assumptions are edited.

A REIT is valued on price/Core-FFO (not P/E: the accounting depreciation of the property is not an economic cost). ⚠️ The real cash is AFFO (owner earnings), substantially lower than Core FFO —it subtracts recurring capex and non-cash straight-line rent—, and the dividend consumes almost all of the AFFO. It returns capital via dividend; it may issue equity to fund development. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

Year 0 is the TTM as of Jun-30-2026, built by levels: FY2025 10-K + 6M-2026 cumulative − 6M-2025 cumulative, with the 2026 half-year from the 2Q26 earnings release (Jul-29-2026) and the 10-Q filed Jul-30-2026. TTM revenue $2,218.8 million ($2,209.1 + $1,108.9 − $1,099.2 million); TTM Core FFO $1,029.1 million ($1,048.4 + $502.6 − $521.9 million); TTM Core AFFO $893.2 million ($913.0 million from the 4Q25 8-K + $446.6 − $466.4 million). Share base: MAA reports Core FFO and Core AFFO attributable to common stockholders and holders of the operating partnership's units, and expresses them per diluted weighted-average share and unit (119.094 million in 2Q26). The record's count uses that same base, 119.094 million diluted shares and units from 2Q26, so numerator and denominator measure the same thing: each operating-partnership unit is redeemable for one MAA common share or its cash equivalent (10-K), so the value per unit is that of a common share. The XBRL only tags diluted common shares (116.144 million), and the external count cross-check brings them to the shares-and-units base using the ratio the company's own release publishes; dividing Core FFO for shares and units by the shares-only count would inflate the value per share by ~2.5%. Adding the four reported quarters, TTM Core FFO per share is $8.60 ($8.74 − $4.35 + $4.21): the difference from $8.64 is that the company divides each period by its own, higher, weighted average, while here the total is spread across the latest quarter's count. Gross debt ($5,691.9 million: unsecured $5,331.4 million and secured $360.5 million) and cash ($51.8 million) come from the balance sheet as of Jun-30-2026. In owner earnings, operating income is the trailing-twelve-month adjusted EBITDAre ($1,242.2 million) less depreciation and amortization for the same period ($640.8 million), both from the release's reconciliation; maintenance capex is TTM recurring capex ($135.9 million, the difference between Core FFO and Core AFFO), and growth capex is TTM capital improvements ($366.1 million) less the recurring portion, plus TTM development costs ($267.7 million), from the cash flow statement. Year 1 starts from the current 2026 guidance (Core FFO per share of $8.41-8.65, with a $8.53 midpoint unchanged in the 2Q26 release; same-store property revenue +0.10% and NOI −0.90% at the midpoint): the model shows $8.44 per share, −2.4% versus the TTM, within the guided range and below its midpoint, because the year-1 window includes the first half of 2027, before the recovery the base case assumes shows up in results. It is a trough-and-recovery path: new supply, still elevated by historical standards according to the 10-K, keeps pressuring rents through 2026; management expects fewer deliveries that year and describes an accelerating recovery, and the base case places it starting in year 2, with Core FFO per share growth of 4.6%, 4.4%, 4.2%, and 4.1% in years 2 through 5, within the durable growth band for a mature REIT (3-6%). TTM Core AFFO per share is the actual figure ($7.50, 86.8% of Core FFO per share); the projected figure applies the 2026 guidance ratio ($7.50 ÷ $8.53, ~87.9%) to Core FFO per share, which improves slightly with scale. Shares and units are modeled flat across the three scenarios (119.094 million): net buybacks are not sustained — none in 2024, 0.2 million shares for $27.2 million in 2025, and 0.94 million in the first half of 2026 — and diluted common share count fell 0.9% over twelve months (from 117.163 to 116.144 million), below the ~1% annual threshold above which a share-count path is modeled; when in doubt, the method models less buyback. The dividend starts at the current declared annual rate ($6.12 per share, the 130th consecutive quarterly distribution, equivalent to ~82% of TTM Core AFFO per share) and grows by policy, slower in year 1 and accelerating toward 4% annually by year 5, in line with Core FFO. The adverse scenario stresses year 1 (Core FFO per share −5.7% versus the TTM, versus −2.4% in the base case) assuming the recovery is delayed until year 3; the favorable scenario pulls it forward (+0.5% already in year 1) assuming new supply is absorbed sooner.

Today's multiple compresses on its own going forward as the metric per share grows. The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $160 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $120, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $160 in 5 years plus $33 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $158. Against the current market price ($120), the margin of safety is 24.2% (trades below the maximum → there is margin) and the total return at that price would be 11.0% annually.

• Entry multiple vs. archetype band. The current entry multiple (16× TTM Core FFO) trades near the floor of the REIT band (15-20x), consistent with the unfavorable supply cycle and not an unwarranted premium.
• Dividend as a return floor. The current dividend yield (5.1%) on a policy of sustained growth (130 consecutive quarterly distributions) provides a relatively stable return floor independent of any multiple re-rating.
• Sensitivity to the recovery scenario. The 5-year total return depends materially on the rent recovery that management describes, and that the base case places starting in year 2, actually occurring; if it is delayed (adverse scenario), the return falls to +11% annual.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (184%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Predictable cash generation. Core AFFO (the REIT's owner earnings) is predictable quarter to quarter, with variations tied to the rent and occupancy cycle, not to discretionary events.
• Return on capital vs. the 10% bar. Return on capital employed measured with Core FFO (~9.2%) sits just below the 10% bar — neither clearly above nor clearly below, consistent with a mature REIT at the trough of its cycle.
• Reinvestment runway. The six development projects (1,749 units, $597.5 million expected total cost as of Jun-30-2026) offer a concrete, quantified reinvestment runway.
• Accounting distortions. GAAP net income is heavily distorted by non-economic depreciation and gains/losses on asset sales; Core FFO and Core AFFO are the metrics that truly measure dividend-paying capacity.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

A residential REIT's revenue breaks down into volume times price: occupied units (total units × physical occupancy) times average effective rent. At MAA, the volume component has been holding up or improving (occupancy stable between 95.3% and 95.6%, total units growing via development and acquisitions), while the price component is compressed by excess new supply in the Sun Belt markets (average effective rent declining slightly since 2024). Historically low resident turnover (39.6% as of Jun-30-2026) is the clearest signal that the weakness is a supply issue (too many new units competing for the same tenant) and not a demand issue (residents are not leaving).

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Organic growth (Same Store). Same-store revenue fell 0.1% in 2025 and 0.3% in the first half of 2026, with 2026 guidance of +0.10% at the midpoint, reflecting excess new supply in the core markets.
• Growth via development and acquisitions. Revenue from non-same-store, lease-up or development communities and the commercial segment grew 22.1% in Q2 26 from a small base (5.6% of Q2 25 revenue), sustained by six development projects that keep adding units regardless of the rent cycle.
• Recovery trajectory described by management. Management describes an accelerating recovery as new-delivery pressure eases, and same-store blended leasing pricing growth (new leases and renewals) already improved 100 basis points in Q2 26 vs. Q1 26, to +0.7%.

• Demand recurrence and predictability. Residential rent is a non-discretionary expense with annual contracts that renew predictably; occupancy stays stable (95.4% in the first half of 2026) even at the trough of the supply cycle.
• Commodity product with low switching cost. The resident can move to a competing community, a single-family rental, or a home purchase once the annual lease expires — MAA has no way to retain the tenant beyond price and quality of service.
• Modest operating leverage. Same Store operating expenses (taxes, staff, utilities, insurance) grow in line with general inflation and do not compress easily when revenue decelerates, limiting upside operating leverage.
• Behavior in the current cycle. Occupancy and resident turnover remain healthy (occupancy between 95.3% and 95.6%, and turnover of 39.6% as of Jun-30-2026, historically low) despite pricing pressure from supply — a signal that the weakness is supply-driven, not demand-driven.
• Pricing power. Pricing power is temporarily suspended by the excess supply: Same Store effective rent fell −0.5% per unit in 2025, and 2026 guidance barely reaches +0.10% at the midpoint.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Portfolio quality (occupancy + same-store NOI)Occupancy 95.3%
• ✓Dividend coverage (payout over AFFO)82% of AFFO

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Adjusted net debt/EBITDAre of 4.5x, within the stated 4.5x-5.5x target, and debt/adjusted total assets of 31.2% (target 30-36%).
• Debt structure. 86.6% of debt at fixed rates with an average 6.0 years to maturity and 93.7% unsecured, limiting immediate refinancing risk and preserving flexibility over the assets.
• Liquidity. $882.8 million of combined cash and available capacity under the revolving credit facility as of the Q2'26 close, plus an additional DDTL Facility of up to $350 million put in place during the quarter.
• Credit rating. An investment-grade balance sheet maintained consistently, which grants access to unsecured debt markets on more favorable terms than lower-rated competitors.

• Capital allocation. Prioritizes the dividend (distributions of ~82% of TTM Core AFFO) and in-house development over external M&A, with leverage sustained within its stated target throughout the recent rate cycle.
• Alignment and incentives. Insider ownership detail could not be reliably verified in the proxy; there is no evidence in the filings reviewed of a founder or problematic controlling shareholder, but also none of notable skin in the game.
• Candor in communication. Management explicitly acknowledges the guidance cut from excess supply in the same release where it reports results, rather than attributing the weakness to vague external factors.
• Buyback discipline. The buyback is modest and recent: none in 2024, 0.2 million shares for $27.2 million in 2025 and 0.94 million shares in the first half of 2026, 0.38 million of them in Q2 26 at $130.66 per share; the diluted common-share count fell 0.9% over twelve months (from 117.163 to 116.144 million).

• Sector cycle trough: new multifamily unit supply, still elevated by historical standards in MAA's Sun Belt markets, is pressuring rent growth across the whole sector, and the market extrapolates the current weakness without fully discounting that management expects fewer deliveries during 2026 and describes an accelerating recovery.
• Guidance cut in the quarter: in the Jul-29-2026 release MAA cut its 2026 same-store NOI guidance to -0.90% at the midpoint (from -0.70%) and its diluted earnings-per-share guidance to $4.08 (from $4.34), though it kept the Core FFO per share midpoint unchanged at $8.53; that depresses the entry multiple without the balance sheet or the portfolio's quality having deteriorated.
• Investment-grade balance sheet with leverage within target (adjusted net debt/EBITDAre 4.5x) that the market does not fully reward relative to residential REITs with weaker balance sheets in the same supply cycle.

The current discount is consistent with missing buyers from the Sun Belt multifamily supply cycle — a sector-wide phenomenon, verifiable in the cut NOI guidance and in historically low resident turnover (healthy demand, excess supply) — and not with an idiosyncratic deterioration of MAA's portfolio quality, balance sheet or management.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +6%/year (+34% total): the margin of safety protects the downside. The bull (+16%/year, +109% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Sun Belt supply cycle. New multifamily supply delivering into MAA's core markets led MAA to cut its 2026 same-store revenue and NOI guidance in Q2 26 and is the dominant risk in the thesis.
• RealPage litigation. Partial settlements coexist with separate lawsuits from state regulators (District of Columbia, Kentucky) still pending, with the final exposure unquantified.
• Interest-rate sensitivity. 13.4% of debt at floating rates and ongoing refinancing of maturing fixed-rate debt expose Core AFFO to a higher-for-longer rate cycle.
• Geographic concentration. 41.2% of the portfolio concentrated in five markets (Atlanta, Dallas, Austin, Charlotte, Orlando), amplifying any market-specific regional shock.
• Insurance and tax costs. Litigation 'social inflation' and rising insurance premiums from extreme weather events can outpace general inflation without fully passing through to rent.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC 9% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 3% at a multiple/growth of 5.1 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -7% vs our 3%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +1%/yr, bull-scenario ceiling +11%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: efficient scale, cost advantage, intangibles → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -7%, within what we project (3%) — the story squares with the numbers.