Apartment Investment and Management pany(AIV) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Aimco reported a solid first quarter with AFFO of $0.55 per share, which was $0.02 ahead of the midpoint of guidance due to better-than-expected operating results [19] - The company ended the first quarter with $198 million in cash and the capacity to borrow $723 million on its revolving credit facility, indicating a strong balance sheet [18] - Net operating income (NOI) was up 5.5% for the quarter, reflecting effective revenue and expense management [11] Business Line Data and Key Metrics Changes - Same-store revenues increased by 4.2% for the quarter, with top markets like Washington DC, The Bay Area, Boston, Los Angeles, and Philadelphia showing growth over 4.5% [11] - Daily occupancy averaged 97%, which is 90 basis points better than the first quarter of 2018, indicating strong operational performance [10] - New leases were up 80 basis points, renewals increased by 5.2%, and same-store blended lease rates rose by 2.9% [12] Market Data and Key Metrics Changes - The company experienced solid performances in markets such as San Diego, Seattle, and Chicago, with growth rates of 3% [11] - Preliminary April same-store results showed continued momentum with blended lease rates up 3.4% and new lease rates up 1.6% [12] Company Strategy and Development Direction - Aimco's strategy focuses on creating net asset value per share through operational excellence, accretive redevelopment, and disciplined capital allocation [7] - The company is maintaining its target investment range for redevelopment and development at between $225 million and $275 million for the year [13] - Aimco is actively pursuing acquisitions that offer high free cash flow IRRs on a risk-adjusted basis, with a focus on unique opportunities rather than specific asset classes [79] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the U.S. economy and strong consumer demand, expecting 2019 to be another good year [8] - The company is cautious about raising guidance due to being only a third of the way through its leasing activities for the year [25] - Management highlighted the importance of culture and teamwork in driving operational improvements and achieving strategic goals [75] Other Important Information - Aimco declared a quarterly cash dividend of $0.39 per share, a 3% increase over the quarterly dividend paid in 2018 [21] - The company adopted a new accounting standard affecting how indirect costs related to resident leases are recognized, which has been reflected in the financial results [20] Q&A Session Summary Question: Why is there hesitation to raise guidance despite strong results? - Management believes the current guidance range is appropriate as they are only a third of the way through leasing activities for the year [25] Question: What are the latest thoughts on rent control and affordability initiatives? - Management expressed concern over the political discussions surrounding rent control, noting recent developments in states like Oregon and California [27] Question: Can you provide details on the 707 Leahy redevelopment? - The redevelopment is expected to yield a cash-on-cash return of about 5% and is positioned to attract higher-income residents [33] Question: What is the impact of turnover on NOI? - A lease that renews is 20% to 30% more profitable than a new lease, indicating significant savings from reduced turnover [38] Question: What is the rationale for maintaining a 16% weighting in C properties? - These properties serve primarily as a land bank for future redevelopment opportunities [42] Question: What are the leasing trends in the Los Angeles market? - The Los Angeles market, particularly in Mid-Wilshire, has shown strong performance with occupancy rates above 97% [51] Question: What is the cap rate for recent asset sales? - The sales achieved an NOI cap rate of 5.6% and a free cash flow cap rate of 5% [62] Question: What is the outlook for acquisitions? - The company is looking for opportunities that provide above-average growth potential, regardless of asset class [79]