Apartment Investment and Management pany(AIV) - 2018 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company increased net asset value by almost 6% and economic income by more than 8% in 2018 [7] - Fourth quarter pro forma FFO and AFFO per share met the midpoint of guidance at $0.63 and $0.53 respectively [20] - Full year pro forma FFO per share was $2.47 and AFFO per share was $2.16, exceeding original guidance [20] Business Line Data and Key Metrics Changes - Same-store revenues were up 3.4% for the fourth quarter, with a full year increase of 3.1% [11][21] - Fourth quarter NOI margin was 75.6%, the highest performance on record, with a full year result of 74.2% [10][11] - New leases were up 20 basis points, renewals were up 4.3%, and same-store blended lease rates were up 2% [12] Market Data and Key Metrics Changes - Top revenue performers included Boston, the Bay Area, San Diego, and Seattle with increases over 4% [11] - Revenue growth in Los Angeles, Washington D.C., Miami, and Denver was around 3% [11] - Atlanta, Chicago, New York, and Philadelphia had the lowest revenue growth, ranging from flat to 2.5% [11] Company Strategy and Development Direction - The company exited the affordable business and made accretive acquisitions in Philadelphia and Northern Virginia [7] - Plans to increase redevelopment and development spending to between $225 million and $275 million in 2019, a 40% increase over 2018 [15] - The company aims to reduce total leverage by about 10% during the coming year [8] Management's Comments on Operating Environment and Future Outlook - Management expects 2019 market conditions to be the same as or better than last year, despite competitive new building challenges [8] - Economic income growth is expected to be similar to that achieved in 2018, with same-store revenue growth projected between 2.8% and 3.8% [21] - The company anticipates a stable and cohesive team, recognized as a best workplace in Colorado for six consecutive years [8] Other Important Information - The company repurchased 6% of its shares at about a 20% discount to net asset value per share [7] - A special dividend was declared, consisting of a regular quarterly revenue of $0.39 per share plus $1.54 per share of additional consideration [19] - The company improved its balance sheet by reducing 2019 to 2021 maturities by more than one-half [8] Q&A Session Summary Question: What is the appetite for executing on larger transactions in selling the company? - Management will consider any such transaction as fiduciaries and what's best for shareholders [26] Question: Will the share repurchase program continue? - Management views share buybacks as a tool to create value and will compare opportunities on a risk-adjusted basis [28] Question: What is the investment thesis on Atlanta? - Atlanta is a competitive real estate market prone to oversupply, and management prefers to redeploy capital to areas with better risk-adjusted growth [31] Question: How is revenue growth expected in Seattle? - Revenue growth in Seattle was strong, but the impact is minimal due to the limited number of buildings [35] Question: What are the expected same-store revenue outcomes for 2019? - The top markets with the most positive outlook are Boston, D.C., and LA [39] Question: What is the timing of the expected dispositions? - About half of the dispositions are expected to occur in the first quarter, with the remainder spread throughout the year [68] Question: What is the expected blended cap rate for dispositions in 2019? - The blended cap rate is expected to be in the mid-5s [71] Question: Will there be any tax benefits post-2019? - The company expects about $8 million of tax benefit in 2019, with a similar run rate going forward [73]