Apartment me REIT (AIRC) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - FFO for Q3 2023 was $0.64 per share, exceeding the midpoint of guidance by$ 0.01, with run rate FFO at $0.59 per share, up 7.3% year-over-year [21] - AFFO was$ 0.52 per share, reflecting a 4% year-over-year increase, with excess AFFO over dividends expected to be about $80 million for the full year [21][22] - Revenue increased by 6.8% year-over-year, while expenses rose by 8%, primarily due to timing [9] Business Line Data and Key Metrics Changes - New lease rates increased by 3.6%, renewals by 6%, and blended lease rates by 4.7% in Q3 [9] - The acquisition portfolio, now 20% of the business, saw revenue growth of 10.3% and net operating income growth of 15.2% [10] - Same-store net operating income grew by 6.3%, with an operating margin of 73.4% [9] Market Data and Key Metrics Changes - Occupancy rates improved from 94.6% in July to 96% in September, with October's average daily occupancy at 96.9% [11] - The company anticipates a strong start to 2024, with bad debt showing improvement and diversified portfolio mitigating pressures from new supply [11][12] Company Strategy and Development Direction - The company emphasizes a diversified portfolio across markets and price points, focusing on operational excellence and customer selection to enhance stability [5][6] - AIR is actively pursuing profitable acquisitions, having raised over$ 600 million through joint ventures and property sales [8][13] - The investment philosophy remains focused on generating positive spreads to the cost of capital and improving portfolio quality [14] Management's Comments on Operating Environment and Future Outlook - Management noted that interest rates have disrupted property pricing but created acquisition opportunities [5] - The company expects continued strong same-store NOI growth and a favorable outlook for 2024, despite potential headwinds from higher interest rates [38][39] - Management remains cautious about certain markets, particularly Northern California, but sees potential for recovery [48][56] Other Important Information - The company declared a quarterly cash dividend of $0.45 per share, reflecting an annualized yield of approximately 5.8% [22] - AIR's balance sheet is robust, with no debt maturities until Q2 2025 and$ 2.1 billion in available liquidity [20] Q&A Session Summary Question: Breakdown of NOI growth by properties - Management confirmed that 89% of GAV will be in the same-store pool next year, with expectations for growth from reacquired properties [25][26] Question: Impact of late fees on growth - Management acknowledged potential headwinds from reduced late fees but highlighted other initiatives to offset this [27][28] Question: Future joint venture activities - Management indicated that while joint ventures add complexity, they are necessary due to changes in capital markets and will continue to be a part of the strategy [29][30] Question: Guidance on same-store revenue - Management maintained that the midpoint of guidance is achievable, with expectations for blended lease rate growth remaining consistent [34][35] Question: Bad debt recovery efforts - Management emphasized their focus on resident quality and ongoing efforts to pursue delinquent accounts, with some success in small claims court [66][68]