Apartment me REIT (AIRC) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased by 6.2% with occupancy at 97.3%, up 200 basis points from the third quarter [11] - Pro forma FFO was $2.41 per share, matching the midpoint of guidance, and run rate FFO was$2.36 per share, up 7.8% from 2022 [22] - Run rate AFFO was $2.09 per share, up 7.7$2.12, a 1.4% increase [23] Business Line Data and Key Metrics Changes - New leases signed decreased by 1.1% while renewals increased by 4.7% [11] - The AIR Edge portfolio showed net operating income growth 300 basis points better than the same-store portfolio [12] - The Class of 2021 acquisitions saw revenue up 25% and controllable expenses down 21% compared to the fourth quarter of 2021 [12] Market Data and Key Metrics Changes - Anticipated 2024 revenue growth of 3.8% is based on various factors including a 2.4% earn-in from 2023 leasing activity [13] - Strongest markets expected to be South Florida, Boston, Washington DC, and San Diego, while the Bay Area lags in revenue growth [13] Company Strategy and Development Direction - The company is focused on long-term value creation through property upgrades and maintaining a diversified portfolio [6][10] - Management emphasized the importance of leveraging borrowed proceeds to enhance portfolio quality and shareholder value [7] - The company plans to remain active in the transaction market through paired trades and joint ventures [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in outperforming peers due to improved portfolio quality and operational efficiency [10][45] - The anticipated challenges include rising interest rates and fluctuating real estate values, but management remains optimistic about NOI growth [24][26] - The company expects to appeal property assessments to mitigate tax impacts from declining real estate values [24] Other Important Information - The company has a strong balance sheet with abundant liquidity of nearly $2 billion available for refinancing and acquisitions [20] - A quarterly cash dividend of$0.45 per share was declared, reflecting a yield of 5.7% based on the current share price [30] Q&A Session Summary Question: Details on the $0.04 increase in interest expense - Management explained that the increase was due to refinancing activities that extended the duration of loans and adjusted interest rates [33][35] Question: Growth expectations for the Class of 2022 portfolio - Management noted that a tax revaluation impacted NOI growth, but future growth is expected to be double that of the same-store portfolio [40][41] Question: Comparison of AIR's performance to peers - Management highlighted operational efficiency, customer credit quality, and strategic portfolio composition as key differentiators [70][73] Question: Concerns about new lease rates and market conditions - Management expressed optimism about maintaining positive new lease rates, supported by strong occupancy levels [51][52] Question: Impact of recent weather events on the Southern California portfolio - Management confirmed no material damage from recent weather, with minor costs expected to be less than$0.5 million [54] Question: Expectations for turnover and bad debt improvement - Management reported a significant reduction in bad debt as a percentage of revenues, with continued improvement expected in 2024 [63][66]