Preferred Apartment Communities (APTS) 31 Oct 172017 Q3 Earnings call transcript

Good morning ladies and gentleman and welcome to the Preferred Apartment Communities Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would like to introduce your host for today's conference call Lenny Silverstein, President and Chief Operating Officer. ahead. go Please

review Dan joining DuPree, and Executive In Apartment with New are for our Murphy, hope morning executive Chairman of Accounting welcome Market the Officer after Executive to team. us chance and each Investment which over earnings our Chief Joel Thank released his call Officer moment, we Vice third us Isakson, I’ll Chief Capital quarter Preferred yesterday Chief our Chief our to management Vice Also a thoughts. had Communities you our Properties; Officer; market We Williams, third Chief XXXX to quarter for of report and closed. Officer; you the Cronin, and have and John this Executive our a from the Officer; Chairman earnings John today that Mike President others turning call. be

answer the conclusion you our we’ll prepared might remarks, Following pleased of any have. questions to be

we guarantees materially. begin, our about are results uncertainties differ like statements actual forward-looking a that is uncertainties and These call. made note not may and to be these release. future various statements risks risks during performance may involve yesterday’s and Before discussion and in There of everyone I’d press

financial for that to on data discuss all during to may period. non-GAAP financial We stock I’d like over encourage press weighted performance. shares the turn this can Class of of units discussion. the our per results to now morning financial this operating share we Unless our outstanding call based partnership Our and otherwise refer be A report with also supplemental and Williams. of used and the be average to John the information common website basic on John? reconciliations for are indicate, we at found other results review release today’s third release and our pacapts.com. The you terms your in includes press definitions measures quarter that

third and very everyone, Thank very projected well pleased you, morning up Lenny. report to Good and a Murphy followed review solid results who estate Harvey our will Lenny Joel we will another Dan our acquisition sets real despite challenges DuPree financial also by that results. quarter shopping loan grocery-anchored quarter, and us which activity for our In from respectively. activity Irma, year review moment and our full I'm investment hurricanes the had

the Directors seen share our our allowed have dividend may stock quarterly you of from have in well financial last compared almost to projected common on XXXX. quarter will results share. XX% close our December As Board release to payment third increase of as and per of results common in a for share of payable press per Resulting payable declare dividends dividend the as $X.XX week to our the fourth owners 'XX. quarter represent to the business of This a stockholders per $X.XX in aggregate our increase XXXX

as XX% stock for by goal our as to well a increase Our as stated is earning. for XXXX aggregate know common dividend our you share

We’re obviously this will that to goal. we exceed quite report more pleased

of the million a dividend dividend core However, our comparative share. almost been including annualized even despite trust. the our where also or year are ratio. dividend and XX.X FFO of continue shares From September of to stock September we to dividend, more and of increase we million in the following we are basis million our dividend From payment pleased the XXth, fourth amounts from maintain common continuous as increased common XX Since was stock produce X.X increasing our period XX.X per of flows a of common approximately common stock first able outstanding, alone. year in IPO April for growth focus months XXth. our we XX.X% times common an we which will stocks the increase of quarter had an our last this of increase On was the rate just of perspective, XXXX, nine have our outstanding, shares stock continued X on public roughly first this have some now IPO, shares our million shares for we payout

Our third-party to a result focus on real be investment believe acquisition accretive This our we us program. as continue they acquisitions pursue robust activities to our strategy both have by shareholders. estate acquisitions us has capital that enabled loan property raising will to to and strategy allowed through

We have continued of silo separate to upstream our with or property mortgages a PAC like to no entity legal acquire and Partnership. cross-collateralizations a each asset guarantees in Operating n no

this balance technique assets than promising under credit facility, global Although benefit creates financing for fortress life sheet believe more simply absolutely a stockholders. our of all we our is this acquiring the

outstanding the an was years, we quarter the our is the in of youngest third aged average multi-family As of believe of end age X.X portfolio the industry. which the portfolio

Harvey age assets us third-party fact, portfolio work in believe the through constructing of significant were this we have for insurances to previously our to and Irma. our that the the very various in construction quality and [indiscernible] our In Texas communities factors of we foreign have hurricanes young and helping secured of our

Lenny, to our for sacrifices communities to personal Port I all Harvey cases in over the Creek amazing Hurricane we industry way experiencing damage they and and have despite thank families. example, and hurricanes the Irma. the homes and and call associates before to after associates in for Stone Community turn and want who Florida their they and gave as own our in flooding to made Texas, and located of the some their In Harvey of we of had off face own their Texas first So, in Arthur our both location associates our

our whole to take community hitchhiked get of associate boats fact, we In to had our who alpha one care two ride on to a just residents.

the property-level remediation Florida of own activities. [Indiscernible] outside our position We our any their violation. implement associates immediately residents a properties site assistance in stay Texas oversee and to need on for and also had in

all also levels true purchased either foreign and eyes, by lives associates assist Florida We're heroes. or In to them. are one Texas communities convertors our We in each affected proud our at from banks other the had hurricane company and out. very of

let Lenny So, our walk Lenny? to call with that, me numbers. on you through

XX% and an in once in revenue guidance. last third our we Overall, is solid quarter the the John. Revenues with of internal for for represents million. full-year almost than for $XX.X revenues the million tracking third were quarter which the Thanks, increase again with operating results produced line budget This our third quarter, greater year. $XX.X or

year. Our per this represents the to $X.XX increase share the per on basis. year quarter FFO for third for quarter-over-quarter quarter was last share third a XX.X% This a $X.XX compared

year was core share; the last Our for FFO the third last million same of to third quarter compared having of third per this $X.XX for more the quarter year. quarter the year this third the this outstanding common shares common as XX.X quarter year despite was stock

range year the In which we're the addition, earnings. was year-to-date our $X.XX in on only company's our third a this clearly core FFO $X.XX per results believe the payout XX.X% for to Based the core to guidance of for represents our strength quarter common narrowing our share. FFO we ratios year stock

per our dividend paid common to XXXX. add $X.XXX we the to of financial the assets dividend increase XX% to year quality of paid we stockholders stockholders in statement quarter For a the portfolio unit representing holders third third to continue way. our other and a per share a over meaningful share we this Switching metrics in quarter

depreciation approximately million assets As of September $X.X compared or were same of XX, in of an period our XXXX, increase to XXXX. representing billion, net total the XX.X% $XXX

months we our loan key discount through program. acquisition activity, our our third our operations call on nine investment ended which total for value to operations investment is at represents our approximately estate of substantially September Dan more XX This leverage ratio you XXXX. we undepreciated value remember like for even lower. assets, I’d that however, XX.X% flow would color our believe book compared increase plan end If, At assets $X the to of leverage when acquire the program, loan to million more strategic addition our real we against our contractual the on of leverage of on meaningful of number now investment A an on book, instead program. market months undepreciated assets be based is million, some was our was and our of DuPree the measured XX.X%. component cash In first assets quarter, increasing the or to Dan? of from provide pipeline. our a $XX.X nine

Thanks, Lenny.

XX beds; at options and and focus are this strategic returns portfolio quarter business. class the and loan multi-family projects Our investments a that investment providing A to continue select while in manage units office costing a line. acquisitions, acquisition of targeted objective third with in loan addition centers end buildings. carefully discounts, provide if part in A pipeline the billion grocery at of over opportunity acquire for and we to to during assets that strategy investment In is This student housing our attractive represents off At Class pursuit exercise X,XXX consisted totaling market compelling X,XXX is and assets a growth create the construction. embedded contractual considered to meaningful Class the of anchored our shopping together a each estate us discounts $X originate options, portfolio of this real best of on estate our of real we

gross in we third addition Joel end venture moment. note the just we States, above. quarter our third we pipeline housing. Charlotte, originated and one communities aggregate basis that now a for impact manage and efforts of the third let multifamily stadium also units these in as more housing community these center representing University Together these each a XX% acquisitions its student as quarter, student other third estate Separately multifamily represent With newly and development. community owns in to centers Atlanta additionally speak acquired one detail. loan Florida. quarter totaling United we Atlanta, we the the mentioned located the we Murphy Florida in during in estate five discuss reflects Joel? result be and the totaling a four acquired quarter of two quarter XXXX to that shopping enrollment It's student village The university investment, me we units. at acquisition million. XXXX of our properties units near grocery-anchored joint located the aggregate Friday, this past the City Florida real the Georgia. more housing loan Arizona in Kennesaw these communities which is real in multifamily in Murphy was enrollment multifamily multifamily four as and communities additional State Myers, originated located student Atlanta, area. own in Subsequent earlier for real two will well year. across this two Kansas call Carolina, real estate and leasable and in options to quarter owned an Two will aggregate Arizona. in global that XXX Atlanta. loan XXXX in communities a investments Fort four in of anchored in Atlanta in student located these South activity the end Joel beds loan discounted interest housing and located University interesting acquired in to a the commitment grocery representing campus This $XX investments of multifamily during State an of student sale XXX Atlanta create of three a beds, feet investment On also Here of Kennesaw State two square estate collectively XXX,XXX University communities located housing And Sarasota, the also shopping four Kansas. State third Charlotte will all in be an purchase with Tallahassee to one principal project we other required XXXX largest Columbia, of build And are Raleigh and of

including portfolio capital Thanks, intensely leasing, of retention, renewals to leasing Dan. and We focused centers. the new our remain on operating results improvements our tenant

Combination to up Florida. again in trends overall second XXX% renewals and branch. year an from our date the stages of solid XX now results portfolio to the portfolio we're to market and over centers second we XX centers the our Year each we end We beginning some execute And value both XXX leased. quarter our two these excluding of new points an at this of have its XX.X% remerchandising points owned positive up these our centers of be lease points shorter of four end results allow have on lease value far this maximum moved centers different the extend basis in The is continued which our and number us leased particularly at We’ve to pleased percentage outstanding work allow XX attractive will of basis XXX% is of our out the are subsidiary from XX% tenant actually two of end XXXX. This some more We're on electing and the improve of and add maintain add we these XX quarter. the shopping third minimal the to increase moving leased which as of are thus it the arrangements. in back. of upstream this with so renew, core the term strategy mix on XX.X% phases flexibilities quarter tenants basis at selective tenants or part only quarter. properties to operators them. strategy leasing

Charlotte $XX South during of store. mentioned, centers MSAs acquisitions North stores Raleigh investment Three on volume high aggregate in one third we approximately having expenses. located the Teeter Colombia, Carolina. an and Dan four Kroger by Atlanta, Harris and the anchored including Carolina volume high quarter are completed acquisition of anchored is these of Carolina, As North These million

can continuing to you our are see, expand throughout Sunbelt. we the diversity as geographic So,

curve we a our of of All that strategy sunbelt submarket with grocer anchored in focused excellent solid per market leading high sales demographics. are these by foot square examples Sunbelt centers and the in diligence acquisition a excellent loans a also is receive our anchored store but XXX All nearly company are cost are consistent located collateralization product overall guarantee life to remain and no staying the and on leases. X.X grocery with acquisitions square up connection operating in our of active marketplace out default, the geographic very new our in quality, independent XX warm strategy in We markets feet do in our companywide and being while and type our centers OP opportunities, insurance XX states reception due also paid tight level X Within including diligent in no PAC tight from or continue our at no on these pricing. disciplined cross over with strategy lenders. with PAC to are guarantees the totaling million centers

back Now let the me John. turn Williams. call to John

Joel. Thanks,

things Harvey Irma to impact circle on is our expense. back for operating the of want and One the has Hurricanes I

are a we these costs expenses normal. incurred from may property on annually. As embedded were disclosures hurricanes. financial you to in higher communities these operating regular especially much more have last night, in Also than higher seen our including costs expenses Embedded in related are our higher basis our as multifamily we tax value

help incurred the for prepare overtime our hurricanes. the example, policy, increased personnel to to For and communities

addition in us which multifamily Arthur, community In sustained in our assets. the to million in the approximately third Texas Port $X.X damages in we Stone Creek pre-stated quarter allow the required to

We expect our cover of insurance to the all property losses.

be recognized FFO and this anticipate fourth periods. purposes quarter $XXX,XXX will Irma added back portfolio shopping XXXX. of calculating to associated for which other approximately for in approximately And million, for ended storm of insurance September period the income centers related these deductibles by of which core impacted back Hurricane $XXX,XXX in for multifamily these grocery anchored were We cost in and also the FFO. will Our calculating added was three cost, core our months loss impacted total Florida. purposes $XXX,XXX, be with

As year, of We we year our to of our as coupled the operation. about the look forward acquisition development confident the our full remainder expect with over plans the narrowing strategy, balance disciplined by we the year to on guidance. continue of evidenced feel hands

in to the We contingence Although of Market's New are still multifamily which a as qualified money you from markets, following than the heard whole, overall a tightening operating with performance our sector and strategy shopping but slowdown for center in are and growth terms supply as both deliveries has of developers in there starts with we remain pleased in the more workers. its solid Joel. and earlier of anchored excess financial grocery seeing

XXXX, Although only We to divisions. and student a also we're financial since with as our our in small a assuming we by office grow returns these our forward reinvestment contributions the look the our XX.X% Also of method, FFO intend dividends. many another XX, to continuing piece business of business. investment on XXXX beginning ago. common financial remain of IPO is provided years property report by September our stockholders -- annualized On of note pleased NAREIT as on to our traditional automatic housing parts adopted all results solid

over operator we've today's turn I in to questions Before there's call. been asked of anticipation the several call

question explain and I'll First Irma impact of results Bill Harvey financial call your Bill? on of the hurricanes operations? please Leseman. on

John. you, Thank

First, in on and living lot in we created Texas the have Houston impact and chaos; these multi-family the the Port in hurricanes and from folks These hurricanes in mainly I especially North/Northwest Arthur, of located our North don't communities to corridor three have perspective trivialize in Texas. a Harvey want Florida. community one Texas

pre-Harvey it to three XX.X%, significant ancillary recent ramps Harvey maintain not of an at the frankly approximately Our benefit and type this also to collect Prior of approximately understand hurricane until this decision those hurricane was occupancy time period. Please application all properties XX.X%. Harvey following increased receive typically increase Harvey communities we in our Harvey upfront is during X.X% damage occupancy many recently for properties of a fees to just but at that these increased level occupancy our context did from to suffer waving did occupancy. any subsequent in

first each damage buildings As supplemental well From catastrophe we noted issues. a received interruption insurance have as flood we four for All as and our insurance our well lost once of related enough all, flood coverage insurance we'll all the finance Port business Arthur community leasing the earlier perspective as through fine office. think as we income of includes that as be coverage. rental insurance in John

where issues We Irma hurricane of hit, generally is Irma most Florida, the to for not and will properties primarily nearly the socket and we property Again, damage the eye damage had constructed physical minor Thank help and As focused out coverage leaks. roof, Florida of constructed significant our landscaping financial per impact have we Naples and That window of was ameliorate any some the material there on hit. minor more as hurricane and newly properties. those you. believe on insurance asset concrete. where

hurricane Thanks, how centers grocery-anchored Texas and Joel, Harvey Florida Bill. during hold and Irma? our did up shopping

minimal of we resulting overall, did Yes, our addressed had had which we've flooding. we damage and all Texas have very centers now from some intense Florida, in and the rain to zero leaks we roof

cap Thanks. seeing compression The this is if affecting this you how so rate program. question, and are next Dan. after PAC

rates it challenging acquisitions. XXXX this make sure. yes levels does on or more make Yes, us for at Cap near to compressed remained properties multifamily and accretive

several other have in our we Fortunately, arrows quiver.

the loan we gives of available in us program have rates secondly, and real-estate diversity and to efficient capital choices way. and during and our construction product investment most a interest better measure the it's on spend been purchase how options that have discounts current We

Thanks.

Next increase outstanding shares question continue? Lenny? common in of this to you this significant expect Do year. stock you your had

the made we program, outstanding first which volume which in stock connection positive increased sales to quarter our series shares shifts. issued try demonstrating ATM corresponding of year We've trades outstanding sale finally in common are with stock. in box overnight connection one can with in Well, We've of multiple and million stock are X.X including our correct. common continue under exercise connection and our sales warrants in cash with shares outstanding A that redeemable our in the increase shares mainly like accomplish this is we increase last the our sales by transaction ways to stopping and completed of a with you

Lenny. Thanks

question options? played forward in existing Next role purchase as is is, exercise what portfolio your Dan? you like investments going looks

to to in pressure from continue a heightened value. notice lower loan in we to Yes, program the developers loans increased our real-estate increase as investment from interest feeling banks significant HVCRE regulations

I look going bad. and have the two expect these with gross to good we and we are we initiated groups are groups relationships this long in know anticipate new whom have had more increase. outstanding XX next past months the forward perhaps we Because our standing loans and couple and clearly of loans to over months slight times of behave development and had how Over with a groups to really some in be going stable they XX

With that over for thank to floor to operator Thanks Operator? questions earnings where callers our you turn I'd may I'd for on you the call. to like back like us Dan. other the the joining to any call up open have.

Please [Operator Our Planning Nationwide Associates. ahead. Ammirato go comes with from question first Frank Instructions]

Yes, the very must say impressive quarter. I for

what a average job ask if leased you there. guys properties? the did centers in would as those average tell know I great terms for the you they can the is want -- but for I me multi-families be are the terms shopping leased you on the to different have it average You down

to The Dan be the tell talk have Dan, and think but we figures, one I [Indiscernible] to generally multi-family about do have properties would you year are other? able want you but we that. our

nimbly. I several one our great mean where is things market mother we shorter-term we understanding multi-family have to the having the more that of I can an for that's leases, mean respond changes about us, in as right, ship the products

the remaining. think generally smaller our average that nicely leases with have, excess nine they and the on the tenants long-term term with about us and to able of the been revenue projects we office represent GLA I of sample half years Our of acquisition, we lease in every retail anchored fits because half make

out at that allows look us the future that maturities. to blend lease a really into it’s So,

ahead. question from go Benda Securities John Please next with Corporation. Our National comes

financials, just reflected the and expect So million was impairment, where in to guys the Creek on you is when be quickly, that back, general do Stone profits $X.X in the that that off revenue? written

Cronin, related first to set all related mentioned to and is we is $XXX,XXX that the company, to Mike wrote What depreciated being of the in the the issues insurance soft get the cost rough numbers floors quarter what that the core floors yet a added those to $XXX,XXX of and the the expect they some unrecorded basically additionally, those GAAP. This landscaping not basically Collectively around total about and on roofs is receivable up from FFO. back get the future that’s buildings, set with and revenue that And being to under repairs receivables up value deductibles, the we've P&L etcetera. the loss in related loss off all will with obviously for book back insurance details proceeds. expectation the a that we to Leseman Bill

the we of off separate going to we P&L be going from was about does it of the item question formed, have was options structure can one on Kennesaw on not mean next deals State, you the this more time. intent is forward My a fortunately XX% kind forward you that some to but I that exercised JV JV, are is purchase going consolidate see interest or that

the comment on further write Before off. to answer make I hurricane Lenny wants that,

maintain will bases go going every on transaction stockholders. for respect what you of PAC cash State with assets a clear to opposed opportunities to that to straight hurricane and just had as at to not value structural maximize the a to and the laid and for results, Mike it off for see especially our we're a determination, quarter on Kennesaw us something pretty do look that it's to acquisition, it's information at transaction if back the third charge, we the every front. structuring write out of Yes, respect necessarily Cronin transaction-by-transaction and it and that available transaction you the the couple to With trying that to you just

traditional as you that, there we one to at for to on The be structure high at fact sense. I every very of who maintain comment of portfolio, listening something small us and call aggressive to this of a assessors me allows a reflect that challenges we taxes us opportunities out not an looking but essentially, developers taxes. taxes have, us, to allowing piece have in the our seen we chance. are very that this of increase the Let and hope we no interest be to tax not necessarily for flag the in from Only allows having is community the what we property sales file to pattern. increase evolve know

wants use be think a perhaps to will comment. it I it Dan So, again to a it's but we And will pay us very make expectations. specific

KSU, one applications of wait successful It's XXX we ever The on just most of had leased at XXX% make editorial we been school involved is I'll the the comment. file year projects our Kennesaw, an additional with. start Yeah, that list. on the

more And could be you a property. not I going have to successful

up these questions. all kind follows of lastly then And a Okay.

As matured the and and is about release 'XX you release the X properties option other purchase XQ either XQ, Stadium than look at XX-X. 'XX there compare X-X Village windows, or that

can that So, all How XX, going X of windows or exercise open? are decision kind even what to what like something or you take property decide drove maybe XX down you Village, but XX to the decision, you the about do are of talk which not Stadium that.

we quarter the truth probably to fourth in the is to developer. relates they're will exercise bit getting on are on [indiscernible]. Frankly, little turnover. make another a And trying Well, sure the the developers capital four transactions the gains treatment one

growth we paid of loan the includes higher fully take we So, X% handsomely will is a rate developers, evolved that who truth pattern think set rate generally relates to program. asset get when we properties have one it stay to pay ownerships. we another program X.X% we The relates follow it. which that for for up the and the mezzanine up, [indiscernible] or these very buy in don’t mezzanine The the of so tax that

So, earnings manage we're those seriously. try pretty to

it of We are during to process. decide maybe asset even diluted we was exercise options. And the those can a Or so Yeah variety be may if that best decide it's discovered acquire. from a the option. we've we things we good time-to-time there reasons the not where development maybe it the that market, situation like did why interest don't was

variety So, into the and things going of decision. factors

basically the can kind every have everything out And built do you into you a to a option on that windows flexibility underwrite? that’s Is purchase push flexibility loan made. guys

did. Even period we it's for can though favorable we specific us. or if renegotiate takedown Generally, for maybe have developer the favorable we

far, So work very amenable we to us date. used on have the developers the for them delivery been with

like question-and-answer concludes the for session. Williams closing any to This back to remarks. John turn conference our over I'd

quarter PAC. you for great for and thanks joining sharing Thank us another with

The presentation. conference today's attending is now concluded. Thank you for

disconnect. now may You