Preferred Apartment Communities (APTS) 1 May 182018 Q1 Earnings call transcript

Good morning and welcome to the Preferred Apartment Communities First Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, that today's event is being recorded. I would now like to turn the conference over to Jeff Sprain, Executive Vice President and General Counsel. Please go ahead, sir.

us quarter and XXXX joining Apartment to for first Communities earnings you this welcome morning Preferred Thank call. we quarter We have hope report first had you after which earnings a chance market that to review each closed. released yesterday of the our moment, the call I'll our Dan over his for turning Executive Chief and Officer be thoughts. a to DuPree, In Chairman Vice President Director Multi-Family Preferred Also President Investments; Vice the Isakson, Mike of Cronin, COO; Chief Chairman, President Properties; President with and our from Office Chief John Communities; team. Chief Officer; Cullen, Capital us today New of Officer Chief President Officer; Executive Executive and are and the Vice Jeff Preferred Lenny Apartment our Executive and others Accounting Joel Officer Silverstein, Murphy, Executive of management the Executive Boone our Vice executive our Paul of Market Officer Chief Properties; our Sherman, DuPree, and & Executive

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

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

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

remind here our to encourage do Thursday annual of I U.S. call at to we In meeting so. for the Atlanta. Before I everyone over stakeholders offices that is at Dan, to want A.M. turn this X:XX you [indiscernible] scheduled our at

any the like regarding to to XXX-XXX-XXXX. over free feel Dan? Dan at turn now to I DuPree. If the probable questions call would call you have [ph], me

Thanks, Jeff.

in Before to a our Co-Founder, today. the number of was leadership and industry. over public inspired plus Williams, was of spanning countless the or two of a in me and Most many and we and in on friend great two XX. two room all, year word John with begin, real career, he associates a passed community partner. his I'd in His vision estate leader to people was weeks mentor like companies say are away a about countless ventures. April John who during our ago course our so whom He this a private XX career

miss and helped that he to will solid build on move for all this but company rock him we continue and we We will strive in do. forward excellence a foundation

another had for we financial to quarter. our solid the first extremely I'm report performance pleased to quarter; Moving that

a of In successfully fact, associates management reflection which both, operated board our Company work. and diligence is the across hard our and our team direct

have a and our dividend April increased payout XXXX, stock same low ratio. XX%. an annualized common first increase moment just under results we IPO XXx while Lenny, us quarter our in to These our first payment hear well at to results compare time last the from allowed a will shareholders you pay dividend first common our our following dividend had dividend the year. healthy to As in portfolio of financial quarter maintaining produced growth in Since of a

as of share XXXX. X.X% addition, common our increase stock XX. to per another of of dividend QX an on close quarterly payable XX.X% increasing are again the X% record business over we effectively announced just In This to that June we is stakeholders

shares stock we common of sold stock offering. our connection Series unit During quarter warrants also first in XXX,XXX the for issued of A approximately an the under with preferred exercise our $X.X and aggregate million of

three non-multi-family We continue our as housing buildings. is grocery preferred key to and elements the invest operations multi-family of anchored product, PAC. to assets that associates, forming focus our portion of our focused communities, on office customers, our or a continue we and shopping properties on community apartment such student our the foundation and our centers remain and including We

favorable an billion Although acquired and highlight that since talk a assets million to this $X.X aggregate $XXX I January will about specifics approximately of since just XXXX moment, January of I we want of X have in terms X, these debt collateralization business to year. or for These on with upstream no as our with operating were or strategy properties. is our partnership cost pack of mortgages customary and onboarded assets any any guarantees,

opportunities. which Since the four industry. return in on an age to older multi-family reduce the sold believe be is of assets continued youngest unlikely will have we X.X the sale on projected million. we we to approximately sale can of oldest XXXX, assets for of these this stress our holdings $XXX the years. sales for We expenditures portfolio plus asset As it average our grow receive The represented average of we of the communities the portfolio of capital our that investment. beginning sale reducing aggregate continually four base, of price multi-family with strategic financial an we believe believe our age a review our XX-year We

asset oldest we asset an average sold resulting the in XX-years XX%. which multi-family year at multi-family $XX.X PAC annual to of rate to happened for million our be For first quarter this of alone one

as part the to of assets plan. expect overtime sell We additional strategic

build the very of benefit of residents, are the announce to unique and management our and in best of perspective programs our XXXX, called training during our environment have We work trained associates technical proud Serious Atlanta strengthen over our tenants in not remain depth We programs the XXX continue accomplishments, pleased very XXX through the [ph]. have put culture, we workplace efforts committed XXXX. by committed to can to continued the experience and places but first who that associates over management Company's for to acknowledged for now quarter To stakeholders, our training associates. Soar in team they We to the onboarded this our customer PAC named interactions all when also and of skills their training skills. fact partners. in only to associates of our I'm & one and of doing to is on recently and leadership were were top I'm XXXX,

to Let Lenny? Lenny me call our you on numbers. know through walk

and Thanks, with Dan. operating with our the first results Overall, quarter guidance. we once again produced line internal very budgets in our good tracking for

the last were revenues $XX.X almost million year. or for for first Our first almost quarter the XX% greater quarter than the revenues

first stockholders XX.X this ratings time outstanding we Our on compared the range The of results more to a or solid FFO of first or was $XX.X year-over-year. and share our shares are March approximately in a Class represents and and even for or units million and reflect XX, FFO share XX% units the XX% XXXX common which year X.X% and compared of XXXX per these since weighted $X.XX first have of continuation to FFO the of Based the midpoint million, impressive, in historic for of $X.XX approximately quarter to this shares performance. we $XX.X that our $X.XX the paid which is the per reiterating units in our increase period. almost A unitholders to per million last the increase in share dividends at stock more is as outstanding represents guidance average the million XX% a fact quarter share of XXXX. average a first $X.X per shares for basis. weighted $X.XX quarter-over-quarter XXXX representing increase quarter over our in on quarter But year very XX.X% year; we paid share $X.XX per FFO stakeholders This common dividend we

acquire Switching first metric, of Remember In quarter if assets our to addition, it's we initially dividend payout ratio portfolio increasing quality to meaningful to occasion. advisors statement our we appropriate asset be financial some to stakeholders our prepack believe to ongoing continue FFO prepare fee other to not a so an an of on in way. has our and represented the that that wage in may add only -- done payment [ph] XX.X%. though, XXXX fact

the For aggregated of end billion gross assets $XXX of the quarter the favor from of $XX.X at last first two of net is depreciation proceeds. which of in XX, first the were net assets greater $XXX quarter our year. assets XXXX increase million than This or new March million $X.X total approximately

was quarter increasing to a first compared from in cash XX% to represents addition $XX.X XX.X%, which flow our this total almost a increase of quarter assets, million operations last year. cash flow the In

strategy. somewhat year, to last our based mentioned leverage of against rate We've reduction last determining first represents risen they relationship with leverage leverage have laid we decline been leverage a proper first ongoing rates on the between monitor on to interest have of At is continue cap the undepreciable our be asset XX.X% end undepreciated which substantially assets X% leverage connection the value interest our book. ratio we in instead the [ph]. was closely year. of the assets acquisition We'll quarter rate the our our lower. what and down market value believe in the Although compared the on financing And quarter in however, would

broker support registered may component the M expected investment continue tax-ability our our have Series and of As read release of independent key plan strategic us of last give earnings advisors through to stock channels [ph] Series and press programs. and A on our our dealers from acquisition night, investment a our continued wonderful of two preferred to capital activity; sale raise you

back some on let provide activity, to pipeline Dan color program our call investment and now acquisition our So me our loan on more

Lenny. Thanks,

through our rates these and foundational compress We we'll also opportunities acquisitions preferred target office our to interest opportunities several re-anchored pursue loans in asset our platforms. rates remain but and properties, growth class for Multi-family continue in across types. rise, look as investment real estate property actively investment for properties our cap

continue best-in-class and housing student As and multi-family acquisition Class communities. in I mentioned, investment in A we be active the to

at the acquired a X,XXX units active of multi-family with in pipeline. in the a of of we cities two this With XX end communities March, XX opportunities manage in total year, and representing those across number multi-family the now XX communities own state first our we quarter

Arizona, also the beds. four and of X,XXX of We housing student as Texas or the in each Georgia units Florida, representing owned XXX of communities end first quarter

solely we unique the depend our raise money to stock fortunate common new on are our that We do of and for not sale investments.

of for loan $XX terrific, accrued an capital PAC of we to our on assets Our This which the Series have M investment enjoy on has interest XX% typically real fairly when receives on public million loans of FFO. to so current to to also each were major created in accretive option Series return the when is plays a our diversification. be estate that acquire we multi-family there commitments our purchase capital These or shares is XX% we also we is sales us a stocks the discount and with make investment They value. differentiator the a had that and had option be. can stock and stock preferred to two determine preferred some what Company Park to acquire is we completed make $XX ensure appraisals price not Atlanta. to structured aggregate provide very on source their of which advantage a our at is first a of below uncertainty when Wall strategic that determine Till easily, would well attractive retreated pursue result is Street, month, our The this A two This us program. but NAVs, our A create raised as to these property best When hard assets. the the pay, stream we the should a northeast platform are a loans our market. determination prices. capital To advantage Green ability with at brokers' specked too steady a to at exercised stabilization. money we we just second opinions It of have competitive discount availability. a independent result. in discount the investment was to with new has pace this product provided we to quarter, sell [ph] value originated market [ph] at a and of Because is these BOVs, properties have million, typical expensive. common properties it off reached of we To and million along $X.X

sheet P&L while Our understates discount that only positively frustration has that and impact is this balance extent to nominal our it impacts earnings. on our

in we that by true the forward, address in of cost reflect saved the are will combine to parts way these these Going will allow received discounts the opportunity to the a our P&L these as discounts value the us component we us discounts interest integral borrower. of the with

the first During also we of this closed estate real investments. two year quarter on loan

million the small support North mixed Carolina. was in first of of a The loan use in of upto $X.X investment South project

commercial approximately National, California; in manager. larger being loan support Western closing a a premier The real square space developer community $XXX.X feet San million and of multi-family Jose, multi-family of of a the much by unit second of was XXX estate XX,XXX developed investment in and

the reported recall, second when connection originated National acquisition last Western land feet. the $XX.X office real previously acquired into an the of Atlanta representing first loan amount that you in loan a estate development. aggregate year we one in XXX,XXX in for investment quarter this investment. had during of new we complex was If square with rolled with This million quarter the We the

and Line other remaining. quarter new the contractual Class totaling aggregating now the These $X.X of aggregate million flow billion an slightly approximately real in a aggregate five value as multi-family and loan X than our with end and term a these of connection units we this of for weighted we embedded options X,XXX within opportunities and and investments real received $XXX Alexandria, this a over to investment represents purchase This projects have cash A loan of lease $X create a X,XXX leased pipeline discount tenants PAC representing aggregating first discounted to the more end with with of Blue new project XXX real of over housing outstanding at tremendous Washington the investments. potential we DC. market XX% receives excited the loan years of transaction. having properties, an investment. million we enter program time distance Passenger and commitments estate duplicate Under $XX of through quarter XXXX in development significant of investment to origination rentable the owned few feat. office origination can And Subsequently estate of option located in estate collectively walking clear Rail multi-family Virginia. purchase of estimated generate of such loan loan into purchase are This We're excellent average million student strategic properties importantly As real program heading is the end estate in value delighted to that comprised beds. market continues unit originated a investments XX March,

our you platform. been our like to invest now. active we grocery-anchored I'd in We've in through business with new Murphy know, Joel? this these activities you As also regard, market as shopping part centers discuss very Joel of

Thank you, Dan.

an exceptional for at the senior proven We has management performance. subsidiary new have track grow high market portfolio for our to grocery-anchored executing at and team which the sunbelt the level tight operating record strategy a

acquisitions to associates support this by in We asset talented continue finance. all adding our build and bench portfolio areas, including to management, growing

quarter leasing. new both the the on our We and operating income we our continue internal leasing In including of goals our operating our tenant for centers. focus net and improvements capital to outperformed on portfolio results leasing, renewals retention, first

out, moving of flexibility XX.X% to are in work have our part an more which center some in redevelopment April and tenants CapEx. When improve rent totaled XX we centers some we of two that of scenarios us actually add were maximum are underwriting value all space. our we leased into very as both allow quarter strategy phases or maintain stages In portfolio, anchor we're -- mix a we third our of XX this extend centers. being operators only to different center, electing to acquired XX backfilled currently with underway in centers and of at these short-term execute the in so grocery-anchored strategy of XXXX redevelopment. tenant we on did value-add on of planned We the on centers this with and our as these centers the first at downtime and leased. the we remerchandising majority the space so little XXX% with the with three we of And renew, now end factored higher proactively tenants this arrangements, selective is Our are our portfolio which

we quarter year. construction to We now of by fourth the are expect under and this OLD open

'XX. list to these [ph] properties portfolio end is welcome grocery first points core pleased the increase the leased Top anchors. and are tenants. excluding basis to We fourth to compared the Tier anchors pleased of both OLD quarter our We're our XX% year, of particularly of XX three The past this an renewals of momentum in-line with at leased of properties also of XX quarter,

are manage XXXX We anchor Of proactively continue renewals, anchor just all of square now XXXX for XXX,XXX centers XXX,XXX feet; with remaining square or feet rollover. approximately anchor renewals XXXX expirations which of to XX leaves our us leased XXX,XXX totaled the anchor complete. shy square of our XXXX. This feet

we on and feet balance quarter inline we approximately 'XX. During execute the square remaining executed XX,XXX of renewals, XXX,XXX the on for square of first feet to

new in early capital shopping centers also each to rollover a adding year. with the all replacements. of we've new execution the lighting, upgrading on the landscaping pleased kept and center allowed we've of grew close percentage you just of all good this the in this fact bad pipeline. combination in and XX, past such handled the our debt and inline value these approximately acquired our value executed had and anchor trends very very in seen are actively opened; having before signage, centers have upstream on little rollover results the our LED of We The roof our We our leased, Atlanta April have million. Nashville may market at suburban parking in market first $XX our expense vacant managed of expenses, released we outstanding One positive is and anchor release, [ph]. renewed shopping quarter, Friday our projects of in aggregate located public press higher After space, PAC. we suburban rates, as lot centers we one to cylinders yesterday quarter, investment upgrades, in two of our including We're to is subsidiary

that add sub-market these to two are in our leading a to by these store grocer per pleased a markets. of growing Anchor centers and in located excellent high solid market are We with examples focused base has demographics. two asset excellent strategy. the foot square sales your These centers sunbelt

on share As focused being is states leases. better operating nearly and approximately generated anchored opportunities with totaling past but strategy companies geographic Kroger our sunbelt disciplined, in are staying public XX grocery-anchored our billion we a we XXX feet and banners, tight very remain X.X of them independent diligence market X product of and our pricing. centers are diligent has earnings the market in also acquisition of XX on [indiscernible] new also own by very year. square pipeline due anchored are and by inside and marketplace, in we and We very public $X both over while XX tight now million this Each centers healthy [ph] active today, the XX leaders. are are these

to turn me over back let the Lenny. Now call

at to the a our place and IPO. continued our a into great platform the Despite and do vision Joel. of that of I on and back Thanks, team downs marketplace job the the time building executing in strategies Dan put carefully John, April constructive ups XXXX has and

to well. financial innovative, and many be and We on we have which [ph] believe set I and promised goal in allowed each hours we've effective. every Overall, us our nimble quiver extremely performed delivered have

believe also youngest menopause in in and attractive our most among the are the in multi-family We are hardly communities are the [ph] the industry, industry.

Our buildings shopping our quite on right. own in multi-family well complemented focus grocery-anchored have our and office student frankly have very centers housing, in performed investment and

With industry. our potential investments We to continue with and purchase these Operator? that, the like on our value together you discounted and for you this our joining forefront back earnings loan PAC the options flow turn our to I'd open talks to estate we've the investment real any call place call at the created to our I'd that questions believe to for morning. all have. thank by floor program embedded the cash through operator generated now us of like may or

question Michael comes from from [Operator ahead. Instructions] go And the Lewis SunTrust. first Please

the I this something Let me years? for learn well, in do? little do as to there changes role place? then wanted it in tactical like continue was in or passing, plans vision maybe sad Company; that feels you maybe how to want I along at a even multiple a but it Is sounds you ask you for it the CEO those anything but with John's first think of a now yourself soon long were to Dan, level of you say that see more maybe time to strategy can or lines on And do first ask, terms the is

Company the part I from I be have go XXXX. a became a first President going most in that [ph] qualified a will to as the of the I to way me board the an was plan to within to in would understanding cousins step invested As good unique long uniquely person situation I'm may and were the Interim reason. as I question, role to in role so CEO be for part, the kind second To that this it of the properties John situation, yes, stay don't in a really and as think

to be in done John step that appreciation and certainly keen an a have I iconic think for when for need that. the I was leap you things So

believe I collectively decisions In John, second. company Lenny, going first and public And predicated strategy; for are now, in good background on to in and because we real Joel it employing the finance, of a years estate strategy of that we've trying wholeheartedly probably X is really years. it, X all terms developed our make estate last had real on

So the a -- can very strategy similar. I you to think strategy expect be very,

and we're mean everybody that -- but team. are of you, tactical yes, dry -- yes, their figure mean cash respect buying overtime. strategic things on no kind twist things the maybe different, standpoint some from would tactical all and keeping and so look management involve tell there noticeable terms I powder to In assets view of of the own more tweaks, not in I are we'll at tweaks; has I on we're things and begin these long we'll But taking the out consistency that might

was I a situation ask on of had tax we in what quarter My seen, you and But you trend item bit quarter the the little sizeable second that for of are increases of seeing rest pressure the property the -- lot expect a about this unique guys wanted could to question, more a taxes; to REITs side? I maybe wanted lot. And kind year? has down this a of ask expense

a credit and the major that, to the is around of [indiscernible] [ph] taxes extraordinarily has insurance, you recognize to that of Gayle It focus management major, tell management. Well, the effort. I let that Bill not property but me Lieshman we've Ron only made in a give proud we're lot property along to asset for before and of with fruits [ph] we effort

property needs for properties. a by increasingly their really so they backlash out particularly -- amount they we increase, political we're deals that capital think know, least need taxes the property You that about important figured municipalities that be as to deciding we commercial it's be particularly get think one, important eye silver taxes, become on of raising going And in very we but -- have we are I just underwrite that are a not taxes smart appropriate. to on what with our proactive where it's property target;

Lastly 'XX. for than like or XQ in it later looked little bit maybe preferred were the XQ sales me; in a they

wanted then if quarter quarter going to there kind to with expect rates and just you I was again side, the the of make what on or to during if So you maybe up a sell if one year? do you the it had reason interest the or was ask that just rest doesn't think preferred anything another trend for -- of

crack Lenny, this. take a at

towards the A No, fairly bit simple the our mean, rush out A stock Series -- in of we are that. it's for quarter I last Yes. million year accounted as types transactions typical the $XXX offering of first answered you in a a closing 'XX, I those of a end Series preferred the and see which is little for increasing numbers

A consistency 'XX stock, fact and and negative therefore slightly clients. different a preferred -- best to be assumes appreciate is of Series around well us, as much they M consistency at interest the hearing for quarter a impact I'm dividend are the really as in the and community a yesterday in the fiduciary X% their had that but shares I community for RA just -- back would rates reproducibility at think time are own on from and format conference the of first steadiness the this major again, for I of they for -- what which also trying Chicago, don't We a on broker-dealer

them return than interest seen to outweighing in be it solid very is that rate the for more and of steady, marketplace. just predictable seems So very, increase we've type in the

that although we prepared because vision going a just I've been we of made off, because with involved have they off. little there with and spike we I it's towards it and is pursuing be a amount spike is comment their capital to when your I when lesser us bit. active on have a frankly the of the since can want competition be public XXXX, need -- deals, clear we on, advantage have when strategic great in about to it. certainty remarks it's is question on; tip and A companies it's more close with

feel addressed question it. said absolutely in nothing So actually I but having your better about

ahead. question National Securities Please John go Corp. And comes next Benda the from from

Just case? be other kind Park that is Green right infer takedown, exercised schedule, like down on one quickly on can will purchase the that windows was also of unique it a on schedule that seems or the we option taken

morning much the and I by are XX% windows lease across in think project in one than down I just on started somebody high think this right exist in with going as but were see to [indiscernible] -- the at that good but leased pretty for disagree effort I'm looking are now, the the large, or and portfolio, the where that large, on we really we're there there. shape to Most purchase out of is table leasing one option Orlando two we are me the looking if by we're those deal we're the and and newer loans. target

cash And please but you're how -- a a invested of quickly, think the CapEx flows from maintained return comments in perspective? can you at earlier aren't naturally for CapEx not that made properties? about you're in Can on you earning then spending and CapEx elaborate I you on a earning dollars larger statement kind the return look the through somewhat argue

is of assets, Yes, age. saying probably i.e., if portfolio years in a have pushing more XX specifically we're what you

route. they to going are new you're a to to get to on need from lot at and not rent anymore new going going parking routes, are new a putting need portfolio looking assets that You're start

the really really portfolios have when expenditures. really, tenants going really, roof what field and the at outsized have also a old capital that's of mezzanine to so really, have portfolio in you're you advantage a because us, across competitive really of good dry, companies be good the really, loan of So multi-family are some is at from companies; look expect fact multi-family program that's about. feeder, The for standpoint CapEx. keen you part the that something and some we're and is to our And that talking a looking look

investments see terms XXXX to in going we're to and in would did same of just you say shift we that some And lastly, retail, as of percentages going the or do multi-family loans -- for in that you kind way? XXXX to

We're going raising by in. and coming year. it's money it month we're every I mean, play by to unique

of which was compressing preferred you've -- is rates cap going And clearly the it How on cap it's a got coming rates not was is in because and money multi-family rates our some coming in; money level necessary project. cap were up, interest diversification if rates having which Joel's Boone's scenario retail buildings are for differential XXX in right that than continued buying that. invest that office greater opportunity better right probably growth going centers now even by at for to now points compressing, basis and in we're the allows

this ways have we're in also we're take invest not are; ability long-term, accretive -- into for attention ourselves for pay actually we're IRRs competition. to to I from that it in We and are money the our and trying the it mean, short-term, to the what the XX-year and in distance we

comment that a renewed and Joel, some Joel. why? you plan for in you you not about selectively has a specific if us can plans there quick real retail haven't made the just portfolio; give example had been then And renewing

the renew know say coming we'll they and next do term stay available because even together is what keep know Sure, a that's John. up different I is another we XX in the saying, year; two can somebody we a space we say choose we might was it that or those specifically we are three in add put then in in higher in their space because them then to put and to to assets we'll not to Those with space a up any deal our coming them we space to you so a much are we'll store give somebody do want want -- comments occur have at they so because one the -- value a that's but year might could rent. together and to somebody phases, actually well, five-year adjacent might -- deal, of want might get bigger the let's

bit downtime rather that at local a of also let's these what the little a will do we but that there -- and rate. don't look down is goal say then in better sub-markets and we good market say in accept and street the better the particularly restaurant some would restaurant a but be our better So renew center into move and one that could around I operator operator is

no [Operator this remarks. concludes questions, question-and-answer there for our further are to Instructions] to any turn DuPree Seeing the session. like would I call Dan closing back

great that industry. like business call. yesterday both are people the you folks to and I'd of felt talented got we've explain captained of want thank best the us for I've but work had kind the folks they associated by more was some to of have folks I I to the are that market; joining a this multiple been the the you units of people than never on opportunity new we earnings at to with group that with in here group [indiscernible] some Well, in here. that industry,

legacy fact you to is going I can team here that and hope we're bust an our all comfort outstanding put of So all for together the take John's he perform you. in tails deep to that

to So no, I'd it. going that, to operator; that back to I'm the turn call I'd end call. to With already we've because like not like done the do

please a any don't or have hesitate me Thanks. to questions additional call. you comments, If give

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

You may now disconnect.