Preferred Apartment Communities (APTS) 2 Mar 212020 Q4 Earnings call transcript

Good morning and welcome to Preferred Apartment Communities Fourth Quarter 2020 Earnings Conference Call. This conference call is being recorded. And I would like to introduce your host for today’s call, Mr. Paul Cullen, Executive Vice President, Investor Relations. Please go ahead.

us full to year joining fourth Apartment for and quarter XXXX you and Preferred welcome Communities Thank earnings call. of quarter we each review close hope you an market. had We opportunity of our the fourth yesterday earnings released which report after the have to Executive moment, Chief turn Murphy, I’ll some share a call over to In Joel initial to the our Officer, thoughts. Chief and some additional financial metrics capital And share then, details will John Financial Officer, Isakson, markets. our about prepared Joel return conclude Then our remarks. will to

limited to made answer performance like COVID-XX, the are include, to, of the uncertainties pleased materially. questions call. Joel’s conditions economic impact you quarter that ability uncertainties, to COVID-XX. I’d impacts be Following of the and and in and remarks, statements have. any XXXX pandemic everyone and mitigate differ risks we our These forward-looking XXXX and might of our in we’ll risks operations future These various business first guarantees rent not statements during on the light operate, and are and collections the note but involve information from may to not about our actual fourth may the be our quarter markets which results in COVID-XX arising

For should earnings statements disclosure our and press as a in release uncertainties, of risks review discussion filings. SEC yesterday’s these you the forward-looking as well

today's you and release the that our filings with non-GAAP other be includes quarter SEC reasons non-GAAP other over measures on indicated outstanding at found press uses partnership XXXX full fourth your on The and review based to be in refer We for results for may these year this basic otherwise I reconciliations period. Joel. and of definitions measures. can would and management releases press Class Common Our results to terms our of encourage of financial used financial also and A data turn the weighted Joel. financial discussion units website pacapts.com. now and per supplemental and like report Stock this morning shares share that Go are call Unless discuss the average to ahead, performance. information we or operating the to the during our

Paul. our to thank fourth XXXX everyone, and results. you, call and Thank Good today full joining quarter discuss for you Hey. our morning, year

We days at well. Let of today the impact COVID-XX the beginning this realities me pandemic those the about global of and been hope of and wide events past us XXXX and of when anniversary the attentions. business country by families here personal your sit begin We continue year of stating right have that felt be of primary focus the the and to the by and of globe. call finds COVID-XX our ranging the first all unsettling across this you deeply in became the significant March

externally in However, Class with of preferred in the We and while begun. strong high and across the all ended We a outperformance balance have could accelerating investment operating own focus the had and dynamics the was our pandemic continued the as focused latter our environment. movements, four also investments integrated trends significant a a company This well-run going begun year now our and our realigning already with sheet to the well challenges. what managed to and now year hope vaccination earnest, year in are prouder year, markets be an the creative to of a work. have multi-family suburban relative renewed men hard had internally located entire of with programs their I that of forward women increasing flight assets. believe country operating of includes Sunbelt quality, required particular thinking rolling of tailwind asset the They're We rapidly rate the stages for benefit on and face towards out and and our in and we is in agile quarter worldwide. in the and to our be four three level. level year classes foreseeable at Communities. asset pandemic us This that asset we also tailwind and will perform XXXX Apartment COVID provide place The well began on In verticals so properties effective A believe work we economic in and past a spotlighted a COVID-XX be for future reduction demographic operational process Sunbelt trends exemplified have an stock outstanding. our for their strategy XXXX suburban PACs was and difficult that this distinct allowed had has and transformation will that the classes these at fourth smart it as free and Preferred and fully execution advised they unprecedented significant changing, REIT portfolio. certainly performance. Companies across a

assets retail For and XXXX, across rent for full operational to XX% teams Cash, collections, quality deferrals report credit in of and of dedicated for were financial including More board this high with sector found XX% very by portfolio collections real have detail is loan fourth been performance particularly peer office. with the for the multi-family, to yesterday our strong quarter our significant our our supplemental filed investments the groups. fourth respect grocery expertise. cash XX% run including quarter that year XXX a for estate We can results relative anchored evening. to be

Sunbelt benefit the We also focus. cannot suburban overstate our of

continued strong growth have employment household rising from high and We and population base, strong incomes. economic educational employment attainment, diverse a drivers including benefited

strong items and more to businesses. places COVID to places as net necessity and and suburban families to for to And companies result. their has guess live, they Sunbelt those into markets for seek more markets a shop only growing what, a This to as groceries continue migration our attract positive experience places which businesses they We operate accelerated. creates also need out families positive our continued businesses loop and feedback

operational the certain we favorable strategic up implementing in extremely to company company's for opportunity the accelerated our of Our end we was that manager. to of alignment the believe future. demographic and stockholders PAC new PAC January manager. internalization begin our eliminating stability full structure simplifying internalization the important of scale This portfolio providing have trends fees completed for set an changes growth meaningfully PAC platform. event XXXX, the This gave of management performance, the across benefits has and the allowed At and by us to external the capture

$XXX stock stock to bylaws years. then two through amend a quickly the A and ability realigning sheet. capture an pandemic This took friendly of to in two multi-family a during our outstanding improve to important We our management loan XXX allocated areas business from capital approximately million to overwhelmingly when Series the housing to corporate is enabled Class internalization to sales proceeds student approximately the with and vote we XX% multi-family of and our then initiatives simplified We balance important, We governance net two and our common team our as common our sheet optionality with Series As preferred in significant. of and stockholders improve measures and portfolio deployed the million fourth real for us balance be XX for decisively These growth. acquiring acquisitions, housing strategic our the tool ability meaningfully by believe stack of November. X modification put our our to steps balance A redemption can built the estate the One outsized goal of option on up stockholders. to our assets remainder hold. passed the our the reducing the we positive preferred took our completing call sale where years we This on react We is shares by nimble successfully preferred our newly growing support was of investments company's to capital stockholder focus quarter. call student to portfolios portfolio in other Florida by giving the utilized flexibility A this and purposes. towards

the Winter quarter generated a through within unit MSA. XXX a total year-over-year investment the was units Menlo, XX,XXX account XXX high was in increase our units in located opportunity estate second The representing additional first a which We one is taking Orlando, I'll The Even our approximately Florida $XXX And was demand multifamily the net year our sale in the community minute that an located year-end in loan Menlo unit Blake, into community a fourth investment fourth growing fast X.X% our increase X,XXX total. The two quarter units and a submarket ended XX.X% XXXX Springs asset real These acquisitions Jacksonville. over in discuss with growth. programs. XXX in XXXX properties unit during of to million brought

Multi-housing In estate approximately XXX $XX attributes addition, multi-housing of in our that and investment including the our believe fourth asset revenues have class this we in an XX% investment property student which the strong revenue growth issued loans totaling these future. of our into additional and investments loans estate real commitments, the units demonstrates comprised million the belief order real housing partial of quarter. development supporting we markets approximately

drive We driver of are via growth organic believe strongly is rental our increases As our believe to the look we for ahead, across very we portfolio. and positioned multi-family company. growth we rate well future

the We expenditures. our advantage place believe of the actively the we team our markets. to tailwinds We and have have capital expenses managed in in controllable and managed also take portfolio

market active acquisition be We for sunbelt to in in expect markets. quality properties suburban the multi-family our

to markets XX We decisions. some the by we cap to remain quality last basis significantly months. That in said, basis our cases some disciplined properties points investment compressed, in rates our few for are have that in seeing just intend points approximately of in XX

real our market those including and believe However, developers with estate operating teams a meaningful relationships we advantage. that do provide markets our knowledge investment in deep competitive those through program and loan local

dispose at New and more this New Creekside no mentioned to concentrate Texas, of this our fourth sold asset Braunfels non-core one We quarter, as community, our assets the growth longer Avenues a we ago portfolio profile and in minute the fit that our portfolios also in This multi-family desire will and market exit in from and I just sale Texas. time-to-time is strategically. Braunfels line with sale

market-leading, approximately pure Next, grocery-anchored Publix, of centers largely our fourth by centers traffic leased. Teeter XXX% XXXX expect quarter properties anchored and Kroger portfolio. continue These to see continue seeing grocery sales grocery strong results daily Based partners, our across from we have seeing sales far foot significant received we sales. and play and are our solid are our so including XX% XX.X% Harris on are excluding to the we our grocery-anchored redevelopment price grocers from and high-performance revenues, retail increases

As we were the furnished update past fourth in our business collections quarter. for year very we times and with our last this retail pleased once January, several which rent collection were rent XX%

total have our reserved appropriate. revenue on X.X% XXXX More believe our We retail which this of for supplemental. is is contained in detail we

XXXX Our to turned has focus for leasing.

those tenant quarter. be new signing leases with continue We successful and the in fourth to retention

Our levels. activity are market all in expanded rates pipeline markets growing has New holding nearly our and pre-pandemic rental of or Deal of from

in the so numbers outperformance was disruption for in done strategic for numbers collections grocery-anchored momentum of sector. on the the there incredible on sector. themselves we this group of where of XXXX gave in first an we board and assets The team much our ability retail distress in speak has broader across accelerated. far but The believe rent has our retail so And team themselves, noteworthy. The is management and Performance focus job the our speak obviously navigating but and obviously this XXXX company operational the relative pandemic the to our retail efforts. quarter us

comprised the revenues fourth suburban quarter. XX% Finally, of office in

have strong we collections for expiring over portfolio our of leases XX% just been in have XXXX very office Our also XXXX. XX% and and

our of more XX% We years weighted remaining. our properties across lease larger corporate than carry office are average and are largely capitalized and leases leased term seven users with well

from believe also negatives from of by While home Jamie that more continues we more the are that working longer the staff JPMorgan, work recognize recently away Dimon the and saying office. for comments made from we being some felt are home many, CEO,

in certainly are where it. have in our be Office much back to for and this true force our Home We in found we better Atlanta full experience

rollout is Atlanta to where continue from coastal like our of demographic away see their nine located. migration increasing office We benefit and Raleigh, cities the back also trends country believe trends in towards markets pointing people of the across these We will are buildings demand Charlotte urban over corporate and offices. towards rapidly vaccines seven time suburban office more

users to in also appear decision focus as mode to to their returning about leasing office needs. Our making office space be turned has for XXXX

I’ll So, the now John. to over John? call turn

for I joining this Joel. staying Thanks, to And healthy. all morning. us and everyone thanks hope safe you're

and with me fourth start full our Let year quarter results.

quarter For the XXXX, per of $X.XX share, generated per FFO of revenues and share $X.XX per AFFO PAC negative core of fourth $XXX FFO million, $X.XX of share.

year $XXX AFFO FFO core of per of For million, XXXX, $X.XX of share reported $X.XX the share, revenues and $X.XX share. full FFO per of we per negative

I think results. the in our the articulate housing ways. affected how important portfolio the student strategic The our noted fourth our results in have quarter it's call our sale Joel to of preferred efforts different of impacted in stock

number. eight removed from our housing which our operating revenue top affected portfolio assets student line of sale the First,

the quarter but growth a housing would the assets have decline. owned in million entire on we higher. quarter, see, we year-over-year been $X basis, the a can Had our saw you about revenues student As revenue had

things This a but solid $X.XX a $X.XX Second, when by deemed reconcile of generated. interest were from importance dividend Mac quarter, $XXX a investment called lower of decreased FFO -- quarter helped was real operations. $XX the a cash, FFO incurred the our a results smaller purchase Series almost There without FFO FFO and share. our FFO in gain lesser core sale reflected Also versus than as measure a positive other of dividends million our the in book the $X.XX differently impacting the Higher deemed A stock though in investments. relevance results. have highlights the share option result negative discussion helps estate our our this to Said we worth for QX. in we and to share of also helped core impacted on alone FFO revenues in of K FFO that in quarter's XXXX negatively share the and in about income would interest from Freddie program million loans obviously which deemed been the share the strong extent the per that to a core we dividends true QX $X.XX contribute termination of the expense one-time in to preferred going

to our our forecast. increase the driven investment from lower QX the primarily is As quarter. With income have of times, many to we said accrued respect realization to AFFO, loan purchase was an in will revenue estate option results. and detail from quarter, from million interest real book, a Solis our more portfolio. these multifamily improvement now difficult lower QX loan in received by the expense capital the and expenditures me revenue to full loan real In turn Let deferred investments, Kennesaw approximately II Straights, give of estate Sanibel interest property little E-Town received investment $X.X plus on now we our fourth segment loans of I repayment

impact related operating year-over-year did pointed the feel While well Joel certain we from costs. our as operations to perform continue out, COVID

fourth same-store quarter, multifamily NOI our X.X%. the by decreased For

by insurance actually in taxes X.X%. up XX% XX% -- primarily increase a slightly costs. The was in driven estate and increase decrease revenues NOI taxes real property by Our in were property

For grew the year, full X.X%. by same-store NOI

same-store as was XXXX. over XX.X% increase of December of Our XXXX December occupancy XX, XX, an X.X%

stock, This issuance cost to investable marks see balance stock preferred stockholder reduce of capital quarter. the would option the we vote. A realign to when outstanding call execution Looking stock our our call liquidity like of to balance of currently we at by at the now $XXX post drive the Series sheet preferred reduce net end shares after beginning Joel’s capital initiatives, the approximately total to in of capital points of quarter. the a our we company’s the to reduced desire our we respect all and XX% continue position preferred completed redemptions at Ideally, time approximately preferred to represented and with With negative the XX% available stack of of growth. the of cash, stock. the strategic of company stock call outstanding The million sheet, the preferred at balance long-term our our balance highlighting on the and be issuance about and that balance again and for

While to both market our we done of broker this this equation. an job us and can't control perfectly, sides excellent dealers communicating managing helping manage the

For $XXX the million. redemptions, quarter, we had of call net about offset about million. approximately redemptions of $XXX raise $XX a of the million This our reflects including by

were For done redemptions cash. the in reporter, our all

company's the FFO in team in would focus would we common option, cash on were the conjunction this for redemptions for raise stock shares redeemed a incur We going would our to and to dividend is strategic the impact we continue we we If stock, which deemed will redeem with to other our that continue pace future, efforts. results. As preferred not accrue of dividend. forward

our Let me now to guidance. turn

We portfolio with are comfort environment. of initiating our given full in the year and expectations for guidance for improvement our the XXXX performance our

per $X.XX of range of same-store We full to to growth for guidance FFO following core $X.XX share underpinning the the X%. in this X.X% of assumptions, multi-family NOI expect year the

loan real the and million guidance accrued a calls. New includes not this note guidance investment interest termination does that in estate Series This A purchase impact of received also $XXX originations $XX additional revenues Please include cash. million. in any of decline option to preferred

thoughts. will We call like would becomes the Joel? for and guidance this Joel turn update to back further as when to if now I it appropriate. some

take John. long-term how of comments objectives. measures focused and to they’re John's from we are financial step are operational thank those broader short-term results. away summarize minute important Obviously, because those our financial covering metrics. strategy financial are let I important, judged. some earlier me for just back comments and Thanks and and those very on our metrics know Hey, detailed my here obviously that you, that because a very and But

than As XXXX start we the of I a said we the were outset, XXXX. as different company at start at far

all advantage COVID-XX we of the -- emboldened this of pandemic, to have to take year opportunities Given to position have more even do amid the that accomplished before are we we entering us. PAC

First, economic country lion's believe friendly for businesses attract Sunbelt growing in fastest the located the we current the of business our tailor-made states and across continued tax, the share is is to where over environment. Research growth in Low rise non-Sunbelt families Partners the According are MSAs or XXXX the forecasted X%. $X to while $XX next decade the expected population XX% growth Sunbelt Sunbelt. is April million Clarian another by a to or pre-COVID increase million only piece, portfolio to

So to years differently, were two will the could XX. ahead. trends they mean The the and in pre-COVID headquarters families. Packard, more have we Hewlett that urban the to in Oracle, Atlanta. such in here Microsoft and Amazon locating than population for in believe they also in accelerate experiencing only Sunbelt their being corporate areas. that expect see relocated as that in and states these hubs are as non-Sunbelt place next living space these significant the Tesla, renaissance growth states Companies millennials and Sunbelt suburbs next in growing CBRE Sunbelt prioritize are their being de-prioritize each point The years Microsoft's

historical numbers into an reason our higher rate as long cash for CapEx piece and of state of averages We business migration resetting believe as by in their demand US February is us assets. in suburban many offers Mac state markets. discussed of housing also opportunity a multi-family issued relatively low in of housing extrapolates the compression today. Freddie informative XXXX driver grows. growth on demonstrates top demand cap which to believe flows we are account research pre-COVID Sunbelt This a This then clear demand take state Second for flows. to this is quality term highlights best for high we're a is seeing shortages There

incremental diversification sense not lending We we our stability pack. unique allocation dismiss have create our providing makes platform and suburban to multi-family believe for the to a a in Sunbelt deep of in multifamily in in strong benefits including expertise operations asset our class opportunities. other But pipeline This relationships us. most developer and for is the to

seek leverage reduce we cost to to Third, out continue our sheet, our balance opportunities will enhance and lower of our capital.

and adjusted refine can capital We continue will work portfolio where risk stockholders. the our best to our returns for to ways find we drive to allocate our believe we also

reasons, as forward is continuing feel very this we We further just these these as the you the look For and are updated for to beginning. year the keep excited shape to initiatives future take progresses.

let me And Paul? back call now thank to So the turn Paul. you. over

up Great. Operator, Q&A this time go ahead open the let’s call, session. our at for and of

Mehta from [Operator National of Please First Gaurav comes go Securities. Instructions] question ahead.

morning. Good Hi. Yeah.

on provided, within First could market X.X% -- question the guidance or on portfolio? if you I your same-store expectations mean NOI your outperform talk are in the you apartment you about underperform you wondering that to markets I X% your portfolio, expecting the within was have portfolio to really any apartment

we to you. Gaurav, our Hey, going going that feel any don't thank are I have pretty any particular don't we No, underperform. mean about outperform markets range. have of any or that good to -- sense -- we are

Okay.

what your retention on portfolio known you you of slightly expirations up expecting touched kind retail, office this and I outs expecting Do XXXX for question think are any your you’ve -- and XXXX. about part of Second within on you in your tenant that have XXXX? move guys lease in

know No very on never we what's you now. brings in we -- good look, right wouldn't going our but future what look feel feel very about Gaurav, necessarily portfolio overall

Okay.

you on? XX% guys redevelopments you retail, expect occupancy within to talk what and of is are Lastly I going then further EBITDA and your the kind occupancy you of is doing the think properties your your the what retail Are kind of in redeveloped portfolio excluding redevelopment returns about XX.X%/

expiring that's rents moving not lot re-tenanting the tenants using of when terms that by that’s lot low yet. you actually do that that times is we we're their have when ready answer A the Gaurav. question, and time. those take or a you’re properties times out. that do over But opportunity leases retail obviously be great natural of to a might And you or actually for positioning redevelopment Hey, -- a are

to thing before So leases decline actually very redevelopment. see are we a it's natural to us announce able a for in and occupancy

Okay, understood. you. all Thank have. That's I

right. All

Okay. Thanks Gaurav.

you. Thank

Next Truist from Please Securities. Michael question comes Lewis go of ahead.

about in the a Is I shareholders economic basis Great. potential the of new should had you. accounting or this or any really terms dividend. anything as Thank we the else is cost just to existing question impact of about either comment there think this construct? an shareholders or

accounting just really Michael. It's an construct

Okay.

a in there maybe is My your of net a preferred. we expect sounds or Okay. question property It types. keep away you retail be another opportunity preferred that one about how way student sale ability think doing? those think nice to to housing in to provided how to sounds but you're those to office do the continue second it to the multifamily, you the since can shares. like to that's any able at get chip chunk so continue And a large want is you do that something do or of like seller about you How

Michael, good question.

that where asset. particular felt the that right that the things felt and we through those was the gave things, in them across asset that we with of at all exiting age example fourth them. quarter was product at it. with all a quarterly types assets of just do our That and our with And with we market different thing the as of and look As us look you for its basis look we to on all

to that a do for very That's always. to natural quarterly. continue do We us regular thing

that's in best it Series options up there, A use You of we whatever growth the right did we the opportunities for do. that when which that's some incremental available in question the to We have have capital have and we the of obviously preferred, taking external what bring from moment. the incremental That have at company. do can source. capital against the that that get but also now investment be still We look opportunity

any quarter, new to guess. at of just I This another this internalization I'm Great. be to the liability when more you accounting one manager would isn't one year. settle needed related but are balance the to former your going it's there Okay. that sheet. Could the ask talk of That the beginning $XX million is to due if payments and on cash that?

things and that's the broken buckets all in that be two Michael of two next into settled those down years. would

Okay.

those So, are…

I think those are…

of gradual cash …will kind expenses? be

I in think -- the will I the Not next and I be pretty items. they'll be years two they'll gradual so they'll time points occur two at much mean each occur as think lumpy. of they in

fixed And it of component of one the at think I would XXXX. January on be a end of time

Three years.

you. Thank

question go Please at JonesTrading. ahead. comes from Jason Next Stewart

was market then could Hi. or cap Good acquisition hoping morning. and see Thanks. your you detail. I more on you bit elaborate a disposition where by compression comments markets, about rate little opportunities and

but we're going disciplined. Sure. are Yeah. to comment there things to we also this that is in the be to a market The is obviously buy and show Jason good question there

are as love dilutive then but we we situation have out. to we're fast moves in would And that all -- of whether but says Southwest somebody a liked We we not we've And position. are on not assets think for -- is our it would answer an that in fit at those buy then well these we moment good Atlanta, so to like they're sudden those would Florida assets asset as where a to you really Florida just that going We this us we've into are, they and really across get that portfolio. in like really where seen and in seen markets a markets is that other asset I it know have what there that us the just to is it and we're even is saying and they get the hey has out possibility think In we're over reasonably be we look the as not and that high them our we unit better might that to the price try the little coming. I actually allowed we basis understand go a on might we for what's per really aggressive in broker markets per supply a some It's see know can you them those and price. that's growth pound rate or in look put optimistic. you at what monitor than sometimes way teams well rental as OEM or say say that think

went or reasons -- of really a could too where to submarket didn't in in inside make the that asset it's you really markets hard Atlanta there's Atlanta on little have asset So specific it because it's be really but and one another another price generalization even kind

asset. And any That's listed. it's you then markets have “shadow expectation lease to there inventory a that's the check see And going that there?” you is have by Okay. submarkets eventually really -- for impact asset assuming that Do are larger any evictions new how or activity? on moratorium

than our meaningful No sure other. to so assets that. a a collections thing that. mean there been markets of seen for guess the just we it's have really But things whole a we're haven't or mine. I'm in way the haven't high where couple seen particular overall not solid I of markets rent that lot I are more about us pretty I mean one worry

as you process to And in bit maybe and new lease a just of leases number then concessions more of Could guidance. thought rates have we more one kind terms Okay. on your of up that multifamily? sort what like Thanks. guidance little of Fair things activity enough. blended us you your for build give

being those the prepared assumptions. uncertain somewhat of just question. environment we're just with I the Yeah. the mean Jason, in recovery about to this pace totally talk appreciate not

question-and-answer This concludes session. our

closing to conference to Please I'd Paul turn for over any the go Now Mr. back ahead. remarks. like Cullen

wish Communities. Thank also your and a you Apartment joining day for us and in care. I to interest good take for today everyone want Preferred

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

now disconnect. may You