Apartment Income REIT Corp - Ordinary Shares (AIRC) 29 Jul 222022 Q2 Earnings call transcript

Good afternoon. Thank you for attending. My name is Matt, and I will be your moderator for today's call. At this time, I would like to welcome everyone to the Air Communities Second Quarter 2022 Earnings Conference Call [Operator Instructions]. I would now like to pass the conference over to our host, Lisa Cohn, President and General Counsel of AIR Communities.

good and Matt, you, day. Thank Lisa My and I President and Counsel name of is General AIR am Cohn, Communities.

related These During differ results this risks be on be projections found based may we and materially make XXXX conference call, of today. SEC discussed the from management's forward-looking uncertainties, a in judgment, what which to our are may subject statements statements description are to certain expectations. can including Actual filings.

Operations; funds certain comparable release non-GAAP present, Co-CIO Other part These Considine. will Financial financial our the We from will of Chief now Prepared of Keith of as and Terry? reconciled Beldin, most operations. full and remarks. to prepared published defined such the supplemental also John also site. Officer. Considine, Web be turn GAAP CEO; Committee; Kimmel, remarks will during President are and question-and-answer earnings discuss AIR's our the of We'll the is are are come Terry Chairman all Paul measures call management today McGrath, Terry session, Investment in on our which the information follow to our that measures our available us from members of Property

the in old but less simplifying growing of efficient IPO, in to business, now are and of way Aimco, than of modeling public invest master difficult, XX important you, milestones four few AIR’s AIR. ownership be was cancellation is acceleration the effective real most the and the the they Aimco was note multifamily In its Aimco months is for months, completed the which At AIR to all more the estate. lease ahead properties NAV making points. noise schedule. XX% to designed quarter, AIR and Thank steadily. in Aimco AIR'S of XX Lisa, created The of your entangled thanks from it separation past you of of interest at AIR has basis with largely

we separation can see the With operating us, AIR what clearly the behind be. AIR platform, can the what the more will see of AIR strength now from old Keith calls Edge. Aimco We

challenged example, year-over-year almost operating costs were by AIR X%. second increased flat. expenses inflation, quarter essentially For peers by

also chain and replace of has The as none runoff of laser requirements risks the supply ongoing is need and on its developments, to loans, many others so AIR the programs. allows added on makes power the Edge when because are of of platform. wins buy more AIR we invest safety at to properties can AIR and emphasis case focus with unfinished business to leverage revenue But communities in on how lot. peer has What Our is cash customer to risk. AIR and the with to results see now highest good matters gets the margins, the model growth of neighbors to repricing flow. also shareholders. much conversion through low rent of model. distribution stable AIR and limited refunding selection We cash the AIR properties sidelines. a the low more business that of ownership the coupled the investment of satisfaction safety enjoys with business leading Rent G&A, stabilized free Thanks worth with lending financial our to of for and matters no and time the AIR a Paul, The the maturing

the inside And to purchase apartment XX% our investments, have rents Average neutral. that that among of of buyback debate shares. discipline now recession. REITs. X of whether the excellent we fund proposed the and we're our acquisitions properties sold in important million But see after returns maybe the purchase. and purchased we million. their look compare quarter, we $XXX customers than know good a are approached leverage soon. billion, And better. a will than come more monthly to trade business in recession AIR no When not portfolio shareholders, expected paired considering Economists purchased now. credit you more even [third] we incomes the AIR $X,XXX, clear shares when and second the makes someday accretive properties Our sign of none, And for But about is both reinvestment have $X scores. I regularly and recession, AIR, greater high to we

repair. buildings are Our in good

and paid well are teams stable. Our

to have Our buildings near higher balance or maturities, term to exposed to complete. no interest rates we no lease-ups sheet is we finish, not have

key to an grow us, opportunity The will people. for a investment. by is accretive So, always recession be

the their team from lost will to that uses three same growth investors from on based commitment all see happy Paul by C a be to leases corps, You've on Aimco Lisa report goals this expectations away high raising best. one quarter, our also a one year, make good reporting family year platform. others first ESG measurement of apartment when companies manage and among our may ready the exceeds second report and properties duties our satisfaction. the shortly that accretive our faster all are called ability her Index, will our and The Kingsley heard in through taxation. will perhaps delivered has UN of customer Lisa this and to our also among plus next store portfolio ops Kingsley ranked Keith rising Shwayder tax reduce added will attractive characteristics dividend been John outstanding sources and foreign newly productivity to AIR momentum his on nature, for We're and suggest so our the based for the sustainability gratification teammates companies express of on published backup, shares costs the engagement and next undertaking. public falling, balance AIR’s of Lisa on others individuals, remarkable year. that we of sheet why interested are and and very public to apartment year another AIR to income guidance report, and made reason report especially made you'll results. be and be releases targets year. In Patti earning on to who to this recently second hear lease for

help, our With to work results. remarkable, call Finally, for my thank And committed the and friendship. Kimmel you're to thank Keith? my teammates and hard turn your to excel. engaged Board, to I I colleagues like making on discuss operating AIR the that, Keith I'd AIR

Terry. Thanks,

like The second takeaways. XX% volume leasing a share was of year, over with of now quarter the for our I'd to number outstanding complete

lease-to-lease half the to of XXXX the indicators second the XX.X% XX.X%. In XXXX. is second elevated average leases and were performance in pointing of performance blended average and into quarter up rate rates signed First, blended historically up increase July, up lease with strong strengthened a new leading XX.X%. up leading rates further Renewals XX.X%, were XX%. towards In with new

Looking forward, of and remains into XXXX our loss for and will the above to next rates indicates balance XX% transacted year. lease remain strong

peaked is summer we with average and is occupancy will was higher July XX.X%, tracking robust Average move-out during August. in design, daily the from leasing declines occupancy daily basis year. sequential and Second, on up By which occupancy in in the last reverse points saw associated plan. a demand trend XXX volumes in season, second quarter

move of Our saw we out peak in just forward XXXX. like indicators of as acceleration occupancy we signal an

most the is AIR efficient multifamily operator. Third,

the customer We We world and record of selection maintenance or of insurance. expense next through most can plus first quarter, and to due month possible is using avoidance points maximize red in year-over-year skills importantly, productivity led to altogether. with gains. not of first productivity the low creating solving inflation. repetitive of jobs three of administrative we which discipline tasks. and Our talented XX expenses our design, right I in increased their expenses our to roughly elimination taxes to controllable second we cost of decade timing amplified on approach resident cost, to tape XX.X%. starts managing recognize by full up as and team the be basis their process said, up expenses the increase will lower thoughts for to the trailing which with navigate long and they margin turnover additional offset communities, Last recently to most team class do by for hiring year. work remove last thing, but In that X.X% on were the maximizing XX service, investment flat expenses growth. It by invested to on plan, exceptional We All importance controllable compensation members success. year, technology have work, expenses, focus and our a term

is the XX.X%, realized a quarter margin, up acquired are when for efficiencies applied which Fourth, AIR engine operating in one XXX second year growth. Our to newly for the communities, was basis points Edge, tremendous from net ago.

time points Our customer above sharpening growth improving are AIR platform to and year-over-year we for in fourth physical strengthening have expected the comparison. the operation, entire revenue basis our efficiency portfolio our The transforms stabilized five approach, the first team's the have period technology relationship, the a implementing Edge acquisitions XXXX XXX quarter, the community.

lease improved see quarter weighted XX% satisfaction lease that and the increased power, further leads XX% increases July. we for and current result, with both to pricing to future This resident a As average to in second directly value residents. up increased in

finally, Edge but industry with And and and Estero, only is Towers tailwinds a strong activity Our subside. today blockbuster Florida, Miami, and Maryland Chase, XXXX in at Eventually, that Watermark securing in business and district running the Point the XXXX AIR Fort earning acquisitions, the underway. experiencing implementation are AIR into of will the well Flagler the in are off Willer XXXX. Lauderdale happening not Chevy performance Coconut in the now,

we dedication With Committee. all signals the has I'll your over call business McGrath, John? the made this to drive of Investment that continuously to improve John team our yet that, not now AIR thanks turn quarter members, our success. Chairman a serving great to come. the the time your With see have and My our to residents indicate

terms you, capital Aimco, allocation. risk the enhanced Since Thank portfolio quality, Keith. materially separation been in of has AIR the and with

risk. systemic growth strategy on portfolio is focused Our profitable and reducing and both idiosyncratic

strategy. transactions Our have this supported

we XX transactions, contract. And Over another billion Washington, of acquire Florida $X.X past to was located billion in South under and $X.X and currently of $XXX have billion of used D.C. months, which million we $X.X nine sources of million equity $XXX sources, of the uses completed properties

capital. which condition the by efforts, and improved deleveraging risk measured Through and supported as rents, on properties, of of and we be highly to reallocated in acquisitions, which AIR accretive competitive demand age and our or high durable points high past, some reduced benefit the supply. in the criteria XXX to quality constraints that as such and IRR reported are Karl capital regulatory to the with factors the invested more expected basis over due will exposure. sales on portfolio concentration cost from exhibit growth quality acquisitions Edge, we Our markets physical These spreads

NOI we portfolio pressures represents purchased over by are for a mix XX% us Edge reality, attractive capital we yield Over acquisitions, our bifurcated We expect produce will time, of AIR can In last shift by at the later greater higher in This and rates spread macroeconomic and find XX%, now provided fast growth be the IRR, approximately our the output Xs in about higher insulate effect, the the growing will to year. same generation. the quality properties and test we take enable help leverage mid-Xs to portfolio. of an opportunities from will earnings, even in to the allocation of expect yields year which While cap policy. store AIR we portfolio. we measure class this cost and into increase within Today, XXXX example. is portfolio Edge an

equity through disciplined lie to quarter through of inflation recession see sidelined world the and to top by XXXX, focused systematic our conditions few opportunity we enhancement on us Having the make our me profitable XXXX, 'XX second waters, Recession the which be real lived activity, to navigate buyers. trades, changing offer accretive fears allow and rate capital. thoughts. to allow market factors many mind. volatility relatively and remain investment trades XXXX, reporting growth ahead. Macroeconomic on Despite funded and experience to we AIR's Before our in uncertainty, trades. seasoned interest transactions locking of Paired have by are portfolio a paired professionals of of market agnostic have the cost choppy may continued

business. As It target our acquisitions. return is capital to put, note firmly thresholds spread no committed we in for Simply accordingly. market to allocation, conditions fluctuate, important adjust disciplined and we are fixed the we AIR goal is have further that

can highly deploy transact an our be earn when we future cost within to accretive, to our we policies capital, While are transactions leverage able we the AIR will do and of only attractive expect Edge. spread over be

transactions our recent for activity. Now

equity a in pricing of top Virginia sale quarter, we approximately capital contract sales, our ranked and On have with lower timing properties located million. the million four raised under of During $XXX through fortuitous $XXX we of and these of for California nonrefundable deposits. another

external South announced, for into We D.C. invested previously Aimco Florida. acquire million in master properties its of of in the Turning growth. cancellation to with located entered four to Washington, the and we for metro an area as three agreement And properties $XXX $XXX million. lease

the enhanced through are week, at Chief one to Florida turn call these AIR policies, basis Officer. Financial our investment points XXX of South million. capital, in for Beldin, IRR our acquired With cost we I'll of least leverage to In located Paul? spreads Additionally, are over accordance property earlier be this over will acquisitions $XXX with Paul that, the Edge. and expected earn our neutral

will sheet our earnings release. a results, three be the in expectations Thank my you, second strong comment for which balance on like conclude and our I'd dividend. brief the to balance the and of found can John. focus our Today, the made I discuss year improvements with quarter, sheet, balance during on significant We flexible of quarter our the remarks points. to key details

complete. our First, is effort deleveraging

actual expect the While quarter-to-quarter we leverage-to-EBITDA target from of a will that on of X.X:X, vary transactions. ratio we the timing based ratio

we does seek timing uses sources quarter that in keep end. are of our transactions sources our paired the our and rarely the As part perfect balance, such of in and uses align balance discipline, trade at to

to For $XXX and example, will due we district when today, repurchases we agreement to on leases. million close balance the acquisition of are Aimco four slightly Flagler. out share of the This the the our second of July increase at quarter cancel imbalance

which the completely today. before end contract million be We properties, year expect will that are of of the $XXX eliminated $XXX of sale imbalance the by closing million under

such, leverage our expectation to unchanged. EBITDA of As year-end X.X:X at is

and slowdown. about is Second, is seven any volatility potential years. XX% sheet balance rates our insulated fixed maturities with and rate fixed, for leverage the interest from of next our economic

the our about of leverage In million to XX next $XXX fact, or months. subject only X% in is repricing

estimated unencumbered of we liquidity Third, debt have facility, million with million by revolving $XX $X abundant available and almost on credit $XXX our with cash an properties of value billion.

results XXXX. the second of quarter and Now for turning to our expectations balance

entity by treasuries in Aimco offset result payable The prepayment anticipated $X.XX penalty quarter fully our residual than approximately basis prepayment the the penalty was be deferred from term shift AIR. investment holding results of $X.XXX into of above aggregate payment June of was the a will more expectations, July. was the approximately This midpoint cost FFO the pro Aimco quarter Aimco Second below of short the per small forma share, the was the our the was $X.XX repaid of to second guidance, to $X.XX July, Instead, second forecast. of timing that note effect increasing a repayment. the in to significantly quarter. note note sale We XX% in

AIR With necessary the no the this payment position. maintain Aimco was of longer to it note, ownership for

and offset NOI excluding and are cancellation which cost ago, $X.XX Looking full the our items. forma lower the FFO, the of same-store incremental expectations year $X.XX from Primarily, to Relative now four from sale FFO, be and one of our $X.XX we is maintaining Aimco forward, note run we of acquisition growth in effect for our narrowing the expectations contribution also between per on Aimco FFO rate our the other share, pro is FFO the of $X.XX $X.XX the unchanged $X.XX of $X.XX. for leases midpoint. investment, and earnings basis to portfolios, by expect at of stronger quarter gain

growth implemented. complete months greatly commented and been Terry first is acquisitions and the As model operating the same-store of in reduced, our they a during existence business income faster G&A being results strong the XX from even the AIR With in simplicity our low between his of operations, added growth. earnings from of was which to Aimco faster quality transition has deleveraging benefit AIR AIR's and platform AIR entanglements remarks, portfolio vision promise model and of as period operating clear. predictable, and and business Best-in-class delivering AIR property high results from

Board peers, AIR taxable to more Directors of investors, the as believe to foreign compared quarterly of Lastly, declared our cash corporations. such a dividend investors, makes the of $X.XX We tax stock, share. characteristics per individuals and dividend taxable attractive our our

capital For the two capital XX% the limit in dividend of questions. rates over Matt, the Please taxed of that, at remaining In peer return at capital, two was time the taxed XXXX, call will to AIR's third one per year, open now of with it tax-free gains. in gain taxable for remaining queue. example, ordinary XX% questions was to approximately were to question. the a your dividends for first while With turn thirds we the same income you I'll rates.

the is [Operator first with Instructions] The from Citi. question of Nicholas line Joseph

It's Michael Nick. with Bilerman here

any you Do impediments the relative back, the lot step plan should Board of is as the do lowest the you've and do you you think company what portfolio, trade on or articulated forward you to do as to multiple doesn't close, at think well go FFO to a if you FFO AIR positives the for left that your way and measure it? Where there it. obviously, peers? which any, company about achieving If are [XX] the it stock

what of a that business have we you do low I'm giving think loan accomplished premium, have I compete We to have travails and stocks issues say chain deserves which I have and is about don't But to buy. model which today. don't to with implicit out have where forth. you going I issues to not risk advice so we is think supply very development people that a a a would don't in runoff. have what a very the lease-ups because the favorable and business in risk We set

better. a operating last team them and at business doing is look properties the We just at his if And you have years, owning excelled Keith many to that. expense. And of the and stabilized key have and that revenue

reward that going that's I think to And average to we're what that market the what will focus see we'll think is growth I So above on. and try it.

was And because But did surprised I to been that you To have not when created. accomplish you fair, able this have was of AIR was about talked have for been their that these guess you was wanted a recently. a vote, even shouldn't stand be that if input. an It all a I things you've the shareholder mentioned back, Terry, to an number shareholders spin. though this IPO issue

and too so the highly what the you that And coming you box, ATM a lot a it entanglements, leveraged loans, sits the were let's that had to the company call go today, that balance you discount, issue and forget, that direct not wasn't took. sheet didn't while have risk out a the was fact of fact an big of equity and at the

in the need a at reflective And XX, stock you fact so forward, purchased a big you more up. fixed. execution. in things the all Balance go now bit the we little these sheet to quarter have undermining of effectively I of right? is sit cleaned discount, good my stocks terms today, from you've here now it that at question, and We you've it's I'm not which done

AIR is talked operating everything that Edge and the the about platforms doing. Keith You and

any there's left. to So it that appear doesn't impediments be

of see known And how company? we've historically, sort decades. do You so each you other of had, I guess, value the

to used NAV. You put out

of sense good value. very a have You

everything compare yourself presentation. that else in and to You peers

little how do to that, it? And give sort you a the achieve of stock you doesn't more can So detail are what you value? if see about bit going about

would has I you're you your the answered say Michael, for question. And I opinion, entitled your that market the thank prepared what remarks. to but is

the at whether look was or idea spin -- a you If good not.

for AID TSRs seven best, handsomely but at two look the the the outperformed have AIR combo the the you has REITs apartment large done Sunbelt If remainder. the REITs,

please call and much if you want to continue. time very another thanks So

question SMBC. Anderson The Rich next of the is from line with

terms out us triangulate -- or numbers, So Keith, predictable, you're can to hazard your seeing we sort think of peak rents what that an and be your -- as you year give haven't question front of about we're estimation comment earning in in and sort of what of point this for have where might in they assumptions what about you in or if XXXX? what a starting already probably

that Rich, that watermark the we July question. is similar with say has between XX%. season I'd than What where for What the of we thanks year teens. better now is balance high forward in in the that hit or at at sort lease we are as some high look come new of in the see the maybe about year that to pricing the and the is for number

think it, we mid we'll loss the what of about we the as ultimately And to that high and I that that way be get something through So we to a believe couple of -- with January. then an earn-in when our continue XX% strong would Xs will call balance to the in lease to XXXX. work to translate is we into pricing that be year. maintain go What we

that gives and have you a have know strength the to data we think we it of points to of as year. a So we're this we more balance strong finish couple up going XXXX, that

or So some what on depending you X starting market, which started saying. up mid-Xs the with and upside go is lease, then down to you're this but could you loss the have point’s essentially

think to about it, a Rich. way I that's good think

peers your their from a talk the and and AIR AIR lot you of Edge, appreciate you makes version kind Edge, and have all is, I what that's the of think the all about But question terminology that. I pack. own Second of separate

of private to relative the -- market ownership multifamily. of So

of in operate competitors outperformance your the all now some with mind at entanglements, more bull mind, What's that you sophistication? for level than lot cleared world? a grow that in tough similar have assuming in of So the peers public keeping you've of would, why case kind the AIR a that you A,

two they'll very have advantages. have competitors, will, get today is and and too. we we really important better, Rich, tough What we

With the of money retain increasing of rent. we highest margins, bit more every out

And the more how that an with to but it one XX%, The gets either can much NOI? also of rents to question that advantage or say thing G&A, of gets so for through thing, in of to up is to the invested it's distributed second where benefit shareholders. be

next line [Barry question the The is Liu] with Mizuho. of from

the line on St. for I'm Haendel

was your if you year-over-year Juste. I expenses wondering could talk decreased stayed guidance. through your the you Impressively, flat expense. and

So you and lines, we forward? half this hoping out think for for how about and year break property particularly was I going the repair could to back go maintenance the should taxes

Paul is him. this meet so but you filling miss for and thank It's nice in to for we Haendel, you, Barry, Beldin.

of X% notably we're that outside is wish have the please by his that expenses growth narrow the items we And year that of to fact the in on XX did So for let X% at visibility the a -- of year, are where controllable estate kind total estate moderate, expected expectations basis reduced from details will now reflects we In Keith and maybe fill And expense for quite response operating most expense bucket, the greater continued well. growth and expect midpoint expectations, year-to-date I'll there. a had some Haendel function X% tax in for managing work full our halfway And and it that tax into we've the we're team good range. our a Keith through also, real we our to where actually did the we both be But points. the excellent of on basis. growth expenses. real range year-to-date that negative

some avoidance And on end just from having the front is comes focus it the color greater that Barry, really the process is customer and where we we this and selection cost around team business then through that of things efficient who qualified highly our get exceptional we match When the members highly needs high-tech, and service. effective high-touch highly team, combination. with are provide customer exceptional who those retention.

costs. through that repairs you so point we lower And maintenance out, get, as and

We advantage seasonal that have find also and take way lower marketing we to costs opportunities staffing our of.

So some those the of are inputs.

turnover. on actually, so And

numbers some really low So I turnover noticed well. as

Some couple occupancy about of to trying your turn on to a higher not of Is hit peers points rents over as thinking kind of of taking a that churn and push or strategy are that. much? you're

about as as individual it about don't we single We think contribution. inputs. total it think Barry,

So one, having high it's find its but rates the cost low cash all and of, to way on and avoidance turnover, that and both of to combination the new having rents through. the comes ultimately, margin down renewal way

we just point on for don't a we optimization data focus So return. single but really look total the of

The of Goldman is Chandni from Sachs. next Luthra with the question line

that maintain, changed you that be that spread doing. on any values what's You how sense that anything if guys should Any talked going you've in would about give could color these great? of transaction in paired trades has typically around the market, been And much have come down?

across by core assets basis to seen XX on XX Valuations, when about with seeing start think them comparing about we've first rates that the to X% points X% to said, down. we to noncore saying I'll expanded about zero But points the first, an have about on imprecise rates, XX board science. we're basis and cap assets. cap

However, should best for I that the best note demand our assets to hold strong remain best and -- locations. our prices continue does in the

I'd what a of contract say the the million [dispositions] the under have our spread, What that And deal, for seeing market, a bid-ask $XXX we maybe the seeing to not on is, own the we're a tightened as we're really if seeing compared including an percent. we on big today, bid-ask far where that example, only couple small maybe use, spread. spreads As have they months in I ago. we're have spread of were few a

back please What the a year? bad if on of are follow-up And for could I quick half your expectations get debt. this

bad state looked as particularly quarter there's our note our typical basis But systems the California? of you what a on out which XX of important bad assistance lot that second around million in expense, calls, look year, line about the is within this and is portfolio to of is we've term our was around for government results. of balance expect basis, long to the debt, about of bad for can So we $X points a debt in at been as with so other payments. government our revenue, discussion net debt, the payments, And benefit of having in of

to the it working that eviction if debt assuming necessarily We're saw to look do So as with before X.X% those revenues. better projecting was our We get But on going basis hard within debt gross guidance. than order we in our local as about quarter. experience accelerate at to we're we bad is much our to process. don't you not payments, second balance are of that we And the bad any we the year, of better in that a jurisdictions to do will numbers guided make improve. what hope anticipate the

questions further [Operator no currently registered Instructions]. are There

thank call. Well, you the call. all Matt, on Thank managing for you, this

me, the well. Considine. And or please you summer. enjoy questions, Matt or Paul If Terry have Be O'Grady call

That Conference the AIR you Thank Call. Communities concludes Earnings for XXXX Second Quarter participation. your

lines. your disconnect now may You