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Apartment Investment CEO Discusses Q3 2010 Results – Earnings Call Transcript

Apartment Investment CEO Discusses Q3 2010 Results â¿¿ Earnings Call Transcript

Apartment Investment and Management Company (



Q3 2010 Earnings Call Transcript

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October 29, 2010 1:00 pm ET


Lisa Cohn – EVP, General Counsel and Secretary

Terry Considine – Chairman and CEO

Tim Beaudin – President and COO

Ernie Freedman – EVP and CFO

Tony D’Alto – EVP, Property Operations

John Bezzant – SVP, Transactions


Eric Wolfe – Citigroup

Swaroop Yalla – Morgan Stanley

Michelle Ko – Bank of America-Merrill Lynch

Anthony Paolone – JPMorgan

Bill Acheson – Benchmark

Andrew McCulloch – Green Street Advisors

Rob Stevenson – Macquarie

Rich Anderson – BMO Capital Markets

Haendel St. Juste – KBW



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Previous Statements by AIV
» Apartment Investment and Management Company Q2 2010 Earnings Call Transcript
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» Apartment Investment and Management Co. Q3 2009 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Third Quarter 2010 Apartment Investment and Management Earnings Conference Call. My name is Andrea and I will be coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded.

Now, I’d like to turn the presentation over to your host for today’s call, Lisa Cohn, Executive Vice President and General Counsel. Please proceed, ma’am.

Lisa Cohn

Thank you, Andrea. Good morning and good afternoon. During this conference call, the forward-looking statements we make are based on management’s judgment, including projections related to 2010 results. These statements are subject to certain risks and uncertainties, a description of which can be found in our SEC filings. Actual results may differ materially from what may be discussed today.

Also, we will discuss certain non-GAAP financial measures, such as funds from operations. These are defined and are reconciled to the most comparable GAAP measures in the supplemental information that is part of the full earnings release published on AIMCO’s Web site.

The participants on today’s call will be Terry Considine, our Chairman and CEO, who will provide opening remarks; Tim Beaudin, AIMCO’s President and Chief Operating Officer, who will speak to property operations and capital recycling activities; and Ernie Freedman, our CFO, who will review third quarter financial results, debt capital markets activity, and guidance for the fourth quarter and full year 2010.

I will now turn the call to Terry Considine. Terry?

Terry Considine

Thank you, Lisa, and thanks to all of you for your interest in AIMCO. AIMCO enjoyed a good third quarter beating FFO guidance and raising full year guidance. And by the way, AIMCO has met or beat guidance for the past 19 consecutive quarters.

In a few minutes, Tim and Ernie will provide their thoughts regarding our third quarter. Before they do I’d like to offer them my thanks for jobs well done and add my own perspective on where we’ve been and what I see ahead.

For me the headline for third quarter is apartment markets are on the mend. Occupancies are quite high, and rental income is increasing. Now the last few years have of course been extremely difficult for the U.S. economy, but during that same time for a number of reasons, the apartment business has been better than the economy at large.

So looking back we can see that AIMCO’s same-store income has been fairly stable, up 3.7% in 2008, down 3.3% in 2009, and in our revised guidance down say 50 bps for this year. So taken together our same-store net operating income during the past three years has been flat, notwithstanding the most volatile economy in a great many years.

Looking back, we can also see that our conventional same-store net operating income results have been better than peer averages that is better than our peers for the past one, three and five years.

And we can see that our conventional same-store operating margin actually improved during the recession and is now 61 year-to-date. These sustained outperformances are due to a great job by my AIMCO teammates. It’s my privilege to work each day with terrific colleagues and they have my thanks.

As we look forward, my crystal ball is murky. There is an usually wide range of forecast for the overall economy. However, there is a general expectation that full recovery will take several years at a minimum. Even so just as in the recent past, apartments are expected to do better than the broader economy and AIMCO results are expected to be competitive with its peers.

For example, there is a great focus on rent growth. AIMCO rental rates are expected by third-party forecasters to increase about 16% cumulative over the next four years. This is above the average rent growth expected for all apartment REITs and only slightly say about 80 basis points cumulative over the four years or 20 basis points a year behind the California-centric portfolios, which of course declined more during the downturn and so have more ground to recover.

Given the economic uncertainties, we are cautious as we finish a solid 2010 and plan for 2011. Here are our priorities.

First, maximize revenues by maintaining our high average daily occupancy, and working to increase rental rates, while recognizing that customers are likely to remain price sensitive.

Second, continue strict cost controls and high levels of capital spending to maintain and improve our properties.

Third, reduce offsite cost including G&A by continuing to simplify our business, for example, shedding non-core activities; continuing to simplify our capital structure, for example; acquiring partnership interest, and deploying new technology platforms.

Fourth, strengthen our balance sheet further by avoiding recourse debt, continuing to reduce refunding risk by extending the duration of our debt already more than one-third longer than the peer average, and continuing to take advantage of today’s interest rates to lower our cost of leverage.

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