Apartment Investment And Management Company Q2 2010 Earnings Call Transcript

Apartment Investment and Management Company (AIV)

Q2 2010 Earnings Call

July 30, 2010 1:00 PM EST

Executives

Lisa Cohn – EVP, General Counsel

Terry Considine – Chairman and CEO

Tim Beaudin – President and COO

Ernie Freedman – CFO

John Bezzant SVP

Tony D’Alto – EVP, Property Operations

Miles Cortez – EVP and Chief Administrative Officer

Analysts

Swaroop Yalla – Morgan Stanley

Michael Levy – Macquarie

Michelle Ko – Bank of America

Eric Wolf – Citi

Michael Salinsky – RBC Capital Markets

Andrew McCulloch – Green Street Advisors

Ross Nussbaum – UBS

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2010 Apartment Investment and Management earnings conference call. My name is Andrea and I will be your coordinator for today.

At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions).

As a reminder, this conference is being recorded.

And, 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 judgments 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 website.

Participants on today’s call will be Terry Considine, our Chairman and CEO who’ll provide opening remarks; Tim Beaudin, AIMCO’s President and Chief Operation officer will speak to property operations and capital recycling activity; and Ernie Freedman, our CFO will review second quarter financial results, debt capital markets activity, and guidance for the third 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 on this call for your interest in AIMCO. On today’s call, my colleagues and I will discuss second quarter results, give an update on our balance sheet, and provide some comments about what we see as we look forward.

First, our business is improving. Average daily occupancy is high, renewal rates have been positive since February. During the second quarter, new leased rates were positive in several markets for the first time in more than a year. We expect total portfolio net operating income to be just about breakeven with last year for all of 2010 and we project same-store net operating income to be about breakeven for the second half of 2010.

Second, our balance sheet is improving. We’ve repaid the balance on our term debt earlier this week, leaving us with no recourse debt.

Looking forward, we are cautious. The economy continues to recover, but the pace of recovery is slowing. Apartment demand will be better than the general economy, because the demographics are attractive and because homeownership is not. And this demand will drive rent growth, because apartment supply is expected to be fairly positive over the next few years.

However, unsustainable federal deficits and expansive legislative agendas mean that wrenching change lies ahead with unpredictable consequences. In the pace of these uncertainties, we remain focused on serving our residents and keeping high occupancies, maintaining our properties in good condition, controlling costs, refinancing property debt to extend maturities and lock in current insurance.

With that, I’d like to turn the call to Tim Beaudin, to review operations. Tim?

Tim Beaudin

Thanks Terry. On today’s call, I will discuss second quarter and year-to-date operating results with a focus on top line and rental trends we’ve seen so far this year, and I will also provide a brief update on our capital recycling activities.

First, property operations. AIMCO’s portfolio can be divided into five categories, conventional same store, affordable same store, conventional redevelopment, affordable redevelopment, and others.

On page two of this morning’s earnings release, we laid out the year-to-date financial performance of these portfolios and additional quarterly and year-to-date information related to the conventional same-store portfolio. You will find quarterly results of our entire portfolio on page 23 of our supplemental schedules.

Moving onto to results, property NOI across our entire portfolio was up 1.2% for the quarter and year-to-date was just 40 basis point behind last year. Total same-store NOI which includes conventional and affordable same store was down 1.3% for the quarter and down 2.8% year-to-date.

In our conventional same-store portfolio, NOI was down a little more than 1% for the quarter, a result almost 4% better than the high end of our guidance with out performance in both revenues and expenses. Year-to-date conventional same-store NOI is down just over 3%.

Affordable same-store NOI was down 2.8% for the quarter and 20 basis points year-to-date. So far this year, expense growth in this portfolio had our case study revenue gains. As for the top line, we saw a strengthening revenue across our portfolio during the second quarter.

Revenue for our entire portfolio was up 1% for the quarter and up 60 basis points year-to-date. Revenue for our total same-store portfolio was equal to last year for the quarter and down 60 basis points year-to-date.

Conventional same-store revenue for the quarter was down 50 basis points with high occupancy at 95.6% offsetting a year-over-year decline in average rental rates of about 4%. Year-to-date conventional same-store revenue was down a little over 1%.

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