Apartment Investment & Management Earnings Call Insights: Stable Rent Performance and Slower Growth for Peers

Apartment Investment & Management (NYSE:AIV) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Stable Rent Performance

Jana Galan – Bank of America Merrill Lynch: Keith, you mentioned in your comments that you expect rent growth to be similar to 2012 levels. Are you expecting roughly the same performance from each market or are you seeing an acceleration in certain markets and deceleration in others?

Keith M. Kimmel – EVP, Property Operations: Jana, this is, Keith. We have an expectation that there will be some acceleration and some that will hold the line within our assumptions for our guidance in 2013. One that – couple that I just point out that stand out, the Bay area is one that has been of question about whether or not you can continue to have a strong growth, and I would tell you, it’s in the upper third of our guidance is that we anticipate having a strong performance there as well as Miami and Denver kind of standouts at the top third.

Jana Galan – Bank of America Merrill Lynch: Can you share any comments on the B price points versus A price points within your portfolio?

Keith M. Kimmel – EVP, Property Operations: Certainly, Jana, the As and Bs have been really almost on top of each other most recently. We use new lease rates as a barometer for that, they’ve been quite tight, the Cs have been the laggard.

Slower Growth for Peers

Eric Wolfe – Citi: Actually I just wanted to follow-up on Jana’s first question there regarding your assumption of similar rent growth in 2013 versus 2012. If you could, could you just tell us what gives you confidence in that assumption, especially when the rest of your peers are seemingly seeing slower growth this year?

Ernest M. Freedman – EVP and CFO: Hey, Eric, this is Ernie, I’ll take a stab at that and pass it over to Keith to talk through some of the details. Just looking at our portfolio, in 2012, we had blended lease growth of 4.2% that will give us an opportunity to earn in at about 2.1%, and we are expecting to see similar type activity in 2012. We saw some upside also in other income and then specifically within our guidance Eric we’re calling for occupancy to be flat. So, we’ve given a range that would keep occupancy flat, and so, each of those items, it really puts us pretty much right on top of our numbers between 2012 and 2013, and 2012 we had revenue growth of 4.7% at the midpoint of our guidance range for 2013, we’re at 4.75%. Now of course, different markets are behaving differently and Keith gave a little bit of color as to where some are going to decelerate, some of them are accelerating as well, but overall we see a very similar year with our portfolio, mainly at that average BB+ price point, very geographically diversified, probably a little bit more than our peers. So, all I can see units going to be very similar in ’13 to ’12 at least as where we stand today.

Eric Wolfe – Citi: So, I guess from your perspective it’s a little bit market mix, but really I guess just he price point, and just doing a bottoms up analysis of your portfolio, leads you to believe that you’ll be around the same rent growth. I mean that’s the answer to it, why other peers would be seeing slowing growth, but you would be seeing sort of stable?

Ernest M. Freedman – EVP and CFO: It’s hard for me to compare what other peers are doing Eric. You guys spend a lot of time doing that, but for us, we’ve seen a nice acceleration of our revenues during 2012, and it gives us an opportunity to perform about at the same levels in 2013, so we feel pretty good about our opportunity to deliver those results for our shareholders.

Eric Wolfe – Citi: Then in the fourth quarter you saw, I guess, it looks like some outsized increases in your other income. Is that the result of new initiatives or timing and also, how would you expect that to trend in 2013?

Ernest M. Freedman – EVP and CFO: Eric, what I’d say with other income is that we probably won’t have a stronger growth in other income in 2013 or 2012, but we’ll still be stronger than our expected revenue growth in terms of our rate growth is or what we’re going to do, in the fourth quarter, a lot of that’s due to timing in terms of some of the things we tried. We had a nice year-over-year response from that. We still continue to see opportunities for us to do a little bit better in some of the areas and then importantly, we are expecting utility costs to be a little bit higher in 2013 versus ’12 which would lead to a higher utility reimbursement for us received in 2012. So, we do think we will continue to do better than the midpoint of our guidance and other income of which is 4.75 and that helps boost us to that amount of 4.75 for total revenue.