Apartment Investment & Management Earnings Call Nuggets: Second-Half Guidance and Investment Grade Outlook

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

Second-Half Guidance Outlook

Nicholas Joseph – Citi: Ernie, a quick question on guidance. So you beat the midpoint of 2Q guidance by $0.02, but you only raised the midpoint of full year guidance by $0.01, so effectively you lowered the back half of guidance by $0.01. So, can you talk about what has changed in terms of your expectations through the back half versus initial guidance?

Ernest M. Freedman – EVP and CFO: Really not much has changed. As you can see from NOI perspective, we’ve kept everything similar. What I would say is that pricing being a little conservative now raising at $0.02 versus $0.01. We see the year playing out very similar to the second half of the year $0.01 on second half guidance of about $1.06 or so, it’s obviously a small percentage. So, we see the year playing out very similar to how we saw the first part of the year and just being a little cautious by not raising the mid-point by $0.02.

Nicholas Joseph – Citi: So, then do you have an update on the Pacific Bay Vistas redevelopment project redesign?

Ernest M. Freedman – EVP and CFO: Happy to report on Pacific Bay Vistas that we had our first move-ins actually yesterday on August 1. I’ll turn it over to Keith just talk a little bit about what we are seeing there with regards to renting activity. It is early days, but we can give you a little bit of color on that…

Keith M. Kimmel – EVP, Property Operations: Nick, yesterday in fact we had our first nine residents move into Pacific Bay Vistas. We are just thrilled to have them in. It really went very smoothly. In addition to that, we have another 16 pre-leased in our first phases that we’ll move in over the next couple of weeks. In totality of all those, we actually are seeing our rentals coming in above our trended underwritten rent. So, we are very pleased and looking forward to the project moving forward.


Investment Grade

Robert Stevenson – Macquarie: Terry, you’ve probably been the strongest proponent in the REIT space over the years of property-specific self-amortizing debt. What has sort of led you guys to seek or to slowly move down the path towards investment grade if you guys continue to move down there with just access to different options? Is there something that’s driving that et cetera?

Terry Considine – Chairman and CEO: Rob, no I’d say there hasn’t been a special change. What’s happened is that as we’ve pursued our own balance sheet strategies, there has been a better understanding in the market and by rating agencies of how safe and sound they are. So, I am glad to see that recognized. It will have some benefits to us in pricing on our line of credit, which as you know we use sparingly and in the issuance of any preferred stock. But the primary fact of it is the greater market recognition of the soundness of our balance sheet…

Robert Stevenson – Macquarie: Can you guys talk a little about what you are seeing operationally in the D.C. market sort of Northern Virginia versus the Maryland suburbs, especially?

Keith M. Kimmel – EVP, Property Operations: Rob, this is Keith. I’ll take that. In D.C., we are just very pleased to see that we continue to maintain high occupancies. Throughout the second quarter we were in the high 95s to mid-95s in occupancy. We’ve definitely seen a little more strength in Northern Virginia versus Maryland, but it’s – we’re well-positioned. We really believe that sort of our BB+ assets that are in around Beltway have insulated us a little better than others and we’re looking forward to the second half of the year.

Robert Stevenson – Macquarie: Now, as you go into those sort of weaker leasing season of the fall here. Do you push more occupancy at the expense of rental rate in order to drive higher occupancy in that market and guard against move-outs or is there any difference in change operationally between how you are addressing that market versus markets that are further up on the strength list?

Keith M. Kimmel – EVP, Property Operations: Rob, what I would just tell you is that across the country we are very focused on high retention, low turnover and that’s not much different in D.C. In fact, we were very strong focused on that. We’re pleased to let you know that our renewal increases in the second quarter in D.C. were nearly 5%, which represents about 55% of our business. We’ll continue to be very focused on that, so that we are not having to rely as much on new leases and competing with new product, the way that maybe some others would. Once again, we just are positioned with our product around in the Beltway, we think we’re just better positioned and we’ll look forward to the second half of the year playing out strong.