Apartment Investment & Mgmt Earnings Call Insights: Branding, Affordable Portfolio

On Friday, Apartment Investment & Management (NYSE:AIV) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.


Eric Wolfe – Citi: You guys announced a branding initiative in July of last year and since that time you’ve obviously changed around a couple things, including your website, so I’m curious as you move more towards the higher rental rate properties, whether you’re considering changing the names of your properties as well just so that there is one sort of consistent brand that you’re putting out there to customers?

Keith M. Kimmel – EVP – Property Operations: Eric, this Keith. What I would say is that we’ve heard of some others that are really starting to experiment with this and we think it’s certainly intriguing to see if they have success and we’ll continue to watch how it’s being executed and see if it’s beneficial to them, and we’re certainly very in tune with it and we’ll be watching closely.

Eric Wolfe – Citi: And then second question is on the dispositions. You mentioned that you might accelerate some of the ones earmarked for 2013 and 2014 into this year. What does that depend on and when you think about once you sell those assets what the portfolio looks like, could you maybe give us some statistics around what the average revenue per unit will be, the average margin, just trying to think about how the portfolio would change once you sell all those assets?

John E. Bezzant – EVP – Transactions: Eric. John Bezzant. I’ll start it. In terms of what we pick and what we’re selecting, it continues to what we’ve done over the last few years, several years really, and in terms of profiling the entire portfolio and selling what we consider to be the lower rated assets and that’s going to be in terms of anticipated return over the coming years off of those properties, it’s the rent levels at the properties, it’s the specific submarkets they happen to be in and some various demographic measures within those submarkets.

Keith M. Kimmel – EVP – Property Operations: As it relates to the portfolio as a whole, we have in some of the prior conferences provided some detail on where portfolio rents will move and anticipation is that they’ll move in accordance with the magnitude of what we actually executed, how is that. They are going up and I think in terms of what to expect and when we will decide to pull the trigger, it will really be driven by pricing. We got some very good execution this quarter in the properties that we sold and we will continue to look for good executions as we look forward.

Ernest M. Freedman – EVP and CFO: (Let me) remind you Eric, what’s baked into our base plan at least for this year before any potential acceleration is rents ended this quarter at about $1,253. We noted in our release that (when we’ll be) executing our plan today and (with) our expectations with Keith and the operations team are going to deliver with rental growth, we’d end the year revenue per unit about $1,370 and at the end of the day roughly half of that’s coming – increase from the prior year’s coming from – rental increase is roughly half is coming from the type of (indiscernible) rate of sales. If we’re successful in accelerating some sales you would see a similar acceleration with regards to the piece having to do with the sales of properties, but as John pointed out, a little bit early for us to be projecting where things could go and we’re exploring and seeing what the opportunity is.

Eric Wolfe – Citi: But the decision to see is going to be mainly based on what kind of pricing you are going to be getting on these assets, not so much in terms of what the reinvestment opportunity is. It seems like you have most of the dispositions I guess earmarked for redeeming your higher cost preferreds?

Ernest M. Freedman – EVP and CFO: Yeah, at the end of the day Eric we’re focused on the economics of the sale. When you sell for a price that we think is the right price and we can achieve it that’s the priority for us, and assuming that that happens then the opportunity would be for us to take out preferred equity.

Affordable Portfolio

Karin Ford – KeyBanc Capital Markets: On the last call I think you said you expected blended rents to be – blended rent increases for the year to be approximately 5%. You got 3.4 in 1Q. I wanted to see if there was any change to that expectation and given some of the positive trends you laid out post quarter here on this call, why you chose not to move up revenue guidance?

Ernest M. Freedman – EVP and CFO: Karin, this is Ernie. Well, one, what you pointed out is correct. In our last call we expected blended rates to be at (5.2). We’re in April; we’re now May. We have the April books closed and we’re just at the beginning of peak leasing season, and we just – we don’t want to get ahead of ourselves too much. As Keith mentioned, we’re very pleased with where we’re at. It puts us a little bit above the expectations where we’re expected to be, and we would hope that once we’re in our next call in July or early August and having much of the peak leasing season behind us, we’ll be able to speak pretty definitely about where we think that’s going to come out.

Karin Ford – KeyBanc Capital Markets: And my second question is just on the affordable portfolio. It sounded like there was a slight change in philosophy on that. I think you had said previously you wanted to maintain that at roughly 10% of the portfolio, and then in the release today it said, you were hoping today that it would be fully disposed off in the next few years. Can you just talk about your view on the affordable portfolio and how that’s changed, if it has?

Terry Considine – Chairman and CEO: Karin, this is Terry. And you’re right, our thinking about that has changed, and what’s driving the change is just observation about the fiscal budget pressures that the government faces, and the unpredictable outcomes that might have over time. So, the business has been good for us, it continues to be good for us, we have wanted to bring it down a little bit in size, and we expect those reductions to continue to reduce the support (vehicle)

Karin Ford – KeyBanc Capital Markets: Would you consider a large portfolio sale in that regard?

Terry Considine – Chairman and CEO: You bet. Make me an offer.