On Thursday, AvalonBay Communities Inc (NYSE:AVB) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Fund I Assets
Robert Stevenson – Macquarie: You’ve talked about upping the sales pace of Fund I to $250 million to $350 million a share. When you get done with that, what does that leave you in terms of dollar value of assets, the number of assets in Fund I?
Sean J. Breslin – Executive Vice President – Investments and Asset Management: Rob, this is Sean. In terms of Fund I activity, we did up the range and I believe we have about 17 assets left in that fund. We plan to exit somewhere depending on what its executor doesn’t get executed, somewhere in the range of three to four assets. So, bring it down to somewhere in the neighborhood of 13, 14 assets, somewhere in that vicinity, which would represent, let’s look at the numbers. I think it’s probably around – it’s about 400 million or so left to go, which would be spread over the rest of ’13 and ’14.
Robert Stevenson – Macquarie: From a timing standpoint, is there any reason why you wouldn’t sell more sooner rather than later from your standpoint as long as the market conditions allow?
Timothy J. Naughton – President: Sure, Rob, good question. A couple of comments on that, first is a majority of those assets have secured debt against them. So we do factor in a prepayment penalty cost, as we’re looking at when the debt maturities what the cost is, is one part of the decision-making process, but we also have some assets in markets where NOI growth is still pretty robust and so we’ll take a look at sensitivities about what we think that NOI growth might look like relative to the change in cap rates that could occur and sort of determine the optimal time to sell those assets. So, sort of blending both of those things, the prepayment penalties, as well as the asset specific NOI growth and potential valuation changes.
Robert Stevenson – Macquarie: Tim given all your comments on the development pipeline, what are you guys seeing today in terms of any inflationary pressure on hard cost for future developments as you try to underwrite your back half ’12 and ’13 starts?
Timothy J. Naughton – President: Rob, we have seen a little bit of pressure on the cost in the construction side and I think we talked a little bit about this last quarter and I think what we’re seeing today is still consistent with that, where costs have maybe come back about a third from how much they had declined from the prior peak. So, depending upon the market and product type, if costs were down 15% to 25% from the peak, today they’re down maybe 10% to 15%.
Robert Stevenson – Macquarie: Are you seeing pressure in any particular place whether or not it’s steel, oil products, et cetera?
Timothy J. Naughton – President: Well, we had been seeing pressure in some commodity costs and we’ve seen some relief in certain costs lately but, no I don’t know that it’s pronounced and concentrated in any one area at this point.
Robert Stevenson – Macquarie: Then land costs, just along the same lines, I mean what do you guys continue to tie up sites, I mean is it for anything that’s going to be ready to be constructed on in the next couple of years, I mean how aggressive is pricing for land today?
Timothy J. Naughton – President: For the most part, the answer is no, we haven’t been tying an up sites lately. They’re going to be ready say over the next year, they’re entitled. I’d say, the majority of them require some kind of entitlement or re-entitlement. As we’ve mentioned on the last couple of calls, sites that are ready to go tend to be a bit up in options, often at times to merchant builders, who are looking to accelerate fee income strains, if you will. So, we’ve really shifted our focus and are increasingly shifting our focus towards sites that are likely to be option, take two or three years to get to the process where the competitors dynamics aren’t quite as intense.
Jana Galan – Bank of America Merrill Lynch: Last year I believe Avalon started to see rents start to slow maybe in August and I was wondering if you’re seeing anything in the data you track that would suggest that, that occurred in June or July this year?
Sean J. Breslin – Executive Vice President – Investments and Asset Management: Jana, this is Sean. What you stated is true. Typically, we started to ramp up rents in the first quarter and push them through the summer month and just depending on what year we’re in, things will move around a little bit, but we’re not seeing much of a different trend this year in terms of sort of the sweet spot of the year, if you want to consider that the right phrase. So, I think what we’re seeing this year is consistent with what we’ve seen in years past in terms of the window throughout the year that we can push rents.
Jana Galan – Bank of America Merrill Lynch: And, I think you gave us a low 5% on new leases in July. Do you have that number for April, May and June?
Sean J. Breslin – Executive Vice President – Investments and Asset Management: The numbers for July which were renewals in the high 5s and move-ins in the low 5s, are relatively consistent with what we saw moving through the second quarter.
Jana Galan – Bank of America Merrill Lynch: And then maybe just on, as you evaluate potential acquisitions, and also just assets or land, are you looking in all markets or only ones where you currently have a presence?
Sean J. Breslin – Executive Vice President – Investments and Asset Management: In terms of both acquisitions and land, we’re only looking for assets and opportunities in our existing markets. We’re not looking to extend our footprint at this point.