Original Source: FD (FAIR DISCLOSURE) WIRE
. Gregory Mutz, AMLI Residential Properties, Chairman and CEO . Bob Chapman, AMLI Residential Properties, EVP and CFO . Steve Hallsey, AMLI Residential Properties, EVP & CEO of AMLI Management Company
Company announced 4Q04 FFO per share of $0.46, consistent with guidance. 2004 FFO per share was $2.01. Q&A Focus: Portfolio, 2005 guidance.
A. Key Data From Call 1. 4Q04 FFO per share = $0.46. 2. 2004 FFO per share = $2.01.
S1. 4Q04 Review (G.M.) 1. 4Q04 Highlights: 1. 4Q04 FFO was $0.46 per share vs. $0.55 for 4Q03. 1. Consistent with recent guidance and equal to First Call's most recent estimate. 2. 2004 FFO was $2.01 per share vs. $2.12 in 2003, down 5.2%. 3. Much of the decrease for 4Q04 and 2004 attributable to: 1. Higher G&A cost in 2004, primarily related to audit compliance with Sarbanes-Oxley. 2. Impact of implementing B-to-A strategy. 3. Higher interest cost as AML converted significant portion of short-term floating rate debt to longer-term fixed rate financing. 4. Additional dilution costs by investing proceeds of $94m equity raise done early in 2004, more slowly than originally anticipated. 1. Spent a bit over $1.3m on Sarbanes internal control matters, and external third-party costs of around $1.5m including co. cost, of which about $1m or $0.03 per share was in 4Q04. 2. For planning and guidance, co. estimates 2005 Sarbanes 404 costs to decline by about a third over 2004. 2. Properties: 1. 4Q04 over 4Q03: 1. Total community revenue up 0.5%, reflecting a slight increase in wtd. avg. occupancy to 93.6%. 2. Wtd. avg. collected revenue per occupied unit decreased by 0.1%. 3. Opex up 0.5 point. 4. NOI up 0.5 point.
2. 4Q04 over 3Q04: 1. Total community revenue down 1.7%, reflecting decrease in wtd. avg. occupancy of 0.4 point and decrease in wtd. avg. collected revenue per occupied unit of 1.3%. 2. Opex down 6.9%. 3. NOI up 2.2%. 1. Decrease in revenue follows four consecutive quarterly increases in revenue. 2. Partly reflects 4Q seasonal adjustment and slowing of recovery that got some traction in Aug-Oct time period. 3. Non-same-store results lagging projections.
1. Behind expectations in rental rates and lease-up velocity at
high-end developments in downtown Austin, Seven Bridges, and Museum Gardens. 2. Leasing velocity also behind projection at rehab community in Atlanta. 3. Summary: 1. Co. projected it would cross rental rate inflection point early in 4Q04, meaning current rate new leases were at rental rates above last year's rates.
1. Co. just about at the inflection point now. 2. Not seeing job growth or rise in mortgage rates translating to a slowdown in housing sales as hoped. 3. Continue to see gradual slowdown in new apartment starts in most markets. 4. Continue to see a number of conversions of higher-quality apartment communities into condo sales at higher prices than co. would have thought possible.
5. Seeing competition from condo players when co. trying to buy
high quality apartment properties that are condo conversion candidates.
6. Condo buyers shutting out apartment investors as AML cannot
compete at extremely aggressive cap rates they are willing to pay.
2. Continued improvement in most of nine markets, but slower and
less robust than expected.
S2. Strategic Plan Update (G.M.) 1. B-to-A Initiative: 1. Co. made significant headway in improving community quality and enhancing brand strength. 2. In 2004 and Jan. 2005, co. sold 4,110 units for $256m, approx. $62,000 a unit at cap rates just north of blended 7%, before Capex. 3. In the same period, AML bought 3,624 units for $382m, or a little over $105,000 a unit, at projected cap rate before capex of 6%. 1. Amounts include purchase in January of AMLI at Lantana Hills, sale of AMLI at Chase Oaks. 4. Co. committed to continuing initiative. 5. Project to buy and sell somewhere between $250-300m of communities in 2005. 2. Diversification of NOI by Geography: 1. Working to reduce percentage of NOI from Dallas and Indianapolis. 2. Working to increase NOI from Chicago, Denver, Austin, and southeast Florida. 1. In 2003, co. generated a bit over 50% of NOI from Dallas and Atlanta. 2. In 3Q04, share of NOI from Dallas and Atlanta down to 41%, decreased to 37% in 4Q04, and will be less in 1Q05. 3. Percent of NOI from Chicago, Austin, Denver, and southeast
Florida was less than 23% in 2003, will likely equal, and probably move ahead of, Dallas and Atlanta in 1Q05. 4. Chicago now second largest market, generating more NOI than Atlanta. 3. Ramping Development Efforts: 1. Co. announced intention to ramp development efforts.
2. Under construction 874 units in Chicago, Austin, and Dallas,
representing total development costs of $138m. 3. During 2005, expect to start between 3-5 new developments representing more than 1,000 units. 1. Anticipate several developments will likely be in JVs. 4. Technology: 1. Aim to lead industry in using technology for a sustainable competitive advantage allowing increased yield from apartment properties relative to competitors.
2. Over past five years, AML has spent $25.5m on various technology initiatives. 1. Roughly 38% expensed in …