Original Source: FD (FAIR DISCLOSURE) WIRE
. Janie Maddox, Post Properties, Inc., SVP, Communications . Dave Stockert, Post Properties, Inc., President & CEO . Tom Wilkes, Post Properties, Inc., EVP & President, Post Apartment Management . Tom Senkbeil, Post Properties, Inc., EVP & Chief Investment Officer
. Chris Papa, Post Properties, Inc., EVP & CFO
PPS reported 4Q04 per share FFO, including certain accounting charges totaling approx. $0.38 a share. Across the same store portfolio, effective rents increased on a sequential basis by 50 bp. Same-store NOI increased sequentially in 4Q04 as expenses declined due to lower property tax and maintenance expenses. Same-store revenue for 4Q04 was 0.8% positive. PPS expects 1Q05 FFO to be in the range of $0.49-0.53 per share. Q&A Focus: Condominium development, cap rate and expenses.
A. Key Data From Call 1. 4Q04 same-store revenue = 0.8% positive.
2. 1Q05 FFO guidance = $0.49-0.53. 3. 2005 FFO guidance = $1.75-1.93.
4. 1Q05 same-store revenue guidance = flat to up about 0.5%.
S1. Opening Comments (D.S.) 1. Objectives: 1. A year ago PPS set out a new strategic plan for the Co. with six key objectives.
1. Shaping and balancing the portfolio while focusing in fewer
markets where the Co. can achieve critical mass, leverage operations, and take full advantage of the brand. 2. Reestablish PPS' value creation infrastructure to pursue a mix of development, acquisitions, dispositions, and for sale or condo activities. 3. Continually reinvest in the Post brand and customer service. 4. Continually reinvest in the Co.'s associates and their career development.
5. Constantly strive for operational excellence. 6. Maintain a strong balance sheet and deliver financial results and investor returns. 7. PPS is making good on each of the aforementioned objectives. 2. In 2004, PPS sold more than $240m of properties principally comprised of its oldest Atlanta and Dallas properties.
3. PPS expects to sell another approx. $200m of older assets in
2005, concentrated in Atlanta and Dallas. 4. During the past year PPS also focused on building its presence in Washington, D.C. 1. Acquired a very well located property in Tysons Corner.
2. Commenced a high quality development in Alexandria. 5. Recently commenced a process to seek and exchange the Co.'s Manhattan high-rise for additional high quality Washington assets.
1. If completed, the Co. has the opportunity to make Washington, D.C. a strong Number 2 market to Atlanta. 6. Combined with selling the Co.'s single Nashville community, PPS would reduce its footprint to eight markets from ten, making it more efficient in concentrating its brand. 2. Brand Perspective: 1. Improved the Co.'s on-site presentation and customer service programs in 2004 and raised residence satisfaction scores in independent surveys for the fourth straight year. 2. PPS is also launching a brand extension Post Preferred Homes to market for-sale product. 3. To invest in associates, PPS hired a new head of career development in 2004 out of the Coca-Cola Company. 3. Operations: 1. PPS completed its evaluation and selection process for new web-based property operating and procurement software. 1. Expects to implement this software in 2005, leading to improvements in operations and in efficiency.
2. Financial Performance: 1. By settling the MOPPRS remarketing agreement in Dec., PPS has positioned 2005 and beyond for earnings and cash flow growth. 2. Market fundamentals continue to improve in 4Q04. 3. Jan. leasing is off to a solid start.
S2. Portfolio (T.W.) 1. Rents: 1. In 4Q04, effective rents increased on a sequential basis by 50 bp. 2. PPS is almost even with the effective rents in 4Q03. 2. Occupancy: 1. As the Co. strives to maintain its occupancy in the 93-95% range for the recovering markets, a YoverY positive variance in effective rents is its next milestone. 1. Expects to achieve that in mid-year 2005.
2. Same-store NOI increased sequentially in 4Q04 as expenses
declined due to lower property tax and maintenance expenses.
3. Markets generally decrease in occupancy seasonally in 4Q. 4. Therefore, total revenues did sequentially decline by 1.2% as
economic occupancy dropped from 94.2% to 93.1%. 3. Financials:
1. On a YoverY basis, revenue for 4Q04 was 0.8% positive. 2. For 2004, total revenues exceeded 2003 totals by 0.6%. 3. All five of the Co.'s major markets achieved positive YoverY comparisons for revenue in 4Q04. 4. In four of the five markets, the Co.'s YoverY revenue growth has exceeded the avg. for the reported results of its peer group. 5. With an expense increase of only 1.6%, PPS' quarterly NOI was positive YoverY for the first time in several years, surpassing 4Q03 by 0.3%. 6. For 2004, expenses were up 3.6%, driven primarily by increases in property taxes and payroll costs. 7. In line with PPS' guidance in 3Q04's call, annual NOI was 1.3% lower than prior year. 8. PPS closed out the year with 0.53% net delinquency, which is a 13 bp improvement over 2003. 9. Net resident turnover was 51% in 2004, declining from the 2003 net turnover of 55%. 1. This lower turnover enabled PPS to lower its traffic and leasing demand and hence advertising cost and vacancy loss. 4. 2005 Trends: 1. PPS' first month (Jan.) has been encouraging in demand and in rent growth on turnover and renewals. 2. Beginning in March traffic typically increases by 30% over Jan. and Feb. and PPS will use that as an opportunity to continue to push rents. 3. Offsetting the positive impact on revenues, expenses will sequentially increase as expense accruals in categories such as property taxes are reset for the New Year.
S3. Investments (T.S.) 1. 2005 Opportunities: 1. Expects to redeploy capital raised from the asset sales to strengthen its balance sheet and to reinvest in assets that demonstrate better growth potential in markets where it desires to build critical mass and leverage the Post brand such as Washington, D.C. and Florida markets. 2. In 2005, in addition to the apartment communities …