Apartment Investment and Management Company
Q1 2016 Earnings Call Transcript

Published: 30 Apr 2016

[Operator:]

Good afternoon and welcome to the Aimco First Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I’d now like to turn the conference over to Lisa Cohn. Please go ahead.

[Lisa Cohn:]

Thank you. Good day. During this conference call, the forward-looking statements we make are based on management’s judgment including projections related to 2016 results. These statements are subject to certain risks and uncertainties, a description of which can be found in our SEC filings. Actual results may differ materially from what may be discussed today. Also, we will discuss certain non-GAAP financial measures, such as adjusted fund from operations and fund from operations. These are defined and are reconciled to the most comparable GAAP measures in the supplemental information that is part of the full earnings release published on Aimco’s website. Prepared remarks today come from Terry Considine, our Chairman and CEO; Keith Kimmel, our Executive Vice President in charge of Property Operations, John Bezzant, our Chief Investment Officer; and Paul Beldin, our Chief Financial Officer. A question-and-answer session will follow our prepared remarks. I will now turn the call to Terry Considine. Terry?

[Terry Considine:]

Thank you, Lisa and good morning to all of you and thank you for your interest in Aimco. Business is good. In property operations, same-store rent per apartment home was up 5.1%, the rate of increase 70 basis points better than the 4.4% growth rate of the first quarter last year. Operating expenses were essentially flat. With higher rents and flat expenses same-store net operating income was up by more than 7% leading the high end of guidance by 160 basis points making for a good quarter and a solid start to the year. In redevelopment, ongoing projects are on time, on budget and are creating value equal to $0.25 to $0.35 for each dollar invested. Patty and her team are doing a great job including construction on -- completing construction on the South tower and starting construction on the East tower at Park Town place in Center City, Philadelphia as well as adding to our active redevelopments by starting the final phase that completes redevelopment of The Sterling in Center City, Philadelphia and starting a second phase at Palazzo at Park La Brea in Los Angeles. In portfolio management, first quarter revenue per apartment home was up across the entire Amico portfolio to more than $1,860 an Amico record and up 9% year-over-year. For these good results I offer sincere congratulations and thanks to my Aimco teammates both here in Denver and across the country. It’s a privilege and a pleasure to work with you. I’m especially proud of your grading Aimco a top workplace in Colorado for a fourth consecutive year. Now for more detailed report on first quarter operations, I’d like to turn the call over to Keith Kimmel, Head of Property Operations. Keith.

[Keith Kimmel:]

Thanks Terry. We're pleased to report that we had a solid quarter of operations with revenues up 4.8% year-over-year. Expenses were up 10 basis points year-over-year with net operating income up 7.1% for the quarter. Each of these quarter, metrics are better than the first quarter of last year. In Q1 of 2016, our residence gave us our 10th consecutive quarters better than a Four Star rating in customer satisfaction. This contributed to renewal rent increases of 6% for the quarter, some 120 basis points higher than the first quarter of 2015. Of note, renewal premiums increased in each successive month of the quarter. We saw particular strength in the Bay Area, Denver and Atlanta. Renewal rents in these markets increased 8% to 9% compared to the expiring leases. Where those leases expired and were not renewed, our new lease pricing outperformed the results from the first quarter of 2015 and for each month of the quarter individually. This resulted in a quarterly increase in new lease rates of 3.5%, 230 basis points better than last year. The year-over-year rate of growth for new leases was strongest in Boston and Los Angeles. As a result of our team's hard work, our blended lease rate increases of 4.6% were 180 basis points higher than the first quarter of last year and by a 100 basis points sequentially, all while increasing average daily occupancy for the quarter by 10 basis points year-over-year and 50 basis points from fourth quarter. We’d another solid quarter on the expense front, growing by 10 basis points overall and 2% on excluding the year-over-year decline in utility expense due to a milder winter. Turnover for the quarter was 50.9%. Of the customers who decided to move out 23% were for career moves, 17% did not renew due to price and 14% moved out to purchase homes. There are no significant changes in these move-out reasons versus recent quarters or our long-term averages. Our resident quality continues to improve. The average incomes of those new customers who moved in during the first quarter was $136,000 with a median income of 95,000. Year-over-year the median income of our new residents was up 19% compared to the first quarter of 2015, with half coming from a more discriminating application process and half from an improvement of portfolio quality. Our 12 target market, which represent 90% of same-store net operating income had topline revenue growth up 5.2% in the quarter versus 4.8% for the entire portfolio. Our top performers all had revenue increases in double-digits for more than 10% to better than 13%. This was led by the Bay Area followed by Seattle and Denver. Our strong performers, which had revenue growth from nearly 6% to better than 7% were Boston, San Diego, Atlanta and Greater Los Angeles. Our steady target markets with about 2.5% to 3% revenue growth were Chicago, New York City and Washington DC. And finally was software revenue growth of around 1% we had Philadelphia and Miami. As we look to our April month to date results, lender lease rates are up 5%, 10 basis points better than last year. New leases are up 3.6% and renewals are up 6.4%. April's average daily occupancy is at 95.9%, 30 basis points below last year by design. We've intentionally moved leases from our shorter months into peak leasing season with higher demand. This improvement in expiration management will pay dividends by re-pricing leases in periods of greater expected rent growth. And finally May and June renewal offers went up with 6% to 8% increases and with great thanks to our teams in the field and hearing Denver for your commitment to Aimco for success. I'll turn the call over to John Bezzant, our Chief Investment Officer. John?

[John Bezzant:]

Thank you, Keith and good day, everybody. Here I would like to take a few minutes to review our recent investment and portfolio activities. During the first quarter, we invested $31 million in redevelopment, $9 million of it on our redevelopment pipeline and $22 million of Park Towne Place and The Sterling both located in Center City, Philadelphia. At Park Towne Place, we completed redevelopment of the South Tower and the Town Center. 91% of the 224 completed apartment homes in the South Tower at least and rents are ahead of underwriting. Construction is progressing as planned on East Tower with delivering the first redeveloped apartment homes coming this summer. Sterling leasing results are encouraging as we continue to see strong demand. We also continued our Phase redevelopment of The Sterling with 95% of the 283 completed apartment homes leased at rents above underwriting. Patty and her team continue plan our next round of redevelopment and as Terry mentioned, we're continuing that redevelopment at The Sterling and Pallazo Park, La Brea. At The Sterling, the final phase of redevelopment includes 125 apartment homes on seven floors and the build out of the retail space. The incremental cost of this work is approximately $22 million. We're also moving forward on the continued redevelopment of Pallazo Park, La Brea property in Los Angeles. This phase will upgrade 389 apartment homes in the accompanying common areas. The incremental investment there is approximately $24 million with Aimco's share about $30 million. During the first quarter, we also invested $16 million in the construction of our One Canal development project in Boston. We anticipate receiving our initial temporary Certificate of Occupancy for the building within the new few days and our first move ins are scheduled for Mid-way. Today 12% of the 310 apartment homes have been leased and rents there are also above underwriting. In addition to One Canal we have three other properties undergoing lease up; Axiom, Vivo and Indigo, and we're on track at each. Our lease-up of Axiom and Vivo, the properties that we acquired last year Cambridge is progressing well. Axiom, which acquired in construction completion last April is now 92% leased and Vivo which we completed construction on in October is 75% leased. Rents and lease space at both properties are exceeding our underwriting. At Indigo and Redwood City, California, construction continues on plan. We're under contract to purchase this property on construction completion and anticipate closing the acquisition before our next call. We've commenced leasing at this property and at least 9% of the 463 apartment homes are also at rent in excess of our underwriting. On the disposition side, we sold one conventional property during the first quarter for $10 million in gross proceeds. We continue to expect to execute the bulk of our property sales in the second and fourth quarter as we match fund our planned investment activities. We don’t normally talk about our sales activity prior to closing, many of you are aware that our buyer on Riverside, Washington REIT disclosed transaction details on their call yesterday. We can confirm the details as disclosed by them and anticipate closing of this transaction during the second quarter. The proceeds on the sale of Riverside will complete the funding of our Indigo acquisition. With that I would now like to turn the call over to Paul Beldin, our Chief Financial Officer. Paul?

[Paul Beldin:]

Thanks John. I will start today with first quarter 2016 results. At $0.51 per share, AFFO was up 11% year-over-year and $0.05 per share ahead of the midpoint of our guidance range. Pro forma FFO of $0.57 per share was up 10% year-over-year and $0.03 ahead of the midpoint of our guidance range. First quarter AFFO outperformance of $0.05 per share was driven by $0.02 from same-store net operating income outperformance 210 basis points, $0.01 from a timing of income tax related items and $0.02 from the timing of capital replacement spending. These positive first quarter results we're increasing full year AFFO and pro forma FFO guidance by $0.01 per share at their respective midpoints. This increase reflects one, the turnaround of first quarter’s $0.03 outperformance related to the timing items I just mentioned and two, the recognition of $0.01 of the first quarter’s $0.02 of same-store NOI outperformance. I would like to be clear here. We do not see a slowdown in business compared to our beginning of year expectations. However, we do prefer to take a conservative approach to raising guidance and until we have more visibility into peak leasing season. On last night’s release, we also established second quarter AFFO guidance of $0.45 to $0.49 per share and pro forma FFO guidance of $0.54 to $0.58 per share. Shifting gears to our operations related guidance. We're increasing our same-store NOI growth guidance to a range of 5.5% to 6.5%, an increase of 25 basis points at the midpoint. This increase reflects a 75 basis point decrease in projected operating expense growth. Our guidance for full year same-store revenue growth is unchanged at 4.75% at the midpoint. With last night’s release, we also establish guidance for second quarter same-store NOI growth of 3.5% to 4.5%, which is consistent with the expectations we had for the quarter when we started the year. Now is then we expect to see continued solid rent growth with the year-over-year comparison for the quarter affected by two items, first as Keith mentioned we have undertaken to reduce a number of lease expirations occurring in off peak months and to drive more leasing volume into peak season where we expect greater pricing power. The increased number of lease expirations will increase frictional vacancy during the second quarter reducing average daily occupancy by 40 basis points compared to the second quarter of 2015 and also increasing turnover expenses. While these costs are expected to be reversed and rewarded in other quarters, in the second quarter they are expected to reduce year-over-year, same-store NOI growth by approximately 100 basis points. Second, our second quarter expense growth last year was actually negative as a result of non-routine items in 2015. So while we expect to low expense growth in this year, we also expect faster expense growth in this quarter. With that, we will now open up the call for questions. Please limit your questions to two per time in the queue. Operator, I will turn it over to you for the first question.

[Operator:]

Thank you. [Operator Instructions] The first question is from Nick Joseph with Citigroup.

[Nick Joseph:]

Thanks. I just wanted to start on the shifting of the leases and the lease optimization. What drove the decision to do that this year? And will it be complete in terms of the allocation for each quarter to where you would like to see it after 2016?

[Keith Kimmel:]

Hey Nick, it’s Keith Kimmel. I'll take it. Let me walk with a broader overview of the objective and then talk about what we did. When we look at the first and fourth quarter, we believe having 20% of our expiring leases in each of those quarters is where we would like to be and then putting the balance or 60% in the second and third quarters. A year ago we moved roughly 2,000 units from the shouldering quarters and them put them into the second and third quarter, essentially so we could take advantage of peak season and essentially some of the slowdowns that you can see in pricing and demand in particularly November, December things like that.

[Nick Joseph:]

Thanks. And then just I guess larger picture, we're seeing two of your peers now do larger portfolio sales and return capital through special dividends. What percentage of your portfolio do you consider non-core today and is that something you would be interested in doing just given the strong private market pricing?

[Terry Considine:]

Nick this is Terry and there is -- 10% of our portfolio is in the bottom 10%. So it's question for what's non-core. It's a question of what the use of proceeds would be. So that's a little bit difficult to describe specifically. The no assets that we own that we don’t appreciate owning and there is no asset that we own that in time will be ready for sale. The second question about special dividends is one that we've focused on and discussed with our larger shareholders and our view is that they want us to continue to be invested in the apartment business that we serve in allocation for them and what they expect us to focus on running apartments cutting the grass.

[Nick Joseph:]

Thanks. And then just finally in terms of the Indigo, I recognize it's only 9% of leases but could you talk about how far ahead of underwriting you are?

[Terry Considine:]

John was there yesterday, John?

[John Bezzant:]

Yes I would say the -- so leasing at this point obviously is very early days. I don't want to give you a precise number but its mid-single digits of our underwriting where we’re at today.

[Nick Joseph:]

Thanks.

[Operator:]

The next question is from Nick Yulico of UBS.

[Nick Yulico:]

Thanks. Can you talk a little bit about the performance of your assets, the A assets versus the B/C assets, how they have been trending from a growth standpoint?

[Keith Kimmel:]

Nick, Keith Kimmel. I will walk you through it. First let me start with that we think using new lease pricing is the best parameter as we look across how they are performing and if we look at our 12 target markets what we've seen in this past quarter is nine out of the 12 saw that Bs were outperforming the As.

[Nick Yulico:]

Okay, which are the ones where the Bs are not outperforming the As?

[Keith Kimmel:]

Sure Nick. Let me walk through this, a couple of unique things in those three. First Washington DC in which we have one single building in the district where we have an excessive operating team there that had an outperformance. In the Bay Area, we have a single building that outperformed into the Pacific Bay business, our redevelopment that we did a few years back that is extremely well located and has really done well. And then the third is Chicago in which both our As and Bs are almost on top of each other, our As is nudge them out probably about 10 basis points so very, very close.

[Nick Yulico:]

Okay. That's helpful. Thanks. And then just a question on the Indigo project. When it comes -- when you actually buy the project, how does that work from an accounting standpoint? Is there any third quarter capitalized interest or expense benefit that you start getting for FFO?

[Paul Beldin:]

No Nick as we -- this is Paul, thank you for the question. Once we take control and acquired Indigo here in the next few months the impact will be it's an asset on our books and since all the units are available and ready to be leased, there is no capitalization of cost other than what you would typically capitalize in operating property and to the extent there is construction activities.

[Nick Yulico:]

Okay. Thanks Paul.

[Operator:]

The next question is from Jordan Sadler at KeyBanc Capital Markets.

[Austin Wurschmidt:]

Hi guys, it's Austin Wurschmidt here with Jordan. I was just curious with the plans to move out some expirations, what's your loss to lease today across the portfolio?

[Keith Kimmel:]

Austin this is Keith, I'll take it. It’s actually 7% and it’s increased about 1.8% from the fourth quarter, which really just demonstrates the fact that we have more pricing power.

[Austin Wurschmidt:]

Thanks for that. And I was just curious with the strength and acceleration you've seen in your markets as well as at the lease-up properties. Have you guys considered accelerating your redevelopment program?

[Terry Considine:]

Austin, this is Terry Considine. We are comfortable with our pace in redevelopment. Patty has a deep pipeline and it's conceivable it could increase somewhat. But these are long term projects. They have a fair amount of lead time and we're comfortable running out.

[Austin Wurschmidt:]

Thanks. And last one for me. On the occupancy decline as you move those out, would you expect to make up that occupancy later in the year as you start to release some of those units?

[Paul Beldin:]

Yeah, Austin this is Paul, as we look at our plan for the year, in our prepared remarks we mentioned that occupancy was up in the first quarter of this year over last year. That is attributable to in part few release expirations in the first quarter and we would expect to see a benefit in the fourth quarter as well.

[Austin Wurschmidt:]

Great. Thanks for taking the questions.

[Operator:]

The next question is from John Kim at BMO Capital Markets.

[John Kim:]

Thanks, good morning. Terry, I think in the last call you said Redwood City, your assets in that market had gone up 10% in the fourth quarter and 5% in January. Can you provide an update on that for the first quarter?

[Terry Considine:]

John, I'm happy to and my crack team tells me that those four properties were up by 8% in the first quarter. So the four properties nearest to Indigo that are owned and operated by Aimco was up -- revenue was up 8% year-over-year in the first quarter. Is that right Paul?

[Paul Beldin:]

That is correct.

[Terry Considine:]

There you go.

[John Kim:]

Okay. And then conversely you mentioned a softer growth that you're seeing in Philadelphia and Miami. What is this attributable to, particularly Philadelphia because there doesn't seem to be that much new construction?

[Terry Considine:]

Keith, do you want to take that.

[Keith Kimmel:]

Sure, yeah. John, let me just I think qualify the Philadelphia portfolio that represents the stuff here. This is not Center City, Philadelphia. When we think about the tours that we had at Sterling and Park Towne, this is our suburban markets that are outside of the City and Germantown and places like that in which it's really not what we would consider Center City, Philadelphia. So it's different marketplace.

[John Kim:]

So Center City itself what do you think.

[Terry Considine:]

Center City is doing great. I don't know if we have River Loft readily available, but most of our Center City assets are out of same-store, because they're in redevelopment at Park Towne and Sterling. That River Loft was up by 4% in the quarter and the assets that are included under the Philadelphia heading in there that Keith mentioned are in Levittown and places like that, not representative of our core portfolio or whole portfolio. Miami, you also asked about and Keith you could speak to that. But the Miami numbers are influenced in very specific cases, our three largest properties there which are Flamingo, Yacht Club and Bay Park, each have a nearby adjacent construction, disruptions of one degree or another and it's not necessarily representative of the market.

[John Kim:]

Okay. Thank you

[Operator:]

The next question is from Jana Galan at Bank of America Merrill Lynch

[Jana Galan:]

Thank you. Keith, I just wanted to follow up on your comment about initiating a more discriminating application process. I'm curious how you changed income qualification, when you started to do it, and what was the reason? Were you seeing any increase in delinquencies?

[Keith Kimmel:]

So Jana thanks for that question. It's something that we do on a regular bases, over the past many years, it's something we review. But what we really saw as an opportunity to really just be pushing our credit scores in income qualifications in a variety of those different things in which we're just -- we're just being a little bit stricter. We know that at the end of the day that we have a responsibility that we help pick the neighbors that live in our communities and we want to take a more concerted effort to even push further.

[Jana Galan:]

And any change in the delinquencies?

[Keith Kimmel:]

No we're not really seeing anything. When we look at our bad debt our bad debt typically runs in the 30 to 40 basis points of total revenue and so we're not seeing anything that would be really different there. It's just an opportunity we want to continue to tighten our belt and just get better at it.

[Jana Galan:]

Thank you.

[Operator:]

The next question is from Rob Stevenson at Janney.

[Rob Stevenson:]

Good afternoon guys. Keith, can you talk about your DC submarkets? Numbers look pretty good both sequentially and year-over-year. Where are you seeing the greatest pockets of strength, and where is the more challenging parts of the portfolio in greater DC for you?

[Keith Kimmel:]

We got it Rob. Let me walk through it. We continue to see recovery and in fact acceleration. When we look at our revenue being up 2.4% this past quarter was also better sequentially. And really where we sit, we're in Suburban Virginia at the Alexandrian market and of course Maryland. What we've seen is that the Suburban Virginia outperformed Maryland in this quarter and more importantly did it also in the fourth quarter of last year, which was the first time we had seen that. So where we have 4,000 units there's a majority of our portfolio in Alexandria Area and it's been outperforming and we're seeing a better performance there.

[Rob Stevenson:]

Okay. And then in terms of the pushing the lease expirations, are you guys adding additional staffing to handle the leasing and the turnover, make ready costs, or your existing staff just gutting it out?

[Keith Kimmel:]

Rob. This is Keith, I will take it again. One of the things that we have been focused on for many years is matching our staffing levels with the demand of the business and so we've done this over the years. It's been an area in which we have been able to take advantage of really matching when you have those ebbs and flows. And so what I would tell you is in January of this year and at the end of last year when I was getting the team together, we had a very focused effort on -- the peak season is going to come earlier. However, get to staff up and it's not just our own staffing, it's vendors, it's a variety of other folks in which we get well prepared so that we could really take advantage of it and not be in a position that seems like you're caught off guard, but in fact it's all by plan and by design.

[Rob Stevenson:]

Okay. And anything too -- if I look, the only market you had negative quarter-over-quarter revenue, negative revenue growth was New York. Anything to take out of that, is it one asset? Are you starting to see trends in New York area?

[Keith Kimmel:]

Rob. It’s Keith, I’ll take it again. First of all let's just be on the same page it's 500 units. Most of them are walk ups. We had one building in Chelsea that had a little bit of a more difficult quarter. But there I wouldn't take any signs of it that anything unique is going on.

[Rob Stevenson:]

Okay. Thanks guys.

[Operator:]

[Operator Instructions] Our next question is from Rich Anderson at Mizuho Securities.

[Rich Anderson:]

Thanks, good afternoon. So you mentioned on the lease optimization process, is there any cost to that in terms of making a deal with people or whatever to shift into the second and third quarter? And is there anymore of it to do?

[Keith Kimmel:]

Rich. It’s Keith. Let me help you think about it, first of all there's no cost to it. Essentially what happens is that we have a professional deputy management team that works in house and essentially when we're sending out renewal offers, what we're able to do is we're able to stagger and offer different extensions and lengths in order to match up so that we get those leases to get renewed and/or new leases the match up into these new periods of time. So from that standpoint, there's really no difference in the way that our cost associated with it it's more about just walking through the process and ensuring we match it up that way.

[Rich Anderson:]

I'm sorry, I'm still here. Hello? Sorry I had a little disruption there. And if I could have a quick question, follow-up question unrelated, you mentioned I think Keith you said Philly was at the low end of your range in terms of how markets are performing yet you're doing a fair amount of redevelopment there. I'm curious how you feel about that and do you have an eye towards Philly becoming a much better market, it's that why you're developing there or is it turning against you a little bit?

[Keith Kimmel:]

Rich. This is Keith. I'll take the first stab at it and then I can ask John or to anybody who wants to add in. First of all just to be on the same page the Philadelphia market that we're seeing, that's not performing at the same levels as some of the others is outside of Center City and when we look at the redevelopments that we're doing at Park Towne and Sterling and Center City, there's not anything that's better located in those buildings and all of Philadelphia. And in fact those are being received and leased up above our expectation and I would just tell you that we would not change the way we're thinking about that in any way.

[John Bezzant:]

You have to double down on a little bit. If you recall the conservation back in October, the Investor Day, Philadelphia, for us long term in the portfolio is Center City in our own lease Center City assets that in the same story today is River Loft that had 4% growth and so we would not consider it to be lighter within the portfolio at all. We have high hopes and high prospectus for Center City

[Rich Anderson:]

Got you. Thanks very much for the color.

[Operator:]

Next question is from Connor Wagner of Green Street Advisors.

[Connor Wagner:]

Good afternoon. What is the outlook for LA and specifically in Venice? How is that performing and will it be impacted by supply this year?

[Keith Kimmel:]

Connor its Keith, let me take a stab at it and then I’ll ask if anybody wants give additional insight. When we look at LA, we think LA is going to be one of top performers. It fell in our strong performers in my prepared remarks. The bottom line is that when we look at it our West LA or Mid-Wilshire portfolio is some of the best located communities on all of Los Angeles and we continue to see LA perform well. As we look at our property in Venice the Lincoln property, it continues to perform better than our plans, continues to stay highly occupied and great absorption and great focus as the customers in that area are really enjoying it.

[John Bezzant:]

Connor, this is John. One thing I would remind you on Venice in particular is that that product at Lincoln place is very different than any of the new supply that’s going to come into the market and we feel very good about its positioning and relation to new supply whether it comes in Marina or elsewhere.

[Connor Wagner:]

Great, thank you, John, and a follow-up for you. Have you seen any slowdown in Fannie and Freddie's activity in specifically in some of the lower quality assets that you're looking to sell?

[John Bezzant:]

None whatsoever.

[Connor Wagner:]

Great. Thank you.

[Operator:]

The next question is from Wes Golladay at RBC Capital markets.

[Wes Golladay:]

Hello, everyone. I just want to get a little clarification on the lease expiration movement. Did you say you moved 2,000 last year; and if so, what is the number this year that you're looking to move?

[Keith Kimmel:]

Wes, its Keith. It was 2,000 last year that we reorganized into 2016, what I would say is I think that as we look from our 2016 activity into '17, it would be lesser -- that would be less of that, very minimal. But it’s an area that we constantly look at and constantly look at how we can fine-tune it and make it even better. Paul, anything you want to add to that?

[Paul Beldin:]

Yes Wes, one point I would add as you think about those 2,000 expirations that were moved into peak leasing season, we see those pretty evenly split between the second and third quarters.

[Wes Golladay:]

Okay. And what kind of lift do you think that does for overall same-store revenue? You had a little bit of a net effect this year where you're going to have a little bit of a headwind; but the ones from last year, how much of a benefit is that for you guys.

[Paul Beldin:]

Well as we look at it, it's little bit tough to predict at this point in time just because we’re not quite into peak leasing season and we’re not quite sure of the rates that we would ultimately achieve. But if were to look at the lease spreads last year between the second quarter and the fourth quarter, there is about 180, 200 basis points spread on a blended basis between the rates in those two periods.

[Wes Golladay:]

Okay. And then looking at Alexandria, what is driving the acceleration there? Is it incremental demand or just less supply?

[Keith Kimmel:]

Wes, I will take it, I think you're seeing some of that supply as being absorbed and the market is also just stabilizing to a certain extent.

[Wes Golladay:]

Okay. Thank you.

[Operator:]

[Operator Instructions] There are no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Terry Considine for any closing remarks.

[Terry Considine:]

Thank you, operator. And thanks to all of you for your interest in Aimco. We look forward to seeing a great many of you in New York in June for REIT week, in the meantime if you have any questions please call Elizabeth Coalson, Paul Beldin or me, and we’ll do our best to answer them. Thank you very much.

[Operator:]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.