AIV
#Thank you for the question, <UNK>.
Our expectations for dispositions next year, is actually very much back-end loaded.
And, so in our earnings release we provided a walk of our 2016 FFO to 2017 FFO.
And in that walk, we showed $0.09 loss in FFO from the impact of property sales.
And $0.08 of that $0.09, is due to dilution from our sales in 2016, and $0.01 is due to expected dilution for our 2017 sales.
And so, the quarter-over-quarter mid-point projected decline from fourth-quarter FFO to the first-quarter mid-point, is really being driven by ---+ it's seasonality factors, if you think about it.
It is the impact of coming off a fourth quarter, where typically we have lower turn-costs, because we have fairly low lease expirations ---+ lease expirations are lower in the first quarter, as well, but still higher than the fourth quarter, generally.
But more impactful, is the impact of utility costs, both in the general sense in that our utility costs are lower in the fourth quarter than in the first.
But specifically, in 2017, it's a bigger impact because we expect in 2017 a return to normalized weather and there for normalized utility costs in Q1.
Recurring but non-revenue producing.
We expect to spend about $1100 per unit, on our capital replacement spending which falls into that category.
Yes, just so everybody is on the same page, when we set our 2017 same-store expectations it's based upon our portfolio at the end of the year.
And so, as we look out into 2017 we are adding to the same-store population, Lincoln Place, Ocean House, Preserve at Marin, the three stabilized redevelopments that <UNK> mentioned, as well as Mezzo, which was an acquisition we made in 2015 in Atlanta.
We also expect to remove, say, three, to four, to five properties, due to the redevelopment, and one potential conventional property due to sale.
And so, if you look at those eight properties in aggregate, we expect about a 20 basis point impact to our same-store growth rate.
<UNK>, this is <UNK>.
I'll start by talking about the dollars involved on the dispositions, and maybe I'll turn it over to <UNK> to comment on, potentially, the environment.
In the third-quarter call, we talked about the fact that we're increasing our 2016 disposition guidance, to get a little bit of a head start on our needs for 2017.
And, <UNK> and the team were very successful in accomplishing that.
So if you were to normalize our expected dispositions by pulling the year-end ---+ a portion of the year-end 2016 sales, put those back into 2017, as we originally expected a year ago, there would be no change from our expectations for sales in 2017 versus 2018.
Thanks, <UNK>, for the question.
For the refinancing activity we completed in the fourth quarter, those were deals that we rate locked in the October time frame, and so, if I'm thinking back to rates at that time, we were probably at the 180 to 220 type of ---+ 200 type of point.
As we think about our expectations for 2017, the indications we have seen, as we've been talking with our partners in the secured debt world, is that spreads have remained about the same.
There's always a little bit of a range depending on the location and quality of the asset, and the need for our partner to allocate capital to that particular market.
And so, I think, broadly, we would say that our spreads for 2017 are expected to be between the about the 130 and 150 range.
<UNK>.
It's <UNK>.
I'll walk through that.
There's definitely the opportunities to go both ways on that.
And, so, what we will do is, we will manage it market-by-market.
And so, if we are in a market that we're seeing acceleration in new lease rates and getting stronger, we may be more comfortable that the occupancy could dip a little bit in trade for higher new rents.
In markets that we're seeing deceleration, or we're seeing more pressures, we may make a decision that says, listen, let's moderate a little bit on the renewal side, let's retain customers, and that may ultimately, in turn, turn into a higher ADO.
So, we won't manage it globally as a macro decision but we'll manage it building-by-building and market-by-market.
<UNK> this is <UNK>.
And our exit point at the end of 2017 will be in our 2017 guidance.
That reflects our judgment, our opinion.
2018 is based on third-party providers, who, at least right now, have been seen as perhaps too optimistic.
I've read your material with interest, and I recognize your concern about caution about what lies ahead and I don't think it's clear that you're wrong.
You may well be right.
But what I would ask you to consider is that we aren't passive takers of what the market provides.
We're not ants on a log drifting downstream.
We are an active hands-on Management team, and we believe that we can absorb what variance there may be in the market, and continue to produce the kind of returns we've discussed.
I think that, what's implicit ---+ or what's explicit in a net asset value calculation, is the price at which properties would trade in the broad real estate market.
And those prices can certainly change.
Some of the factors that will increase factors going forward, might be rising incomes.
Some of the factors that might depress valuations going forward might be changes in the risk free rate.
Those are obviously factors that can go in both directions.
And so we aren't trying to say that net asset value is a guaranteed number which will never change.
That's not at all the case.
We're trying to connect it to the value of the private real estate markets.
Is that responsive.
Hey, <UNK>, this is <UNK>.
Just to add a little bit more color on the impact of Lincoln Place coming into the same-store pool.
As we look at our prospects for Lincoln Place, in particular, relative to the LA market as a whole, and translating that impact to the entire portfolio, we're not getting neither a lift nor a detriment from the addition of Lincoln Place to the same-store pool.
No.
I think all four of those deals ---+ the four properties that closed were really two transactions.
Three were adjoining properties in Atlanta, that we operated as a single property and went to a single buyer.
Those transactions were cut, kind of mid-year, and we did not see retrade activity of any significant sort on either one of them.
The fourth asset there was one in suburban Philadelphia.
In terms of the market overall, I would say ---+ you were at NMAC last week.
I think there's caution there.
I think the bid pools ---+ and in our discussions with brokers out there last week, bid pools are a little thinner.
I think they are particularly thinner at the A price point.
There is still a lot of interest and a lot of capital out there chasing deals, but a lot of that capital is focused on value add and the B, C price point today.
Well I'd qualify, one, the assumption you want to buy more A property.
Let's start there.
So, an essential element in the paired trade, is certainly higher rent.
And as we have been very successful over the last several years in selling out of the bottom of our portfolio, our bottom 10% rents have moved up.
And so, it's tough to find a property in our portfolio today that's got rents under $1100 a month.
So the trade-up math there, in our free cash flow analysis ---+ and that's the primary metric in that fair trade analysis, is the free cash flow generated on both sides of the trade, the sell and the buy.
That math gets tighter ---+ or that math gets harder, the tighter that spread is.
So I would close the loop, maybe, by saying that we are not particularly interested buying top-of-the-market in terms of top price point, today.
We are very cautious, as we look at trade opportunities, and I think that's manifest in the fact that other than closing Indigo, that we tied up a year and a half ago, we haven't done a new acquisition deal in 18 months, or more.
And so, we're cautious, and I think that that is somewhat reflected in the general market as a whole.
I think as we look at it today, we're pretty comfortable in that 50/50 mix.
If anything, we see a little more opportunity right now, on the B side for revenue growth, in the coming year as we've laid out in our guidance.
There may be a little drift down from the A price point, but our focus is really going to be on B, C product as we look at potential acquisitions.
And you'll see some drift that comes from redevelopments as they earn-in, and other things that push our average rate up.
You're going to see that continue to move.
I'll start and maybe <UNK>, or somebody else, would like to jump in.
Those big four lease-ups, the easy ones let's go to Indigo, which is in downtown Redwood City, with a limited amount of new supply around it.
There is some, that South San Mateo market is getting new supply, but it's not downtown San Francisco.
And so, we are not seeing the concession activity, and in fact, yesterday, we were on one of our lease-up and revenue calls relating to Indigo.
It's primary competitor property is putting out renewal notices at $500 to $800 increases to their residents.
And so we feel pretty comfortable about our rate and our lease-up pace there.
At One Canal we continue to see good pace there.
It's winter, and so pace has certainly slowed from the summer last year, but we're over 90% leased.
And we're right on track with our underwriting and feel very good about One Canal.
Yes, there is some new supply.
There's a new Avalon Tower just a few blocks away that's in lease-up.
But we have not seen major pushes there in terms of additional concessions or anything else at One Canal.
If anything they are tighter today than they were before.
And the Philadelphia properties, we're going to watch Park Towne, and be cautious about it, and go from there as we look at that fourth tower.
But we've got a third tower coming on, and the first two have gone great.
Well, thank you all for your interest in Aimco.
If we've left you with a question or two, feel comfortable contacting me or <UNK> <UNK>, our Chief Financial Officer; or Lynn Stanfield, Head of Investor Relations in FP&A; or her trusted right hand, Elizabeth Coalson.
We would be glad to answer them as best we can.
And for those of you that will be headed to Florida in about six weeks, we look forward to seeing you there.
Thank you so much.
