Apartment Income REIT Corp.

Hello and welcome to the Air Communities 3rd Quarter 2022 Earnings Conference Call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 1 on your telephone keypad. If you'd like to withdraw your question, you may press star 2. I will now hand over to your host, Lisa Cohn. Please go ahead, Lisa.

Thank you, Alex, and good day. My name is Lisa Cohn and I am President and General Counsel of Air Communities. During this conference call, the forward-looking statements we make are based on management's judgments, including projections related to 2022 and 2023 expectations. 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. We will also discuss certain non-GAAP financial measures, such as funds from operations. These are defined and are reconciled to the most comparable gap measures and the supplemental information that is part of the full earnings release published on AIR's website. Prepared remarks today come from Terry Considine, our CEO, Pete Kimmel, our President of Property Operations, John McGrath, our Co-CIO and Chairman of our Investment Committee, and Paul Belden, our Chief Financial Officer. Other members of management are also present. All of us will be available during the question and answer session, which will follow our prepared remarks. I will now turn the call to Terry Considine.

Terry? Thank you, Lisa, and my thanks to all of you for your interest in AIR. We live in interesting times. As an executive at a department REIT, this year has been a great success. As a REIT shareholder, it's been a pretty tough year. When I talk to other investors, They tell me they've already put this year in the past and instead are interested to talk about next year. I want to help, but I'm also mindful of the wisdom of Yogi Berra. It's tough to make predictions, especially about the future. In preparing for this call, I was impressed by the wide range of estimates for air FFO. 12% from high to low, or 28 cents per share. I was also struck by the thought that any one of them might be right, depending on the economy. So here's how I look at it and where I can speak with conviction. AIR is in good shape, great shape, and executing well. Keith and his team will do an excellent job in leasing apartments and controlling costs next year, no matter the economy. But how their work translates into FFO is will be unusually dependent on macroeconomic conditions. So with that in mind, we set out to structure the earnings release and this call to provide you information about the effectiveness of the AIR business model and also about how we're prepared for different economic scenarios. Most of the call will focus on the execution of the AIR business. For example, John's continuing transformation of the AIR portfolio with average rents up 19% in two years, and intentional diversification by geography and price point to target economic growth and reduce volatility. Orr keeps remarkable success, managing two distinct portfolios. Same store, where revenues are up year over year by almost 10%, and up 3.8% sequentially, continuing strong through the end of the year. and managing also the acquisition portfolio, where the class of 21 had sequential revenue growth of 9.2%, more than twice the growth rate of the same store portfolio. In both portfolios, Keith's gifts for innovation and productivity are such that costs are almost flat, no matter the highest inflation in 40 years. Or it might be Paul's Midwestern cautions. On display in our balance sheet, we're allowing for a few smallish closings in the next few weeks. There's no debt maturing before mid-2025 and no exposure to higher interest rates for the next three years, except for a $70 million piece in mid-2024 and $285 million in the second half of 2025. Paul is similarly conservative in his accounting, where, for example, we have almost no exposure to rent that is owed but not yet collected. Each of Keith, John, and Paul will provide other interesting facts that are proofs of the AIR business model, its above-planned results in 2022, and its excellent prospects for next year. Mindful of conversations with other investors, The earnings release also addresses such questions as, what is the outcome if inflation proves stubborn and is higher for longer? Well, the error answer is inflation is good news for apartment owners that can raise rents annually. An error leads all peers in conversion of rent growth to free cash flow because of our ability to control operating expenses and G&A costs. Second question might be, what if interest rates continue to increase? The error answer, interest rates next year will make little difference to error. After completion of a small refunding already underway that I mentioned just a minute ago, we have no maturity for the next two or three years till mid 2025. And outside our revolver, which will be paid down to $150 million from property sales later this month, Our interest rates are fixed for even longer. And then there's a third question. Well, what if the Fed succeeds in causing a recession? Well, the answer is recessions are always tough, but error is ready. Our current highly occupied apartments have rent rolls with stable cash flows backed by the high incomes and lofty credit ratings of our customers. Our high-quality portfolio is diversified across markets. There's a recession focused on tech companies. Philadelphia's students and Washington's national government are likely to be affected differently. And finally, our high-quality portfolio is about one-half B. And so benefits when customers become more price sensitive. So we're not giving guidance today. But even when Paul gives guidance in January, his best estimates will be subject to subsequent macro events. What we are attempting today is to show how AIR is managed through the macro events of the third quarter and the full year of 2022 and how AIR is designed to manage through whatever may await us, await us all in 2023 and beyond. My optimism, and I'm optimistic, is based on my confidence in my AIR teammates whose sense of mission attracts and retains residents, and in the air culture of collaboration, and in an engaged board whose directors have joined me, and many of you, in investor meetings, and who spent an energetic two days here in Denver earlier this week. We operate as a team, working together, collaborating, ready for whatever the future may bring, and I thank each and every one of them. With no more, I'd like to turn the call over to Keith Kimmel, head of Air Ops. Keith? Thanks, Jerry.