Apartment Income REIT Corp.

Welcome and thank you for attending today's Air Communities fourth quarter and full year 2022 earnings conference call. My name is Alexis and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to Lisa Cohn, President and General Counsel of Air Communities. You may proceed.

Thank you, Alexis, and good day. My name is Lisa Cohn, and as Alexis said, I am the President and General Counsel of Air Communities. During this conference call, the forward-looking statements we make are based on management's judgment of, among other things, current market conditions, macroeconomic trends, socioeconomic drivers, including projections related to 2023 performance 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 GAAP measures in the supplemental information that is part of our full earnings release, published on AIR's website. The remarks today come from Terry Considine, our CEO, Keith Kimmel, 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 welcome to all of you on this call. AIR was designed to be the most efficient way to invest in public ownership of multifamily properties. The past year provides this confirmation. At 74%, AIR operating margins are the highest among our peers. At 67%, AIR has, by far, the highest rate of conversion of revenue into free cash flow, the highest among our peers and 10% higher than the peer average. And for your information, it's posted on our webpage, and you might be interested to review the calculation. One foundation is the prowess of Keith and his ops team. Like other apartment owners, rent growth last year was good. Air's same-store revenue was up more than 10%. But unlike all other owners that I know, Air's COE, controllable operating expenses, actually declined by 10 basis points, and the most inflationary economy of the past 40 years. How does Keith do it? A second foundation is the portfolio management of John McGrath. Roughly three times as active in the past two years as the average apartment REIT, John and his team sold 21% of our starting assets and purchased The acquisition class of 2021 increases the overall same store NOI growth rate by about 100 basis points. The class of 2022, about the same size, is outside the same store portfolio and has net operating income growing at faster than 20%, approximately 2.5 times the growth rate of the same store properties. A good example of the consistency of air ops can be seen in the fourth quarter in January and now February leasing activity, up and without the seasonal slowdown others faced. A good example how paired trades improve portfolio quality and revenue growth can be seen in John's fourth quarter trade of 50-year-old garden apartments in the outer suburbs of Boston for an almost new mid-rise in dynamic Miami Beach. It also shows how we'd like to invest on highlands where zoning or neighborhoods or mother nature make a location attractive to high-quality residents and is protected in some part from competitive new supply. Good ops and dynamic portfolio management combined with Paul's balance sheet with little floating rate debt and Lisa's disciplined oversight of off-site activities and costs makes for growth and the greatest efficiency of any public apartment REIT in converting revenue to free cash flow. Looking to 2023 this year, we plan for more of the same. Heath and his team will select the best residents and then work hard to satisfy and retain them. John and Josh on John's team will look for acquisitions whose returns, magnified by the air edge, are accretive to air's cost of capitals. Paul will keep score and our balance sheet safe with low leverage, long maturities, limited interest rate exposure, and abundant liquidity. And Lisa will develop our precious human capital, manage risk, upgrade corporate systems, and most important, guard our prized culture. There are conflicting views about what to expect from the economy this year. I note that the stock market and the bond market are pointing in different directions. AIR is prepared for both. If inflation continues higher and longer, AIR customers can afford higher rents and Keith has proven he can control costs. If the Fed raises interest rates, AIR bottom line is little affected because Paul has only 4% of borrowings and floating rate debt. If the economy turns down, AIR is resilient with residents with high credit scores, incomes averaging $225,000 in the latest quarter, and a greater than 60% propensity to renew. If the transaction markets prove difficult, John and Josh have demonstrated their ability to source capital from property sales and to invest in properties with big upsides when added to their platform. I note that Paul's guidance assumes no increase in market rents. and yet results in same-store net operating income up almost 9%, and FFO up 10% over last year's run rate FFO. It's not guidance and only my opinion, but I expect inflation to linger and that rents in our portfolios may grow faster than we'd expect. I'm optimistic about AIR's future. Efficiency and effectiveness provide comparative advantage in operations and acquisitions. We are a veteran team committed to continuous improvement and to each other. Our intentional culture makes AIR a great place to work. I think pride in its regular recognitions and National Top Workplace Award is the most recent. I look forward to the opportunities of this year and appreciate my teammates for their exceptional work last year. I thank Tom Keltner, Chairman of the AIR Board, and my fellow directors for their engagement and good counsel. I'm grateful to shareholders. We work hard to be good stewards of your precious capital. With no more, I'll turn the call to Keith Kimmel, head of Air Ops. Keith?