Jeffrey Friedman, the CEO of Associated Estates (AEC), set the stage for today’s relatively brief earnings call when he explained that there “are only so many ways you can say the apartment market is good and not letting up anytime soon.”
Indeed there wasn’t a lot more to add about the Cleveland-based REIT’s first quarter performance, which was driven by stronger-than-expected occupancies and expense control. Its turnover remains near historicals averages.
“Our same store community portfolio and 2011 acquisitions are exceeding expectations,” Friedman said.
And there really wasn’t a weak performer for AEC, which still has most of its portfolio in the Midwest, but is in a number of markets around the country. “We currently operate in 13 markets and all of them are strong,” said John Shannon, the company’s vice president of operations.
The company occupancy ticked up to 97 percent (which is actually a little higher than it would like) and it saw 5.9 percent same store revenue growth. Though not known as a developer,its new construction in Nashville was trending more than 7 percent higher than what it had underwritten. It’s also closed a deal to develop a post office site in the Bethesda, Md. Though there have been concerns about over development in that market, the company remains confident.
“We think the Mid Atlantic will perform well for the balance of 2012,” Shannon said. “We don’t think think supply will impact us as much as people think.”
As AEC enjoys a solid market, it’s also diversifying its debt sources and pruning its portfolio. It has four assets in Western Michigan (originally listed at $39 million) under contract to a private buyer. Another goal has been to earn an investment grade rating. That could be coming soon.
“ We hope to earn back our investment grade rating by late this year or early next year,” said CFO Lou Fatica.