Apartment Investment and Management Company (AIV) Q1 2012 Earnings Report, Transcript and Summary

Lisa R. Cohn - Executive Vice President, General Counsel and Secretary Terry Considine - Chairman and Chief Executive Officer Keith M. Kimmel - Executive Vice President of Property Operations Ernest M. Freedman - Chief Financial Officer and Executive Vice President John E. Bezzant - Executive Vice President of Transactions Daniel S. Matula - Executive Vice President of Redevelopment and Construction Services

Eric Wolfe - Citigroup Inc, Research Division Karin A. Ford - KeyBanc Capital Markets Inc., Research Division Jana Galan - BofA Merrill Lynch, Research Division David Harris - Imperial Capital, LLC, Research Division Paul Morgan - Morgan Stanley, Research Division Richard C. Anderson - BMO Capital Markets U.S. Robert Stevenson - Macquarie Research Michael J. Salinsky - RBC Capital Markets, LLC, Research Division David Bragg - Zelman & Associates, Research Division Taylor Schimkat - Keefe, Bruyette, & Woods, Inc., Research Division Buck Horne - Raymond James & Associates, Inc., Research Division

Good afternoon, and welcome to the Apartment Investment and Management Company First Quarter 2012 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lisa Cohn, Executive Vice President and General Counsel. Please go ahead.

Thank you. Good day. During this conference call, the forward-looking statements we make are based on management's judgment, including projections related to 2012 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 we may -- from what we discussed today. Also, we will 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 the full earnings release published on Aimco's website. Participants on today's call will be Terry Considine, our Chairman and CEO, who will provide opening remarks; Keith Kimmel, Executive Vice President, in charge of property operations; and Ernie Freedman, our CFO, who will review first quarter results and 2012 guidance. Also in the room today are John Bezzant, EVP, Transactions; Miles Cortez, EVP and Chief Administrative Officer; and Dan Matula, EVP of Redevelopment and Construction Services. We are available to answer questions at the conclusion of our prepared remarks. I will now turn the call to Terry Considine. Terry?

Thank you, Lisa, and good day to all of you on this call. Thank you for your interest in Aimco. Business is good. With great thanks to my teammates all across Aimco, we are on track to meet or beat our guidance for 2012, with FFO up 9% year-over-year and AFFO up 22%. More importantly, we are making steady progress on 4 long-term goals. First, our portfolio gets better and better. Our Conventional portfolio revenue per unit is now $1,263, up 9% year-over-year and up from $800 7 years ago, a compounded annual growth rate of 7%. This gratifying increase is due to same-store rent increases, higher rents on acquired and redeveloped properties and the sale of lower rent properties. We expect this process of steady improvement to continue as we concentrate our capital in fewer submarkets with greater and more certain rent growth. In addition, we are reducing our investment in our Affordable segment, selling 40 properties last year and expecting to sell another 60 properties this year. Our remaining business will be simpler and of higher quality. Second, we are ramping up our redevelopment activities. We began this year with 4 redevelopments underway and we have since started a fifth. We expect to start 5 more during the balance of the year. For all 10, we expect to spend about $400 million over the next 2 or 3 years. On completion, we expect rents on the redeveloped units, un-trended and at today's levels to average $2,200 or so. We expect free cash flow IRRs greater than 10% and cash and cash returns greater than 7%. Given that the average cap rates in these markets are about 4.5%, we expect to get -- create considerable value for our shareholders. These projects will also improve our portfolio quality and increase…

Thanks, Terry. We’ve started out 2012 ahead of our expectations. Conventional Same Store revenue was up 4.2% year-over-year and up 1.2% compared to fourth quarter 2011. We were pleased with our overall performance, and particularly with first quarter sequential revenue growth driven by both improved rate and higher occupancy. Revenue growth is our top priority, and the commitment and focus of the team in the field is notably visible in our results. Staying on revenue for a moment. First quarter blended rates were up 3.4%, with new leases up 2% and renewals up 5.1% on a lease-to-lease basis. Both new and renewal lease rates improved each month during the quarter and relative to the first quarter of 2011. During April, these rates continued their positive momentum, with blended rates up 5.2%, with new lease rates up 4.7% and renewal rates up 5.6%, all while April's average daily occupancy was 95.9%. May and June renewal offers went out with 6% to 8% increases, and July renewals are going out with 7% to 9% increases. Turnover was 45.2% for the quarter compared to 44.5% for the first quarter of 2011. Our focus on customer retention continues to serve us well, not only because we achieved higher rent increases on our renewal rents but also because it allows us to keep our cost down. We have not seen any material changes and reasons for move-outs over the last several quarters, with the top 3 reasons being: Career moves at 23%, pricing at 19% and purchasing homes at 15%. While we always hate to lose a customer, we are replacing move outs with better qualified residents at higher rents. We had 5,200 move ins during the first quarter with an average income of $81,000, a median income of $59,000 and an average rent income…

Thanks, Keith. Today I'll report on financial results, portfolio and redevelopment activities, balance sheet targets, and finally, I will provide a guidance update. Beginning with financial results, first quarter pro forma FFO of $0.40 per share was $0.05 above the midpoint of our guidance range, primarily due to $0.03 from property operations, with $0.01 driven both by lower utility costs from the mild winter and reduced personnel costs; and $0.02 the result of timing of expenses, which we expect now to incur in the second and third quarters; $0.01 due to lower offsite costs and $0.01 from other items. Turning to the portfolio. During the quarter, we sold 9 properties with about 1,500 units, including 3 low-rated Conventional properties at an average NOI cap rate of 6%. These properties had average revenue per unit of $753 compared to our portfolio today of $1,253. We also sold 6 Affordable properties at an average NOI cap rate of 7.7%. In March, we acquired a 488-unit property located in Phoenix for $69 million, with $29 million of debt in place. The property's revenue per unit is approximately $1,110 and dollars, and its rents are approximately 47% higher than the local market average. During the quarter, we also acquired the remaining partnership interest in 7 consolidated real estate partnerships that own 13 properties. The fair value of the real estate corresponding to these interests totaled $124 million before property debt. Our acquisition cost was $38 million. As to redevelopment activities, we expect to have 10 active redevelopment projects in 2012. We continue construction activity at our $94 million redevelopments of Pacific Bay Vistas at San Bruno, California. As Keith mentioned, we will start leasing activities next week, and expect our first move-in during the third quarter of this year. During the first quarter of…

[Operator Instructions] Our first question comes from Eric Wolfe at Citi.

You guys announced a branding initiative in July of last year. And since that time, you've obviously changed around a couple of things, including your website. So I'm curious as you move more towards a higher rental rate properties, whether you would consider around changing the names of your properties as well, just so that there's one sort of consistent brand that you're putting out there to customers?

Eric, this is Keith. What I would say is that we've heard of some others that are really starting to experiment with this, and we think it's certainly intriguing to see if they have success. And we'll continue to watch how it's being executed and see if it's beneficial to them. And we're certainly very in-tuned with it and we'll be watching closely.

Okay. And then second question is on the dispositions. You mentioned that you might accelerate some of the ones earmarked for 2013 and 2014 into this year. So what does that depend on? And when you think about once you sell those assets, what the portfolio looks like, can you give -- maybe give us some statistics around what the average revenue per unit will be or the average margin? Just trying to think about how the portfolio will change once you sell all those assets.

Eric, John Bezzant, I'll start it. In terms of what we pick and what we're selecting, it continues to what we've done over the last few years, several years really in terms of profiling the entire portfolio and selling what we consider to be the lower-rated assets. And that's going to be in terms of anticipated return over the coming years off of those properties. It's the rent levels at the properties. It's the specific submarkets they happen to be in and some various demographic measures within those submarkets. As it relates to the portfolio as a whole, we haven't, in some of the prior conferences, provided some detail on where portfolio rents will move. The anticipation is, is that -- they’ll move in accordance with the magnitude of what we actually execute, how's that? They're going up. And I think in terms of what to expect and when we will decide to pull the trigger, it will really be driven by pricing. We've got some very good execution this quarter in the properties that we sold and we will continue to look for good executions as we look forward.

Well, let me remind you, Eric, what's baked into our base plan, at least for this year before any potential acceleration, is rents ended this quarter about $1,253. We noted in our release that when executing our plans today with our expectations, what Keith and the operations team are going to deliver with rental growth, we then meet our revenue per unit at about $1,370. And at the end of the day, roughly half of that is coming -- the increase from the prior year is coming from rental increases and roughly half is coming from the fact that we sold lower rate of sales. If we're successful in accelerating some sales, you'll see a similar acceleration with regards to the piece having to do with the sales and properties. But as John pointed out, it's a little bit early for us to be projecting where things could go, as we're exploring it and seeing what the opportunity is.

Right. But the decision to sell is going to be mainly based on what kind of pricing you're going to be getting on these assets, not so much in terms of what the reinvestment opportunity is, seems like you have most of the dispositions I guess earmarked for redeeming your higher cost preferreds?

Yes, at the end of the day, Eric, we're focused on the economics of the sale. And we sell for a price that we think is the right price and we can achieve it. That's the priority for us. And assuming that that happens, then the opportunity would be for us to take out preferred equity.

The next question comes from Karin Ford of KeyBanc.

On the last call, I think you said you expected blended rents to be -- blended rent increases for the year to be approximately 5%. You got 3.4% in 1Q. I wanted to see if there was any change to that expectation. And given some of the positive trends you laid out post quarter here on this call, why you chose not to move up revenue guidance?

Karen, this is Ernie. Well, one, what you pointed out is correct. On our last call, we expected blended rents to be at 5%. Two, we're in April or now May, we have the April books closed, and we're just at beginning of peak leasing season and we just -- we don't want to get ahead of our ourselves too much. We're, as Keith mentioned, very pleased with where we're at. It puts us a little bit above expectations, we’re expected to be in. We would hope that once we're -- in our next call in July or in early August, having much of the peak season behind us, we'll be able to speak pretty definitively about where we think that's going to come out.

Okay. My second question is just on the Affordable portfolio. It sounded like there was a slight change in philosophy on that. I think you had said previously you wanted to maintain that at roughly 10% of the portfolio. And then in the release today, it said that you were hoping today that it would be fully disposed off in the next few years. Can you just talk about your view on the Affordable portfolio and how that's changed? Is that...

Karin, this is Terry. And you're right, our thinking about that has changed and what's driving the change is just the observation about the fiscal budget pressures that the government faces and the unpredictable outcomes that it might have over time. So this has been good for us, it continues to be good for us. We have wanted to bring it down a little bit in size, and we expect those reductions to continue to reduce its importance to Aimco.

Would you consider a large portfolio of sale in that regard?

You bet. Make me an offer.

The next question comes from Jana Galan of Bank of America.

I had a question on the pick-up in the new lease rates and kind of more curious if you felt this was more of a result of where we are in the recovery, where B [ph] rents start to accelerate or maybe more due to kind of fully being up and running on LRO for a year?

Jana, this is Keith Kimmel. I'll take that question for you. I think there's a couple of things to consider. The first is that I just -- I want to point out that while we have released that we were on -- we moved to YieldStar, we've always had a professional revenue management system as part of our operating platform. And so we certainly believe that YieldStar has helped us to be able to have some simplicities in using that system. We wouldn't really contribute that as being the direct result of having some real acceleration. As you look at the A, Bs and Cs, that's a different topic. And so really we look at new leases being the barometer of kind of how they're performing. And so at the moment, what we're seeing is about 140-basis point spread between the As and the Cs. Of note, what's a little bit interesting is we're starting to see some acceleration with the Cs, which previously had been really driven by the As. And so, of course, that's one of the benefits of having a blended portfolio like we have. And we're pleased to see that there's some balancing out happening.

And then maybe just a quick question on the insurance expense. I noticed a lot of your peers have that going up. I was curious if there was a reason, anything specific why it kind of fell for AIV?

Well, on the insurance line item, we were under our old policy plan through the end of February. So our new policy to go in effect in March, and we did see an increase there. So you will see increases for the rest of the year there, Jana. Separately though -- we run through -- in a lot of areas we are self-insured with health -- specifically on the health side, and we just happened to have a good quarter with regards to health claims that drive a good performance there for insurance.

Next question comes from David Harris of Imperial Capital.

On the redevelopment program, you talk about putting $125 million to $150 million in this year. What size do you think that program gets to over the next year or 2?

David, this is Ernie. We have opportunities where we could ramp it up to $150 million to $200 million a year over the next couple of years. And just depending on progress and planning and then other opportunities, maybe even a touch higher than that. I don't want to get too far ahead and provide guidance for future years. But we're comfortable with that, kind of that $150 million to $200 million range is a pretty good number to pencil in for the upcoming few years. And we'll provide more specifics as we get closer to those future years.

Okay. And just to be clear, that's an annual investment rate, so the program itself could actually be larger than that?

That would be the annual investment rate, yes. And then within the pipeline, because often some of our programs are running between 18 and 30 months, you'd have a higher overall investment currently, but that will be our rate per year.

Right. And would you envisage buying in additional sites? Or do you think this program can be almost entirely predicated on assets that you own currently?

Well, the answer is both, David. A good example is the property we bought in Corte Madera, The Preserve at Marin, which formerly was referred to as Madera Vista, which was a great opportunity for us to put it right into our redevelopment pipeline. We've closed that in August of last year, and we think it's a great addition to the portfolio. We do have plenty of opportunities within our own portfolio as well to get us to those numbers. But as John and the acquisition team is able to find the right opportunity for us, we have the expertise to create value there. We would consider that as an opportunity and compare that to other investment alternatives for us.

Okay, terrific. And then maybe I missed this, forgive me. Did you cite how much of benefit there was in terms of expense savings on the weather -- from the weather in the first quarter?

Yes, on a net basis, David, it was about $0.01, not quite $0.01. Clearly we had a large savings on utility expenses. But on conventional side, we collect utility reimbursements of almost 67% of that. So when you actually net those 2 numbers, it's not as big as one may think. On the affordable side, a much smaller part of our portfolio, we do get the benefit of the savings, and there's not a utility reimbursement. Overall though, it's right around $0.01 for us, David.

The next question comes from Paul Morgan of Morgan Stanley

On the kind of just the accelerated disposition potential, I mean, can you help me just think about how you're prioritizing the use of proceeds should you do a lot more this year than you originally planned? I mean, you've mentioned the preferred, should we think of kind of everything goes to the preferred that's redeemable until that's exhausted, and then you've got your redevelopments and then after that your incremental acquisitions? Or is there a different way of prioritizing that I should think about?

Sure. That's a good question, Paul. With regards to what our use of proceeds are -- right now, we've identified that we would like to take out our highest cost preferreds. As many of you may know, today, we still have a little over $600 million of preferred equity that we can call. And that's at rates ranging from 7.75% to 8%. We're not looking to accelerate enough sales to be able to pay all those down. So you mentioned a couple of other items that we potentially consider. But Paul, those other items that you talked about, specifically redevelopment, is already accounted for on our base plan in terms of being able to fund that. I don't want to get ahead of myself and give any kind of indication of how many proceeds we may be able to accelerate with regards to accelerating some sales, but I'm comfortable saying it won't be enough to pay off the $600 million of preferreds that are callable today.

Okay, and then just -- and then going to the redevelopments. Just on Pacific Bay, should we think of that as being sort of pro rata coming online over a year starting in the third quarter? And then maybe if you have any updates on timing in Venice and in Corte Madera, the 2 that you mentioned in your supp?

I'll be happy to. Actually, I'm glad you asked that, Paul. It gives me an opportunity to talk again about our Schedule 10, which is a new schedule and not everyone may have seen it. On Schedule 10, we do lay out some timing for Pacific Bay Vistas. And I would just point to that, that we expect construction to be completed by the second quarter of 2013, and that we will have stabilized occupancy in terms of having a full house by about the third quarter of 2013. So your point is exactly right, that over the next roughly year or so, starting in the third quarter, we would deliver pretty much pro rata various buildings within that project and people being able to move in. Specifically, with the Lincoln Place and The Preserve at Marin, which is in Corte Madera, Lincoln Place we did complete phase 1 and we have the returning tenants moving in. That commenced in the middle of April, and that will continue for the next couple of weeks here. As we talked about before, there's really no change in our -- in the plans on what would be phase 2 and phase 3. We're working to secure financing. We're hopeful that the financing secured probably in the next, I would say, few months, let's make it 4 months. And once that is in place that would allow us to begin construction on phase 2 and phase 3, which is the remainder of the property. At The Preserve at Marin, we would expect that probably in the coming 3 to 4 mon -- we start demolition work there. Actually, let me ask Danny to speak a little about some of the details. But we start demolition work in the next, Dan, couple of months, we would expect then to see some heavy construction activity?

Yes, we would expect to probably kick off reconstruction of that project in the third quarter. And if all goes well, begin to deliver units late in the fourth quarter of this year.

Similar to what we did with Pacific Bay Vistas in December, and those are very large projects for us. And as we get to the point where construction, significant construction, is starting, we're going to provide, in a separate press release, sort of the timing have to be around our earnings release, some specific details around those. So you can plug that information into any models you may have in terms of the potential value creation from each of those projects. So you can be on the lookout for that information on those 2 projects probably in the next couple of months.

The next question comes from Rich Anderson of BMO Capital Markets.

So back on the preferred redemption pieces. I guess I'm curious, it's been kind of sticking out there for a while now. Actually, you look back and saw the last time you did a preferred redemption was the G [ph] in the fourth quarter of '10, I believe, but that was at 9.4% coupon. But it's still pretty expensive stuff. What's holding you back from -- I mean, why wouldn't you sell assets and pay that stuff down? It seems like a no-brainer. What -- is there something holding you back?

No, I keep asking John, Rich, to get down a little bit faster. So no, we've come to that conclusion. I've been asked, Rich, would you consider refinancing them because, because we could refinance them in a lower rate than they are today, but we committed that we want to bring leverage down. And so the question is being able to successfully sell real estate at prices that we think is fair and absolutely we think it’s a very good use of proceeds and we're now on board.

Okay. But since 2010 till now, you didn't think they were expensive or just occurred to you that they are expensive now?

I would say back in 2010, 8% weren’t so far out of the market as they are today.

But you probably could have sold assets still and made some money there, but relative to your debt cost expenses.

Well, Rich, we are where we are today, and what we're going to do going forward. So I think we’ve laid out what we want to do and to talk about where things were at in 2010, we're in 2012 now.

Okay. I just -- I have lost my train of thoughts, excuse me. The second follow-up question is I asked this on a few calls earlier and didn't really get a great response, maybe this is to Keith. Everyone talks about reason for move out, do you guys track reasons for move in?

Rich, I have noted that that was a question that you've asked and I think it's an interesting one. One of the things I would tell you is that we think it's a pretty straightforward kind of point, which is that when we look at all the move-out reasons and not only of our own, but what we see from our peers, that it's really reciprocal. Career moves always seems to be the leading move-out reason, not just from ourselves, but many times from our peers. And so we know that's a big driver, and of course relocation. I think the other that really is interesting for our move-ins is that we have a compelling value proposition that really is driven by product quality and service quality and the fact that you have people that are moving up in a lot of cases out of the gray market or other apartments into a really professionally managed community. So interesting point, and we're very focused on it.

Well, I mean, I guess everyone has these percentages of reasons for move out. Is there any thought to having it as structured as you have the knowledge for the move-out? As have -- being able to tie a percentage to the reasons for move-in? Or is that a difficult thing to do when people are coming in the door?

Well, I mean, Rich, I think it's quite valuable that you brought it up us a point. It is a little bit difficult sometimes to get out of the perspective resident coming in what their reason for moving in is, but it's something that we do ask of course every resident that moves in. But tracking it hasn’t always been something that has been noted, and we appreciate your insight and thinking about it in a different way.

Okay. And Ernie, the other question I lost for a second was did you provide a base case disposition number for 2012? If you did, I missed it.

Yes, we provided dispositions, $550 million to $650 million of real estate value at Aimco share. We provided that guidance last quarter.

And that's Aimco share, $600 million?

Yes, that would be with -- that's on both our conventional and affordable sales. What we expect in terms of gross asset value that we would sell.

The next question comes from Rob Stevenson of Macquarie.

Can you talk to what the rough dollar value of the limited partnership interest that you guys would want to acquire if the current owners were willing sellers? And can you talk about how active that market is today? You did $38 million in the first quarter. Are owners willing sellers today or not given the lack of reinvestment alternatives?

Yes, Rob, this is Ernie. I'll take that. We're almost complete with what we expect to do with regards to partnership tenders and mergers. And there are a few more that are outstanding. But those ones that are outstanding certainly have assets that we expect to sell in the next year to 2 years. There are a few private ones that are outstanding, and we have approached owners, and we think -- to see if they have an interest in selling those units to us. But the overall amount of that is very small, well less than $100 million in terms of opportunities for us there, in terms of what we can bring in. And what I would tell you is when we approach those private owners often, one, it's hard to find them; 2, they don't necessarily have a lot of interest in it. So we engage in a dialogue and we’re able to pick up a few units here and there. But for the most part with what we accomplished in the first quarter, there's not going to be much more for us to talk about in terms of closing these partnership tenders and mergers, we're pretty much there.

Okay. And the $100 million is both public and private?

There's a couple of more that we're going to do this year. Those are mainly private at this point.

Okay. And then, Ernie, in terms of the acceleration of the disposition to redeem preferreds, can you remind us like what's the rough magnitude of assets that you could sell this year and not trigger special dividend or that you could account for under the current common dividend?

That's a good question. Within our current plans, we definitely have plenty of room for that if we were to do an acceleration it sort of depends on what the transaction would be, Rob. So it would be getting a little bit ahead of myself to say that if we were able to accelerate a number of sales, what impact that would have on what we’d have to from a dividend perspective.

The special dividend, I mean, given the history that you guys have had with that, does that sort of -- would that push you to push closings into the next year or something like to avoid that? Or do special dividends at this point not really bother you one way or the other?

Rob, we would keep all options open for us. What's most important for us is to generate the best economics from the potential sale. We did do the special dividends in the past, but we want to first focus and seeing what the opportunity is.

The next question comes from Michael Salinsky of RBC.

Just going back to the sale. Would it -- you talked about pulling '13 and '14, so you've also talked about 5% to 10% of the bottom. Would you -- can you quantify kind of how much -- what kind of pull we're talking there in terms of what you would pull forward? And also if there's any preference in selling conventional versus the affordable as you look to accelerate some of that?

Let me address that Mike, the second part of your question first, affordable versus conventional. The affordable game plan really hasn't changed in that we expect to sell 60 Affordable assets this year, and if we do have the opportunity to maybe accelerate another 20 to 25 asset sales into this year. But then the proceeds that would be generated from that are pretty small, our ownership percentages are smaller on that and wouldn't have as much of a meaningful impact on use of proceeds to take out preferred equity. And then as Terry talked about in his prepared remarks, overall, longer-term, our expectation was to continue to see that more Affordable sales over the next few years. On the Conventional side, in terms of what the numbers are going to be, again, we're focused on the right economics, in getting what we want to get. And we're looking to do it. We're not committing that it's going happen. We're hopeful that it will happen. Just at this point, you raised the right point, Mike, that we would expect to sell about 5% to 10% of our assets or sorry our lowest-yield assets over the next couple of years. That's the population we're drawing from to see if it makes sense to accelerate some of those into 2012.

Okay. It's helpful. Second of all, Keith, did you give April -- the occupancy at the end of April?

Sure. I actually did, it was a 95.9% average daily occupancy.

That was average for the month.

Right.

And how does that compare to the prior year?

Last year, in the fourth quarter, we were at 95.9% for the entire fourth quarter. Last year in April we trended down. I don't have the number in front of me, Michael, but I would expect that in the fourth quarter -- on April last year, we were in 96.2% to 96.3% range.

The next question comes from Dave Bragg of Zelman & Associates. David Bragg - Zelman & Associates, Research Division: Could you just talk about what you're currently marketing for sale?

That's actually publicly out there on our website. It's a pretty diverse splits of both Conventional and Affordable assets. John, do you want to provide a little color?

Yes, in broad strokes, again, as we've talked about, portfolio lower rent properties. Geographically, we got properties in Phoenix and Central Florida. There is a link on the Aimco website. You're welcome to go to and look. It's got the Affordable and the Conventional assets listed there. Geographically, on the Affordable side, a much more diverse, really all over the country. We got 60-odd properties out there right now. So it's basically all over. David Bragg - Zelman & Associates, Research Division: Okay. And can you talk about your views so far as you've evaluated this on the opportunity, pricing wise, of selling the assets individually versus as a portfolio?

Yes, we're in the middle of that analysis right now, frankly. And as we look at a portfolio trade, there are certain buyers that come into the market for a large portfolio of properties that perhaps price and underwrite and model their transactions somewhat differently than our typical one-off buyers. And we are looking at that right now as we speak. David Bragg - Zelman & Associates, Research Division: And would you be willing to provide some of your initial expectations on pricing on the Conventional assets?

No. How's that for an answer? I would tell you if you look back historically, you can look back at our Schedule 8 over this and prior quarters and kind of see where we've landed cap rate wise on assets that are very similar to what we anticipate selling, and we would -- we haven't seen huge moves in cap rates over the last 9 months. So I would tell you looking out for at least the near-term future, we don't see any big changes. David Bragg - Zelman & Associates, Research Division: All right. Last question on operations. You mentioned earlier Chicago as a market in which you've underperformed and that creates an opportunity. What -- how many other and what other markets kind of fit into that type of description in that maybe you've lagged the market and that's contributing to your pricing power this year?

Dave, this is Keith. Obviously, we talked about Chicago being up 1.5%. We believe there's room there. One of the things, in addition to Chicago that I would point out, is Los Angeles at 3.6%. Los Angeles at 3.6%, there's been a lot of anticipation for recovery in Los Angeles. Some of our peers have started to realize it sooner than we have. But what I would tell you is that we're really starting to see some indications that we are particularly seeing a comeback. We look at our trailing 4 weeks on our lease-to-lease rates for new leases and renewal rates. New are coming in up 6.4% and renewals are coming in up 4.1%. So both significantly higher than our current 3.6%, and we're starting to see some acceleration there. David Bragg - Zelman & Associates, Research Division: So it's not in your sense that this is wide spread across the portfolio, it's isolated in a few specific markets, the opportunity to gain back underperformance?

Yes, I think that's a good way to describe it.

The next question comes from Taylor Schimkat at KBW. Taylor Schimkat - Keefe, Bruyette, & Woods, Inc., Research Division: Just one question. As you ramp up the redevelopment projects underway, how should we be thinking the offsetting factors of NOI dilution from lower occupancy from the units offline and the ramp-up in NOI from the redev projects that are not producing NOI? I guess more specifically as we look out from here on a net basis, are you expecting incremental NOI dilution? Or should we be expecting NOI from the redev pipeline to only go up from here?

It's great, Taylor, and I'll refer back to Schedule 10, just kind of walk through the projects so people can get a sense of what we're seeing. 3 of the projects that we have that are listed on Schedule 10 are Lincoln Place, The Preserve at Marin and Pacific Bay Vistas that are empty projects. So for there, we'll have absolutely no NOI dilution and it will have only accretive impacts. Now of course, we'll capitalize and we'll divest interest as those things come online, but net-net that's going to be a positive contribution for us. And there is no redev drag from those projects. And the other projects that we have listed on Schedule 10, Flamingo South Beach is actually some exterior work. There's not any units being taken down, so we'll have no redev drag from Flamingo South Beach. Plantation Gardens has been undergoing a renovation for some time since 2011, and we're getting to the point where it's actually turning where we had a minimal amount of redev drag on that. And I said minimal because it's a smaller project. And the good news is that will start contributing NOI positive for us. And then finally, Palazzo will have some drag. It's a smaller project. There is a decent amount of those dollars that are being spent on amenities and exterior works that won't take units out of -- in a sense, out of place. On a project like Palazzo, there will be a little bit of redev drag. Now for the projects we have going on in the future, there will be some disruption in terms of redev being done on the terms, and terms taking a little longer because of that, and as those projects come out and we get more specific information on those, we can provide definitely some color as to the redev drag. What I think, Taylor is when we used to talk about redev drag in the program where we're spending $350 million a year, it was a pretty significant negative contribution to our earnings. But with the projects we have in place here, we're not going to be looking at those kind of numbers like we did back in 2006, 2007 and 2008. Taylor Schimkat - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. But it's just -- so it sounds like on a net basis that other than potentially minor dilution in 2012, once we sort of the strategy is looking forward that there's not going to be much incremental drag.

No, we have the benefit of Lincoln Place, Madera -- The Preserve at Marin and Pacific Bay Vistas really have offset any drag we have from the other projects because they're empty right now. So it's not going to be a meaningful contributor to our results like it was in the past.

The next question comes from Buck Horne at Raymond James. Buck Horne - Raymond James & Associates, Inc., Research Division: A couple of quick ones. Do you guys track the number of residents per unit that you have in your apartments? And has that changed in any meaningful way? I'm just wondering, are you seeing any affect from the unbundling of households?

This is Keith. We do track it, and we haven't seen any meaningful change in that number. Buck Horne - Raymond James & Associates, Inc., Research Division: Okay. And likewise, do you guys -- I mean, do you have a feel for the median income of your incoming residents as materially different than the ones moving out? Are you replacing your move-outs with a much higher quality tenant?

This is Keith. I'll answer that. Because of the transition of our operating system, we previously didn't have that number to have a direct comparison. So of course, now that we are reporting on it and we're watching it closely, we'll be able to have a more detailed information on the outs versus the ins.

This concludes our question-and-answer session. I would like to turn the conference back over to Terry Considine for any closing remarks.

Well, thank you all for your interest in Aimco. If you have further questions, please call Elizabeth Coalson, Ernie Freedman or me with any of your questions. We look forward to seeing many of you at the NAREIT Meeting in New York City in another month or so. Thank you very much, and have a good day.

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