hme home properties sept 2010 presentation slides deck
TRANSCRIPT
8/8/2019 HME Home Properties Sept 2010 Presentation Slides Deck
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Welcome
Charis Warshof Vice President, Investor Relations
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This presentation was created as of the specific date indicated and reflectsmanagement views as of that date. Such information may include certainforward-looking statements that are subject to risks and uncertainties that maycause results to differ materially and are described in our filings with the
Disclosure Statement
Securities and Exchange Commission. The presentation may include statementsthat may not be accurate after the date indicated. The Company disclaims anyduty to update such information.
Any reference to guidance relates to guidance previously provided publiclyby the Company, which it typically updates on a quarterly basis. Nothing in thispresentation should be construed as confirmation of any guidance previouslygiven. Any third party information and/or analyst estimates are provided for
. ,analysts' projections. Non-GAAP financial measures in this presentation arereconciled to the most directly comparable financial measures calculated inaccordance with GAAP in the Company’s public filings, news releases andsupplemental information for the specific fiscal period, all of which are availableon the Home Properties website at homeproperties.com.
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Introduction
President andChief Executive Officer
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The Right Focus
• Introduction Ed Pettinella• Financial commentary David Gardner
Presentation Agenda
• Acquisitions John Smith• Property management and operations Scott Doyle
Rosemarie Cook-ManleyLes EisenbergKeith Knight
• Development Don Hague• Summar Ed Pettinella• Q&A• Property tour at 10:30 AM
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Financial Commentary
Executive Vice Presidentand Chief Financial Officer
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We’re Prepared
Future Guidance
2010 Guidance Update
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4Q 2009 1Q 2010 2Q 2010 August 2010Region New Renewal New Renewal New Renewal New Renewal
Improv ing Spreads on New/Renewed Leases
, . . . . . . . . . .Baltimore (6.0%) 1.8% (3.4%) 2.2% 0.8% 3.4% 3.4% 4.3%New Jersey,
Long Island (5.0%) 1.8% (4.1%) 1.6% (0.1%) 2.6% 4.6% 3.4%Philadelphia (9.0%) 1.0% (5.0%) 0.6% 0.8% 1.5% 4.6% 3.1%Boston (7.4%) 0.7% (5.4%) 1.2% (1.4%) 1.5% 3.4% 2.6%Chicago (8.0%) 0.2% (4.7%) 0.8% (2.7%) 1.1% (0.9%) 2.5%Florida (5.4%) 0.7% (4.6%) 0.5% (0.7%) 0.5% 2.0% 2.4%Maine (7.4%) 1.5% (0.7%) 1.0% 1.3% 1.1% 6.3% 2.0%
. . . . . . . .
Spread 7.6% 5.8% 2.5% 0.3%
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Strong Capital Structure
Equity 53%Common Stock (76%)Operating Partnership Interests (24%)
Debt 47%Fixed (89%)Floating (11%)
Common Stock
Fixed Rate Debt
Operating PartnershipInterests Floating Rate Debt
9
Balance sheet as of 6/30/2010 based on recent stock price of $52.79 on 9/3/2010
$4.9 BILLION TOTAL MARKET CAPITALIZATION
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600
Well-Managed Mortgage Debt Maturi tiesWe’re Prepared
$
Total Debt Maturities
299
126
205 190
353
271
153
202184200
300
400
500
233
600
100
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Thereafter
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As of 6/30/2010
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Ac qu is it ion Strateg y
Seizing Only the Right Opportunities
John Smith
Senior Vice Presidentand Chief Investment Officer
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We Buy Right
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• High barrier-to-entry, high growth, close-in suburban markets ofmajor selected MSAs
Ac qu is it ion Strateg yRight Focus + Integrity = Proven Success
• ast oast ocus: oston to - t ant c• High average home prices• Favorable supply/demand equation• Positive demographic trends: immigrants, echo boomers, seniors• UPREIT transactions• Additional development potential• cqu re - an -c ass proper es w so cons ruc on, oor p ans an
upgradeable to B+ and C+-class
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• Acquisition team – Combined experience of 180 years
How We Buy Right
Measure Twice, Cut Once
• Thorough due diligence – Comprehensive market studies – Measure real estate tax reassessment risk – Property Management input – Environmental research – Construction and cap ex projections
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• 2000 through 2010 YTD – Units submitted for review 1,543,272
Apart men t Uni ts Acqu is it ion His to ryDiscriminating Buyer, Only Buy th e Best Fit
– , – Offers issued 176,599 (20% of units reviewed) – Units closed 24,780 (13% of offers issued)
• Closed 90 properties – $2.3 billion – Average price per unit $92,000
• Average annual acquisitions $230mm
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• Major East Coast buyer of older properties• Largest OP Unit player in industry
Home Properti es is the Go-to Buyer
Partner of Choice
• Build long-term relationships• Home Properties name and reputation• Employee-friendly approach
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Inventory in Target MarketsTremendous Acqui sition Growth Potential
Estimated Current HMEB/C-Class Market
Target Region Apartments* HME Owned Penetration
D.C. Metro 434,000 9,911 2.3%Baltimore 166,000 8,582 5.2%Philadelphia 267,000 5,603 2.1%Northern New Jersey 229,000 3,578 1.6%Long Island 435,000 3,390 0.8%Boston 399,000 2,382 0.6%Chicago 628,000 2,242 0.4%
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* Source: Witten Advisors
, , , .
Recent Example: Westb rook e and Middlebrooke
Buy Right – Rehab – Enhance Value
Acquired 4/1/2010Occupancy at acquisition 88.0%Occu anc 9/1/2010 94.0%
Westbrooke Apartments
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Middlebrooke ApartmentsWestminster, MD
208 Units
,110 Units
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Market Cap 2
10E Acq 1 10E Disp 1 Net Acq/Disp 6/30/2010 Net Acq/Disp as($ mil) ($ mil) ($ mil) ($ mil) % Market Cap
2010E Net Acquis itio ns as % of Market Cap Am ong t he Gr owth Leaders
HME 330 0 330 4,709 7.01%
AIV 120 -250 -130 8,117 -1.60% AVB 70 -190 -120 12,837 -0.93%BRE 80 -120 -40 4,410 -0.91%CPT 130 -100 30 6,100 0.49%CLP 50 -10 40 3,354 1.19%EQR 1,250 -850 400 23,222 1.72%
- , .MAA 250 -30 220 3,355 6.56%PPS 0 0 0 2,376 0.00%UDR 80 0 80 6,929 1.15%
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Source:(1) Green Street Advisors “Residential REITs August ‘10 Update” August 20, 2010 – net acquisitions 2010E(2) Citigroup Global Markets “Weekly REIT and Lodging Strategy” August 20, 2010 – market cap
7.0 6.6
5
6
7
2010E Net Acquis itio ns as % of Market Cap (1)
Am ong t he Gr owth Leaders%
2.21.7
1.2 1.2 0.90.5
0.00
1
2
3
4
(2)
-0.9 -0.9-1.6-2
-
HME MAA ESS EQR CLP UDR Average CPT PPS BRE AVB AIV
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(1) Apartment REITs with market cap >$1B(2) Average excluding HMESource: Green Street Advisors “Residential REITs August ‘10 Update” August 20, 2010 – net acquisitions 2010E;
Citigroup Global Markets “Weekly REIT and Lodging Strategy” August 20, 2010 – market cap
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• Cap rates – Dropping recently, but steady now
Street Level ObservationThe Right Focus on B/C-Class Opportunities
– – General differential of 25-75 bps between A- and B/C-class – Cap rate range in our markets of 5.75% up to 6.5%
• Portfolio average of approximately 6%
• Deal flow – Strong B/C-class opportunities – Still lent of ca ital chasin deals
• A-class: 30 to 40 bidders• B/C-class: fewer bidders
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• Excellent reputation for closing, which generates transaction network• B/C-class acquisition and repositioning strategy generates positive results
Ac qu is it ions Strateg y
Seizing Only the Right Opportunities
• Acquisition engine roaring and driving NOI growth
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Property Management
Scott Doyle
Senior Vice PresidentStrategic Property Managemen t
’
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e ve a se e ar
Road to NOI Growth
RealEstate
Technology
Marketing
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Operations
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• Reposition strategy tailored to each community based on – Current physical condition
Property Repositioni ng
– – Future target demographic – Maximization of return
• Target a minimum of 10% initial unlevered yield on revenue-enhancinginterior renovations
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Property Repositioni ng - Before
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Property Repositioning - Before
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Property Repositioning - Before
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Property Repositioning - Before
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Example of Property Repositionin g
n t
$
M o n
t h l y A p a r t m e n
t R
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Apartment Quality
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Braddoc k Lee Apartments, Alexandri a, VA
Renovated vs. Unrenovated Rent$
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Property Age # Units* % Not Upgraded20+ years 35,290 42%
Future Potential from Unit Upgrades
10-20 years 1,826 97%<10 years 1,367 0%Total 38,483 43%
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* Includes 1,222 units scheduled to close by 9/30/2010
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Varying Demographics
Virginia Village• Primarily 30s & 40s• Families with children• High school education
Alexandria, VA submarket
• English is 2nd language• Blue collar workers• Pay rent with money order • Renter by necessity; can ’t
afford a houseBraddock Lee
• Wide variety of ages• Very few children• Highly educated• Professional jobs
• Pay rent online and withchecks• Renter by choice; highly
mobile due to career
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Road to NOI Growth
RealEstate
• Flexible approach allows us to
Technology
Marketing
repositioning opportunity
• Over 40% of current portfolioavailable for interior upgrade
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Operations
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Rosemarie Cook-ManleyVice President
Les EisenbergVice President
Strategic Business Systems
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Vice President
Capital Improvements andNational Accounts
Customer LifecyclePersonalized Communication & Technolo gy
Reach
•Advertising
Acquisition Conversion Retention Loyalty
•Searchengines
•Social media
•Mobile
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DRIVING NOI RESULTS
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Mobile Av ail able Whenev er, Wherever
www.MtVernonSquareVA.com
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Adver ti si ng
Driving Down Costs
ver ave
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Customer LifecyclePersonalized Communication & Technology
Reach
•Advertising
Acquisition
•Contact
Conversion Retention Loyalty
•Searchengines
•Social media
•Mobile
•Web 2.0
•Prospectprogram
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DRIVING NOI RESULTS
Web 2.0
Enhancing Interactive Communication
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Prospect ProgramMaking a Difficult Decision Easier
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Customer Lifecycle
Personalized Communication & Technology
Reach
•Advertising
Acquisition
•Contact
Conversion
• Consultative
Retention Loyalty
•Searchengines
•Social media
•Mobile
•Web 2.0
•Prospectprogram
saes
• Onlinereservations
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DRIVING NOI RESULTS
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Online ReservationsStreamlining th e Process f or the Prospect
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35VaultWare Reservations per Property
5
10
15
20
25
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0
Sep ‐09 Oct ‐0 9 Nov ‐09 Dec ‐09 Jan ‐1 0 Feb ‐1 0 M ar ‐1 0 Apr ‐1 0 May ‐1 0 Jun ‐10 Jul ‐10 Aug ‐10
Home Properties Major ILS Aggregate
Market Index Public REIT Index
Customer Lifecycle
Personalized Communication & Technology
Reach Acquisition
•Contact
Conversion Retention
•Customer
Loyalty
• Consultative•Advertising
•Web 2.0
•Prospectprogram
serv ce
•Social media
•CustomerRelationshipManagement
•Residentportals
saes
• Onlinereservations
•Searchengines
•Social media
•Mobile
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DRIVING NOI RESULTS
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Customer Relationship ManagementWelcome Home!
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Resident Portals
Building a Sense of Community
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Customer LifecyclePersonalized Communication & Technology
Reach
•Advertising
Acquisition
•Contact
Conversion
•Consultative
Retention Loyalty
•Choice•Customer
•Searchengines
•Social media
•Mobile
Center
•Web 2.0
•Prospectprogram
sales
•Onlinereservations
•Our Pledge
•Referrals
service
•Social media
•CustomerRelationshipManagement
•Residentportals
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DRIVING NOI RESULTS
Customer Lifecycle
Personalized Communication & Technology
Reach
•Advertising
Acquisition
•Contact
Conversion
•Consultative
Retention Loyalty
•Choice•Customer
•Searchengines
•Social media
•Mobile
en er
•Web 2.0
•Prospectprogram
saes
•Onlinereservations
•Our Pledge
•Referrals
service
•Social media
•CustomerRelationshipManagement
•Residentportals
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16% CostReduction
PersonalizedInteraction
Over 3xReservations
vs. Peers
LowestTurnover in Sector
27% ofLeases fro m
Referrals
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Rosemarie Cook-ManleyVice President
Les EisenbergVice President
Strategic Business Systems
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Vice President
Capital Improvements andNational Accounts
Customer Lifecycle
Understanding the Pricing Puzzle
Reach
•Advertising
Acquisition
•Contact
Conversion
• Consultative
Retention Loyalty
••Customer
•Searchengines
•Social media
•Mobile
Center
•Web 2.0
•Prospectprogram
sales
• Onlinereservations
•Our Pledge
•Referrals
service
•Social media
•CustomerRelationshipManagement
•Residentportals• LRO
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• Analytics
FORWARD-LOOKING STRATEGY
Maximizing NOI
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Customer LifecycleCustom Alerts LRO
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Customer Lifecycle
Custom Pricing Snapshots
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Customer LifecycleCustom Upgrade Pricing Analysis
723 Saddle Brooke Apartments
2A11 256 UnitsRented Units
Amenity Code
#RentedUnits
Avg.Days Avail
H/(L)Base
Units inDays
Avg. RentalRate
$ H/(L) RentUnits
TargetPremium
BASE UNIT 53 45 --- $918 --- $0BATH 2 37 -8 $952 $34 $30NUPK 16 48 3 $1,003 $85 $80PREM 7 30 -15 $1,068 $150 $136Total Upgraded Units 25 42 -3 $1,017 $99 ---
Total All Units 78 44 --- $950 --- ---
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Customer Lifecycle
Understanding the Pricing Puzzle
Reach
•Advertising
Acquisition
•Contact
Conversion
• Consultative
Retention Loyalty
••Customer
•Searchengines
•Social media
•Mobile
Center
•Web 2.0
•Prospectprogram
sales
• Onlinereservations
•Our Pledge
•Referrals
service
•Social media
•CustomerRelationshipManagement
•Residentportals• LRO
• Inte rated• Lease terms
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FORWARD-LOOKING STRATEGY
Maximizing NOI
• Analyti cs renewals• r ceexceptions
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Customer Lifecycle2010 Price Improv ements
1.6 1.5 1.62.0
3.2
3.53.12.6
2.33
4%
-2.7
-1.9
-0.3
1.31.7
-3
-2
-1
0
1
-5.0 -4.8
-6
-5
-
Jan Feb Mar Apr May Jun Jul Aug
2010 Renewal Increases 2010 New Lease vs. Old Lease
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Rosemarie Cook-ManleyVice President
Les EisenbergVice President
Strategic Business Systems
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Vice President
Capital Improvements andNational Accounts
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• Design team – Exterior finishes
Property Repositioni ngExecution
– – Interior Design/decorating – “3D” color renderings – Finish and design standards
• Regional construction teams – Depth of understanding of property management – Ex erience in new a artment construction and renovations – Established pool of local trades
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Property Repositioning – Before
Curb Appeal
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Property Repositioning – After Enhancing Curb Appeal Increases Traffic
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Property Repositioning – Before
Property Lost to Landscaping
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Property Repositioning – After Curb Appeal & Reduced Maintenance
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Property Repositioning – Before
As phalt Park ing Jung le
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Property Repositioning – After Reducing Hardscape
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Property Repositioning – Before
Existing Community Room
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Property Repositioning – After Enhancing Selling Features
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Property Repositioning – Before
Prohibitive Environment
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Property Repositioning – After Enabling Ancillary Revenue
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Property Repositioning – Before
Lack of Visual Appeal
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Property Repositioning – After Elegant Entrance Features
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Property Repositioning – Before
Common Area Hallway
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Property Repositioning – DesignPlan - Design - Execute
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Property Repositioning – After
Welcome Home!
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Property Repositioning – BeforeClosed-in Kitchen
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Property Repositioning – After
10.4% ROI
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Property Repositioni ngNight and Day
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Property Repositioning – Before
End of Life Cycle
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Property Repositioning – BeforeEnd of Life Cycle
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Property Repositioning – After
12.2 % ROI
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Property Repositioning – BeforeOutdated Kitchen
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Property Repositioning – After
11.5% ROI
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Traditional Upgrade
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Transitional I Upgrade
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Transitional II Upgrade
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Contemporary Upgrade
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Property Repositioni ng Execution
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Property Repositioning – C.A.D. / C.G.I.
Build It Right The First Time
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Financial Improvement Initiatives
Revenue
•Revenue sharing
Expense
•Supplies agreement
CapEx
• Supplies agreement
•Advertising fees
•Utility billing fee
•Utility conservation
•Trash
•Renter’s insurance
•Automation
• Appliances
• Cabinets
• Carpeting
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$1.6mm $1.1mm $1.9mm
NOI $2.7mm
Development
Senior Vice President, Development
’
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–
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• Focus on Mid-Atlantic Region
Development StrategyIt’s Working
• Low-risk approach with limited pre-construction investment – Emphasis on transit-oriented developments close to shopping,
entertainment, education and work opportunities – Density/adjacent opportunities on existing properties – Acquisition of entitled land
• Target average unlevered stabilized yield of 7.00% and minimum.
90
• Began ground-up development in 2004• To date, 885 units delivered
Track Record Since 2004
• Current pipeline of 2,861 new units• Potential to grow to 4,355 new units• Assembled experienced go-to team with key capabilities• Delivered first A-class units in 2010
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Location Alexandria, VARegion Washington, D.C.Units 421
The Courts at Huntington Station
Initial occupancy 2Q 2010Completion 2Q 2011Total cost $127mmCost per unit $302K
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1200 East West Highway
Location Silver Spring, MDRegion Washington, D.C.Units 247
,Start date 2Q 2007Initial occupancy 1Q 2010Total cost $87mmCost per apartment $332K
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Ripley StreetEntitled Land
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Location Silver Spring, MDRegion Washington, D.C.
Ripley Street
Entitled Land
Units 368Retail square footage 5,100Possible start Summer 2011Features - 800 feet to new Transit Center
- 3 blocks to pedestrian shopping mall,Whole Foods, American Film Institute
- Tallest buildin in central business district
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CobblestoneEntitled Land
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Location Fredericksburg, VARegion Washington, D.C.
Cobblestone
Entitled Land
Units 312Possible start 1Q 2011Features - 3 blocks to Virginia Railway Express/
Amtrak Station- 5 blocks to historic Main Street/Old Town- Only true A-class in market at only slightly
higher price point than existing apartments
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Falkland North UpdateUnlocking Land Value
Ripley
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1200East West
Location Silver Spring, MDRegion Washington, D.C.
Falkland North Update
Unlocking Land Value
Units Up to 1,200 apartments, 65,000 square feet retailPossible start 2 to 3 years
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Concluding Remarks
President andChief Executive Officer
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The Right Focus
• Refinancin o ortunities roduce lower borrowin costs
The Right Focus
Higher Earnings Growth2011 Projected
FFO Impact
……10 cents
• B/C-class acquisition deal flow is strong
• Marketing, technology, property operations drive NOI growth – Tailored approach – Pricing optimization – Ancillary revenue/cost reduction
………………….……. 5 cents
………………….……….... 3 cents
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The amounts above represent the 2011 impact the Company expects solely from these three specific items. This information is not intended tobe construed as guidance for 2011, which may include offsetting factors that may affect 2011 earnings results. The Company expects toprovide 2011 guidance in its earnings release for the fourth quarter and full year 2010.
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• Strong capital structure – We’re prepared• Seizing accretive acquisitions in prime apartment markets – We buy righ t
The Right Focus
• Maximizing repositioning business model – We’ve raised the bar – Tailored approach to resident communications & value enhancements – Strategic use of technology – Pricing power + insightful analytics = optimized revenue – Increased ancillary revenue and reduced costs
• Development strategy – It’s working
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