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Colonial Properties Trust, (CLP)

Q3 2010 Earnings Conference Call

October 28, 2010 02:00 pm ET

Executives

Jerry Brewer - Executive Vice President, Finance

Tom Lowder - Chairman and Chief Executive Officer

Reynolds Thompson - President and Chief Financial Officer

Paul Earle - Chief Operating Officer

Analysts

David Toti - FBR Capital Markets

Michelle Ko - Bank of America

Dustin Pizzo - UBS

Ross Nussbaum - UBS

Eric Wolf - Citi

Alex Goldfarb - Sandler O’Neill

Rich Anderson - BMO Capital Markets

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Colonial Properties Trust Q3 2010 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded Thursday, October 28th, 2010.

I would now like to turn the conference over to Jerry Brewer, Executive Vice President of finance. Please go head, sir.

Jerry Brewer

Thank you, Todd and welcome to everyone joining us today. We released our earnings today via business wire. A copy of this earnings release may be found on our website at colonialprop.com. We are also webcasting this call for your convenience. A replay will be available for your convenience at our website after the call. Tom Lowder our Chairman and Chief Executive Officer and Reynolds Thompson, President and Chief Financial Officer will lead today’s call. On the call, they’ll discuss our business developments, financial results for the third quarter and our guidance for 2010.

After their comments, we’ll open up the call to take your questions. Paul Earle, our Chief Operating Officer is also here to field questions.

Let me remind you that much of the information we discuss on this call, including answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters.

These forward-looking statements are intended to fall under the Safe Harbor provisions of the Securities Law. These estimates are also based on a number of assumptions, any of which, unrealized, could adversely affect their accuracy. Please see our latest SEC filings for the detail and explanation of risk.

Any non-GAAP financial measures we discuss are reconciled to the closest GAAP measures and filings that can be found on our website.

I will now turn the call over to Tom.

Tom Lowder

Thanks, Jerry. And welcome to everyone joining us. On the call today we'll discuss our third quarter results, update you on the continued progress with our directives and review our outlook for the balance of the year. You may recall our directives are focused on simplifying the business, improving operating margins, strengthening the balance sheet and growing the company.

I noted last quarter that a number of factors were working in our favor to drive demand for multi-family homes along with the limited new supply. These fundamentals continue to improve in the third quarter as expected, and allowed us to push rates as planned in many of our markets. In September, both our new and renewal rates were positive to the expiring lease rights. We will continue to look for opportunities to leverage this improving environment with our strong occupancy over the course of the year and into 2011.

During the quarter, we raised nearly 100 million in common equity and redeployed that capital to redeem the 8 and 8 series D preferred shares. In October, we completed the disposition of our 50% interest in the Parkway Place mall asset and were successful in acquiring the Colonial Grand at Brier Creek, a 364 unit Class A multi-family asset in Raleigh, North Carolina.

Now I would like to turn the call over to Reynolds to discuss the details on our operating performance and financing activities. Reynolds?

Reynolds Thompson

Thank you Tom. FFO for the third quarter was $0.20 per share compared with $0.49 a year ago. The decline is primarily related to gains recognized last year from the repurchase of unsecured bonds. Operating FFO, which we define as FFO before transaction income was $0.25 per share compared with $0.23 per share for the prior year.

Multi-family same property revenue growth was up 0.1% in the third quarter 2010 compared to the third quarter of 2009. The percentage is small but it is significant because it represents our first quarter of positive growth since the fourth quarter of 2008. Multi-family same property physical occupancy was 96.5% at the end of the third quarter, which was 210 basis points higher than the third quarter of 2009 and 10 basis points higher sequentially.

The average rental rate per unit improved to $712 per unit during the third quarter of 2010 and $714 by the month of September. Based on these results, it appears that the second quarter was the low point in rent per unit. Multi-family same property NOI declined 3.3% versus the third quarter of 2009. Our same property operating expenses increased 4.9% versus the third quarter of 2009. The increase in expenses is primarily due to higher repairs and maintenance, utilities and property insurance.

The increase in repair and maintenance is primarily a result of a higher occupancy level and improving current in anticipation of future rental rate increases. The increase in utilities is attributable to water usage from higher occupancy, most of which is recoverable expense. The maintenance and insurance is due to a favorable true up of our self insurance accrual in third quarter of 2009.

As anticipated last quarter, new lease rates turned favorable in August, and we’re positive 0.5% in September renewal rates were positive in all of our markets and we finished the month of September up 4%. We recently raised our minimum renewal rent to 5%. Our strongest revenue markets were Richmond, Phoenix, Charleston and Orlando. Revenue in Atlanta and Raleigh was also slightly positive for the quarter.

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