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Associated Estates Realty Corporation (NYSE:AEC)

Q1 2010 Earnings Call

April 27, 2010 2:00 pm ET

Executives

Jeff Friedman - President & CEO

Lou Fatica - CFO

John Shannon - SVP of Operations

Patrick Duffy - VP of Strategic Marketing

Jeremy Goldberg - Senior Director of Corporate Finance and Investor Relations

Analysts

Paula Poskon - Robert W. Baird

William Acheson - Benchmark

Andrew DiZio - Janney Montgomery Scott

Buck Horne - Raymond James

Haendel St.Juste - KBW

Operator

Good afternoon and welcome to the Associated Estates first quarter 2010 earnings conference call. My name Andrea and I will be your operator for your call today. At this time all participants are in a listen-only mode. Following prepared remarks by the company we will conduct the question-and-answer session and instructions will asking questions will follow at that time.

Now, I’d like to turn the call over to, Jeremy Goldberg, Senior Director of Corporate Finance and Investor Relations for opening remarks and introductions. Please go ahead.

Jeremy Goldberg

Thank you, Andrea. Good afternoon everyone and thank you for joining the Associated Estates first quarter 2010 conference call. I’d like to remind everyone that our call today is being webcast and will be archived on the Associated Estates website through May ‘11.

On the call today, prepared remarks will presented by Jeff Friedman, our President and Chief Executive Officer, Lou Fatica, our Chief Financial Officer and John Shannon, our Senior Vice President of Operations. Additionally, Patrick Duffy, Swarup Katuri and I are available for the Q&A.

Before we begin our prepared comments, we would like to note that certain statements made during this call will be forward-looking statements that are based on the current expectations and beliefs of management. These forward-looking statements are subject to certain risks and trends that could cause actual results to differ materially from projection.

Further information about these risk and trends could be found in our filings with SEC and we encourage everyone to review them. As a reminder Associated Estates first quarter earnings release and the supplemental financial booklet are available on the Investor Relations section of our website at www.associatedestates.com and they include reconciliation to non-GAAP financial measures which maybe discussed on this call.

At this time, I will turn the call over to Jeff Friedman.

Jeff Friedman

Thank you Jeremy and thanks to everyone for your continued interest in Associated Estates. Let me take a few minutes to explain how we prepare for this call. Although this quarterly calls typically last 30 to 45 minutes. We spend the lot of time making sure what we’ve say is pertinent, succinct, and helps the listeners and participants be in a better understanding of our business.

By the time we get the actual quarter end numbers there are really no surprises for us because we've known how we’re doing throughout the quarter. From the last few years our guidance and expectations for our portfolio have been the most aggressive of practically all of the other apartment REITs.

This year our same community NOI guidance for the year of negative 3.3% was the second best. I must admit there is the point each quarter for me when we see the proof when we had the actual numbers, where I can savor feeling of knowing that we once again net our aggressive goals and this quarter it was no different.

Our first quarter results are right inline with our budget and our 2010 guidance. Might also add now that we had visibility into the second quarter, that our leasing activity for the first five months of the year is also consistent with our budget. This strong performance is the result of a well position portfolio improving market conditions and a very dedicated and well prepared team of professionals running our properties and supporting our business.

Everyone in the apartment business expected 2010 to be a transitional year, with proving fundamentals relating to household formation, propensity the rent and relativity few new units coming online. One can't call it a sea change or an inflection point until we look in the rear view mirror. Based on what we see, the Associated Estates portfolio has clearly hit an inflection point.

John will provide more detail on a number of the metrics supporting my attestation, but let me just mention one. We carefully monitor the differential between renewal leases and new leases. For us, this reached an unprecedented high of 950 basis points in December of 2009.

During the first quarter we increased rents on renewals by 1.6% and new leases were down 5.2% from expiring leases for a difference of 680 basis points. A 2.7% improvement from December, this differential has remained steady for April and based on what we are assume for May the trend continues to be positive. The pricing power will return when the US economy begins to add jobs.

Our guidance for the year has remained the same. You will not we have once again included no acquisition or dispositions in our guidance. We haven’t acquired property in two years. First was because we weren't willing to overpay. Then they were no deals that met our criteria coming to market. This is year we want share what to expect. However we are beginning to see and here about more deals being available.

This increase in deal flow is probably the biggest positive surprise we’ve seen so far this year. Many of these deals will sell it prices significantly below the highs and below current replacement cost. So although we haven’t revised our acquisition guidance, because of uncertainties relating to timing and pricing. We are fairly confident we will make some good buys in 2010. Our policy is not to discuss our specific acquisitions or dispositions until we close.

I’ll now turn the call over to Lou.

Lou Fatica

Thank you, Jeff. For the first quarter FFO was $0.20 per share and includes a credit $554,000 or $0.02 per share were refund of defeasance costs and five loans we decreased in 2006 and 2007. Excluding this credit FFO per share was $0.18 and right inline with our internal expectations.

Our same community portfolio delivered NOI at 1.9% on a quarter-over-quarter basis. Portfolio revenue decline just 178,000 or 60 basis points from a year ago driven by a 140 basis points increase in physical occupancy offset by the impact of the amortization of in place concessions and lower rents on new leases. Concessions appear to have stabilized in all of our markets.

John will discuss each of our markets as part of his prepared remarks. We are reaffirming our 2010 FFO with adjusted guidance range of $0.86 to $0.92 per share. This FFO guidance range continues to reflect no acquisition or disposition activity. As Jeff stated we continue to evaluate acquisition opportunities and we have ample liquidity to acquire our properties.

We will use all of the available options to us to fund acquisitions including equity and unsecured line of credit and projects specific secured debt. We use proceeds from the January equity offering so repay maturing debt and as a result our leverage is measured by debt to undepreciated book value is right inline with our peers. We ended the quarter at 50.4% leverage and it is our intention to operate a plus or minus 200 basis points from this metric on a long-term basis.

With the Q1 debt repayments, we now have 22 unencumbered assets with an estimated market value of over $330 million. Also as a result of the debt repayments, interest savings for the reminder of the year will be approximately $2 million or $0.09 per share.

Near term maturities are quite manageable with $21 million maturing at December of this year and a total of $54 million maturing in the middle of next year. We are in the process of addressing the loan maturing in December and currently expect pricing on a fixed rate basis to be in the 5.5% to 6% range. Fannie Mae and Freddie Mac continue to be open for business.

Additionally, life companies and regional banks are again making competitive loans on good assets with well capitalized sponsors like associated space. Our unsecured line of credit matures in March 2011 and we are in active discussions with our bank group. Certainly the credit markets are in far better shape than they were last year and spreads continue to tighten. We anticipate that renewal of our unsecured credit facility will happen in the second half of 2010.

Before I turn the call over to John, let me address the couple of comments and questions we received following the release last night. First as it relates to G&A, our 2010 guidance contemplates G&A for the year at similar levels of 2009 are $13.9 million or approximately 11% of property revenue. This quarter the Q1 comparison was impacted by a credit of 500,000 in Q1 last year related to marking-to-market our deferred director’s compensation. This credit was the result of $3.45 share price declines from year end 2008 to Q1, 2009.

We will continue to have quarterly lumpiness when comparing 2010 versus 2009 quarter-over-quarter results due to the volatility in our share price last year and resulting marking-to-market in these units. As we have previously stated effect of January 1 of this year, the deferred director’s plan has been amended to settle in shares versus cash eliminating any future requirements to mark-to-market that differed units.

Second as it relates the net contribution of our construction services. We expect the nominal positive contribution for the full year back ended into the second half. The Q1 negative contribution as the result of the timing of new projects which are not slated to began until later in the year.

At this time I will turn the call over to John.

John Shannon

Thank you, Lou. In my prepared remarks I will provide an overview of our first quarter same community operating performance and specific market detail. We are pleased with our first quarter performance as our results are inline with or internal expectation. On a year-over-year basis our same community NOI, was down 1.9%. This is our result of 140 basis point increase in physical occupancy, referenced earlier by Lou as we finished the quarter at 95.3%.

The strong occupancy was offset by an overall 2.2% decline in net rent. On a sequential basis Q1 same community revenue was 30 basis points lower than Q4 in average physical occupancy was up 140 basis points. These sequential trends are consistent with historical performance. Once again our solid performance continues to be centered around our focus on the details of the day-to-day operating fundamental, our talented employees and superior condition of our properties and the competitive sub markets in which we operate.

Additionally and we have not often talked about this on our calls, we have consistently improved and enhanced our technology platform which has allowed us to manage our properties more efficiently. We have improved the prospect and resident experienced through online leasing and online maintenance requests, payment options and resident satisfaction programs. We have further enhanced the sense of community with the utilization of social media and events.

As a result of these efforts, our Internet presence is equal to or better than our peers. As Jeff mentioned from what we see, our portfolio has clearly hidden inflection point. In support of this for the first quarter we are looking out our key metrics on a quarter-over-quarter basis we are seeing positive signs.

Annualize turnover is down better than 2.5%, prospect traffic is up 7% from a year ago and occupancy has increased to 140 basis points with new deals in Q1 down 5% as compared to 8% in Q4. Also, throughout our portfolio we have seen that residents are staying longer on average 18 months.

People have a greater propensity to rent versus own, as renting allows for increased financial flexibility and fiscal mobility. Additionally we are nearly at a full cycle of marking leases to market and the negative trends between new deals and renewable pricing have diminished. Our higher occupancy levels at quarter end and into the first part of Q2 will afford us greater pricing power as we enter the peak reselling season.

Now let me take a minute to discuss our markets in a specific quarter-over-quarter and sequential performance. The Midwest, which contributes approximately 57% of our NOI, we finished the quarter at 95.7% physical occupancy. Quarter-over-quarter revenue was down 1% and NOI was down 2%. Sequentially in the Midwest, total revenue was down 80 basis points.

The outlook for our properties in sub markets in the Midwest is that we are at the bottom of the cycle. Over the past two years, the Midwest was our top performing region with average annual revenue growth of nearly 3%. Due to these tough comps and the fact that most of these markets did not peak until the first half of 2009, we budgeted flat to slightly down rental growth in our Midwest markets in 2010 and that’s what we expect.

In the Southeast, which contributes approximately 24% of our NOI, we closed the quarter at 93.9% physical occupancy. Quarter-over-quarter, revenue was up 60 basis points and NOI was down 2.1%. Sequentially, total revenue is positive as a result of an increase in physical occupancy. However, future in place concessions and the impact of new leases in mark-to-market, net rents were down 5.2% offsetting much of the gains in physical occupancy, but also just as we expected.

In Florida, we have four communities that were all performing in line with our internal expectations. In Orlando, we finished the quarter at 95.1% physical occupancy. Two months of free rent continues to be a norm. In South Florida, where we have three properties, we expect occupancies to hold in the 92% to 94 % range with concessions of one to two months.

In Atlanta, we operate two communities in Druid and two communities in Buckhead. In Druid, we finished the quarter at 92% physical occupancy, up 3.3% from Q4 and are still offering concessions in the range of two to three months depending on availability and floor plan. In the Buckhead market, we finished the quarter at 94.1% physical occupancy and offered concessions in the range of one to two months.

Overall, Atlanta continues to be a concession driven market. In the mid-Atlantic where we operate in the Baltimore, Washington and Southern Virginia areas, we closed the quarter at 96.3% fiscal occupancy. Sequentially in the mid-Atlantic total revenue was down 40 basis points. Our three Baltimore Washington properties performed in line with our internal expectations finishing the quarter at 96.1% fiscal occupancy with revenue up 3.4%.

We anticipate that we will maintain occupancy in the 94% to 95% range as quantified prospect traffic continues to be above 2009 levels and concessions or forecast to tick down from the current one month level.

In Virginia we operate in two markets Norfolk and Richmond. We performed as expected with physical occupancy at 96.3% and revenue down 4.2%. We continue to see downward pressure on rent levels as new supply is being delivered. We are forecasting that most part of the new units will be absorbed in the second half of the year as soldiers return from overseas. We are also expecting 10,000 soldiers and support personnel to be transferred to the greater Richmond area over the next two years as part of the military base realignment initiatives.

I wanted to give a quick update on the additional 60 units that we are developing in our River Forest property in Richmond. The project is looking good and we are on schedule to deliver the first unit in early June. We are currently pre-releasing and we’re forecasting to reach stabilized occupancy by late September. In closing, we performed as expected in Q1 and are well positioned to perform in line with our internal budget for Q2 and the balance of the year.

I will now turn the call back over to Jeff.

Jeff Friedman

Thanks, John. Good quarter. I’d now like to take a moment to comment on our proxy solicitation relating to our proposal to increase the number of authorized shares. Our articles of incorporation limit the number of common shares to 41 million. We currently have outstanding or committed to issue approximately 24 million common shares. Management and the Board determined that it was appropriate to increase the number of authorized common shares.

We believe this is important to the company so that we can continue to improve our balance sheet and growth, we urge all of our shareholders to vote for this issue. We would like to discuss this matter in a greater detail, please give any of us a call. I’d also like to mention that this will be Swarup’s last earnings call with us. Swarup is on his way to Duke’s Fuqua School of Business to get his MBA.

Swarup joined us in July of 2005 as a financial analyst in turn. He graduated from Case Western Reserve University and returned Associated Estates in 2006. Over the last four years he has contributed a great deal and those of you who and worked with Swarup will I’m sure want to join me and wishing him all the best. Swarup’s responsibilities are being assumed Jeremy. Although Swarup’s shoes are big Jeremy has begun to fill them and we expect the transition to be seamless. We can now open the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question is from Paula Poskon of Robert W. Baird.

Paula Poskon - Robert W. Baird

Could you provide, John, a little bit more color on pricing power? Are you getting any pushback on renewal increases and what are you hearing generally from your tenants in terms of their own employment situations and outlooks?

John Shannon

First to the renewal increases. In every market or every region to the Midwest to the mid Atlantic to the Southeast, we were able in the first quarter to push through renewal increases anywhere from 2.5% to just over one or two basis points. So we’re seeing positive trends on our renewals. I think as far the resident mindset, I think there is still an uncertainty out there and we think that has played into our lower turnover for the quarter, so it’s kind of uncertainty as well as the terrific service that we’re providing to our residents. They are staying longer and staying with us and are willing to take a slight minimal increase because of that.

Paula Poskon - Robert W. Baird

Thank you very much. And question for you, Lou, is the mark-to-market on the compensation plan the only driver of the spike in G&A?

Lou Fatica

Yes, I think quarter-over-quarter G&A was up slightly over 500,000 and 506,000 relates to the mark-to-market credit that we took in the first quarter of last year.

Paula Poskon - Robert W. Baird

And what is the trigger and the mechanics behind booking a refund of the previously expensed defeasance costs?

Lou Fatica

It shows up as a credits under interest expense or it shows up there and it’s cash, the offset was the cash.

Paula Poskon - Robert W. Baird

But what is the genesis of that?

Lou Fatica

When we defuse those properties, we had a revenue sharing agreement with the defeasance provided that if they were able to prepay that the prepayment date versus the maturity date, which will be required to fund to there was a rebate that came back to us through the defeasance provider.

Paula Poskon - Robert W. Baird

What's driving the large increase in construction fees and costs?

Lou Fatica

As we noted on our fourth quarter we’ve begun to undertake rehabilitation on other construction projects and so that represents a percentage of completion, I believe our three projects that we are currently under way with and the expectation is that the number of projects that we had will ramp up as the year goes on.

Paula Poskon - Robert W. Baird

Just two final questions, the one third-party managed asset, are you thinking at all of growing that business and could that be a pipeline of acquisitions in the future?

Jeff Friedman

Paula, this is Jeff. That’s through our Investment Advisory business and certainly we have ongoing dialogue with both our existing public and private pension fund clients as well as new clients. It is not an area where we are focused on growing the time that it takes to really grow that business, we’re just not committed to making that investment however to the extent that our existing clients, some of the new pension funds that we’re talking to about potential deals are interested in our services we would consider.

Paula Poskon - Robert W. Baird

Okay and then just finally, for you, Jeff. Could you give us just a little more color on the increasing deal flow that you mentioned? Are you seeing quality products in the markets that you are targeting and what are you seeing in the bidding pool as well?

Jeff Friedman

Patrick, you want to pick that up.

Patrick Duffy

We are seeing an increase in the number of acquisition opportunities particularly in the markets where we are focused, the Mid Atlantic and the South. We are seeing a pretty significant increase certainly over the first half of 2009.

Paula Poskon - Robert W. Baird

And of the quality that you would be targeting as well?

Patrick Duffy

Yes.

Paula Poskon - Robert W. Baird

Okay. And then what did you say in the bidding pool?

Patrick Duffy

In the bidding pool…

Paula Poskon - Robert W. Baird

In the competitive -- who else is bidding for assets?

Patrick Duffy

We’re certainly competing against REITs, other institutional investors as well as regional players.

Operator

Pardon me. I have William Acheson from Benchmark to join.

William Acheson - Benchmark

I take it from your remarks and because you're sticking with guidance. Half of the $0.18 in the first quarter it kind of implies a pretty strong upward path in FFO averaging $0.23, $0.24 per share per quarter for the rest of the year. That’s just an average figure, but is that going to be mostly a second half event?

Lou Fatica

Bill, this is Lou. The majority of that will come from interest savings that I mentioned on my prepared remarks that we expect to have 2 million of interest savings that would be ratably over the next three quarter. Additionally, in terms of construction services, we expect that to be back loaded to the third and fourth quarter. And then we have slight impact of what we expect in terms of property NOI.

William Acheson - Benchmark

Okay. When did you pay down the majority of the debt in the first quarter?

Lou Fatica

It was paid in two tranches, one was paid in late January, the second tranch was paid in the middle of March, but also the first quarter included the impact of recognizing the swap expense related to that the first repayments as that was a variable rate that we had spot to fix and once we repaid the underlying note, we accelerate the recognition of the recognition of the swap expense that would exist over the remainder of the term which have the effect of pushing about 350,000 of additional interest expense into Q1 related to that swap expense recognition.

William Acheson - Benchmark

Okay. Good explanation. And you already mentioned occupancy, good rebound there. Were traffic levels higher than you expected them to be in the first quarter?

John Shannon

I think they were, Bill. We have been running the past couple of quarters with traffic kind of on power with the period over period comparison this quarter traffic was up 7% and we really saw that in all of our markets so we’re very encouraged by that.

William Acheson - Benchmark

Okay. One thing that I've read about and seen people write about is that a lot of prospective renters kind of got the feeling that this is as good as the deals was going to get and maybe that got them out looking more than otherwise would have been the case. Is there any possibility that the increase in activity could, say, steal from future periods? I mean, we're in the peak leasing period now and you guys have a pretty good handle on what the traffic looks like, but what do you guys think about that?

Patrick Duffy

I do think that part of the increasing traffic is the result of a renters looking for deal, we’re absolutely seeing that; in terms of what we expect for the rest of the year, thinking that our traffic levels will be somewhat consistent with ’09 and ’08.

William Acheson - Benchmark

Okay. And then going back to the acquisition question by Paula, how many of the deals that you're seeing out there, prospective deals out there, could you properly characterize as being opportunistic or maybe distressed in nature.

Jeff Friedman

This is Jeff. Bill, there is not a whole lot of distress at the operating level of the types of properties we’re most interested in stabilized properties, core, core plus deals. There is some distress at the sponsor level on some of the deals, so there could be some other reason that a deal may be coming to market to trigger some type of a transaction to create a liquidity event by the sponsor. And we are seeing a few on the side of banks, noteholders who have had enough funds so to peak and or biting the bullet and determining that now would be an opportune time for them to sell their positions and I would describe those as opportunistic because it gives the to chance to possibly buy not only below guest levels existing guest levels on performing loans, but substantially below replacement cost.

William Acheson - Benchmark

Okay. That's encouraging. I didn't mean to say that you are going to buy distressed assets; I of course meant it at the ownership level, people are facing maturity concerns and all that. Thank you very much.

Operator

Our next question is Andrew Dizio of Janney Montgomery Scott

Andrew DiZio - Janney Montgomery Scott

When I look at your financial outlook, which you left unchanged versus what we saw in the first quarter, the property revenue pretty much trended in line, but it looked like expenses were low on a year-over-year basis than you had expected, but you left expense growth at 275 to 375 basis points, which I guess implies to me that you would expect to see expenses ramp up later in the year. Is there a particular area in which you would expect that to happen, whether it’s utilities or taxes, insurance?

John Shannon

No, we don’t think that expenses are going to necessarily ramp up during the year, the first quarter is always a quarter where there is some timing, some projects that we’re going to be implementing and given the inclement weather that we saw throughout the country this year, we pulled back on some of those expenses, so we’ll see those move into the second quarter, but we’re not implying that were going to be ramping up expenses through out the year its really just a timing issue.

Andrew DiZio - Janney Montgomery Scott

Okay. And then I think last quarter you had mentioned that your insurance policy was up for renewal in March, can you update us on where that landed?

Lou Fatica

The insurance renewal went well. We renewed at relatively flat due last year, the incremental impact as we mentioned on our last call was going to be the self insurer retention component which in 2009 we had very little impact for that self insured retention and our 2.75 to 3.75 guidance includes expensing all of that self insured retention of about 400,000.

Andrew DiZio - Janney Montgomery Scott

And then just lastly, can you update us on what you're seeing as far as move-out to home purchase does overall and maybe by region as well, Midwest versus Southeast, Mid-Atlantic?

John Shannon

Sure Andrew. Home purchases picked up in the first quarter and as a portfolio we were right around 20% of our move outs which were home purchases, the Midwest stayed flat at about 22%, the Southeast [creeped] up to 13%, whereas last quarter it was up 9%. And the mid Atlantic jumped from 15% in Q4 to 20% the past quarter. So we are seeing some movement out there or an increase of home purchases in our market.

Operator

Our next question is from Buck Horne of Raymond James.

Buck Horne - Raymond James

I just wondered if you could talk to the overall level of G&A costs and maybe if there is any thought or plan to try to bring those down over the course of the year below the 11% of revenue threshold, if there is any wiggle room or things you're working on to address those costs and I guess elaborate on -- well, I will just start there?

Lou Fatica

Buck, this is Lou. The way we look at G&A is that we believe the overall investments is necessary to do all the things that we wanted to do and we really think it’s a function of scale and so the way we bring that 11% down is by growing the top line property revenue, not only from our same store portfolio, but from any acquisitions that we’re able to do here in 2010 and going forward.

Buck Horne - Raymond James

Okay. And regarding the dividend level, are you guys still comfortable with the current dividend level, given the outlook for this year and next. And what would be the scenario that might concern you enough to reconsider the current payout ratio?

Jeff Friedman

[Andrew], this is Jeff. Yes, we’re comfortable and I guess there is lots of different scenario versions we could run. We run lots of stress tests and there are none that we’re running now that would change our position and comfort level with the current dividend of $0.68 on an annualized basis.

Operator

And our next question comes from the line of Haendel St.Juste - KBW.

Haendel St.Juste - KBW

John, I was hoping, this question for you, can you just give me some more inside color on what’s going on within the portfolio? Any signs of unbundling of any pent-up demand? Are you seeing more demand for one bedrooms? Perhaps people coming out of twos and threes, more interest at this point even for one bedrooms?

John Shannon

No, if you look at our unit mix, we were about 33% one bedrooms, 60% two bedrooms and about 6% three bedrooms and we’re comfortably running a report to address exactly that. We finished the quarter at better than 95% in an each unique type we were within 20 basic points of that 95%, so really seeing a strength in all unit types.

Haendel St.Juste - KBW

Okay. What's the average concession built into the effective rental rates during one quarter and how has that trended so far in April? And could you give me some context on where that was at year-end '09?

John Shannon

Year-end ‘09 we were about four weeks of free rents throughout our portfolio and in Q1 we were almost exactly at that same levels, so it’s [tied] to that inflection point where we’ve seen a stabilization we’ve seen a bottom in our markets and we think as we move throughout the year, you're going to see that narrow.

Haendel St.Juste - KBW

Okay. And it hasn't changed much so far in April?

John Shannon

It's running pretty consistently, Haendel.

Haendel St.Juste - KBW

Okay. Last question, this one perhaps for you, Jeff. You’ve been in this business a long time and I'm curious on your assessment of the current condition at this point in the cycle. Is it fair to say that conditions are better and perhaps sooner than you expected at this point?

Jeff Friedman

I would say that realistically if I’m honest about how we felt this time last year, I would say that I would never have thought I would felt this way a year later. But if we step back a little further, I would say and we sort of blur a dislocation that occurred in the financial markets last year and latter part of the 2008. I would say that what’s happening in the apartment sector is pretty much as everybody expected. We have the positive demographics, we have tremendous increased disciple at every level concerning new starts, banks have been more reluctant to make loans, developers, more reluctant put it in the equities to do the deals. And so that the expected demand should continue to be strong and I think for those of us who have been in the business long enough who have looked ahead four or five or six years -- four, five years ago, it’s like where we expected it to be.

The only difference on the positive side I would say would be, that not expecting the dislocation in this capital market. We thought we would had these other competitor single family homes those kinds of condominium investments alternative investments and I think today John mentioned it the financial flexibility, the mobility flexibility and added couple of benefits to our business, so I say overall on that meter we are stronger and the next few years should remain that way.

Operator

(Operator Instructions) Gentlemen, we have no questions at this time. Do you have any closing remarks today?

Jeff Friedman

No ma’am Andrea, thanks very much, that will conclude our call today. Thank you everyone for joining us.

Operator

Thank you for joining. You may now disconnect, the conference has ended.

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