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Executives

Lisa Cohn - Executive Vice President, General Counsel and Secretary

Daniel Matula - Executive Vice President of Redevelopment and Construction Services

John Bezzant - Executive Vice President of Transactions

Keith Kimmel - Executive Vice President of Property Operations

Ernest Freedman - Chief Financial Officer and Executive Vice President

Terry Considine - Founder, Executive Chairman, Chief Executive Officer and Chief Eecutive Officer of AIMCO-GP Inc

Analysts

Swaroop Yalla

Derek Bower - UBS Investment Bank

Jana Galan

Richard Anderson - BMO Capital Markets U.S.

Eric Wolfe

Michael Salinsky - RBC Capital Markets, LLC

Buck Horne - Raymond James & Associates, Inc.

Apartment Investment & Management (AIV) Q2 2011 Earnings Call July 29, 2011 1:00 PM ET

Operator

Good afternoon, and welcome to the Second Quarter 2011 Apartment Investment and Management Company's Earnings Conference Call and Webcast. [Operator Instructions] Please note that today's event is being recorded. At this time, I would like to turn the conference call over to Ms. Lisa Cohn, Executive Vice President and General Counsel. Ma'am, please go ahead.

Lisa Cohn

Thank you, Jamie. Good day. During this conference call, the forward-looking statements we make are based on management's judgment, including projections related to 2011 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 may be 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 our full earnings release published on Aimco's website.

The participants on today's call will be Terry Considine, our Chairman and CEO, who will provide opening remarks; and Ernie Freedman, our CFO, who will review second quarter results, our balance sheet and guidance. Also in the room today are John Bezzant, EVP of Transactions; Miles Cortez, our Chief Administrative Officer; Keith Kimmel, Executive Vice President, Property Operations; 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?

Terry Considine

Thank you, Lisa, and thanks to all of you on this call for your interest in Aimco. My colleagues and I are pleased by Aimco's second quarter results. Before turning the call over to Ernie, who will discuss in detail these results, I'd like to offer some general observations.

Business is good and better than I had assumed last fall when making plans for this year. Current revenue reflects caution last year. But this year, run rates have been improving, and the rate of increase has been accelerating during each of the past 6 months. And these trends continue in July. And as these higher rates earn in, revenue is expected to increase accordingly.

Keith Kimmel and his team in the field have my thanks for this improvement in rental rates. They're also doing a solid job of cost control. Year-to-date, property operating costs are down more than $5 million with savings in every category. And as you can see from guidance, we don't expect the same rate of year-over-year savings in the second half, but our efficiency in technology initiatives are paying off and we expect the cost reductions to be sustainable. We have continued to invest in property maintenance and property upgrades.

Ernie and Patti Fielding have done a good job in lengthening our property debt maturities, lowering our cost of leverage and somewhat lowering our overall leverage. Our off-site costs continue to fall as we simplify and focus our business. These costs are down $8 million, or 14% year-over-year, with more to come. As we look forward, we'd expect further reductions in off-site costs.

We're pleased with our start to the year, and we are optimistic as we turn to the second half and prepare for 2012. We are making plans to ramp up redevelopment spending. In addition to the redevelopment of Lincoln Place and Treetops, we are actively planning for a dozen or so projects, or $100 million to $200 million of spending in 2012, with returns greater than those available today on property acquisitions.

With that, I'll turn it over to Ernie Freedman, Aimco's Chief Financial Officer, to review second quarter results. Ernie?

Ernest Freedman

Thanks, Terry. On today's call, I will cover the following subjects. First, our second quarter results; second, our recent balance sheet activities; and third, I will provide third quarter guidance and update full year 2011 projections.

First, second quarter results. Second quarter pro forma FFO was $0.27 per share after a one-time charge of $0.15 per share related to a refinancing and securitization transaction with Freddie Mac that closed during the quarter. At $0.27 per share, pro forma FFO exceeded the top end of our guidance range by $0.05 per share, primarily due to better-than-expected property operating results.

As shown on the table on Page 2 of our earnings release, total portfolio NOI was up 5.3% year-over-year. Revenues across our entire portfolio were up 2.6%, while expenses decreased 1.5%.

Total same-store NOI, which includes conventional and affordable properties, was up 5.1% year-over-year with Conventional Same Store up 4.6% and Affordable Same Store up 8.4%. Total Same Store revenue was up 2.6% for the quarter, with Conventional Same Store up 2.4%, and Affordable Same Store up 3.7%.

Conventional Same Store revenue growth was driven by an increase in average rents of 1.7% and an increase in average daily occupancy of 0.2%. Conventional Same Store new lease rates during the quarter averaged 5.1% higher than expiring lease rates. Results by month were: April, up 3.8%; May, up 4.7%; and June, up 6.6%. July is coming in currently, up 7.2%.

Rates on renewal leases during the quarter averaged to 3.6% above expiring lease rates. Results by month were: April, up 3.2%; May, up 3.4%; and June, up 4.1%. July is coming in currently, up 4.4%.

On the expense side, second quarter Conventional Same Store expenses were down $900,000 or 1.3% as a result of reductions virtually across the board. Specifically, on-site payroll was down $400,000, or more than 2%, primarily as a result of continued productivity gains. And marketing and turnover costs were down a combined $500,000, with greater efficiency of marketing spends and higher customer retention.

Real estate taxes were up $800,000 due to a second quarter 2010 adjustment of previously estimated amounts after successful settlement of appeals during that quarter. However, this increase in real estate taxes was entirely offset by lower insurance costs.

Affordable Same Store expenses were down 2.3%, with trends similar to those of our Conventional Same Store properties including lower payroll expenses and higher real estate taxes offset by lower insurance costs.

Turning to our balance sheet, our only recourse set obligation is our revolving line of credit, which is used for short-term working capital needs and to collateralized letters of credit. As of June 30, the outstanding balance on the line of credit was $21 million, and collateralized letters of credit total to $27 million, leaving us with an available capacity on our line of $252 million.

Year-to-date, we have further strengthened our balance sheet by reducing our net leverage by $95 million, which includes net refinancing activity, regularly scheduled property debt amortization, loan pay downs and $51 million of notes Aimco purchased from the Freddie Mac securitization trust that holds only Aimco property loans.

We continue to make progress on extending our property debt maturities and locking in today's low interest rates. As of June 30, $884 million is scheduled to mature during the balance of 2011 through the end of 2014. We're about 6% of our outstanding property debt balance each year.

We have rate locked a total of $151 million of these maturities, which is 17% of our property debt coming due in the next 3.5 years. The weighted average interest rate on the committed loans is 4.37% or 113 basis points lower below that of the existing loans.

We announced on July 25 the closing of a new issuance of perpetual preferred equity, or Class Z stock. We issued 800,000 shares with a coupon rate of 7% at $24.25 per share, which equates to an effective yield of 7.216%, or gross proceeds to Aimco of about $19 million and net proceeds of approximately $18.5 million.

Our goal in this new equity issuance was to establish a class of preferred equity at a cost that better reflects today's pricing, and we intend to use the proceeds from the issuance to partially redeem higher cost preferred securities.

Aimco has 4 other classes of preferred equity outstanding with coupon rates between 7.75% and 8%, which generally trade at or near par. These other classes of preferred equity are currently callable, which limits the premium at which the shares might trade in light of today's lower cost of preferred equity. We'll continue to monitor the market to see if there's an opportunity to further reduce our preferred equity costs.

Lastly, on the balance sheet, since April 1st, Aimco has issued 1.7 million shares under our ATM program at a weighted average price of $25.52 per share, generating gross proceeds of $43 million. The proceeds were used primarily to match fund investment activities and to fund prepayment penalties associated with refinancing activities. Year-to-date, we had issued a total of 2.8 million shares at a weighted average price of $24.59 per share, generating gross proceeds of $71 million.

Finally, looking ahead, we are increasing full-year pro forma FFO guidance by $0.09 per share at the midpoint to a range of $1.45 to $1.51 per share. As a reminder, our guidance range includes $0.15 per share of prepayment penalties incurred in the second quarter related to the Freddie Mac refinancing and securitization transaction.

Our projections for property operations are as follows. For Conventional Same Store, narrowing the range of revenue growth expectations from a range of 2% to 3% to a range of 2.5% to 3%. A decrease in expense growth expectations from essentially flat to a range of down 1% to down 1.5%, which results in NOI growth of 4.5% to 5.5% compared to our previous growth expectations of 3% of 5%. We expect Affordable Same Store NOI growth of approximately 10% to 11% over last year and total Same Store NOI growth of 5% to 6%. And across our entire portfolio, we expect full year NOI growth to be in a range from 4% to 5%.

Finally, for the third quarter, pro forma FFO is projected to be $0.38 to $0.42 per share with a year-over-year total Same Store NOI growth of 3.5% to 4.5%.

With that, we will now open up the call to questions. Please limit your questions to 2 per time in the queue. Jamie, I'll turn it over to you for the first question please.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from Jana Galan from Bank of America Merrill Lynch.

Jana Galan

I was wondering if I could get some more color on the redevelopment pipeline for 2012? In particular, what markets are you considering, and then what kind of returns do you pencil in? And how much far above that is that of acquisition cap rates?

Terry Considine

Jana, it's Terry Considine here, and I'll take a crack at that, and then we'll ask Dan Matula, who heads that up, if he'd like to add or qualify it. But broadly, we think we had a redevelopment pipeline in the magnitude of 2% to 4% of GAD, which would drive the cash spend each year of $100 million to $200 million. That might be added to by some value-added acquisitions, which will have a redevelopment component too. The front end of it, the 2 properties that are most ready to go, will be Treetops in San Bruno, California and San Francisco Peninsula, and Lincoln Parks -- Place, Lincoln Place in Venice, California. Right behind that will be properties on the East Coast and others in the Bay Area. But it would be premature to start describing them in detail. Dan, would you like to add to that?

Daniel Matula

Yes. I mean, Terry, as you mentioned, I mean, my team is actively planning a dozen or so redevelopment projects that we expect to follow on the heels of Treetops and Lincoln. And they cover really all of our major core markets across the country. Southern California, Northern California, Chicago, the Northeast, the Southeast. So we are definitely planning on ramping up activities as we move into next year.

Terry Considine

And, Jana, I forgot to address your question about expected returns. We think those returns will likely be in the magnitude of 50 to 150 basis points above the acquisition yields equivalent quality assets.

Operator

Our next question comes from Rich Anderson from BMO Capital Markets.

Richard Anderson - BMO Capital Markets U.S.

So I just wanted to lay out a scenario for you as it relates to supply and demand. I'm looking at the latest permits data from the census, and its 194,000 multi-family units. I understand its permits and not starts, but it's kind of starting to get up there. Then we have 2 million homes that are in the foreclosure process that, in some form or another, may present a competition. So you're getting above 200,000 units, call it 250,000 when you kind up aggregate it all up. Then you're hanging your demand hat kind of the homeownership rate continuing to go down. So the question is, if the homeownership rate does kind a stabilize and you don't get that kind of demand feed anymore, does the business start to fall apart or stabilize or plateau or something? I mean, how would you think about that scenario?

Terry Considine

Rich, this is Terry. And obviously, there are lot of variable factors that are considered. But let me just try and pick through the ones you raised. The first, about multi-family starts, is not much over the replacement rate as a number of units are demolished in that magnitude during the year. The second is that homes, even foreclosed homes and rental homes, are not really competitive with professionally managed departments. They serve different market segments where customers have different interests and preferences. So what drives demand for our product is unmarried, professional people between the ages of 25 and 35. And that market segment is one, growing with the baby boom echo. Despite the unemployment numbers in the overall economy, the employment rate in that age cohort is actually quite high. I think unemployment is down around 4% for that group. And so we feel pretty good about the demand for product. What I would say is that at our B price point, we feel somewhat insulated from the volatility of the weak economy. And with the advantage of redevelopment versus development, we can always fine tune it or adjust it to what we actually find.

Richard Anderson - BMO Capital Markets U.S.

Okay, and just a quick question on Florida. Our utility analyst covers NextEra Energy, and they're tracking increased customer growth, I should say, throughout the state of Florida. I would think of that, that would be a good precursor to, or maybe even a simultaneous indicator of, multi-family in the state of Florida. How are things going in Florida? And would you kind of agree with that kind of connection between what NextEra is seeing and what maybe the multi-family business is seeing?

Terry Considine

Rich, I'm going to turn it over to Keith for more specific responses. But I would agree with your energy analyst. Florida is a long-term market with considerable growth. Some of its disadvantage in the tail end of the last decade was high cost, which have been adjusted by the recession. So I would expect this growth to pick up. But for current events on the ground, Keith?

Keith Kimmel

Rich, I would just -- I'd echo some of the points. What we're seeing in Florida specifically is in South Beach, Miami, where we're certainly seeing a pick up. Orlando is starting to turn. Jacksonville and Tampa, still a little bit weaker, but we are starting to see some recovery. So I think some of the data points that you've referenced to has given some indication that we're seeing some turn there.

Operator

Our next question comes from Swaroop Yalla from Morgan Stanley.

Swaroop Yalla

Mike, to ask a little bit about your property debt refinancing economics, I understand that there's a need to extend the maturity. But just wondering, what was the interest rate savings relative to the prepayment penalty?

Ernest Freedman

Yes, what happened is -- Swaroop, this is Ernie. When you factor in the prepayment penalties to the refinancing transaction we did with the Freddie deal and also factor in the fact that we bought the B notes and the meze piece to bring it down. The effective cost of the entire transaction was 558. We replaced debt that was actually trading a little bit north over that, a little bit north of 6%, about 6.03%. And so we were -- have a nice pick up there. But as you said, the real motivation for us was to continue to extend our maturities and take that off the table. It just worked out for us, and we are pleased that we also got better economics going forward on these loans.

Swaroop Yalla

Great. So along that line, were you guys able to do this because of the 19 non-recourse loans? I mean, I'm just trying to see if others would follow in these kind of securitization-type GSE financing. Or is it that the majority of folks were trying to do this in bulk?

Ernest Freedman

Well, I can't speak for what other may be trying to do, Swaroop. For us, we saw an opportunity not just with Freddie Mac, and we talked to all of our lenders. One of the nice things about having property debt is you have someone to speak to on the other side, to talk about opportunities. And Freddie Mac was motivated to take things off their balance sheet, which is where our financing was. They do the CMDS-type transaction, and we were willing to entertain that. And most of the loans were with Freddie Mac, and so we did have to have a negotiation and discussion around the prepayment penalties and see if we could get some help with those. And Freddie was able to give us some help and some early fund as prepayment penalties to help make the transaction make sense. I would suspect that they may be speaking to others, but I'm the wrong person to ask about that.

Swaroop Yalla

Great. Just turning to renewal increases for August and September, I don't know if you're sending those out. What kind of renewals increases are you asking? And secondly, if you're seeing any pushback on some of these renewal increases from your residence?

Ernest Freedman

I'll ask Keith to address what we're seeing coming up on renewals.

Keith Kimmel

Swaroop, this is Keith. Well, what we're seeing is, is that as we look out into the third quarter, we're sending out asking rates at 6% to 8%. And in the fourth quarter, we're starting to send out increases that will be in the 8% to 10% range. What we're seeing is, is that the take rates usually slide somewhere between 1% to 2%, depending on the market and kind of the supply-demand in that area. But we're being aggressive as we move forward.

Operator

Our next question comes from Buck Horne from Raymond James.

Buck Horne - Raymond James & Associates, Inc.

Just wanted to go back to the 2 redevelopment properties, Treetops and Lincoln Place. Just curious, I know it's not exactly an apples-to-apples comparison, but on the existing book value and whatever your projected redevelopment costs are going to be, what kind of projected stabilized yields would you be looking for out of those 2 properties when they get delivered?

Terry Considine

Buck, I'm not ready to speak to that. I can tell you, I think they'll both be attractive. But I'm just going to wait until we're ready to start.

Operator

Our next question comes from Derek Bower from UBS.

Derek Bower - UBS Investment Bank

Quickly, what was the turnover for the second quarter?

Keith Kimmel

Derek, this is Keith. Turnover was 36%.

Derek Bower - UBS Investment Bank

And did that -- can you comment on how that might have trended at all throughout the quarter as you kind of push to renewals and where you're kind of expecting it to be going forward with the 6% to 8% renewals that you have out?

Keith Kimmel

Derek, it actually -- it upticked to about 2%. And that's an annualized number. But what we've seen is, is that we think that, that will stay consistent. We are certainly seeing acceptance of the renewals at a pretty steady pace, and one of the things that we continue to be focused on is just balancing our net contributions from turnover and vacancy loss and turn cost. And so we think that we'll stay on plan.

Derek Bower - UBS Investment Bank

Got it. And do you have what the current rent income may be for your portfolio today? How it might trend against historically?

Keith Kimmel

No. Okay, Derek, we don't actually look at it exactly that way. Essentially, what we do is we qualify our residents on a specific credit criteria. And what we've seen in the past is that -- or recently, is our low -- with the lowest decline rates and our lowest bad debt numbers that we've seen in several years. And so therefore, we believe, based on that, that we have the ability to continue to optimize rental rent increases.

Derek Bower - UBS Investment Bank

Okay, got it. And then just lastly for your OpEx, what kind of increases are you assuming for real estate taxes later in the year, maybe even into 2012, if you can provide that?

Ernest Freedman

Well, for us -- Derek, this is Ernie. The real estate taxes -- what's going to drive our real estate tax number is really going to be a lot as we did last year. So we are expecting on a year-over-year basis for the rest of 2011 that taxes will be up on a year-over-year basis. That's mainly from the fact that we had more successful appeals in 2010, and we're not projecting as many dollars in successful appeals in 2011. It'll be a little premature for me to start talking specifically about 2012, other than that we are seeing in some jurisdictions, not surprisingly, effective rates are going up. And even in some of those jurisdictions, tax rates went up. So I think real estate taxes in 2012 will be riptide in terms of going unfavorable on us. But it would be premature for me to give too many specifics on that.

Operator

Our next question comes from Michael Bilerman from Citi.

Eric Wolfe

It's Eric Wolfe here with Michael. Just 2 questions on your guidance. Could you tell us what your FFO guidance would be excluding all the one-time items? And then secondly, if you could just help us understand the logic of using pro forma guidance where it includes some items but not others? I'm just wondering why you wouldn't just exclude all of the one-time items from your guidance?

Ernest Freedman

Sure. The answer to your first question, Eric, around the guidance, is simply, we had one large one-time item that hit in the second quarter, and that was the $0.15 for the prepayment penalties, which also included some deferred loan costs in total to $0.15. So I think I saw in your note this morning, you had it the right way. So just add $0.15 to the range to get you to what our numbers would be. And then your second question about why do we exclude some items when other -- we try to be consistent with how we look at it. And in this world, there are always -- it's kind of a gray area we define as a one-time item or not. So we've had a definition around pro forma FFO that we used for quite some time. We just think it's crazy to include operating impairments and not include gains. And so we always take those out. And then we just also believe anything with the preferred redemption cost to preferred equity cost, also very transactional-based. What we try to do is make it clear on our release though that if there are other material items that are large, call them out for folks so they understand it. What I didn't want to do is reestablish a new definition of pro forma FFO with such a large prepayment penalty. This one time around, we want to try to keep some consistency for folks out there so they can have a little more clarity into the numbers.

Eric Wolfe

Okay, that's fair. And switching topics, you spoke about the acceleration you're seeing in your portfolio. It must have, I guess, really accelerated if you went from doing 3.6% increases during the second quarter to 6% -- to 8%. So what are you seeing right now that's making you get that much more aggressive? And is that level of growth even contemplated in your guidance? I mean, are you thinking that you're actually going to get, say, 6% to 8% or 5% to 7% in the back half of the year?

Ernest Freedman

Well, Eric, you're referring to the lease rates, and I'll have Keith talk to what he's seen early in the last 30 to 60 days. But to your point, we had a very nice June, and July is shaping up to be very nice, over 7% new lease growth on a lease-to-lease basis.

Keith Kimmel

Eric, just to follow-up on that point. I mean, obviously, we have been quite pleased with the progress and improvement since the beginning of the year. In new lease rates specifically, just to refresh back to the prepared remarks by Ernie, April came in at 3.8, May at 4.7, June at 6.6. And in fact, we've been tracking a club that we have established at the 10% club. In June, we had 55 communities that actually achieved 10% new lease growth. And so with that being said, we're quite excited about where it's going July. We believe we'll finish in the 7.2 range.

Ernest Freedman

And then, Eric, from a guidance perspective, the answer is yes, we have started to bake that into our assumptions for the second half of the year. We earned in $0.07 of our $0.09 increase with regards to our change in our FFO per share guidance from the second quarter and when you look to the midpoint, which means we think the second half of the year is going to be about $0.02 better. It basically held my expense guidance consistent with the second half of the year from where it was in the first half of the year from the last time I gave you guidance. And so that extra $0.01 or $0.02 should be coming from revenues getting a little better and it's used to price on our numbers. We do have an expectation that revenue growth will now be between 2.5% and 3% versus 2% to 3%. Do keep in mind, it's great that this -- this acceleration that Keith is getting. There's an earning to that. And so as excited as we are where the numbers are today, we don't want to get partial credit for that in 2011. But it's going to make 2012 take off for us if we can maintain these types of numbers, and that's what we're pushing to do.

Eric Wolfe

Right, but you should see very strong sequential growth and maybe not year-over-year because of the lease role. But the sequential revenue growth should be quite strong then?

Ernest Freedman

Knock on wood. That's what we'd hope to report in about 3 months from now.

Operator

[Operator Instructions] Our next question comes from Michael Salinsky from RBC Capital Markets.

Michael Salinsky - RBC Capital Markets, LLC

Let me try to weave 4 questions into 2 here. First question, can you just give us an update on disposition plans for the second half of the year, as well as expected contributions from investment management?

Ernest Freedman

Sure, let me -- I'll ask John to talk about what's happened with dispositions so far and what you'd expect for the second half.

John Bezzant

Sure. We provided you last time out, I think, $350 million to $400 million of guidance for gross sales for the year. We remain on track for that. We're a little past half through the year. We're about halfway through our goal.

Michael Salinsky - RBC Capital Markets, LLC

Okay, and you expect that to be pretty even?

John Bezzant

Yes.

Michael Salinsky - RBC Capital Markets, LLC

Okay, and the question, it's...

Terry Considine

Michael, if might, it's Terry. I'd like to jump in behind John on that, because it crosses my mind that this reporting, that the rate of sales doesn't quite give justice to the weeding that John is overseeing. And I think that if you look at how our portfolio has changed over the last 4 or 5 years in terms of higher rents, higher NOI margins, higher free cash flow margin and higher growth rate, I think you can expect to see that same kind of impact as we look forward over the next 2 or 3 years, as John continues to sell off the bottom of our portfolio. So it's not just going to be the impact in terms of sources and uses of cash or cap rates as you look at it, but you're going to see this continued widening of margin and increase of rental rates and increase of growth rates.

Michael Salinsky - RBC Capital Markets, LLC

That's encouraging. Second question, and again, a 2 parter here, any markets where you -- as you're starting to push rents aggressively here, you're starting to -- you're getting -- you're seeing occupancy fall back more noticeably than you would have thought. And also, just as we look out over the next couple of years here, we haven't seen much activity on the tax credit syndication side. Is that still a business that you guys are going to be active in going forward?

Ernest Freedman

I'll ask Keith to talk about what's happening with the occupancies in some of our markets and then, Mike, I'll address the question around tax credits. Those 2 don't really match up real well, but we'll go ahead and help you out with that.

Michael Salinsky - RBC Capital Markets, LLC

I was trying to -- like I said, trying to weave 4 in 2.

Keith Kimmel

Michael, this is Keith. The markets that we are seeing aggressive new lease in rental rate increases, quite frankly, we're not seeing a real drop in occupancy. I mean, there's been some expected seasonality change based on lease expirations that we plan for, and that's expected friction that will occur with more lease expirations. But it's been holding steady, and that's why we believe there's still an opportunity to push forward there.

Ernest Freedman

And, Mike, regarding tax credit syndications, I think the key for us is we don't view that as the business. We view that as an opportunity to invest dollars into our better, affordable properties. What I can tell you is that, that market has improved, and we've seen pricing get a lot better here in the last couple of months. So that will give us the opportunity to potentially seek out tax credits in the future for some of our better, affordable properties, and use those to redevelop those properties and maintain them from a long-term basis. But I don't expect to see a material change in syndication income as we've talked about many years ago and in many past periods. But I do think there'll be an opportunity for us to raise some capital, spend some redevelopment dollars as we get into -- later into 2011, more specifically into 2012. But I don't view that as more than maybe 2 to 3 type projects a year -- type activity for us. It's not going to be a business for us.

Operator

And we have a follow-up question from Rich Anderson from BMO Capital Markets.

Richard Anderson - BMO Capital Markets U.S.

One more quick question. You guys sound very optimistic, as well as many of your peers, about the business. But when you look at your Same Store outlook on a revenue-change basis, it barely budged, right? You went from 2 to 3, to 2.5 to 3, and a lot of the improvement is at the expense level, unless I'm reading it wrong. Why would you say that's the case? I mean, do you think that there is upside beyond this from a revenue standpoint? I'm just curious as to why the revenue improvement wasn't greater in such a great environment?

Terry Considine

Rich, as you've watched over the last several years, we've tried to be diversified in our portfolio and to have predictable outcomes that are steady year-to-year. So if you look back, you'll see over the past 5 years, we were probably in the top quartile in terms of net operating income. Looking forward, we're doing that same kind of balancing activity, wanting to raise rents were we can but looking at it not just in isolation, but as Keith mentioned, in terms of its contribution. And so whenever we trigger a vacancy, we trigger a certain amount of cost for cleaning the apartment or refurbishing the apartment in vacancy and marketing costs. And so we've tried to balance it. So some of that lower revenue base is offset by lower cost. What you can see in our new lease activity, which as Keith mentioned for this month has a 7 handle, is that customers like our properties, and they are prepared to pay higher rents. And as that happens, and as Ernie points as that earns in, our revenue next year will be considerably higher.

Operator

And with that, we'll conclude today's question and answer session. At this time, I would like to turn the conference call back to over to Mr. Terry Considine for any closing remarks.

Terry Considine

Well, thank you very much for your interest in Aimco. This is a good time to be in the apartment business. While the economy is uncertain, it seems pretty clear that demand for rental apartments is good and getting stronger. And we look forward to talking with you again either during the next quarter or at our next call. Be well.

Operator

That concludes today's conference call. We thank you for attending. You may disconnect your telephone lines.

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