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The most efficient and most effective way to allocate capital to multi-family real estate
Investor Presentation
February 2024
Palazzo West
Los Angeles, CA
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The most efficient and most effective way to allocate capital to multi-family real estate
Key takeaways
Opportunity is present in today’s markets
• Portfolio well positioned, and in excellent shape
– Diversified by price and market; average supply exposure
– Safe balance sheet with $1.9B of liquidity
• Opportunity: increasing allocation to AIR Edge acquisitions
– AIR’s growth was enhanced by 2021 and 2022 acquisitions
– AIR has been the most active among peers
(1)
since 2020
– Clear paired trade framework; ample opportunity currently
AIR had a solid 2023
• Peer-leading
(1)
growth in blended lease rate, Same Store
Revenue and NOI, Free Cash Flow, and operating margins
– Run-Rate FFO and AFFO per share up 7.8% and 7.7%
• Paired trades enhanced portfolio and market exposures
– Average monthly revenue per home now $2,913
– Exited New York; reinvested in Bethesda and Raleigh-Durham
• New JV partners, attracted by AIR’s comparative advantage in
operations, look to co-invest with and support AIR’s growth
• 8% reduction in shares outstanding since year-end 2021
– $1.0B ($7.15 per share at year-end 2023) returned through
dividends and share repurchases
(1) Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
(2) Lease rate growth data through February 2024 is preliminary as of 2/25/2024.
(3) Class of 2021 acquisitions defined as City Center on 7th, North Park, Huntington Gateway, Vaughan Place, and Residences at Capital Crescent Trail. Class of 2022 acquisitions defined as the Reserve at
Coconut Point, Watermarc at Biscayne Bay, Willard Towers, and The District at Flagler Village. Class of 2023 acquisitions defined as Southgate Towers, The Elm, Brizo, and The Villages at Olde Towne.
Class of 2024 acquisitions defined as The Villages at Sunnybrook.
(4) Class of 2022 expenses increased in the quarter primarily as a result of a tax revaluation in Florida, offset by continued improvement in controllable expenses. The Class of 2022 portfolio continues to
perform in line with expectations.
% AIR
GAV
NOI Growth
Rate
Same Store
excl. Class of 2021
(3)
75% Peer-leading
(1)
Acquisitions
Class of 2021 / 2022
(3)
13%
~1.2x Same Store
in Q4 YoY
(4)
Class of 2023 / 2024 /
Other Real Estate
(3)
12%
YoY variance will be
tracked in 2024
2024 guidance indicates solid year ahead
• Peer-leading
(1)
operations expected to:
– Support growth in NAV
– Generate positive, above-average FFO and AFFO growth
• Continued emphasis on renewal business… ~20% more
profitable than new leases
– Signed blended lease rate growth of 3.2% through February
(2)
– Flat COE track record extended to 14-years
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The most efficient and most effective way to allocate capital to multi-family real estate
AIR Edge results
• AIR customer selection in 2023:
– Average / median income: $237K / $170K
o Customers are “renters by choice”
– Average FICO score: 723
• AIR customer satisfaction:
– 4.28 CSAT in 2023 compares to Kingsley peer index of 4.09
– #1 of public operators per Kingsley, and #2 in industry
• AIR customer renewal rate:
– 62.3% over the TTM
o 60.8% at “A” properties, and 63.8% at “B” properties
o +550 bps since 2019 (+135 bps average annual improvement)
– Renewal leases are 20% more profitable than new leases
o 250 bps in higher rent increases in 2023
o Reduced vacancy loss during cleaning and re-leasing
o No turn, marketing, or re-leasing expenses
o Promote stability within communities, increasing propensity to for
others to renew
(1) Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
(2) CEL & Associates, Inc. via the National Apartment Association.
(3) Senior management includes AIR personnel with title of VP or above.
• AIR teammates:
– Site team satisfaction: 4.48 for all onsite; 4.52
for Service Managers
o Compares to Kingsley index of 4.29
– Site team average tenure: 6.3 years for all
onsite (14% turnover in 2023); 8.2 years for
Service Managers (4% turnover in 2023)
o Compares to average ~34-39% annual
turnover for onsite service personnel and
~18-23% for onsite community managers
(2)
– Senior management has worked together
for > 15 years
• Recognitions:
High-Quality Customers Talented, Long-Tenured AIR Teammates
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The most efficient and most effective way to allocate capital to multi-family real estate
2022 2023 % Δ
2024 Guidance
(Midpoint)
% Δ
AIR Reported / Initial Pro forma FFO per Share
$2.41 $2.41 -% $2.38 (1.2%)
Less: Contribution of
Aimco Note Prepayment
(1)
(0.22) - - - -
Less: 2023 Non
-Recurring FFO Impacts - (0.05) - - -
AIR Run
-Rate FFO per Share $2.19 $2.36 7.8% $2.38 0.8%
AIR Run
-Rate AFFO per Share $1.94 $2.09 7.7% $2.12 1.4%
Attractive recurring FFO profile
(1) Aimco note receivable had accelerated repayment with support of shareholders to further disentangle the relationship with Aimco. Original maturity date was 1/31/2024.
(2) Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
• Recurring operations have generated Run-Rate FFO and AFFO per share CAGRs of 9.5% and 10.7% since 2021
– 6.5% and 7.6% when rolled forward at the $2.38 FFO and $2.12 AFFO per share midpoints
• At +0.8% FFO and +1.4% AFFO per share in 2024, AIR is one of three peers
(2)
with positive guidance
• 2024 interest expense in context:
– $0.07 of incremental interest neutralized by $0.08 of swap income in 2023 (called out as nonrecurring)
– Debt refinanced in Q3 2023 would have matured in 2025 and 2026
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The most efficient and most effective way to allocate capital to multi-family real estate
• $1.9B of liquidity (3x peer-average
(1)
)
• No debt maturing until Q2 2025
– 6.5 year weighted-average maturity
• Sufficient committed liquidity to
repay all maturities through 2027
• Net Leverage to EBITDAre of ~6.0x
expected at year-end
– Elevated leverage in Q1 expected
due to Sunnybrook acquisition
• 4.3% weighted-average interest cost
– No floating rate exposure pro forma
for February hedging activity
AIR Refunding Schedule ($M)
$-
$561
$414
$228
$534
$141
$342
$137
$267
$320
$57
2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034+
Ample Liquidity & Limited Financial Risk
Safe, highly liquid balance sheet
6.1x
Net Leverage
to EBITDAre
BBB / Baa2
S&P / Moody’s
Ratings
$4.9B
Unencumbered
Property Pool
33% / 31%
Net Leverage
to GAV /
Adjusted for
Debt M2M
(1) Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
• Per share bridge to $145-150M of interest expense in 2024
– Starting point of $136M interest expense in 2023:
– ~$0.04 from ~21 bps higher rates
– ~$0.01 from change in debt mix at year-end
– ~$0.02 from borrowings in support of property upgrades
$201M
Debt
Mark-to-Market
• 2025 maturities ($561M):
– May 2025: $71M at 3.7%
– July 2025: $122M at 3.3%
– November 2024: $23M at 4.0%
– December 2025: $345M at 4.0%
• ~$0.02 FFO impact if refinanced at
current GSE cost of ~T+125 bps (~5.5%)
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The most efficient and most effective way to allocate capital to multi-family real estate
Full year 2024 guidance
Other Components
Change in Run-Rate FFO per Share
Same Store Portfolio
Lease Rate Growth
(2)
Signed Transacted
January
February
January
February
Renewals
5.4% 4.7% 4.8% 4.9%
New leases
1.1% 0.8% (1.1%) 0.8%
Weighted
-average 3.4% 3.1% (0.2%) 1.9%
ADO %
97.6% 97.6%
$2.41
$2.36
$2.38
($0.05)
$0.11
($0.01)
($0.07)
($0.01)
2023A
Pro Forma
FFO per Share
Nonrecurring
Contributions
in 2023
2023A
Run-Rate
FFO per Share
Same Store
Portfolio
NOI Growth
2023
Paired Trade
Transactions
Incremental
Interest
Expense
Other
Items
2024E
Pro Forma
FFO per Share
(Midpoint)
• Earn-in from 2023 Leasing Activity
• Average Daily Occupancy Growth
• Return in 2024 on Capital Enhancements
• Contribution from Class of 2022
• Change in Net Bad Debt
• Contribution from 0% / 1% / 3% Rent Growth
Guided 2024 Same Store Revenue Growth
• Same Store Expense Growth
Guided 2024 Same Store NOI Growth
2.4% 2.4% 2.4%
Low Mid High
0.2% 0.4% 0.8%
0.2% 0.5% 0.5%
0.1% 0.1% 0.1%
(0.3%) 0.1% 0.2%
-% 0.3% 1.0%
+2.6% +3.8% +5.0%
4.8% to 2.8%
+2.0% to +5.6%
• Other Real Estate
• Third-Party Service Income
(includes ~$0.05 of short duration income)
• Interest Expense
• Capital Enhancements
(down ~$16M YoY, offset by increased ICE investment)
• Year-end Net Leverage
(with fluctuation for intra-quarter activity)
$50M to $54M
~$0.11 per Share
$145M to $150M
$50M to $60M
~6.0x
2024E FFO per Share Guidance in Context:
• +0.8% (at the midpoint) one of three peers
(1)
with
positive FFO guidance
• “Noise” in short-term dilution vs. long-term benefit
– Accelerated mark-to-market on debt offset by
income from swaps
– Positive Same Store impact expected in 2025+
~3.5% blended lease rate for 2024 would achieve
mid-point of Same Store Revenue guidance;
AIR on track through the end of February
(1) Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
(2) Lease rate growth data through February 2024 is preliminary as of 2/25/2024. Data presented reflects Same Store population in 2024, which includes seven additional properties in comparison to data
presented in AIR’s Q4 earnings release.
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The most efficient and most effective way to allocate capital to multi-family real estate
(1) Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
(2) Reflects aggregate acquisition and disposition activity since 2020 divided by Total Assets per GSA as of 2/23/2024. Excludes any (re-)development spend of peers with focus on transaction activity.
(3) Class of 2022 expenses increased in the quarter primarily as a result of a tax revaluation in Florida, offset by continued improvement in controllable expenses. The Class of 2022 portfolio continues to
perform in line with expectations.
AIR is the most active in capital allocation among peers
(1)
• > $700M acquired annually since 2021; platform capacity to acquire and manage substantially more properties
Sunbelt PeersAIR Communities Coastal Peers
22%
6%
7%
25%
7%
3%
Acq. Disp. Acq. Disp. Acq. Disp.
~$4.6B of capital recycled by AIR since 2020,
or ~38% higher than the peer average
Increasing the allocation of capital to acquisitions has
accelerated AIR’s rate of NOI growth and FFO accretion
% AIR
GAV
NOI Growth
Rate
Same Store
(excl. Class of 2021)
75% Peer-leading
(1)
Acquisitions
(Class of 2021 / 2022)
13%
~1.2x Same Store
in Q4 YoY
(3)
Class of 2023 /
Other Real Estate
12%
YoY variance will be
tracked in 2024
2020-2023 Acquisition / Disposition Activity as % of GAV
(1)(2)
Acquisitions Enhance AIR’s Portfolio Growth
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The most efficient and most effective way to allocate capital to multi-family real estate
(1) Reflects aggregate underwritten NOI growth between Year 1 and Year 5 for each of the 14 acquisitions by AIR since 2021, inclusive of benefit of incremental capital spend. Of the 14 acquisitions, only two
were in lease up at the time of acquisition (Flagler at ~80% occupancy and Sunnybrook at ~75% occupancy).
(2) Property value uplift assumes that Year 1 NOI cap rate is used for valuation based on Year 3 NOI, net of capital.
Opportunity: ~30% uplift in NOI expected from AIR Edge implementation
Timing of AIR Edge Impact
Align Rent with Submarket
AIR Onboarding
Rent Roll Optimization
Initial Capital Enhancements
Capital Enhancements
19.1%
11.2%
5.9%
3.0%
Year 1 Year 2 Year 3 Year 4 Year 5
Acquisition Portfolio NOI Growth
(1)
Regress to market
growth in Year 5+
Cumulative
performance results
in ~30%+ uplift in
value by Year 4
(2)
Year 1 may be high or
low due to (i) lack of
comparability with seller
financials and (ii) impact
of AIR’s change in
community standards
Other acquisition considerations:
• 200+ bps spread to AIR’s cost of capital
• Liquidity / estate planning motivations of seller
• Acquisition basis vs. replacement cost
Target acquisitions where a 5-6% NOI cap rate to the seller is a 6-7% NOI cap rate to AIR
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The most efficient and most effective way to allocate capital to multi-family real estate
Case study: The Elm acquisition
• $132.5M investment at AIR share; first investment by AIR’s Core JV
– ~$548K per unit acquisition cost compares to estimated $650K replacement cost
• Underwritten to generate $6.2M in NOI growth by Year 3 and an unlevered IRR of 11.5%
– Year 1 NOI yield of 5.4% increasing to 6.9% by Year 3
$4.8
$1.4
$11.0
$17.2
In-Place
NOI
Revenue
Growth
Expense
Reduction
Year 3
NOI
Revenue Initiatives
• Align with market rents
• Unit premiums
• Upgrade resident mix
• Parking optimization
• Increased storage
Underwritten NOI Growth ($M)
AIR Edge Impact
63.0% 76.6%
NOI Margin %
+1,360 bps
Expense Initiatives
• Redesigned staffing
• Centralized support
• Turnover
Capital Projects
• Convert leasing offices
to rent-earning space
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The most efficient and most effective way to allocate capital to multi-family real estate
Corporate responsibility highlights
Social GovernanceEnvironmental
• Kingsley Elite Five winner
– 2
nd
consecutive year
– #1 REIT operator; #2 of all
operators
• 4.42 / 5 in team engagement
– Record participation at 79%
• Consecutive Top Workplace
awards across several regions
• Emphasis on Patriotic causes
– Full pay and benefits to
teammates deployed overseas
– >$4.8M in donations in last 10-
years, including >$2.7M to
Veteran nonprofits
• Governance and Corporate
Responsibility Committee Charter
amended to include oversight of
climate-related risks and
opportunities
• Eliminated supermajority voting to
amend AIR's Charter and Bylaws
• ~80% of shareholders directly
engaged in 2023
• Achieved GHG emissions goals 2-
years early
– GHG emissions down 17% over
2019 baseline
– Energy usage down 10% over
2019 baseline
– Waste diversion up 16% over
2019 baseline
• 75% of AIR’s properties certified as
sustainable
– Goal of 95% by year-end 2024
Recent Awards
GRESB score of 82
• 100% in leadership and reporting
• “A” in public disclosure (#2 among
peers
• Perfect score in social responsibility;
near-perfect score in governance
•
12.5% improvement in environmental
performance
2023
Elite Five Multifamily Company;
2
nd
consecutive year
2023
National Top Workplace Award
• 2
nd
consecutive year
• 10
th
consecutive award in Denver
Regional Top Workplace Award
• Philly, Denver, South Florida
2023
Best Places to Work Award
• LA, Denver, D.C., and Miami
2023
Healthiest Employer
• Colorado and South Florida
IREM® Certified Sustainable
• 50 properties now certified
Goal of certifying 95% of portfolio (by
IREM or otherwise) by year-end 2024
– 75% complete today
2023
•
MHN Excellence Award for Best ESG
Program
Committed to transparency and disclosure
AIR reports and validates progress with industry-recognized benchmarks, and verification methods
• GRESB: Provides validated ESG performance data and peer benchmarking
• Sustainability Accounting Standards Board: Framework for disclosure on energy management, water
management, tenant sustainability, and climate change adaptation
• Task Force on Climate-related Financial Disclosure: Framework for disclosure on governance, strategy, risk
management, and climate-related metrics and targets
• United Nations Sustainable Development Goals: 17 topical goals toward global sustainability
• Independent Verification: Third-party, independent assurances of goals and metrics
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The most efficient and most effective way to allocate capital to multi-family real estate
The Villages at Sunnybrook
Raleigh, NC
Appendix
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The most efficient and most effective way to allocate capital to multi-family real estate
The AIR Edge: overview
• Our ideal is a culture of collaboration to serve others, nurture relationships, and build safe, stable communities. We seek
teams that are more cohesive, better compensated, and more productive. We seek customers that make better neighbors
and stay longer. The AIR Edge is the result:
– Predictably higher renewal rates.
– Consistently lower bad debt levels and operating expenses.
– Higher NOI and FCF margins.
– Greater opportunity for financial outperformance, less dependent on external factors.
• We begin with seeking, attracting, and selecting high credit customers, using credit scores as a proxy for character.
• We add a Good Neighbor Commitment to each lease: what we expect of our residents and what they can expect of us.
• We hold ourselves accountable, and after each interaction provide our customers with the opportunity to grade our
performance. We publish the unvarnished results online, increasing their importance… and their discipline on team
behavior.
• We avoid apparent opportunities that in practice undermine the long-term safety, stability, and enjoyability of our
communities: no short-term leases, no corporate leases, no subletting or “Airbnb,” no self-guided tours, no entry of
strangers to deliver packages. We enforce rules on behaviors that are inconsiderate of neighbors: for example, our
properties are all “non-smoking.”
• We are an early adopter of various technologies including SmartRent, robotics, and artificial intelligence... but we always
balance “high tech” with “high touch.”
• We re-structure work onsite to focus on customer relationships and property conditions, and provide support offsite for
marketing, credit approval, financial control including purchasing and collecting rent, and compliance with local laws
and regulations. The result is stronger customer relationships, greater productivity, and scalable cost efficiencies.
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The most efficient and most effective way to allocate capital to multi-family real estate
AIR is focused on recurring and growing NOI and FCF, and FFO and AFFO
The AIR business model is distinctive:
• AIR emphasizes customer selection with focus on stability (measured by high FICO scores) to attract “good neighbors.”
At 62%, the AIR retention rate is 550 bps higher than in 2019.
– As in most business, continuing customers are more profitable than new ones. In apartments, renewals are ~20% more
profitable than new leases: ~50% because renewals average ~330 bps higher rent increases than new leases and ~50%
because expenses such as cleaning costs, vacancy loss, and re-leasing expenses are avoided.
– Also, AIR has used technology to restructure onsite work to increase productivity. The result is fewer onsite workers and a
lower total labor cost… even as individual teammates are more highly paid. For example, AIR’s service managers make six-
figure incomes and have been employed at AIR for an average of almost ten years.
– AIR’s cost control has kept controllable operating expenses flat for 14 years.
• AIR’s NOI margins exceed the peer-average,
(1)
as do AIR’s FCF margins.
– FCF is calculated after capital replacements (“CR”) and so avoids differences based on accounting, rather than cash costs.
• AIR’s selection of higher income residents means that customers can afford to pay more for property upgrades, making
K&B and other such short-cycle investments profitable with low execution and inventory risks. Investing $50M of AFFO
(retained after dividends) at low double-digit IRRs adds ~60 bps to the NOI growth rate, and ~$0.02 per share to 2024 FFO
and AFFO.
• AIR has greater flexibility than peers
(1)
in reallocating capital because AIR re-set its income tax basis in 2020, and so has
a reduced tax “lock-up.” AIR has been more active than peers
(1)
with the result of a larger % of capital allocated to new
acquisitions with a higher rate of NOI and FCF growth.
(1) Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
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The most efficient and most effective way to allocate capital to multi-family real estate
AIR’s distinctive business model provides for peer-leading
(1)
results
Same Store NOI Growth (%)
(1)
Property EBITDA Growth (%)
(1)(2)
Same Store Revenue Growth (%)
(1)
122.5
113.4
128.3
2019 2020 2021 2022 2023 2024
Midpoint
Guidance
(1) Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
(2) Property EBITDA defined as Same Store NOI less Net Property Management and G&A Expense and divided by Same Store Revenue. This metric is tracked internally by AIR as a key measure of
efficiency with respect to its Same Store Portfolio. Comparison with peers is made difficult by differences in business models and accounting, and exact numbers are false precision.
126.4
109.6
128.2
2019 2020 2021 2022 2023 2024
Midpoint
Guidance
135.1
105.9
129.9
2019 2020 2021 2022 2023
Sunbelt PeersAIR Communities Coastal Peers
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The most efficient and most effective way to allocate capital to multi-family real estate
($ in 000s, unless noted) AIR ESS UDR AVB EQR CPT MAA
2023 Actuals
Same Store Revenue (GAAP) $600,142 $1,579,890 $1,492,428 $2,514,272 $2,754,711 $1,238,564 $2,024,751
YoY Growth 7.9% 4.6% 6.2% 6.3% 5.6% 5.1% 6.2%
Same Store NOI (GAAP) $447,244 $1,116,606 $1,039,284 $1,732,422 $1,881,263 $804,175 $1,306,939
NOI Margin 74.5% 70.7% 69.6% 68.9% 68.3% 64.9% 64.5%
YoY Growth 9.3% 4.7% 6.8% 6.2% 6.2% 4.3% 6.0%
Net Property Management (21,592) (34,741) (45,828) (121,711) (119,804) (31,972) (67,784)
G&A Expense (21,162) (63,474) (69,929) (76,534) (60,716) (62,506) (58,578)
Property EBITDA (1) $404,490 $1,018,391 $923,527 $1,534,177 $1,700,743 $709,697 $1,180,577
Property EBITDA Margin 67.4% 64.5% 61.9% 61.0% 61.7% 57.3% 58.3%
YoY Growth 11.4% 3.9% 6.8% 6.3% 6.1% 3.7% 6.5%
Capital Replacements (30,517) (126,718) (80,728) (123,849) (203,554) (77,952) (106,882)
Per Unit (2) $1,690 $2,531 $1,572 $1,657 $2,668 $1,644 $1,122
Free Cash Flow (2) $373,973 $891,673 $842,799 $1,410,328 $1,497,189 $631,745 $1,073,695
Free Cash Flow Margin 62.3% 56.4% 56.5% 56.1% 54.4% 51.0% 53.0%
YoY Growth 12.4% 5.0% 5.5% 5.7% 3.2% 3.5% 6.0%
Average Average
SSNOI Margin % 74.5% 70.7% 69.6% 68.9% 68.3% 69.4% 64.9% 64.5% 64.7%
Property EBITDA % 67.4% 64.5% 61.9% 61.0% 61.7% 62.3% 57.3% 58.3% 57.8%
Free Cash Flow % 62.3% 56.4% 56.5% 56.1% 54.4% 55.8% 51.0% 53.0% 52.0%
Implied Revenue % Increase for Breakeven with AIR 11.6% 19.8%
(1) Property EBITDA defined as Same Store NOI less Net Property Management and G&A Expense and divided by Same Store Revenue. This metric is tracked internally by AIR as a key measure of
efficiency with respect to its Same Store Portfolio. Comparison with peers is made difficult by differences in business models and accounting, and exact numbers are false precision.
(2) Free Cash Flow defined as Property EBITDA less Capital Replacements. For peers that report Capital Replacements (or an equivalent) on a consolidated basis, the implied per unit amount over the total
portfolio is applied to the Same Store units outstanding in the measurement period.
Comparison of Same Store NOI, Property EBITDA, and Free Cash Flow margins
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The most efficient and most effective way to allocate capital to multi-family real estate
Turn costs and annual capital replacement
(1)
in line with peers
(2)
• Expectation that recurring capital needs will continue to improve as paired trades reduce average age of AIR portfolio
(1) Capital Replacement for AIR is defined as capital that does not increase the useful life of properties from acquisition (i.e., an offset of depreciation).
(2) Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
(3) Repairs & Maintenance (“R&M”) reflects Same Store expense, per filings, divided by Same Store units or Same Store NOI. Capital Replacement for peers defined as asset preservation, recurring capex,
building improvements, or equivalent, and divided by Same Store units or Same Store NOI, respectively, unless reported on a consolidated basis and then divided by total units or total NOI, respectively.
Sunbelt PeersAIR Communities Coastal Peers
1,367
1,505
1,658
1,735
1,675
1,333
1,427
1,538
1,648
1,562
756
778
876
980
1,075
1,434
1,404
1,673
1,720
1,690
1,548
1,296
1,549
1,928
2,101
1,110
1,194
1,139
1,300
1,383
$2,801
$2,909
$3,331
$3,455
$3,365
$2,882
$2,724
$3,087
$3,576
$3,663
$1,867
$1,971
$2,014
$2,280
$2,458
R&M Expense + Capital Replacements Per Unit
(2)(3)
R&M Expense + Capital Replacements as % of NOI
(2)(3)
7.5%
7.4%
8.4%
7.5%
6.8%
7.6%
6.9%
8.6%
9.3%
9.5%
10.3%
10.8%
9.7%
10.0%
10.3%
7.1%
7.9%
8.3%
7.6%
6.8%
6.3%
7.1%
8.1%
7.6%
7.0%
6.5%
6.6%
7.0%
6.7%
7.0%
14.6%
15.3%
16.6%
15.0%
13.6%
13.9%
14.1%
16.7%
16.9%
16.4%
16.8%
17.3%
16.8%
16.7%
17.3%
Capital Replacements
R&M Expense
2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
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The most efficient and most effective way to allocate capital to multi-family real estate
Programmatic property upgrades drive long-term value and FFO accretion
• Invest only where expected NOI enhancement generates long-term IRR of > 10% (generally ~10% yield in Year 1)
• Funded by retained earnings
• Immediate benefit to NAV; lagged, but sustained benefit to FFO
(1) Capital enhancements (“CE”) includes kitchen and bath remodeling, energy conservation projects, and investments in longer-lived materials designed to reduce costs. CE does not significantly disrupt
property operations.
2024 Capital Enhancement
(1)
Guidance: ~$50-60M
• K&B projects target ~1,600 apartment homes annually
– Transacted new lease rent growth of ~5.6% in 2023 includes
~100 bps benefit from K&B activity
– Affluent residents finance upgrades through higher rents
• ~50% of Same Store units currently eligible for K&B upgrades
– Embedded pipeline potential of ~6 years
• Increasing % being invested in efficiency projects
– In-unit LED, smart lighting, greater security at access points,
parking, etc. increase customer satisfaction and reduce costs
– Investments into customer safety and monitoring (e.g., for water
leaks, temperature, and humidity) also lowers insurance
premiums
• Relative contribution to NOI growth expected to be more
pronounced as rent growth returns to long-term trend
A sustained, annual CE investment program of
~$80M (±) can enhance AIR’s NAV by > 10% on a NPV basis
82%
81%
74%
50%
1%
4%
5%
14%
17%
14%
21%
36%
2021 2022 2023 2024E
Other CEK&Bs Efficiency Projects
$80M $88M $71M
Programmatic use of capital that can be adjusted
subject to market conditions
~$50-60M
17
The most efficient and most effective way to allocate capital to multi-family real estate
Supply impacts in line with historical experience
• Competitive new supply is familiar to AIR; historical experience of ~20-30% of NOI impacted by new supply
• Supply and demand are highly local; analysis below considers addresses, as well as submarkets
Units
% AIR NOI
% AIR NOI w/Supply Impact
(1)
@ Share @ Share “A” “B” Total Market / Supply Commentary
California
6,400 36% -% 4% 4%
+
Supply growth across California remains at < 1% of inventory
+
Continued strength in San Diego and LA; LA COVID bad debt impacts moving to rear view
~
Leasing sluggish in the Bay Area in the Peninsula / San Jose; NO properties in the City of San Francisco
South Florida
3,812 19% 5% -% 5%
+
50%+ in rent increases since 2021 still being absorbed / earned-in; rent growth is positive but slowing
+
Long-term attractiveness of South Florida (e.g., weather, taxes, and rule of law) is unchanged
~
Insurance a challenge; but, recently built / renovated properties (Watermarc
/ Southgate / Flagler) achieved
favorable premiums due to superior construction and AIR operating processes
~
Supply in Edgewater (Watermarc
and Bay Parc); supply in Fort Lauderdale (Flagler); 2023 deliveries largely
absorbed
Washington, DC
4,524 17% 1% 1% 3%
+
Seasonally adjusted market rents continue to increase YoY; market remains attractive (e.g.
, Elm acquisition)
+
Moderate supply in pockets; properties not impacted on account of location and/or positioning
+
Opportunity if federal employees return to office
Philadelphia
2,070 9% 6% -% 6%
+
University City properties well positioned on UPenn campus; Center City properties will benefit from
Comcast’s new RTO mandate in 9/2023
~
New supply plunging after pull forward from 1/1/2022 reduction in Philadelphia Tax Abatement Program
value and increase in construction sales tax
Denver
1,976 7% 1% 2% 3%
+
No supply risk in Boulder
+
Price points in suburban properties well below those of new supply
~
Elevated supply around Anschutz Medical Campus, but AIR properties “on campus,” while new supply is not
Boston
1,284 7% 2% -% 2%
+
Market screens for elevated supply; however, three AIR properties in Kendall Square insulated by proximity
to MIT and suburban properties are at price points below those of new supply
~
One Canal (North Station) will be subject to increased competitive supply in the future, though not 2024
Other
1,608 5% 1% 2% 3%
~
Elevated supply in Atlanta (West Midtown), Minneapolis (Uptown), and Raleigh (Research Triangle); recent
entry into the Raleigh submarket done so at an attractive basis
Total
21,674 100% 17% 10% 27%
(1) Supply Impact defined as % of NOI at AIR properties where either submarket supply inventory levels are > 2% or impacts of competitive lease up activity are present.
18
The most efficient and most effective way to allocate capital to multi-family real estate
Forward-Looking Statements / Non-GAAP Measures
This presentation contains forward-looking statements within the meaning of the federal securities laws, including, without limitation,
statements regarding projected results and specifically forecasts of 2024 results, including but not limited to: Pro forma FFO, Run-Rate
FFO, and selected components thereof; AIR’s ability to maintain current or meet projected occupancy, rental rate, and property operating
results; operating performance of acquisition communities; expectations regarding dispositions and the use of proceeds thereof;
expectations regarding acquisitions; and, liquidity and leverage metrics.
We caution investors not to place undue reliance on any such forward-looking statements. These forward-looking statements are based on
management’s judgment as of this date, which is subject to risks and uncertainties. Risks and uncertainties that could cause actual results
to differ materially from our expectations include, but are not limited to, real estate and operating risks, including fluctuations in real estate
values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and
local economic conditions, including inflation, the pace of job growth and the level of unemployment; the timing and effects of acquisitions
and dispositions; changes in operating costs, insurance risks, including the cost of insurance, and those described from time to time in
filings by AIR with the Securities and Exchange Commission (“SEC”), including in the section entitled “Risk Factors” in Item 1A of AIR’s
Annual Report on Form 10-K for the year ended December 31, 2023, and the “Risk Factors” section of registration statements filed with the
Securities and Exchange Commission.
Readers should carefully review AIR’s financial statements and the notes thereto, as well as the documents AIR files from time to time with
the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ
materially from those contained in the forward-looking statements. These forward-looking statements reflect management’s judgment as of
this date, and AIR assumes no obligation to revise or update them to reflect future events or circumstances.
