AEC had funds from operations of $0.32 a share, after accounting for dilution. That’s about in line with earnings expectations of $0.33 a share. And before adding back in a $0.039 one time charge used to prepay loans.
Let me rephrase that; AEC pulled as much money from operations alone as analysts expected from ALL earnings, before counting any one time line items.
With one time line items, AEC made $0.54 a share, beating earnings expectations by a wide 63.6%. After that dreaded dilution, that’s still pulling an easy $0.46 a share without the company expanding their operation (the company WILL be expanding its operation).
Those line items that produced the excess gains came from the sale of some of their properties. Here’s the thing; those properties have already been replaced, so their sale will not impact operations either.
In fact, the replacement properties are easily 20 years younger than those that have been disposed of. And they probably bring in more money. Average rents of same communities for AEC are up to $1,024 a month, versus $969 a month this time last year.
Oh, yeah, and occupancy of same communities stands at 97.0%
Anyone want to bet that AEC isn’t buying apartments that it can charge more for and fill up quicker than its standard operation?
That’s the entire strategy of management; roll over the existing operation into younger buildings, that are more easily serviced, and pocket the difference, while still growing.
The only one of my key assumptions I listed yesterday that was violated was the “no earnings” prediction. The company had earnings – a ton of them. At their current earnings, AEC is going for just 6.7X their earnings. And trading pretty close to book value.
That’s crazy.
I sort of wish they were still booking losses, because while they were doing that, they were acquiring like mad. They still seem to be interested in acquisitions, but those acquisitions will not be financed by tax free revenue now, it seems.
Their new interest is – credit.
AEC’s management raised just under $100 million in cash in the last 6 months BEFORE counting lower payments from restructured debt. Uh, hi, yeah, AEC is only a $1.1 billion company with $700 million in debt. If they took that money and hit their debt, that’d add another $0.11 onto FFO by itself (although admittedly lowering FFO per share on net after factoring in dilution from not expanding the business).
So we have a company that is continuing to be graced by strong secular trends in housing pushing people into rentals, strong secular trends raising rental rates, strong secular trends in mortgage rates, who have used this opportunity to restructure their operation into signficantly younger properties in easier to maintain, higher desirability locations, and who now are preparing to lower costs even further by improving the company’s credit rating.
And you want to value such a company at 6.7X earnings and par for book value? What the hell is wrong with you?
But the best part is, I KNOW I am completely on mark when I say the downgrades and earnings commentary on this company are completely, 100% algorithm driven, and totally off the mark. One of the first announcements that followed the company’s own disclosure tried saying earnings were $0.32.
No! FFO was $0.32. Earnings were $0.54.
But hey, thanks for playing. I now am completely convinced that the overall majority of opinion on this company is completely off base, created by computers who’s builders never bother to check the drivel that they spit out.
I will continue to hold AEC, and to accumulate it on all dips, much like the one it is experiencing now.
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The market’s nose diving here, but AEC is still up 2.3% so far today.