Come See AEC’s CEO Lambaste The Market, Analysts

I want you all to take a minute and listen to what a prudent management team sounds like. The speaker is Jeff Friedman, AEC’s Chairman, President and CEO:

Thank you, Jeremy. We appreciate everyone taking the time to participate on our call. If in the long run the stock market is a weighing machine, why then do we continue to trade at such a discount? Is it because 40% of our NOI comes from the Midwest? Is it because we are a small cap company?

It can’t be, (sic) because we haven’t executed on our strategic objectives, we have, year in and year out. It can’t be because we haven’t been clear about how we plan to execute, we have, as demonstrated by our 2010 acquisitions, our 2010 equity raises, the limited use of our ATM and by allowing our internal growth from our 2010 and 2011 acquisitions to prove that we once again delivered on what we said we would do.

A long-term property level performance has led most of the publicly traded apartment REITs. Since 1998 when we decided to expand outside of the Midwest, we have repeatedly demonstrated our ability to recognize when to buy and when to sell. Our portfolio today is among the youngest of all of the apartment REITs. Our properties outside of the Midwest are in many of the strongest and fastest growing submarkets in the country. Our Midwest properties continue to produce strong results. Still, our stock trades at a discount.

We’ve repeatedly explained that we will not lever back up and that we need to raise $0.50 of equity for every dollar we spend. We said on our earnings calls in February and April that the midpoint of our acquisition guidance of $75 million could be accomplished while staying in our targeted debt-to-book value range of 48% to 52%, without needing to issue any additional equity.

In a very short period of time, we were able to tie up both marketed and off-market deals that we expect will generate strong returns for many years to come. These properties were under managed and we bought them below replacement cost. We are at a point in the cycle at these properties where we expect strong operating performance for quite some time.

Our re-entry into Raleigh-Durham is consistent with our objectives on all fronts. So why does our stock continue to trade at such a discount? We have delivered sector-leading results over multiple cycles. We have been clear about our strategy. In our case, the market has not been efficient and there is a major disconnect between our stock price, our multiple and the value per share.

Our job is to narrow that gap. We are confident that our continued execution will do just that. We are focused on the long term and every decision we make, every step we take is with that in mind. We have a strong experienced management team committed and focused on creating long-term value and sustainable and predictable earnings. We can’t be swayed by opinions about where we should buy or build and where we shouldn’t.

Would we have wanted our stock price to be higher when we did the follow-on last month? Absolutely. We expect our acquisitions to more than make up for the FFO and NAV dilution associated with our recent follow-on.

We will continue to execute our strategic objective of growing through acquisitions and development. We will allow the organic growth from our same-community properties and our recent acquisitions to drive results. This will position the company to deliver strong and sustainable earnings for years to come.

We urge you to visit our properties. We are confident that their high quality and sub-market-leading positioning will be obvious. We will not lever back up. That’s how we will expand the multiple, the old fashioned way, through continued hard work, focus and continuing to put up the numbers.