Good day, welcome to the AIR Communities' second quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. As a reminder, today's call is being recorded. I'd now like to turn the conference over to Lisa Cohn. Please go ahead, ma'am. Good day. During this conference call, the forward-looking statements we make are based on management's judgment, including projections related to 2021 expectations. 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. We will also discuss certain non-GAAP financial measures, such as FFO. These are defined and are reconciled to the most comparable GAAP measures in the supplemental information that is part of the full earnings release published on AIR's website. Prepared remarks today come from Terry Considine, our CEO, Keith Kimmel, our President in charge of Property Operations, Paul Beldin, our Chief Financial Officer, and other members of management are present and will be available during our question-and-answer session, which will follow our prepared remarks. I will now turn the call to Terry Considine. Terry? Thank you, Lisa, and thank each of you on this call for your interest in AIR. Business is good. It's proof of a very good quarter when the most dramatic glitch is poor sound quality on our call. The most important fact of today's apartment business is that strong consumer demand is driving higher rents and higher occupancy, and the most important question for apartment investors is how much of a higher top line will reach my bottom line? AIR with best-in-class margins, flat controllable operating expenses, and low G&A provides peer-leading efficiency in the flow-through of revenue to FFO and cash dividends. AIR is on track to accomplish and exceed its 2021 goals. Keith's property operations team was superb again. Notwithstanding bad debt resulting from California laws and local ordinances, property revenue grew year-over-year in June and is accelerating to be up year-over-year for the full year. Controllable operating expenses are on track to be down for the full year again, resulting in a return to full-year NOI growth. AIR purchased City Center, upgrading our portfolio and showing the power of great operations. AIR issued $300 million of equity to reduce leverage, with a $600 million balance expected by year end from selling properties into a rising market. The result was a beat to first-half FFO guidance up by 7%, an increase to second-half FFO guidance up by 7%, and a raise to quarterly dividends up by 2%. AIR is well-positioned for an excellent second half. AIR is even better positioned for an excellent 2022. Portfolio quality is good and well-diversified. Loss to lease promises substantial rent growth. The dilution of leverage reduction will be behind us. As always, the key is the AIR team and its focus on operational excellence. To my colleagues in Denver and my teammates in the field, well done and 10,000 thanks. Now to explain what we did, how we did it, and what we see ahead, I'd like to turn the call to Keith Kimmel, Head of Property Operations. Keith? Thanks, Terry. The second quarter was good. More importantly, our leading indicators point towards a continued rapid recovery in the second half of this year and an excellent 2022. We operate with a strategy to solve for maximized contribution to margin over a horizon of 12- 18 months. That long-term perspective allows us to look beyond the moment to spot changes in our market dynamics well in advance and adjust our approach accordingly. Our outlook for the business has improved over the past four quarterly calls. First, calling a bottom last October. Next, identifying green shoots in January, and then pointing to a rebound in April. Today, we see acceleration. The second quarter was good. The recent performance we'll discuss means the third and fourth quarters will be record-setting, and we will be making decisions today to ensure 2022 continues to build on that performance. What do I see that makes me increasingly optimistic? Leasing is running at a record pace. The volume of leasing in the second quarter is the highest we've ever recorded, 65% ahead of 2020 and 10% ahead of the previous best in the second quarter of 2019. Occupancy is poised to accelerate. One key leading indicator is the percentage of units which are leased, which includes today's occupancy and all scheduled future move-in and move-out activity. Today, we are 95% leased, 8% ahead of the same day last year, and 4% ahead of 2019. Our lease percentage in 2019 was a precursor to the 97.4% occupancy in the fourth quarter, driving our bullish outlook for the balance of this year. Pricing is rapidly improving. We increased effective asking rents by $130 on average during the second quarter, and in July, we increased rates another $60. As a result, signed new lease rates increased for the 10th consecutive month, with July up 9.5%. That means we've not only returned to our pre-COVID rates, but we have recovered back to the long-term growth trend line. That combination of record leasing, higher occupancy, and increasing rates will be the drivers that result in a strong growth in the second half of 2021 and into 2022. Turning to the second quarter results. Revenue was lower year-over-year by 1.9% while increasing quarter-over-quarter by 80 basis points. The year-over-year decrease is largely due to the earn-in of last year's lower rents and continued bad debt elevated due to government suspensions of our contractual rights to collect past due rent. The trend for year-over-year revenue growth is improving, with June revenue up 1.8% from June of 2020 as we begin to earn in positive rates from this year. Bad debt for the quarter was 2.1% as renters, even those without hardship, continue to be protected from legal recourse. That being said, I am encouraged that we collected $700,000 in city and state rental assistance payments during the quarter, partially offsetting the growing delinquency from those still allowed to live rent-free. Controllable operating expenses were up 2.8% in the second quarter, largely due to the timing of expenses last year during lockdown. For the full year, we expect controllable operating expenses to be down compared not only to 2020, but down compared to each of the previous five years. Overall expenses increased 5%, driven by increased taxes and insurance. As a result, net operating income for the quarter was down 4.5% and turned positive in the month of June, up 2.6% year-over-year. Most importantly, even at the bottom of the cycle, our margins remained strong at 70.7%, continuing a string of 19 consecutive quarters with margins above 70%. Moving to individual markets, we've improved across the board. Most markets have recovered not only to pre-COVID peak, but also to the long-term growth trend in asking rents. Miami and San Diego were our strongest markets, posting signed new lease rates up over 15% in July, with asking rents now well above long-term trend. Denver, Boston, Los Angeles, and Washington, D.C. have all steadily strengthened. Each has signed new lease rates up 8% or more in July, and with asking rents also above trend. In Philadelphia, in keeping with our approach of solving for long-term contribution, we pursued a strategy of increasing rates in the face of low occupancy this spring, accepting the vacancy loss in the anticipation of a rapid recovery in the market. We have now seen leasing rebound with demand from University City students and Center City workers. As of today, we are more leased than we were in 2019. Signed new lease rates were up 5% in July as asking rents recovered to pre-COVID peak, though they still lag trends slightly. In essence, we made a calculated trade in March. Lower second quarter occupancy and income for a higher rent roll at the end of peak season. This decision has been a net positive for both 2021 and 2022. Pressure continues to ease in the Bay Area, where we've seen occupancy rebound with the return of tech workers. Rates have gradually strengthened. While they remain below pre-COVID peak, new leases in July were signed at positive lease-to-lease. As a result of these positive trends across our markets, July has demonstrated further acceleration. Rates have reached record levels, with signed new lease rates up 9.5% over the prior lease, renewals up 5.9%, and a signed blended rate up 7.5%. We anticipate occupancy of 95.8%, up 30 basis points from June, despite the higher frictional vacancy. We exit July well-positioned for the balance of the year. Bad debt will continue to improve, with increased California government assistance payments and the anticipated lifting of eviction moratoriums, allowing us to address those who are delinquent and without a special hardship while still helping those who are in need. We will continue to earn in the strong rate growth we've signed over the past few months, with 4,000 leases that are already signed and yet to begin at an average increase of 8.6% and sustained strong pricing as indicated by a 10% loss to lease in our current rent roll. Finally, occupancy will increase rapidly as we exit peak season and frictional vacancy dissipates. As we look to 2022, we expect revenue to benefit from the earn-in of the growth rate of leases already transacted and those to come as we reprice the 10% loss to lease, continued growth in rental rates next year, recovery of occupancy to pre-COVID levels, improvements in other income and bad debt as government restrictions are eased, continued discipline in controlling costs, and contribution from City Center on 7th, where we have seen the value of AIR operations in the early days of ownership. In the first 45 days, we have raised rents $350 on average. We've transacted 27 leases at rates up more than 20% and increased occupancy beyond 97%. City Center will be a textbook example of how properties are worth more when operated by AIR. Over the next year or so, we will refresh the physical property, but more importantly, we're putting in place AIR customer selection, customer service, and customer retention. We are also implementing AIR's disciplined property operations so that work is done more effectively and at lower costs. The expected result will be a sharp expansion of margin and bottom line, just as we've done before, for example, with Bent Tree and our Philadelphia acquisitions. My thanks to all the AIR team members involved in the successful integration of City Center into our portfolio, and more broadly, thank you to all the AIR team members who have worked so hard and so well during the challenging times of the past 18 months, whose energy, innovation, and commitment to our customers have set us up for a strong rebound in future growth. With that, I'll now turn the call over to Paul Beldin, our Chief Financial Officer. Paul. Thank you, Keith. Today, I will discuss five topics. First, AIR's strong balance sheet, including our measured strategy to reduce leverage by $900 million over the course of the year. Second, our recent acquisition of City Center on 7th. Third, our expectations for the remainder of 2021. Fourth, our announced dividend increase. Fifth, our optimism for continued improvement in 2022. First, AIR's balance sheet is strong and flexible. As part of the separation transaction, we set a leverage target of debt to EBITDA of 5.5 to 1, and a completion date of year-end 2022. In April, we decided to accelerate our de-levering by 12 months to year-end 2021. Our plan is to achieve this result in three phases. First, during the second quarter, we used the proceeds from our equity issuance to repay $318 million of property debt with a weighted average interest rate of 4.6%. In doing so, we incurred $34 million of prepayment penalties. The prepayment penalties are justified through future interest savings. Second, during the third quarter, we expect to contract for property sales primarily from our New York City and Chicago portfolios, providing additional proceeds in excess of $300 million. Marketing these properties is well underway. Demand is strong with numerous would-be buyers and attractive pricing. Closings are expected before year-end, with proceeds applied to reduce property debt. Third, during the fourth quarter, we expect to raise an additional $300 million or more from the sale of properties outright or in joint ventures. Our marketing here is also underway with similar high interest and attractive pricing. In sum, we are on track to raise the remaining $600 million necessary to reduce our leverage to our target level. Next, I'd like to spend a moment discussing our recent acquisition of City Center on 7th in Pembroke Pines, Florida. City Center has 700 apartment homes with average in-place rents, monthly rents just under $1,900. We purchased City Center six weeks ago for $223 million and anticipate completing the pair trade by selling an additional $175 million of properties in the fourth quarter. We expect a 4.2% yield during our first year of ownership and expect this yield to approach 6% over the next few years due to the effectiveness of Keith's operating platform, investment of an additional $10 million in property upgrades and refreshment, and strong local demand. The transaction will slightly increase leverage to EBITDA at year end, but we expect that rising EBITDA will put us on target soon thereafter. This transaction is important to portfolio management. By year end, we expect to have reduced our capital allocation to New York City and Chicago and increased our allocation to South Florida by 200 basis points to approximately 10%. The expected result is faster growth because of the strength of the South Florida market and more predictable taxes and regulations. Now, turning to full year 2021 guidance. For our second time this year, we are increasing our expectations for FFO, same store revenue, and NOI, and lowering our expectations for expenses. We now expect full year FFO per share between $2.09 and $2.15. At the midpoint, this is an increase of 7% from the guidance we gave six months ago. With year-to-date FFO of $1.02, our guidance implies 8% acceleration in the second half of the year. This acceleration is primarily attributable to the revenue and NOI growth embedded in our guidance for same store operations. During the second half of the year, at the midpoint, we expect revenue growth of about 6%. We are confident in our revenue growth expectations because most of the growth is based on facts in existence today, including maintaining July's expected average daily occupancy of 95.8%, the earn-in of existing leases, and incremental commercial income from tenants who have resumed rent payments. The remaining expected growth of approximately 200 basis points is based on continued improvements in average daily occupancy, lower bad debt expense, including government assistance payments continuing at a level similar to the $700,000 received in the second quarter, and the contribution from 3,700 leases remaining to be executed at rates expected to be 6%-8% above expiring lease. Next, on July 27th, the AIR Board of Directors declared a quarterly cash dividend of $0.44 per share, a 2% increase from the dividend paid in May. This increase is due to higher revenue. It is also due to the AIR business model, which features peer-leading efficiency in conversion of higher top line to the bottom line, providing a flow-through rate to shareholders 10% higher than peer average. I'll conclude with four quick comments about next year. First, we have the opportunity for substantial revenue growth in 2022 from the earn-in of the current 10% loss to lease, continued improvements in average daily occupancy, and lower bad debt expense. Second, more of our revenue will convert to FFO and dividends because of AIR's peer-leading flow-through rates. Third, we expect increasing contribution from the acquisition of City Center. Fourth, we expect a significant reduction in interest expense from lower borrowings at lower rates. When you add it all together, we can see that 2022 is shaping up to be a very good year. With that, we will now open the call for questions. Please limit your questions to two per time in the queue. Rocco, I'll turn it over to you for the first question. Thank you, Paul. As a reminder, if you'd like to ask a question, please press star then one on your touch-tone phone. If your question's been addressed and you'd like to remove yourself from queue, please press star then two. Today's first question comes from Haendel St. Juste with Mizuho Securities. Please go ahead. Hi, thank you for taking the question. In the supplement you discussed the Moody's rating and how that could potentially change later in the year after you execute some of your de-leveraging. What incremental benefits do you think you'll achieve in that process versus what you already have with the S&P investment-grade rating? Yeah, Haendel, thank you for that question. What we desire with the potential of a Moody's rating is continued optionality. By having both an investment-grade rating from Moody's and S&P, it provides us greater opportunity to the debt public capital markets. As you know, today, bond pricing is quite attractive. Many of our activities during the course of the past six months since the establishment of AIR have been leading us towards a path of providing that optionality. Most notably, an increase in our pool of properties that are unencumbered by debt. It has increased by 50% just in the past six months. Got it. Thank you. Yeah. Turning to the dispositions, you gave some numbers, but just curious how the weightings will look like in 3Q and 4Q, and what do you think that will do to the portfolio in terms of percentage of asset class? Do you expect to have a little more weighting in A or B or C post-dispositions? Haendel, I'll start with that, and if somebody else wants to jump in, please feel free. The impact to the third quarter will actually be not consequential because the only real change between now and then is the acquisition of City Center. The transactions we've been discussing are expected to close in the fourth quarter. If we project to year-end, as I mentioned in the prepared remarks, our allocation to New York and Chicago will come down. The Chicago portfolio is kind of a B-plus, A-minus portfolio. The New York portfolio is a C-plus. You'll see some shifts in our weightings from that factor. I think longer term, what we want to do is remain diversified. We want to remain diversified in both price points and in geography, and we think the steps that we are undertaking will help accomplish that goal. Got it. Thank you very much. Our next question today comes from Nick Joseph at Citi. Please go ahead. Thanks. As you think about redeploying those proceeds from the asset sales, what is the coupon on the debt that you're planning to repay? What are the prepayment penalties associated with it? Yeah, Nick, we're planning today to primarily repay property debt with the proceeds from the sales to reduce our leverage, again, to help reduce our non-recourse property-level debt down to levels that are more in line with the Moody's targets. The average cost of that debt, we haven't finalized each piece of paper that we're going to repay, but I would tell you it's going to come down from the 4.6% that we repaid in the second quarter. It'll be more likely in the mid 3% range. There will be prepayment penalties associated with that. The exact amount, again, will be determined by the actual pieces repaid. What I will tell you, as we've run the numbers, we expect that the interest that'll be saved in future years is greater than the prepayment penalty on an NPV basis. Thanks. Are you able to provide a range on it? I think last quarter you had at least given kind of a range for the potential prepayment penalties. Not at this point, Nick. In April, when we spoke, we had already identified the specific pieces of debt that were going to be repaid. Thanks. As you think about your South Florida portfolio, are there any additional engineering studies or re-inspections that are needed just given the tragedy that happened down there? Lisa. Thanks for the question. We routinely work with structural engineers and architects and others as we're doing any work on our properties as well as any work that's being done on adjacent properties, and routinely inspect our properties for their 40-year inspections and additionally. We have no known issues. We are just in an abundance of caution, going to go back and take another look, both to ensure that we haven't missed anything, which I don't think we have, but also just for peace of mind for our residents and teammates who work in those buildings. Thanks. Our next question today comes from John Kim at BMO Capital Markets. Please go ahead. Thank you. Just wanted to ask for more color on the rental uplift you had at City Center. How much of this was due to the market strength versus the AIR initiatives, and what do you think you did that the prior owner didn't? I found that question hard to hear because of fluctuation in sound. Would you mind repeating it, please? Sure. Just some more color on City Center and what you may have done that the prior owner didn't to get that rental uplift, and how much of that, conversely, was due to the market strength. John, it's Keith. I'll take it for you. Really, John, it became belief. We have a team who operates our buildings who doesn't put a ceiling on the opportunities in front of them. What I would say is that what we did is when we walked onto the property, and we looked how we were performing at our other communities in and around the South Florida area, we could see that there was opportunity to push it much, much further. We also think that there could be even more upside as we actually make improvements to the community. This was literally a day one walk on site, bring in our team, and increase it. Of course, not to be missed, the South Florida market is very, very red hot. There's lots of people that are moving there, and there's lots of benefits of living in Florida that is augmenting the performance. Okay, on the new lease change that you had in July, you mentioned it was led by Miami and San Diego, but it was really broad-brushed across your portfolio. Can you remind us how much of that uplift was due to rents versus the reduction of concessions? John, really what has happened is that we have actually moved beyond that, because what has happened is we've had a reversion to the mean of those asking rents that were pre-COVID, and now we've exceeded what would have been the historic trend lines. What we're really seeing is not only a recovery but an acceleration that is happening as the business is getting even better. While, of course, lots of people talk about concessions and coming back, what we really are focused on is we've gone past that mark, and we're seeing growth and strength that goes well beyond that. What is your expectation for August and September? To be better than July. For both? Indeed. Okay. Thank you. Our next question today comes from John Pawlowski with Green Street. Please go ahead. Thanks. Maybe just one follow-up on the Florida acquisition. Is that 160 basis points yield expansion, should we think about that like a year three yield, or what's the time to put the capital into the building and achieve that uplift? Yeah, John, thank you for the question. Your thoughts on timing is right on line with our plan and how we're going to be executing it. We are starting the refreshment and improvement process as soon as we're able to mobilize and implement the plan, that's starting very soon. The completion of that work and then the full earn-in of that work as reflected in our results will end up being in our numbers in the third year. Okay. Hey, John, I'm sorry. I left out a portion of something I should have said, is that our going-in yield today at 4.2% is quite strong on a relative cap rate basis. We're going to see that expand in year two and eventually end up at that close to 6% range in the thi rd year. You'll see nice expansion in both years and year thee. It's not just a hockey stick in the third year. Understood. I joined the call late. Apologies if I missed this. As you stand here today, do you anticipate additional acquisitions this year? John, this is Terry. We're always looking for opportunities for creative uses of shareholder capital. All right. Last one from me. Terry, when can we expect to hear additions to the board or new board members joining? I think soon. Soon as in months or a couple of years, or? Soon, John. All right. Thank you for the time. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star then one. Our next question today comes from Rich Anderson at SMBC. Please go ahead. Hey. Good morning, everybody. The strength that we're seeing in the Sun Belt. It reminds me of mid-2,000 in Essex and California and the hyper-growth that was coming out of that market back then. Like everything else, nothing lasts forever. I'm wondering if maybe the rules are a little bit different this time, if COVID has created a permanent stigma on some of the coastal markets, namely California, and that the ability to push rents, particularly in the Sun Belt, is more of a permanent condition in your mind, or do you think there would be more of a reversion to the mean between Sun Belt and Coastal Gateway within the next few years or so? Rich, good morning. To Terry, I'll try and take a cut at it. We're comparing two different markets with two different dynamics. The Sun Belt market is today fantastic, but it's in a context where money is free and the increases in profitability will attract competitive new supply. You can see the record level of completions, over 27,000, I think it is, in Dallas and Houston. That will be the dynamic there, that there'll be tremendous economic growth and employment growth. Over time, the rental growth will be governed by the cost of competitive new supply. In the coastal market, or specifically in California, which was your question, the demand is great. It's existing today. It's unsatisfied today. There's a period of time where building can be absorbed by existing demand, and it remains hard to build. The competitive new supply will be more constrained. It is certainly correct that California is less of a Golden State than it was a decade ago or two decades ago, and that it's dealing with difficult social and political issues. It's something that makes us want to keep an eye on it. Okay. Great. Keith, to your, or maybe Paul, to your comments about 2022, specifically on the earn-in. It seems to me, the upside in 2022 might be more impressive in the first half of the year as opposed to the second half of the year, assuming the earn-in kind of only plays a role in the first half of the year. Is that the right way to think about it? For the full year 2022 to be sort of equally impressive, you just need market rent growth to continue to, at this pace or greater, for the back half of next year to keep pace. Is that a fair way to think about it? Rich, it definitely is a good way to think about it because as we're gaining momentum in these rates and transactions that are occurring now, when you kick off a new year, they will start earning in against what would have been a lower comp. The truth is that when we look at that loss to lease, it is spread over our portfolio. There will be opportunities throughout the entire year for us to reprice. Our expectation is that we will continue to see rate growth on trend that will go through the balance of 2022 in addition. Okay. Great. Thanks very much, everyone. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to the management team for any final remarks. Well, Rocco, thank you very much for hosting us today. For those of you who have questions for AIR, we thank you for your interest. If you have further questions, please feel free to call Paul or me, and we'll be happy to give you our best answers. Thank you so much. Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.