Interview with: John H. Cassidy, CEO - featuring: their publicly traded real estate investment trust (REIT) company, focusing on the ownership and operation of multifamily apartment properties as long term investments.

America First Apartment Investors, Inc. (APRO-NASDAQ)

wpe3.jpg (15694 bytes)

CURRENT ISSUE    |   COVER ARCHIVES    |       INDEX      |    CONTACT    |    FINANCIALS    |     MARKETING SERVICES   |    HOME PAGE


CEOCFO-Members Login
Become A Member!


This is a printer friendly page!

America First Apartment Investors Inc. continues to grow its portfolio in an efficient manner, seeking to find apartments in locations primarily in the Midwest and Southeast that will deliver above average rental and income growth


wpeA.jpg (5562 bytes)

Financial
Equity Investment in multifamily real estate

(APRO-NASDAQ)

America First Apartment Investors, Inc.

1004 Farnam Street – Suite 100
Omaha, NE 68102
Phone: 800-239-8787

John H. Cassidy
Chief Executive Officer

BIO:
John H. Cassidy
-
President and Chief Executive Officer
Mr. Cassidy was named President and Chief Executive Officer of the REIT in September 2003. From 1992 to 2002,he served as President of America First Properties Management Company L.L.C., the property management subsidiary of America First Companies L.L.C. From 1980 to 1987, Mr. Cassidy was a Vice President of E.F. Hutton & Co., Inc. Mr. Cassidy was an Assistant Vice President of Bank of America from 1978 to 1980. Mr. Cassidy received a Bachelor of Arts from Georgetown University and a Masters of Business Administration from Columbia University School of Business.

Company Profile:
America First Apartment Investors, Inc. is a publicly traded real estate investment trust (REIT). The Company's strategy is focused on the ownership and operation of multifamily apartment properties as long term investments. The objectives of the Company are to generate dependable cash flow, a secure and growing dividend to investors and increase the net asset value of our property portfolio over time. Shares of the Company trade on the NASDAQ stock exchange under the symbol APRO.

Interview published July 20, 2006, with
John H. Cassidy, Chief Executive Officer
Conducted by: Lynn Fosse, Senior Editor - CEOCFOinterviews.com

CEOCFO: Mr. Cassidy, what is your vision when you became CEO and where are you today with that vision?
Mr. Cassidy: “I became CEO of the company in the middle of 2003, and at the time, we were at a size of about $160 million in assets and today we are over $300 million in assets. We are a multi-family equity REIT; in other words, the majority of our investments are in apartment communities primarily in the Southeast, Midwest and a couple in the Southwest. The Company has invested over the years in primarily middle market rental communities; not looking at the luxury end per se. We have a couple properties is a little higher end than others but the vast majority of the portfolio is middle market. Most of our residents tend to be renters for a longer duration than the high-end rental communities. We have lost more rentals over the last several years to home purchases than any other reason. We continue to target that type of property for acquisitions. The vision going forward is to continue to grow the portfolio in an efficient manner, seeking to find apartments in locations that we believe will deliver above average rental and income growth to the portfolio and to our shareholders. Over the past year, we have also in addition to that acquisition strategy; have selectively sold certain assets that we feel do not offer above average income growth. We have sold three properties like that over the past year.”

CEOCFO: What is it that you like about the geographic areas you are focused on?
Mr. Cassidy: “In most of the Southeast we see continued growth at above average rates particularly areas such as Florida that continues to see a significant increase in population growth and demand for apartments. Despite the onslaught of hurricanes in the last few years, Florida continues to be a very strong market. We also have properties in the Carolinas. In North Carolina, there have been pockets that have slowed down, and we are taking a hard look at those properties. We do see certain North Carolina markets beginning to show positive rental growth. We look at the Midwest not expecting the same kind of growth that you are going to see in Florida, but it does offer some strong pockets of growth in certain locations. It also provides us with markets that perhaps other REITs do not venture, so we have found that the pricing in the Midwest is more reasonable, and we get a higher cash flow on a current basis on our acquisitions than we can on some of the other markets where everybody is chasing the same apartment building. We believe the Midwest offers a nice balance to some of the higher priced high-growth areas. We invested in a couple of assets in Omaha that are doing extremely well and getting some very significant rental increases. We just invested in an asset in Columbus, Ohio in a very nice upper-end community that was an under-managed situation, and we project solid income growth over the next few years that will be profitable for our shareholders. We have a few properties in Phoenix that have done extremely well. Phoenix continues to be a market that has seen significant growth over the last couple of years; I am very pleased with our assets there. We continue to look at Phoenix as another pocket of growth that we will look to expand our presence.”

CEOCFO: You mentioned earlier about acquisitions in an efficient manner, please explain?
Mr. Cassidy: “For example, take Omaha, we decided that it was a market that was attractive to us and to buy just one property there, would not have been entirely efficient from a property management standpoint, because we manage our own properties. We look to have two to four properties at a minimum, so in Omaha we acquired two assets and certainly would consider for the right location and asset to buy two more, but that would probably be our maximum exposure to Omaha. With at least two assets in Omaha, we can get a little more efficiency in our operation both for property management oversight and sharing personnel when appropriate. From an oversight standpoint, we do not want to have to travel to fourteen different cities to cover fourteen different properties. It does not create the most efficient platform for us to do a good job. From the efficiency standpoint it is trying to create some critical mass in each targeted location and that leads to a more effective and less costly property management operation.”

CEOCFO: If I were renting one of your apartments, would I know it was an America First apartment?  What sets you apart? 
Mr. Cassidy: “You wouldn’t know it except for the flags that we have outside most of our apartments. I would hope that you would know it by the fact that our personnel are very service oriented, very professionally dressed, greeting you and attending to your needs in a timely fashion. We pride ourselves on a strong property-operating platform that meets the needs and desires of our residents on a timely basis. We look to keep the property in excellent condition at all times, picking up the trash everyday, making sure everything is in good condition, and keeping our residents comfortable in the apartment homes that they are renting from us.”

CEOCFO: Do you see fewer turnovers as the interest rates continue to rise?
Mr. Cassidy: “We see less, and we have seen a decline in the number of residents leaving to purchase homes; that started to occur the second half of last year and it has continued through the first quarter of this year. That factor has caused an overall reduction in our turnover. We anticipate less renters becoming homeowners to continue which has allowed us the ability to raise our rents to levels we were not able to do in the prior two years.”

CEOCFO: What about costs of heating and fuel? Has that effected your bottom line?
Mr. Cassidy: “In almost all of our properties, the cost of heat and air conditioning is passed on to the residents. The only portion of power that we pay would be common area, so it would be the clubhouse, fitness facility, exterior lighting and pool. Most of our properties offer excellent amenities for our residents to enjoy.”

CEOCFO: What do you see two or four years down the line?
Mr. Cassidy: “I have a good idea of what we see for the next several quarters. I would say that the apartment fundamentals are relatively strong for the remainder of the year. I do continue to see less home-buying going on. Homeowner percentages have peaked and interest rates have gone up and that is making home ownership a lot more expensive. We are benefiting from that as potential homebuyers remain renters, which leads us to forecast rental increases going forward for the remainder of the year. We do not see many examples of oversupply due to new apartment construction in most markets. Even though rental rates may be going up, the cost of building a new property today has risen dramatically by virtue of increased land cost, increased materials cost and labor content. Therefore, the overall cost of a new apartment community today is significantly higher than it was two or three years ago. Those factors have slowed down supply and lead us to believe the demand and the supply variables are attractive for rental apartment ownership.”

CEOCFO: Will you tell us about the financial position of the company today?
Mr. Cassidy: “Our first quarter funds from operation as compared to last year were up 20%. Much of that increase was due to our improved operating results on our existing portfolio and our recent acquisitions over the past year. By redeploying sales proceeds, we are getting the cash flow benefit from the newer acquisitions as well as the increased cash flow on our same store or existing portfolio. Our FFO increased to 29 cents in the first quarter from 25 cents in the first quarter of 2005. We are looking for the next few quarters to be very positive as well.”

CEOCFO: What goes into making the right choices in buying and selling properties?
Mr. Cassidy: “We have access to various data sources supplying relevant information about real estate, demographics and economic trends in the area. We are always looking at which markets show good population and good job growth, and overall economic growth; that is what we examine on a region-by-region basis. Within localities, we look at the neighborhoods, and spend a lot of time shopping the other rental communities in a given area before we buy one, speaking to the management at the various properties, understanding what has happened there over the last couple of years such as rental increase history, resident turnover and the characteristics of the resident profile. We also have the data of our existing portfolio where we have compiled significant information over the years. As part or our analysis, we review the past three years history of actual rental revenue and expenses, how has the property been operated, what are the day to day operating issues. We then formulate a business plan, which includes our projected costs or operation and rental revenues. So much of it is driven by location; we can improve a performance relative to a given location with good personnel on the property. We always look to hire the best site managers we can find in the area to manage the property. Most importantly, what you need to have is a good location. If you have a mediocre asset, you can improve the asset to optimize the revenues. But if you do not have a good location, no matter how much investment you put into the property, or how good the people you have managing the property, you can only impact the numbers so much. Much of what we are doing in our acquisition analysis is making sure the location long-term is going to be a positive one for the company.”

CEOCFO: It seems like you have been getting it right!
Mr. Cassidy: “The vast majority of the time we are correct! We all make mistakes from time to time, but we learn from our mistakes and use the lessons as we go forward in our acquisitions. I have been in this business for over 20 years, and over that time, you learn a lot of lessons the hard way. A number of people that are with us have been involved in real estate for a long time. Those lessons make a big difference on how we go forward with our acquisitions and how we operate the company.”

CEOCFO: Why should potential investors be interested in REITs and why America First Apartments?
Mr. Cassidy: “REITS traditionally have been an excellent method for investors to enjoy the benefits of real estate through stock ownership. Many people own homes for investment purposes, but for those who are looking to diversify outside of traditional stocks and bonds, a REIT is a very attractive investment in that provides indirect ownership of real estate. In most cases, REITs provide a very attractive dividend. We are an example of that; we currently pay about a 7% annual dividend rate. We trade on any given day somewhere around mid fourteens; we have gone higher than that but on average it is 14 so it has been an attractive yield over the last few years and that has probably been the primary motivation for investors to purchase many REITs and specifically America First Apartments Investors, Inc. For the foreseeable several quarters, the fundamentals look very good for apartment ownership as I stated earlier.”

CEOCFO: What is commonly missed about America First?
Mr. Cassidy: “Most people do not know about America First because of our small size. As such, growing our asset and equity base is a high priority for the company.  We have minimal institutional ownership in our stock due to our small size and limited liquidity. We are a more attractive investment for retail investors because our average stock volume is too low for many institutions to purchase. We look to increase our exposure to the retail investor and as we grow and increase our attractiveness to institutional investors. We are growing our assets by expanding our apartment portfolio.”

CEOCFO: Do you have any final thoughts for our readers?
Mr. Cassidy: “I think very few people know about America First and my desire would be to encourage people to take a hard look at us; it may not be the kind of investment for everyone, but for a number of people I think it is a very attractive investment and provides a very good yield relative to our peers. We do not trade at the multiples of other multifamily REITs largely due to our size and limited visibility within the investment community. I believe strongly in the future of the company, and I continue to invest my money into this company.”


disclaimers

Any reproduction or further distribution of this article without the express written consent of CEOCFOinterviews.com is prohibited.

“I have a good idea of what we see for the next several quarters. I would say that the apartment fundamentals are relatively strong for the remainder of the year. I do continue to see less home-buying going on. Homeowner percentages have peaked and interest rates have gone up and that is making home ownership a lot more expensive. We are benefiting from that as potential homebuyers remain renters, which leads us to forecast rental increases going forward for the remainder of the year. We do not see many examples of oversupply due to new apartment construction in most markets. Even though rental rates may be going up, the cost of building a new property today has risen dramatically by virtue of increased land cost, increased materials cost and labor content. Therefore, the overall cost of a new apartment community today is significantly higher than it was two or three years ago. Those factors have slowed down supply and lead us to believe the demand and the supply variables are attractive for rental apartment ownership.” - John H. Cassidy

ceocfointerviews.com does not purchase or make
recommendation on stocks based on the interviews published.

.