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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
Equity Investment in multifamily real estate
America First Apartment Investors, Inc.
1004 Farnam Street Suite 100
Omaha, NE 68102
John H. Cassidy
Chief Executive Officer
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.
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
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 wouldnt 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
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
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 14½ 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
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
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.
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