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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and welcome to the Aimco First Quarter 2018 Earnings Conference Call.
[Operator Instructions] Please note, this event is being recorded.
I would now like to turn the conference over to Lisa Cohn, Executive Vice President and General Counsel. Please go ahead.
Thank you. Good day. During this conference call, the forward-looking statements we make are based on management's judgment, including projections related to 2018 results. 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 AFFO and 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 Aimco's website.
Prepared remarks today come from Terry Considine, our Chairman and CEO; Keith Kimmel, Executive Vice President, in charge of Property Operations; John Bezzant, our Chief Investment Officer; and Paul Beldin, our Chief Financial Officer. A question-and-answer session will follow our prepared remarks.
I will now turn the call to Terry Considine. Terry?
Thank you, Lisa, and good morning to all of you on this call. Thank you for your interest in Aimco. Aimco enjoyed a solid first quarter. In property operations, revenue was up. Same-store occupancy was the best first quarter result in the past 7 years. Blended rent increases were 2.7%, up 60 basis points year-over-year, and this positive trend continues in April. In redevelopment and development, projects are on time, on budget and creating value.
In portfolio management, we improved our portfolio with paired trades for 2 selected acquisitions, where, even in a fully priced market, Aimco's operational expertise can produce significant value creation, and we funded both with well-executed sales so that the paired trades' increased expected free cash flow internal rate of return by 400 basis points.
In February, we purchased Bent Tree Apartments, a community located close to 2 Aimco communities in West Fairfax County, all 3 built by the same developer in the late 1980s. We know the market, we know the buildings and we know exactly what to do to increase Bent Tree's profitability.
Later in April, we announced the partnership with Carl Dranoff, a prominent Philadelphia developer, who contributed to Aimco his portfolio of 6-A quality apartment communities in the Philadelphia market, mainly in Center City and University City.
We are pleased to welcome Carl as a partner, and we're gratified that his confidence at Aimco resulted in him becoming a top 20 investor by taking $90 million of OP units valued at $53 per share, consistent with Aimco's published net asset value. Later in Aimco -- later in April, we agreed to sell our Asset Management portfolio and 4 remaining Affordable communities, completing our methodical multiyear exit from this line of business and doing so at a price of $126 million in excess of our published net asset value. These transactions and indeed, all the good work at Aimco are due to a hard-working team energized and shaped by Aimco's intentional culture of respect, collaboration, customer focus and responsibility for results.
I'm grateful and humbled that Aimco was recognized in April as a top workplace in Colorado for a sixth consecutive year, a record of long-term excellence shared with only 7 other companies across our entire state. For these successes and all their hard work, I offer sincere thanks to my Aimco teammates, both here in Denver and across the country.
Now for a more detailed report on the first quarter, I'll turn the call over to Keith Kimmel, Head of Property Operations. Keith?
Thanks, Terry. I'm pleased to report that we had a solid first quarter in operations. The same-store revenues up 2.6%, expenses up 2.1% and net operating income up 2.7%. We had strong average daily occupancy of 96.3% for the quarter, 30 basis points better than the first quarter of 2017. We continue to provide exceptional customer service. Residents gave us better than 4 stars for the 18th consecutive quarter with 4.26 out of 5 stars. Our high customer satisfaction limited our turnover to 45.8% for the quarter, 470 basis points better than the first quarter of 2017. Low turnover continues to be a key contributor to our operational efficiencies and expense results.
Looking at leases, which transacted in the quarter, same-store blended lease rates were up 2.7%, with renewal rents having solid increases of 4.9% and new leases up 40 basis points. We saw new lease rates of 4% to 6% in Miami, Los Angeles and San Diego. These are some of our most important markets, which account for about 1/4 of our same-store NOI. We had the most pressure on new lease rates in Seattle, Nashville and Baltimore. These less-impactful markets only represent 4% of same-store NOI.
Turning to the first quarter same-store revenue growth. Our top performers had revenue increases over 3% for the quarter. This includes Miami, the Bay Area, San Diego and Denver. Strong performers, which had revenue growth over 2%, were Boston, Los Angeles, Chicago and Seattle. With revenue growth of flat to 1%, we had Washington, D.C. and New York. And finally, revenue was down in Atlanta and Philadelphia. As a reminder, our Philadelphia same-store portfolio is 2 communities and does not include our premier redevelopment properties. Those Philadelphia redevelopments, along with our substantial portfolio outside of same-store, have started off strong in 2018.
The Sterling is now 96% occupied. The first 3 towers of Park Towne are about 90% occupied and, while construction of the fourth and final tower is not slated to be finished until September, as of today, we're about 35% preleased and our first move-ins occurred in late April. We are confident in the Philadelphia market, having in total leased over 1,100 units at these Center City communities at rents in line with our underwriting. At Saybrook in San Jose, we've leased 267 of the 269 completed units at rents above plan. Across all of our redevelopment and development properties, 95% of our 2,800 renovated homes are currently occupied with rental rates in line with our projections.
Turning to our new acquisitions. We are encouraged by the early results where we have applied our operational expertise. Bent Tree is currently 96.5% occupied, up from 94% on day 1 with solid new lease rates, all of which exceed our underwriting. And we've hit the ground running with our 4 new communities in Philadelphia. Our first few days have gone according to plan, and we thank our team for their execution during this transition.
As we look at our as same-store April results, we see a solid start to the second quarter with a continuation of our strong average daily occupancy and a strengthening of new lease rates. Our average daily occupancy for April was 96.4%, some 80 basis points higher than 2017. Blended lease rates were up 2.6%, with renewals up 4.7% and new leases up 70 basis points. April marks the fourth consecutive month of accelerating new lease rates, a trend we expect to continue in May as well.
Finally, May and June renewal offers went out with 4% to 6% increases. And with great thanks to our teams in the field and here in Denver for your commitment to Aimco's success.
I'll turn the call over to John Bezzant, our Chief Investment Officer. John?
Thank you, Keith. As Terry discussed, we identified and executed on a few unique transactions in recent months that are indicative of our pair trade philosophy and our eye for opportunistic investing. In February, Aimco closed on the purchase of Bent Tree apartments in Fairfax County, Virginia, just a few miles Southeast of Dallas airport for $160 million. Keith mentioned this team's progress increasing rent since acquisition, but the ability to raise rents is only part of the story.
Bent Tree presented an opportunity for us to take advantage of Aimco's specific knowledge to execute a trade we believe will outperform the market in general. Specifically, we saw opportunities in the following areas.
The market. As Terry noted, Aimco operates 2 very similar properties, located 5 and 10 miles from Bent Tree, Shenandoah Crossing and Berkshire Commons.
The building. These other 2 properties were built by the same developer that built Bent Tree. We've taken both of those communities through various capital enhancements in recent years and understand clearly where the market demand is and what it will pay.
The team. We promoted a new manager to Bent Tree from Berkshire Commons. She knows the market, knows the property and has quickly set about implementing the Aimco management plan.
And finally, the system. Aimco's ability to operate efficiently provides us an opportunity to outperform prior operations and the market. We found a similar opportunity when we announced in mid-April that we had entered an agreement to acquire a portfolio of 6 communities in Philadelphia. These communities, 3 of which are best-of-class renovations of the storage structures and 3 of which are new construction, fit seamlessly in Aimco's Philadelphia portfolio, with the Center City and University City focus that complements our existing properties and bring a world-class team of local knowledge that will build upon our strength. We closed on the acquisition of the initial 4 communities on May 1.
Our East Coast acquisitions team, led by Wes Powell and Matt Conrad, has done a great job of identifying, securing and closing on these unique opportunities. And our East Coast operations team, led by Kevin Mosher, [ Jeric ] Poley and Jason Kessler and assisted by many others, has done a great job of integrating them into the Aimco family and performing from day 1. Aimco will sell Chestnut Hill Village, an older community in north suburban Philadelphia, as part of its paired trade for this transaction, and as another step in our continued reallocation of capital from weaker submarkets to stronger. Upon completion of the transaction, Aimco's allocation to Philadelphia will increase from 8% to 10% of gross asset value with more of that allocation invested in submarkets with higher rents, higher free cash flow margins, greater potential for revenue growth as Center City and University City continue their emergence as thriving residential and professional communities.
With the implementation of Aimco's operating platform, we anticipate this portfolio will generate a year 1 net-operating-income yield of 5.3% for the 5 operating properties. And when adding in the development community to be completed early next year, we'll have average rents of approximately $2,200 per apartment home and a 10-year expected free cash flow internal rate of return of about 8%.
Now I'd like to remind those of you who missed our Investor Day in Philadelphia a few years ago, what it is that draws us to this market, and specifically, to the Center City and University City submarkets. First and foremost, as Keith noted, we have seen strong demand for our redeveloped apartment homes at The Sterling and Park Towne Place over the last few years. They have leased up well and add underwriting, even if supplies crept into the market. We believe that demand is driven by our resurgence in downtown Philadelphia that is largely supported by its high levels of educational attainment and strong job growth in relation to new multifamily supply.
Based on data from Green Street and MPF Research, Philadelphia's ratio of 9.9 new jobs for every new unit of multifamily supply ranks in the top tier nationally. It is third highest among the top 50 largest multifamily markets, behind Sacramento and the Inland Empire of California. And that 9.9 ratio is nearly double the 5:1 ratio we believe drives equilibrium in the market. Much of this job growth is driven by companies looking to tap Philadelphia's highly educated workforce, where, in Center City, 84% of 25- to 34-year olds have a bachelor's degree or higher. This is a number virtually identical to Palo Alto and Cambridge.
And finally, since 2002, according to REIS, Center City's compound annual rate of rent growth of approximately 3.3% lags only Seattle and the Bay Area amongst Aimco's target markets. And that growth was delivered with much less volatility. I'll spend a minute on the sale of our Asset Management business and the remaining Affordable properties.
In late April, we announced an agreement to sell our Asset Management portfolio and 4 Affordable real estate communities to Related for $590 million. This binding agreement puts a substantial deposit in place as the capstone to a multiyear strategy, first announced in 2011, of exiting our Affordable business and concentrating our capital investment in the market REIT communities. As you know, this business has been an integral part of the Aimco family for many years, and we appreciate the contributions of hundreds of teammates across the country that have helped make it successful. We expect this transaction to close in the third quarter of this year. And not to be entirely overshadowed by our transactional activity, as Keith reported, our redevelopment projects are doing well and remain on track in terms of lease-up and construction pace.
With that, I would now like to turn the call over to Paul Beldin, our Chief Financial Officer. Paul?
Thanks, John. I'd like to cover today a number of subjects, starting with our financial results for the first quarter. AFFO per share of $0.54 was up 6% year-over-year and $0.02 ahead of the midpoint of guidance. One $0.01 of the outperformance is due to stronger-than-guided property operations, including a benefit from Bent Tree, which we own for about half of the quarter. The other $0.01 is due to the timing of capital replacement spending.
Our balance sheet remains safe, liquid and strong. We have limited refunding risk, less than 1% of our property debt matures during the balance of this year. The weighted average maturity of our leverage is 8.7 years, up slightly from year-end. We are liquid with abundant capacity, more than $0.5 billion available on our revolving credit facility and $2 billion in our unencumbered properties available as dry powder to support additional borrowings. We have limited entity risk because we continue to use primarily long-term fixed rate nonrecourse property debt.
During the quarter, we closed $242 million of fixed-rate senior loans at a weighted average interest rate of 3.48%, lowering the weighted average interest rate of our total fixed rate debt by almost 10 basis points to 4.55% and reducing annual interest expense by more than $3 million. We also placed $119 million of 5-year floating-rate property loans with interest at 30-day LIBOR plus 125 bps, an all-in rate today of 3.17%. The 5-year term fills a hole in our maturity ladder, and after the expected repayment of our term borrowing, reduces our exposure to floating interest rates to less than 7% of total leverage.
Next, I'd like to cover the financial highlights of our year-to-date transaction activities. Our investment discipline is to fund these acquisitions by paired trades. Proceeds from the sale of asset management portfolio, the remaining 4 Affordable communities and Chestnut Hill Village will complete the funding for the Bent Tree and Philadelphia acquisitions, funds 2018 redevelopment activities, reduce leverage by 2/10 of a turn, and fund redemption of our Class A preferred stock when it is callable in the second quarter next year. Taken together, the properties purchased by Aimco have a free cash flow, internal rate of return, 400 basis points higher than we expect from the assets sold to fund the purchases.
While the trade will be mildly dilutive to AFFO for the next couple of years, it redeploys the value of the depleting cash flows of our Asset Management business into high-quality operating communities with durable cash flows and promising future growth. This trade is a good example of our choosing long-term value-creation and free cash flow growth, even if there is some reduction in short-term earnings.
Now turning to full year 2018 guidance, as updated in last night's release. Notwithstanding our first quarter beat and good momentum entering the second quarter, we made no change to Aimco's same-store revenue, expense and NOI guidance. It is still early in the year, and we will take another look after the second quarter. Given the pending sale of the Asset Management business, we lowered guidance from $36 million for the year to $22 million to $24 million, assuming the sale closes sometime in the third quarter. We lowered pro forma FFO and AFFO per share by $0.03 at the midpoint to take into account first quarter results and the impact of our transactional activities.
Now I'd like to point out our annual enhancements to our supplemental schedules. We now present property revenue, exclusive of resident utility reimbursements and expenses net of such reimbursements. We believe this presentation results in a clearer view of underlying revenue and expense growth rates. This change was contemplated when we set full year guidance and is expected to decrease full year same-store revenue growth by 7 basis points.
For the first quarter, the impact was a 30 basis point reduction in same-store revenue growth. We also adjusted how we present Aimco proportionate share. Schedule 2A now reflects Aimco's consolidated results, while Schedule 2B shows the amount of consolidated AFFO attributable to third parties as well as Aimco's share of AFFO from unconsolidated investments. Schedule 10 has been slightly revised to present more clearly our redevelopment and development activities and the value these activities create for Aimco. Last, given investor interest, we added a schedule to highlight some of what makes Philadelphia an attractive place to invest and helpful to diversify the Aimco portfolio.
We would also like to invite all of you to tour our communities in Philadelphia and experience firsthand what we find so exciting. Several tours are in the process being scheduled for the summer, but should those dates not work, please reach out to me, Lynn or Susie, and we will accommodate you.
With that, we will now open up the call for questions. [Operator Instructions] Laura, I'll turn it over to you for the first question.
[Operator Instructions] And our first question will, from Austin Wurschmidt of KeyBanc Capital Markets.
So last quarter, you guys talked about the midpoint of revenue growth it was comprised of an increase in average daily occupancy of 10 basis points and blended lease rate, growth of about 2.5%. You achieved better results in the first quarter with occupancy of 30 bps, blended lease rate growth was 2.7%. And those trends continued, if not improved, a bit into April, particularly on the occupancy side. So just curious if you expect that to trend lower through the balance of the year? Or if you're just being a little bit conservative as it remains early in the year.
Austin, thank you for your question. This is Paul. And you recapped the facts exactly right. We're off to a great start to the year, but it is 25% of our business. So we like what we have achieved so far, but we have the other 75% of our leases yet to transact, and we look forward to reporting our progress as we proceed through peak leasing.
And then, so when you look at the supply picture quarter-by-quarter, do you expect that to ramp, remain fairly steady or decrease as the year progresses? And then what's kind of the early expectation as you look into '19 versus '18 supply?
Austin, this is Paul, and then I'll turn it over if anybody else wants to add some additional color. As I think we collectively all have learned predicting supply is somewhat challenging, particularly when you talk about it on a quarterly basis. What we see in our submarkets is that, that supply in aggregate is expected to be delivered at a fairly ratable pace throughout 2018, that's always subject to change. We'll see what actually happens, but that's what the third-party forecasters are currently projecting. And I just like to remind everybody, as we think about supply, we look at it when supply is meaningful, and in our definition, that is supply as a percentage of existing stock of greater than 2% and that supply is being delivered into a submarket where Aimco has a price-point communities. And so as we look at supply in that lens, we have roughly about 20% of our gross asset value that would meet that criteria, and that's actually a fairly similar, if not maybe down slightly, from where we were in the end of the fourth quarter.
And the next question will come from Nick Joseph of Citi.
It's Michael Bilerman here with Nick. Terry, you spent a bunch of time talking about Dranoff took equity at $53 a share on an OP basis, but I wonder if you can just step back, and even at current pricing, it's about 20, 25 basis points on the total deal yield. It's only 15% to 20% of the total, taking out 80%, 85% in cash, it's tax, right? So if it's in a long-dated piece of equity for him, it almost doesn't matter where the stock price is or what the unit is because his basis is what he contributed to the assets. I guess, why focus so much on something that's arguably somewhat not material in nature to the overall transaction?
Thank you, Michael. I think it's one of the things we appreciate and the relative weight to it is, of course, in the eye of the beholder, but I'm very grateful for Carl's belief in what we're doing. I think he'll be a great partner and help us in our work going forward.
But that really isn't -- I mean, the reality is it's not a big part of the proceeds that he's taking, right? The majority of proceeds is cash. He's taking units to protect his tax basis. The $53 is a fictional number because his basis is the assets he's selling. And if you just took it at the current stock price, it's only 25 basis points on the transaction from an exit perspective. So I'm just -- I know why you want the headline, but I think it's a little bit misleading.
It's a free country, you're entitled to your opinion, Michael.
Well, how about we ask this from the other perspectives. If the NAV is at $53, you sold the related assets at a premium to what you disclosed the NAV, why not buy your stock in the low 40s at north of the 6 implied cap rate then roll in proceeds at market into assets?
You ask this question each quarter, and I think it's a good one. And it's something that we think about, we keep in our toolkit. You know that we've made stock buybacks in scale at previous times and we may yet again, but we haven't done it this quarter.
But in the context of spending $450 million, right? The majority of $350 million of which is in cash, either taking debt or using your line of credit, if you truly believe in the NAV, which was certainly justified by the related transaction at a premium to what you put into those numbers, why not use any capacity you have to buy back your script, rather than buying assets at market?
It's a very good question. As I've said, it's something we think about, something we've done in the past and we may do in the future, but we didn't do this quarter.
And the next question will come from Juan Sanabria of Bank of America Merrill Lynch.
This is actually [ Shirley Wu ] with Juan Sanabria. So a question on your disposition, when you say cap rates on Affordable units and also the Asset Management Business, how do you guys value that?
So I'll give you just kind of rough guidelines. So on the Asset Management business, it is a little tough to apply a cap rate to it per se because this is a fee-based business. We were not selling underlying real estate, so that's really not the way we looked at it from a value perspective. We look at it as a valuation of the fee and income stream associated with that over the runoff of the business. And effectively, we kind of put it into an IRR-based model that they ended up in the 4s. The Hunters Pointe communities were real estate transactions, and those are 4 caps. Those are mid 4s on a cap rate basis.
And Shirley, just to clarify what John said, the free cash flow internal rate of return that he quoted in the 4s, it's 4.4% and that's actually the combined free cash flow IRR for the fee stream that John described and the 4 Affordable communities in Hunters Point of San Francisco.
Got it. So I guess on the flip-side then, acquisitions, you guys did [indiscernible] Fairfax and also Philly, any other place that you're looking at for opportunity?
Well, in terms of other opportunities, we continue to look all over the country on a regular basis as we've kind of highlighted here this quarter. When we do make a trade, we are making a trade on paired trade basis where we think we can trade out of assets that have a lower long-term value to the portfolio than what we're buying, and we measure that via free cash flow internal rate of return. We have an ongoing pipeline of opportunities that we look at. If you look back to last year, we didn't buy anything. This year, we've done a couple of deals, and I think as we look forward, I would expect we will do very selective deals when we see an opportunity.
And next we have a question from Dennis McGill of Zelman & Associates.
First question just has to do with the Philly increased exposure. Was that driven by your interest in expanding in Philly because of some of the metrics that you had mentioned, in the City Center area in particular? Or was it more the opportunity came to you and it's sort of met an area that you are perhaps somewhat interested in?
I think it's a little bit of both. I think that as we look at opportunities, kind of following up on the prior question, when we see things come across, we look at it in relation to the submarket specifically where the property is located. We look at it in how that submarket fits within our portfolio. What we have within our portfolio that we could trade out of, that would be an accretive, better trade to come out and go into the new opportunity and so we certainly saw that in Philadelphia. This was not a portfolio that was on the market. This was an opportunity that we had to approach a local owner, developer who had a very high quality portfolio in submarkets that we frankly are quite attracted to and we thought it was a good fit for our portfolio, and Weston and his team was able to put together the deal.
Okay. And then on the operational side, I think you talked about blended rent rates in April were 2.6%, could you tell us what that is versus a year ago?
Yes. Dennis, this is Paul. I believe blended lease rate for this portfolio a year ago we're up about 2.2%.
Okay. And if you think about how that's trended so far this year, it's basically been 2.6% or 2.7% each month, but you would think normally there'd be some seasonal lift. Is there something that's preventing that seasonal lift? Or how are you guys thinking about the normal seasonality versus what you're seeing so far this year?
Dennis, this is Keith. We basically produced on our plan to this point when we get into May, June and through August, in our peak season. That is when demand typically accelerates and we see a lift. It's early days, and we will wait and see exactly how that happens, but we're optimistic about our positioning being highly occupied and having strong rates at this point going into peak season.
And our next question will come from Drew Babin of Baird.
Quick question on Miami. Obviously, quite a sequential pickup in occupancy, and I think up 130 basis points or so and good pricing. I was just curious kind of what specifically is happening in Miami? Is it supply burning off? Is it something on the demand side? Any color there would help.
Drew, it's Keith. I'll walk you through the Miami piece. So in Brickell, we have a very specific building, a yacht club that has a lease-up that's going to be happening across the street that's panorama. This particular building, we had anticipated moving, that will start happening in the fourth quarter. It's been a little delayed in their deliveries, so we've had a little stronger occupancy there going into the first quarter. And then the balance of our portfolio also has performed a little stronger than we had anticipated. So I'd say a bit of it is timing on some supply, specifically in Brickell and the rest of it is doing a little better than we thought.
Okay, that's helpful. And then, quickly on Philadelphia, are you assuming anything specifically? Or can you point to anything specifically in your demand forecast regarding the Comcast Technology Center opening by the end of this year? Obviously, very proximate to The Sterling and then some other assets, but I guess what types of jobs might that bring in? Is that something that's kind of critical to your decision to up-weight Philadelphia?
Thank you for the question. This is John. That Comcast Innovation Center is literally across the alley from The Sterling building that we completed the redevelopment on. You heard Keith say earlier, it's over 96% occupied today. We anticipate that, that building will do nothing but good for The Sterling. For Park Towne, that's about less than half a mile away from it and the Dranoff buildings there are also within 0.5 to 0.75 of a mile. And so as we look forward, yes, we see a lot of good things happening, not just with Comcast, but with other companies in the area. We've got Vanguard that's bringing some of their operations downtown in the next couple of years. And just the dynamic in Philadelphia. We were there last week with our Board, did a walking tour. We were walking around the streets and there is an element of dynamism, and I realized there are Philadelphia doubters out there, and I candidly have been one of them over time. And you get out and you walk the streets, and there's a different feel in that town right now than there was 5 years ago, and that's really what we're looking forward to, and that's what we're looking to leverage.
Great. And then one question for Paul on the balance sheet. 2019 debt maturities, I assume some of that is pre-payable this year at some point, is there anything in your guidance specifically regarding refinancing of that debt or otherwise paying it down?
Yes, Drew, thank you for the question. You're right. We have about 25% of our 2019 maturities is pre-payable at par, starting in the fourth quarter. We have started discussions with our lenders on that debt and so the potential benefit from refinancing that debt at today's rates was contemplated in our guidance and we're working to achieve that.
[Operator Instructions] And our next question will come from John Pawlowski of Green Street Advisors.
Terry, my first question is on the portfolio footprint as it sits today. First is your peers. You have the fewest amount of units broadly and spread across the most markets, so sub-sequentially your G&A is higher than most of your peers as a percent of assets. Why does it make sense to operate such a disparate footprint? And are exit markets being actively considered internally?
John, first of all, thank you very much, and I'm confident that you'll have an opinion about Philadelphia as a hometown boy, and maybe you can reassure others on the call, that we do look at markets of changing our weighting, and other markets where we'd like to increase our weighting. And it's really driven more by investment opportunities than it is by G&A. Our G&A as a percentage of revenue or GADs right in the middle of the pack, and we want to be careful and frugal about it so -- but the main investment issue is where we can put capital and have the highest risk-adjusted returns.
Are you exploring any accent markets right now actively?
As John mentioned, we look regularly across the country at lots and lots of deals, but we do very few because we look for ones that have sort of much higher returns than the properties would sell to fund them. For example, most recently, the spread between buying and selling in the paired trade that Paul described is 400 basis points.
Okay. And last one for me. Terry, when the board asks you going forward, what are you and the team going to do differently to close the valuation gap than you've done in the past couple of years, what do you say?
Well, of course, what goes on at the board meeting, goes on in the board meeting, wouldn't necessarily be what -- wouldn't want to report here on the call. But broadly, I think they think as our shareholders do, that we should focus on our business and increasing net asset value, and that over time, this will be reflected in the market.
And this concludes our question-and-answer session. I would like to turn the conference back over to Terry Considine for any closing remarks.
So thank you, and thank you all on the call for your interest. I reiterate Paul's invitation to tour Bent Tree or Philadelphia, and I look forward to seeing many of you in a month's time at NAREIT. Thanks again.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.