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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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Good day, and welcome to the Aimco Third Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note, today's 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, ma'am.
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 and 2019 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 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; Wes Powell, Executive Vice President, in charge of Redevelopment; 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. The apartment business is good and Aimco had another solid quarter. In fact, the strength of our summer leasing season that Paul's increased his expectations for full-year bottom-line for the second time in 2 months.
We are upbeat as we finish 2018 and optimistic that 2019 will bring further good news. As we look forward to next year, we continue to look for accretive opportunities to deploy capital while maintaining our commitment to a safe and flexible balance sheet.
For their hard work and solid results in the third quarter, and for the opportunities they provide us as we look forward, I offer great thanks to my Aimco teammates both here in Denver and across the country. And now for more detailed report on the third quarter, I'd like to turn the call over to Keith Kimmel, Head of Property Operations. Keith?
Thanks, Terry. I'm pleased to report that we had a solid third quarter in operations. We have executed a purposeful strategy focused on average daily occupancy. Third quarter finished at 96.3%, 30- basis points better than the third quarter of 2017. Our occupancy accelerated each month throughout the quarter from 96% in July to 96.6% in September. This has further grown to 96.8% in October, which we expect to maintain throughout the fourth quarter and provide a springboard into 2019.
This is driven by our low turnover of 44.8%, resulting from consistently high customer satisfaction and focused customer selection.
We continue to have pure leading margins in our same-store portfolio of 73.8% for the quarter, benefiting from our consistent focus on staffing efficiencies, process centralization and automation.
Turning to our same-store results. Revenues were up 3.1% for the quarter. Consistent with our plan, expenses were up 4.5% due to a challenging comp related to nonrecurring items in 2017 and higher investment in maintenance across our portfolio.
Going forward, we see continued innovation enabling us to return to a more Aimco-like expense result in 2019.
Finally, net operating income was up 2.6%. Looking at leases which transacted in the quarter. New leases were up 2.2%. Renewals were up 4.2% and same-store blended lease rates were up 3.2%.
We saw new lease rates of 4% to 5% in Los Angeles, Boston, the Bay Area and San Diego with the most pressure on new lease rates in Miami, where we saw the impact of directly competitive new supply.
Turning to the third quarter same-store revenue growth. Our top performers, representing more than half of our same-store portfolio, had revenue increases over 4% for the quarter. This includes Boston, San Diego, the Bay Area, Miami and Los Angeles.
Our lowest same-store revenue growth came from Atlanta and Philadelphia, which had negative revenue growth for the quarter. These 2 markets represent less than 5% of our same-store revenue.
Outside of same-store, our premier Philadelphia redevelopment and acquisition communities have delivered strong results. The Sterling was occupied above 95% for the quarter.
Today, the first 3 towers at Park Towne are 95% occupied and the fourth tower is now over 80% leased. We have accomplished this with rents in line with our underwriting. Our 4 acquisition communities in Philadelphia have achieved revenue on-track with underwriting.
And in Washington, D.C., we continue to be encouraged with the performance at our Bent Tree acquisition, where rents were increased $100 on day 1, and we've seen occupancy rise by more than 300 basis points, and this has resulted in both rents and occupancy ahead of our underwriting.
Overall, our non-same-store portfolio represents over 30% of our total net operating income and had results that outperformed our expectations.
As we look at our October same-store results, blended release rates are up 2.5%, 50 basis points better than the October 2017 results. New lease rates are up 80 basis points, renewals are up 4.2%, all while increasing average daily occupancy to 96.8%, a high watermark over the past 5 years.
And with great thanks to our teams in the field and here in Denver for your commitment to Aimco success, I'll turn the call over to Wes Powell, our Executive Vice President of Redevelopment. Wes?
Thank you, Keith. Our redevelopment business remains on track, averaging about $0.40 of value creation for each dollar we invest.
During the quarter, we substantially completed construction on 2 transformative redevelopment projects. At Park Towne Place in Philadelphia, we capped off a successful 4-year $220 million project with the delivery of our fourth and final tower.
At Saybrook Pointe in San Jose, we invested $20 million and completely repositioned the property over a 2-year period. As we look ahead, given the depth of our pipeline and the strength of our team, we expect to increase redevelopment and development spending from approximately $180 million this year to about $300 million in 2019.
One example of that ramp-up is our decision to move forward with the development of 58 new townhomes on land adjacent to our Elm Creek property in Elmhurst, Illinois. Both our programming and underwriting were aided by our operation of the existing 400-unit property, which includes 28 rental townhomes that we constructed 5 years ago.
We plan to invest $35 million in the Elm Creek townhomes and achieve a stabilized NOI yield of 7% and a free cash flow IRR greater than 11%. With that, I'd like to turn the call over to Paul Beldin our Chief Financial Officer. Paul?
Thank you, Wes. First, I would like to highlight our balance sheet, which is strong and has abundant capacity. As reported on the second quarter earnings call, with $680 million in net proceeds from the July dispositions of our asset management business, Hunters Point properties and Chestnut Hill Village community, we repaid our $250 million term loan and all amounts borrowed on our line of credit. We also invested excess proceeds by first, increasing our pool of unencumbered properties by 15% to $2.3 billion; and secondly, following quarter end, repurchasing $75 million of Aimco shares at an approximate 20% discount to our first quarter published net asset value.
We have also worked to address 2019 through 2021 property debt maturities, targeting almost $1 billion of loans to refinance in the fourth quarter.
During the third quarter, we repaid $120 million of property loans. And since quarter end, we rate-locked another $620 million. The $620 million of rate-lock loans is comprised of $120 million of 5-year loans with interest rates floating at 115 basis points over 30-day LIBOR and $500 million of fixed-rate debt with a weighted average maturity of 9 years and a weighted average interest rate of 4.17%, a spread of 108 basis points to the corresponding treasury rates at the time of pricing.
As in the past, Aimco maintains asset flexibility with the right to substitute other properties as collateral for its property loans. When the almost $1 billion of refinancing are completed in the third -- excuse me, in the fourth quarter, we will have reduced refunding risk, lowered interest expense, improved our ladder of maturities and increased the value of our unencumbered properties to over $3 billion, a near 70% increase in just one year.
In connection with this refinancing activity, we expect to incur debt extinguishment costs of approximately $14 million. In accordance with our policy, we will exclude those costs from fourth quarter and full year pro forma FFO and AFFO.
One last point on liquidity. As we consider 2019 capital uses, we have approximately $1 billion of properties offered for sale. We regularly expose to the market more properties then we sell, while we do it for price discovery, we only sell when we have identified accretive uses consistent with our free cash flow internal rate of return, fair trade philosophy.
Now turning to our financial performance for the third quarter. AFFO per share of $0.56 was up 4% year-over-year and $0.05 ahead of the midpoint of the guidance provided with the second quarter earnings release.
$0.02 of the third quarter outperformance was from the timing of capital replacement spending, which we expect will reverse in the fourth quarter.
Finally, turning to full year 2018 guidance. In later leasing season and increased clarity on our full year results, we raised same-store revenue guidance to 3%, equal to the high-end of our prior range.
We maintain the same-store expense guidance in a range of 2.8% to 3.4%. And as a result, increased same-store net operating income guidance in the range of 2.9% to 3.1%, which at the midpoint equaled the high end of the prior range.
We also raised 2018 pro forma FFO and AFFO guidance ranges by $0.01 per share at the midpoint. Now following completion of the third quarter and based on our fourth quarter expectations, we are raising full year pro forma FFO and AFFO by an additional $0.02 per share.
The $0.03 per share increase from second quarter guidance reflects stronger operational results for the second half of the year. We now expect 2018 pro forma FFO to be between $2.45 and $2.49 per share and AFFO to be between $2.14 and $2.18 per share.
With that, we will now open up the call for questions. [Operator Instructions] Rocco, I'll turn it to you for the first question.
[Operator Instructions] Today's first question comes from Trent Trujillo of Scotiabank Bank.
Regarding the share repurchases, the stock has traded around a 20% discount you published NAV for a while, so what was the decision process for executing on the $75 million buyback? Was that a function of you having some available capital from no longer acquiring The Victor?
Trent, this is Terry Considine. When we looked at our opportunities in October, we looked at it and we thought it was a good buy at the time. I wouldn't tie it to a particular event including The Victor.
Okay, and I guess as a follow-up, what kind of appetite do you have for additional share repurchases? Because if I recall correctly, some prior commentary alluded to not just doing a small or nominal buyback. So how would you characterize the $75 million in this context?
I would think it's a substantial buyback.
Okay. And if I may, since you executed at a higher price than where the stock trades today, are you seriously considering additional repurchases or how are you thinking about capital allocation priorities?
It's something we look at regularly, and it's -- we compare it to all our alternative uses.
And next question today comes from Juan Sanabria of Bank of America.
Can you hear me now?
Loud and clear, sir.
Great. I was just hoping we could talk a little bit more about uses of capital. You did the value-add acquisitions in Philadelphia. Are there any other more opportunities to put money to work where some developments maybe not meeting the underwriting hurdles? You'd talked about redevelopments coming up, and now you've got the buyback in place. So could you rank order -- the pecking order in terms of what you see in the market today and returns that are out there?
Juan, it's Terry again. Wes has a deep pipeline of redevelopment opportunities, which have free cash flow, internal rates of return in the low-double digits. And those are probably the most attractive opportunities we see.
And any acquisition opportunities out there that you guys are looking at or seeing but with some of the developments maybe not meeting hurdles as we've seen and oversupply in some markets?
We look regularly at properties ranging from new properties that might be for sale for either a problem on the development or a problem the developer might be having in another part of his business. But as you know we also look at very old properties where we think the ground is very good and across that whole range, I would say there's a lot of investor interest, there's a lot of liquidity and for Aimco to find something that met our hurdles, it would be an anomaly. And of course, that's what we look for. We found that earlier this year in Fairfax County and in Philadelphia, and we keep looking.
I was just hoping on the debt side, should we just think of the $1 billion that, Paul, you mentioned refinancing -- is there anything else that's an opportunity as we start to think about '19 for refinancing beyond that initial $1 billion that you targeted in the fourth quarter?
Yes, Juan. As we look at our opportunities to refinance our upcoming maturities, our focus is really trying to take advantage of the rates today and take refunding and repricing risks largely off the table. So included in our plans of that $1 billion, it will take out the preferreds. We had previously announced that, so I didn't repeat that in my comments. But as you're thinking about your model for '19, don't forget that the preferreds are callable in May.
And next question today comes from Nick Joseph at Citi.
It's Michael Bilerman here with Nick. Terry, I'm not going to disagree with you in buying back stock because we have been talking about it for a little while. So I think it's definitely good use of capital. But I'm curious, why it wasn't a better use of capital when the stock within the high $30s, low $40s versus executing at $44.
I guess what held you back then or what didn't make an attractive use when your stock was in a much more attractive level?
Michael, hindsight is clear, and probably I should have listened to you sooner. But we have to look at our competing uses and alternate activities at the time and each time we do that, we try to make the best decision. And what we're going to put as a postscript to our meeting agendas is, always listen to Michael.
Well, as you think about the $1 billion of sales that you're going to expose to the market, you've always talked about paired trading, does stock buyback -- given the continued wide disconnect with your stock trades -- does that move up in your capital allocation decisions going forward? Because historically, it hasn't, right? Historically, you haven't been an active buyer of your stock.
History is a long time, and as you'll remember because you've been at it a long time, there are periods when we've been a quite active buyer of our stock.
In recent history, it -- your point is valid. And as we look towards the uses of capital, we'll be looking at pricing capital in property sales and in using capital across a spectrum of uses including Wes's redevelopment, including investments in capital enhancements in our properties, perhaps debt reduction and certainly including stock buyback.
So it doesn't sound like it's moving up in the, I guess, the use side. And I know that, that the tax situation is always been one that we've talked about as being a limiter of being able to use asset-sales proceeds in stock buybacks. I don't know if you have found the silver bullet to correct that.
Michael, I don't want to say more than I've said, which is that we look at it carefully. And when it make sense to us, we will. And we accept your advice that it's always better to buy at a lower price.
And our next question today comes from Austin Wurschmidt from KeyBanc Capital Market.
Quick one. In the context, I guess, of the $300 million of redevelopment spend you've got next year. Acquisitions and buybacks aside, how much of the $1 billion, I guess, should we expect is a reasonable amount for you to execute on next year?
Well, Austin, this is Paul. Thank you for the question. We -- as was brought up in our earlier question everything we do from an investment standpoint is based on a paired trade philosophy where we look to invest at a higher free cash flow and rate of return than what we're selling to fund that activity. And so we have a plan in place to spend the $300 million of the redev next year, that meets that benchmark and criteria. And then to the extent that there are additional opportunities that also meet that same criteria, we would sell those additional assets.
So maybe asked differently, I think leverage is supposed to come down here a little bit by year-end. I guess, where would you target or where are you comfortable from a leverage perspective today?
Yes. I would expect that our leverage will actually remain fairly constant between now and year-end. It's just we are reconstituting where that leverage resides across multiple of properties. So that's how we're able to grow the unencumbered pool, while maintaining leverage. But with that, if you assume that our overall portfolio is on an LTV of roughly 30%. So to fund a $300 million of redevelopment activity, we would probably sell about $450 million of assets.
Great. No, that's helpful, appreciate that. And then just lastly, you referenced in the release that you've kind of implemented a high occupancy strategy, which weighed on renewals a little bit. Occupancies ramped up in October with renewals kind of stable. Do you think renewals will continue to moderate? Or do you feel like they've stabilized here for the time being?
Austin, this is Keith. Listen, at the end of the day we still have the total revenue. And so it's always the combination of both new lease rates and renewals and occupancy. We have found the value in moving the occupancy up. And so there can be some movement up and there can be some movement down in all those components.
And our next question today comes from Rob Stevenson of Janney.
Keith, what markets have underperformed and outperformed the most year-to-date versus your expectations at the beginning of the year? And any markets looking to be in an inflection point, good or bad right now?
Rob, I would point to the Bay Area in Boston. If we go back to the beginning of the year, the Bay Area was coming out of 2017, it was a little bit sluggish, and we anticipated some acceleration and I think it has done better than we would've probably anticipated on day one. Boston, we anticipated it would do well but it was coming off a very strong 2017 and the question was could it do it again, and it's done a little better than I would say that we anticipated. Seattle and Atlanta would be the 2 that I would point out that have been probably been a little bit more difficult than on day one. And as far as an inflection point, I wouldn't point to anything at the moment that stands out as at an inflection point.
Okay. And then Paul, how are you thinking about same-store expense growth going forward? Operating expense is up 3.2% year-to-date but property taxes up 4.3%, insurance up 6.1% but utility is down 2.1%. Where are you still feeling the pressure and is 4% property tax growth going forward for the next few years the reality of it?
Yes. Well, thanks for the question, Rob. In Keith's prepared remarks, he mentioned that we expect to return to a more Aimco-like expense growth number in 2019. So I don't want to give specific guidance for expense growth for '19 but I think that you will see that we expect to do better in '19 than in '18. In regards to your particular question about real estate taxes, I would agree that it's an area where we have seen an increase year-over-year from '17 to '18. It's one where there is some level of exposure. But I would also point out that we have 40% of our capital is located in California where we have the benefit of Prop 13 limiting our tax growth to about 2% per year. So that does provide some level of protection for our overall increases and, we can talk about specifics around our thoughts on '19 and real estate taxes when we are together in January.
But are there any places where you seeing the ability to save operating expenses going forward? I mean, personnel moving more to technology than people. I mean, what's the counterbalance to continual cost inflation on the wages and the property tax standpoint for you guys?
Rob, this is Keith. I'll speak to the operating opportunities. We think that there continues to be opportunities to save in expenses. Now personnel costs may be on an individual person by person level. We know that unemployment is low and we are paying more for our best people but what we know is that we continue to find efficiencies and ways to centralize and automate different things, and we don't think that we're nearly at the end-of-the-road of that.
And our next question today comes from Drew Babin of Baird.
A follow-up on the expense reduction question for next year. Thinking specifically about wage pressure and kind of overall labor costs, would you say that you're seeing more pressure on the wage growth front for leasing and property management personnel? Or maintenance type personnel? We've heard from some companies elsewhere in the residential sector that are having issues retaining maintenance personnel and just curious how you're approaching that and whether you're looking at any different ways of maybe compensating people in the future or anything you're doing strategically there would be helpful.
Drew, it's Keith. It's a carry-on to Rob's question. The maintenance side of the business without a doubt is the heart-and-soul of our on-site communities. We know at the end of the day, those folks have the most interaction with our residents in maintaining our assets and providing exceptional customer service. And what I would tell you is we continue to know that our best people, well, we have to pay them more. And there's less folks that are in the service world these days and so there's no question there's some pressure there. What we've done is we've made that particular role a top priority, and we have for several years. And so therefore we believe we're able to maintain more of those folks than others.
Okay, that's helpful. And one more question for me just on capital enhancements as you kind of break down your CapEx in the supplemental. You're very good about giving yield economics for developments and redevelopments. I was just curious if there's any way you can quantify whether it be an ROI on maybe kind of an expected tailwind from revenue growth going forward. Help us understand kind of the return you're getting under those kitchen and bath type projects. Because the amount spent during the quarter is roughly equivalent to, kind of, combined development and redevelopment. I was just curious how you look at the yield economics?
Yes, Drew. Thank you for the question. This is Paul. We evaluate the opportunity to invest in capital enhancement projects, in the same manner we evaluate redevelopment opportunities. So we have a required a free cash flow internal return hurdle of a 10% target, and we underwrite each of these projects individually. We ensure that the projects on an individual basis hit those target levels, and then we monitor progress against those in that achievement. And so far year-to-date, our capital enhancements have been returning at levels in line with our underwriting and expectations and as we plan for '19, we'll undertake a similar course of action.
And our next question comes from John Kim of BMO Capital Markets.
Just follow-up on Drew's question on capital enhancements. But you took up your guidance for this year, looks like it's approaching what you spent last year, which was $101 million. I guess one can argue that you're spending this capital to help with your same-store results. But I'm wondering, do you think this moderates next year like your OpEx does? Or is this just a sign of kind of upgrading some of your older assets?
John, let me start and then I'll see if anybody else in the group has anything they like to add. As we think about our capital enhancement spending. First and foremost, we want to do it in projects that make sense, and where we are going to get return. So our dollar spend is really driven by the opportunity set that we see within our communities. And so as we increase guidance this year it's because we continue to see good opportunities in that regard.
Secondly, there is an element of benefit that we do see to our reported revenue results for this capital enhancement and that's exactly what we want to do. I think that's exactly what our shareholders are paying us to do is to make good investment returns to generate profits for them. And so I think that's an opportunity that we have in our portfolio, and we continue to see that as we move forward into the future.
On the $1 billion that you mentioned that are offered to sell, I think that's the first time you've provided that number. And I know you sold $805 million this year, but can you just maybe provide some color on where this figure was in the past few quarters?
John, this is Terry. We -- routinely, we will have amounts in that magnitude in the market over the course of the year. There will be ebbs-and-flows depending on take-rates, our spending activities and so forth. But it's not an unusually large number for us overall. It's probably at a high watermark for this year -- during the timing of this year, and some of that's driven by our planning for 2019.
I'm just curious why you mentioned it at this call.
I think just as a source of liquidity.
John, we had actually mentioned it in some of our investor materials that we put out earlier this fall, so we just wanted to -- to the extent that folks missed it originally we wanted to make sure it was mentioned in our prepared remarks but no deeper meaning than that.
And our next question today comes from Rich Anderson of Mizuho Securities.
Paul, we spent some time over the summer together and one of the concepts that you guys were working on was this idea of targeting Pinterest users for their planning purposes and perhaps longer length of stay. I'm wondering where that data experiment has gone lately? If it's sort of died a slow death, or if it's actually working?
Rich, it's -- this is Keith Kimmel. I'll take it. It hasn't died a slow death. Pinterest still exists, and we're continuing to utilize it. What I'd say is, listen, it's early days. What we have found is that there was an opportunity to one, understand how Pinterest users behave and one of those facts are that they are planners and they do things much more thinking -- forward-looking. And we have found a way that we can market to those individuals. I would say that it's part of our marketing strategy, but it hasn't taken over as the sole source.
Well, that's good. Next question with legalization of marijuana, I'm curious if it's a lease violation for someone to smoke pot or eat edibles. I'm just curious how you handle that as it becomes a legal thing over and over? And how it might disrupt your communities. Newsflash, it's already happening. So I'm just wondering how you manage that situation?
Well, Rich, this is Keith. I'll take that one as well. I can't speak to edibles but what I can tell you is that 100% of our communities are smoke-free. So smoking of any sort, whether it's cigarettes marijuana or any other source, it's illegal in our communities, and we don't allow it. And so not something that we have a lot of concern about.
And Rich, just to supplement that a little bit on the -- not necessarily on the edible point but on a broader context point, we have a code of conduct and expectations that we have with our residents. And in that process, as we've talked about in the past with many of you, it almost works like a driver's license point system. And so if resident's behavior for any reason and any cause is disruptive to their neighbors, that would be cause for us to non-renew at the end of their lease, or if their behavior is serious enough, for us to initiate an eviction process.
And our next question today comes from John Pawlowski of Green Street Advisors.
Keith or John, just curious what the long-term house thesis on continuing to own in Chicago is?
John, this is John. We look at all of our markets all the time. We look at our individual properties all the time. If you look at the sale list that's on our website, you'll see some of that $1 billion of assets is in Chicago. And we don't have it as a direct point of thesis. We also have an active redevelopment asset that we've been working on this year and will do next year in Evanston. So we don't have a blanket philosophy on Chicago that we want out but we certainly will look at individual assets where it makes sense.
Okay. Maybe Keith, nearer term, I know Chicago has not seen much supply versus most markets yet demand seems to be -- not falling off a cliff but decelerating quickly. So what's happening on the ground there?
John, basically, we had moved about 150 leases into peak season. That caused a little more frictional vacancy. That'd be the first point. So the third quarter we're at 95.6% average daily occupancy. I'd give you a reference point to October, we're almost at 97%, we're at 96.9%. So it was a build there and then there's been some softening in some of the new lease pricing. At the end of the day we just we wanted to get full before we got into those cold winter months.
Okay. One last one for me. John, the $1 billion in product you're offering in the market, how would you compare the bid for those type of assets versus earlier this year?
Pretty similar. There hasn't been a whole lot of change. And as we look at it, on an active basis, maybe to some of the earlier questions regarding how much of that we'll execute, it's all going to be driven off the pair trade and where we get exceptional pricing on the sell side that frees up exceptional uses on the internal side of reinvestment, we'll execute. And from a demand standpoint it's about same as it was earlier in the year.
And our next question is a follow-up from Nick Joseph from Citi.
Paul, obviously it's been a busy year in terms of transactions. Is $0.63 the midpoint for core FFO on the fourth quarter, a good run-rate going forward?
Nick, we'll always have some volatility quarter-to-quarter just based upon our activities and so I don't want to set a marker or expectation for any 1 particular point or even a range. What we can do though is talk about '19 in January and help kind of give you some guidance around how our FFO will build from quarter-to-quarter at that time.
So maybe on 1 specific line item for the tax benefits. You increased guidance for this year. Assuming about $3.5 million, it looks like in the fourth quarter, what is recurring for 2019 for that line item? It's $14 million the right run-rate? Or does some of that drop off?
Nick, I would direct you to our supplemental schedule 2 where we break out our a tax benefit into 2 lines. One is labeled historic tax credit benefit and the other is labeled other tax benefit net. We have talked about previously that our historic tax benefits where we have earned those in connection with our redevelopment activities are going to decline to 0 in 2019. That is the piece that I would take out of your models. And for the other tax benefit, there is always some change year-over-year based upon the activities of our taxable re-subsidiary so we will provide guidance for that line item again in January.
And our next question comes from Buck Horne at Raymond James.
I just want to talk maybe a little bit more detail about a couple of markets where I think you are facing some supply pressure. Particularly Miami where I think you did see some slowing in leasing activity. Just how that's -- I guess how long the supply pressure might last in Miami? Are you seeing the competitors stay rational there, what the concession level is doing? And also any comments you might have on Philadelphia just kind of Center City and how things are faring up with the supply bump in Philadelphia?
Buck, it's Keith. Thanks for the question. In Miami, you're right, it's actually very specific though, it's in -- across the way in Brickell. And it's our Yacht Club community, there's -- Panorama is leasing directly across the street, literally, it's 800 units. We thought it was going to come in a little bit sooner this year. We actually benefited because it was late to delivery. And we're now seeing it. So they're moving in and leasing as we speak. That's really where the direct supply that we feeling in Miami. And then as far as Philadelphia goes, listen, there is a lot of new development, but I'd point to how well our lease-up is going at Park Towne. So the 3 towers are at 95% and the fourth tower, better than 80% has leased-up faster than any of the previous 3. And then I'd also point to the Sterling maintaining 95% and better throughout the quarter. So we're obviously quite aware of the supply. We'll keep an keen eye on it but our communities have performed well with it being there.
And Buck, just to add to Philadelphia a little bit. We have seen supply be fairly high in Center City, Philadelphia during 2018. As we look out into '19, we think it's still going to be elevated but it's improving so it's moving in the right direction.
Okay, that's very helpful and then just going back to Panorama real quick, how many quarters or months do you think it takes before they kind of reach some sort of stabilization over there?
If I had to guess, I'd say it could be most of next year.
And 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, thank you very much. Thank you all for joining on this call. Many of you, we hope to see next week in San Francisco. And so if you have further questions either feel comfortable calling Paul or one of his team or save them and we'll talk about it when we're together on Tuesday -- or Wednesday and Thursday of next week. Thank you very much.
Thank you, sir. Today's conference has now concluded. And we thank you all for attending today's presentation. You may disconnect your lines, and have a wonderful day.