Strategies for Multi-Family Real Estate Capital Allocation
AIR
COMMUNITIES
The most efficient and most effective way to allocate capital to multi-family real estate
What makes AIR a compelling investment?
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Simple, predictable
business model
High-quality, stabilized multi-family portfolio with focus on the same for external growth; no development
Emphasis on productivity: (i) the AIR Edge and (ii) G&A at less than 15 bps of GAV drive higher FCF conversion
Low debt
Diversification, focus,
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and strategy merit
•
a low risk premium
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Market leading AIR
Edge operating platform
drives earnings growth
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Disciplined capital
allocation enhances
FFO growth
Exceptional governance
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and fully aligned
Management
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Diversified by geography, location (urban vs. suburban), and price point, in high-quality markets where
demand generates continued organic growth
Focus on stable communities with great residents produces high retention, and revenue stability
Attractive growth profile with limited operating and financial risk
Peer-leading (1) track record of cost control with (i) flat onsite controllable operating expenses and (ii) G&A at
less than 15 bps of GAV
Durable advantage through (i) NOI margin performance and (ii) conversion of Same Store Revenue to FCF at
~9-10% higher than the peer average (1) compounds over time
Substantial spread (~200 bps+) over our weighted average cost of capital required for all investments
Recent investments underwritten at ~8-10% unlevered IRRs compare to 2021 and 2022 property sales at
a long-term expected IRRs of ~6%
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Developing access to the full spectrum of debt and equity capital, both public and private, for broadest
choice with respect to the lowest WACC
Anticipate funding near-term growth through property sales and/or JVs given current trading levels
Refreshed Board with diverse and relevant expertise; elected annually; average tenure of ~4 years
"At risk” compensation, primarily tied to TSR, aligns CEO and Management in driving value for shareholders
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Attractive valuation
Attractive absolute and relative valuation
A $100 investment in AIR by a retail investor today would yield $3.67 on a post-tax basis, or $1.78 (+95%)
more than peer average (1) (2) (3)
Per company filings. Peers defined as AVB, CPT, EQR, ESS, MAA, and UDR. Coastal peers defined as AVB, EQR, ESS, and UDR. Sunbelt peers defined as CPT and MAA.
Assumes AIR's dividend in 2021 was ~67% return of capital and -33% capital gain. Peers averaged -62% ordinary income and -28% capital gain. Analysis assumes similar dividend treatment.
Assumed tax rates: (i) federal ordinary income of 37% (29.6% for qualified 199A income), (ii) federal LTCG of 20%, and (iii) federal 1250 recapture of 25%. A 3.8% Net Investment Income Tax and
illustrative 6.65% state tax is added to each respective federal rate.
(1)
(2)
(3)
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