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Aimco (NYSE:AIV)
Q3 2017 Earnings Conference Call
Oct. 27, 2017, 1:00 p.m. EDT

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Aimco Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

To ask a question, you may press star then one. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Lisa Cohn.

Please go ahead.

Lisa Cohn -- Executive Vice President, General Counsel and Secretary of Apartment Investment and Management

Thank you. Good day. During this conference call, the forward-looking statements we make are based on management's judgments, including projections related to 2017 results. These statements are subject to certain risks and uncertainties, a description of which can be found in our SEC filings.

Actual results to 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, and I'll now turn the call to Terry Considine. Terry?

Terry Considine -- Chief Executive Officer, Chairman

Thank you, Lisa, and good morning to all of you on this call. Thank you for your interest in Aimco. Here's the headline: Aimco reports strong results.

This year has had its challenges, including hurricanes, Airbnb, and new supply competing with some of our higher-rent properties, but Aimco's strategy contemplates that there will always be challenges and prepares for such emphasizing portfolio diversification, both geographic and across price, price points; redevelopment overdevelopment, with the flexibility of redevelopment to adjust the pace of activity to track changing market conditions; and customer focus, providing greater retention, lower cost and enhanced pricing power. Here are a few proofs. Year-to-date, FFO per share is up 6%. Year-to-date AFFO per share, our preferred measure for the current period profitability, is up 7%.

In the third quarter, same-store net operating income was up 4.5% year over year, adding $0.03 per share to net operating income. Our portfolio outside of same-store, about 30% of our business, added $0.04 per share to net operating income from the lease-up of redevelopment and acquisition communities before $0.02 per share subtraction from properties sold to fund these activities. And parenthetically, I know this ignores the $0.03 per share increased net operating income from the Palazzo reacquisition because that was roughly offset by interest expense.

Our customer and portfolio quality metrics continue their steady improvement. Median income for new customers was $107,000, up 7% and average monthly revenue per apartment home was $2,075, up 6%. Looking ahead, we are busy now with plans and budgets for next year. Paul will provide detailed guidance for 2018 on our fourth quarter earnings call in early February.

The general assumptions for our planning are, first, the economy will continue steady growth. Second, demographics will support continued solid demand for our apartments. Third, competition from new supply will continue, although there will be rotation as to which submarkets are exposed. And fourth, financial flexibility and safety will be rewarded, if there is unexpected distress in capital markets.

We plan to stick to our strategy of customer selection and customer satisfaction, leading to high customer retention. With constant focus on fine-tuning property operations, to increase effectiveness and to reduce costs. With low risk accretive redevelopments and limited developments, where there are special circumstances. Disciplined capital allocation based on pair trades, a strong balance sheet with abundant liquidity and limited exposure to capital markets, and an intentional team culture, emphasizing collaboration and performance.

For the good results of this quarter, I offer sincere thanks to my Aimco teammates, both here in Denver, as well as across the country. It's a privilege and a pleasure to work with you. And now for a more detailed report on the third quarter, I'd like to turn the call over to Keith Kimmel, Head of Property Operations. Keith?

Keith Kimmel -- Executive Vice President, Property Operations

Thanks, Terry. I'm pleased to report that we had a solid third quarter in operations, with strong performances and stable markets such as San Diego and Chicago offsetting challenges with competitive new supply in particular markets such as Philadelphia and Miami. Same-store revenues were up 2.8%. Expenses were down 1.1%.

And net operating income was up 4.5%. Our residents continue to reward us with high marks as they gave us better than a 4-star rating in customer satisfaction for the 16th consecutive quarter, with a 4.24 out of a possible five stars, matching our record for the second consecutive quarter. This contributed to our turnover for the quarter being at 44.4%, our lowest turnover results since the second quarter of 2012, with the most transactions of the year. This allowed us to keep a higher percentage of our most valued customers at higher rates and reduced costs of preparing additional apartments for rent.

Average daily occupancy finished at 96% for the quarter, matching our highest occupancy for any third quarter since 2010, 20 basis points better than the third quarter of 2016 and 10 basis points sequentially. Move-out reasons for the quarter are unchanged versus recent results or our long-term averages. Looking at rates which transacted in the quarter. Blended lease rates were up 3%, with renewal rates having solid increases of 4.5%.

We saw particular strength in Denver, Seattle, San Diego and Chicago. Renewal rents in these markets increased more than 5% compared to the expiring leases. For those leases expired and were not renewed, our new leases increased 1.4% versus the prior lease. We saw particular improvements in San Diego, Seattle and Boston, where new leases had premiums from better than 3% to7%.

Turning to the third quarter same-store revenue growth. Our top performers had revenue increases from nearly 4% to better than 5% for the quarter. This was led by Atlanta, followed by Seattle, San Diego, Los Angeles and Chicago. Our steady performers, which had revenue growth from 2% to 3%, were Denver, Austin, Miami, the Bay Area and Washington, D.C.

And with revenue growth between positive and negative 1%, we had New York and Philadelphia. Finally, in looking at our early fourth quarter results with 1 week to go to close October. Our preliminary blended lease rates are up roughly 2%, with renewals up 4.6% and new leases down about 1%, with an accelerated average daily occupancy of 96.2% as we shift our focus to higher occupancy for the winter months. In November and December, 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?

John Bezzant -- Chief Investment Officer

Thank you, Keith. You've just heard a good report on our same-store portfolio in operations. I'd like to spend some time talking about our second important line of business, redevelopment and development, where we invested $33 million during the third quarter and leased almost 300 apartment homes, 1/3 of those at Park Towne Place. At Park Towne, we completed the construction on the third tower, which was nearly 70% leased at completion.

That tower is 77% leased today at rates consistent with underwriting. We expect this tower to be over 90% leased by year-end, joining the other two redeveloped towers that are already occupancy stabilized. In the past three years, Aimco has leased more than 1,100 redeveloped apartment homes in Center City, Philadelphia. Based on these successful results, we decided to proceed with a $40 million redevelopment of the fourth and final tower at Park Towne Place.

De-leasing is underway, and construction is scheduled to commence in December. We made a second investment decision this quarter with respect to Eastpointe. In 2014, we acquired this property, a C property in Boulder, Colorado. It's located two miles from the new Google campus and across the street from Ball Aerospace's Technology Campus and Foothills Hospital.

Building in Boulder is highly regulated. New supply is limited, notwithstanding higher enrollment at the University of Colorado and increased employment, averaging nearly 5,000 annually since 2010. Since 2015, three institutional-grade apartment complexes have been constructed in the Boulder submarket, two in the Gunbarrel neighborhood, an area five miles northeast of downtown, where light industrial uses are more typical than residential, and only 1 in downtown Boulder proper, with only 26 units. Over time, more will be built, but Boulder will remain a market with high demand and significant barriers to competitive new supply.

Over the past two years, Aimco has planned and entitled a new $117 million, 226 apartment home community to be known as Parc Mosaic. The de-leasing of Eastpointe is now underway, and construction of Parc Mosaic is scheduled to commence in the fourth quarter. Our investment underwriting includes all costs, including the cost of acquiring the property. Our expected returns and value creation are consistent with our objective to earn free cash flow internal rate of return, risk premium of 150 to 250 basis points when compared to acquisition of the stabilized property.

And one of the things we like about redevelopment is the flexibility it affords us to adjust scope and timing of spending to align with changing market conditions. During the quarter, we leased 83 redeveloped homes at Yorktown and Calhoun, and while we were satisfied with pricing, we were not satisfied with pace. Given the observed new supply and typically softer seasonal demand, we are pausing these projects for the winter. By contrast, we're pleased with both rate and pace at Saybrook Pointe, a B property located in San Jose, California, where we leased 66 redeveloped homes this quarter and continue full speed ahead.

Looking forward, we're planning up projects at Mariners Cove in San Diego and other properties being redeveloped to a B price point. On the transactions front, the property sales needed to fund the Palazzo Pairs Trade are on track, with the majority of closings expected in mid- to late December. And with that, I'd now like to turn the call over to Paul Beldin, our Chief Financial Officer. Paul?

Paul Beldin -- Chief Financial Officer

Thanks, John. Aimco's balance sheet remained healthy, with abundant liquidity, flexibility and limited exposure to capital markets. In the third quarter, we continued to take advantage of the low-interest rate environment and closed or rate-locked five nonrecourse fixed-rate property loans totaling $297 million. On a weighted average basis, these loans have a term of 9.6 years and an interest rate of 3.43%, a spread of 125 basis points over the corresponding treasury rates at the time of pricing.

The net effect of our year-to-date property debt refinancing activities has been to lower our weighted average fixed interest rates by almost 10 basis points to 4.75%, generating prospective annual interest savings of approximately $3 million per year. Aimco's leverage target remains unchanged at $3.8 billion. We are temporarily above target due to the Palazzo reacquisitions. Upon completion of the fourth quarter property sales that John outlined, we expect to return to the targeted leverage level.

Wrapping up the balance sheet, our pool of unencumbered assets is valued today at $1.8 billion, an increase of 12% from the beginning of the year. Moving on to third quarter results. AFFO of $0.54 per share and pro forma FFO of $0.63 per share were up $0.08 and $0.09 respectively and notwithstanding $0.01 of hurricane costs, $0.02 and $0.01 ahead of the midpoint of our respective guidance ranges, with the outperformance driven by a slight beat across a number of categories. These results contributed to year-to-date FFO per share, up 6%, and AFFO per share, up 7%.

Now turning to guidance. With the majority of 2017 in the rearview mirror, we are maintaining the midpoints of our AFFO and FFO guidance while narrowing their ranges to be between $2.10 and $2.14 forAFFO and between $2.42 and $2.46 for FFO. We expect the $0.01 of third quarter FFO outperformance will be offset by dilution resulting from de-leasing Eastpointe and the fourth tower at Park Towne in anticipation of the redevelopment next year. We have also maintained the midpoints of our full year same-store operating results.

For the year, we expect to transact a little over 24,000 leases. We've already completed about 23,000, 20,000 for occupancy in January through September and another 3,000 already executed for occupancy in the fourth quarter, leaving only about 1,200 or roughly 5% of our full year activities still to go. The blended lease rent increases achieved in all 23,000 leases completed year-to-date is 2.7%. Through September, year-to-date average daily occupancy is just below 96%.

With October occupancy expected to be 96.2%, year-to-date average daily occupancy will increase to 96%. All else equal, fourth quarter average daily occupancy, an expected range of 96.2% to 96.4%, will result in revenue growth approximating the midpoint of our revenue guidance. Now inherent within the midpoint achievement is sequential revenue growth acceleration of approximately 40 basis points. We expect the majority of the acceleration will be achieved by sequential average daily occupancy improvements.

Additionally, we see an improvement in year-over-year blended lease rate growth. During the first three quarters of 2017, our blended lease rate achievement was lower year-over-year. However, it is worth noting, in the fourth quarter, we expect that trend to reverse. While over 70% are of our fourth quarter leasing activity complete, we have achieved a blended rate increase of 2.7%, consistent with our blended rate increases during the first 9 months of the year and over 100 basis points ahead of last year.

Finally, in yesterday's release, we set guidance for fourth quarter AFFO per share of $0.54 to $0.58 per share and FFO per share of $0.60 to $0.64. With that, we'll now open up the call for questions. Please limit your questions to two per time in the queue. Operator, I'll turn it over to you for the first question.

Questions and Answers

Operator

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, we ask you please pick up your handsets before pressing the keys.

To withdraw your question, please press star then two. Today's first question comes from Austin Wurschmidt of KeyBanc Capital Markets. Please go ahead.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Hi. Good morning. And thanks for taking the question. John, you mentioned that your underwriting included the initial cost of acquiring Eastpointe, and I was just curious if that $117 million also includes the acquisition cost.

And then can you also give us a sense in Denver, in particular, where cap rates are today for higher-end communities in high-quality submarkets?

John Bezzant -- Chief Investment Officer

Sure. I'm going to start with the second one, and then I'm going to pass you to Patti Fielding, whose team did the underwriting on the Parc Mosaic project and the earnings for that one in more specificity. Denver cap rates are ranging in A types of market, and normally, you will see them in the 4s and in the low 4s, including in Boulder. There were a couple of sales that took place last year in Boulder that were in the 3s.

And so there are institutional cap rates in the -- right around the four range and even below four, and you will see that range all the way up into the B and C categories, into the 6s. Patti, would you like to address the...

Patti Fielding -- Executive Vice President and Treasurer

Sure, the answer is yes. It did include the land cost in the $117 million.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Which was around $19 million as your basis in that today?

Paul Beldin -- Chief Financial Officer

Yes, Austin. The original all-in basis was about a little over $18 million, and so there is roughly $3 million or so allocated to the building that has been fully depreciated and the value of which was recouped during our operating period from 2014 through this year.

Patti Fielding -- Executive Vice President and Treasurer

Right. So $15.3 million was loaded into the model.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Great. And then just as far as the expense cuts and modest growth that you guys have experienced now for some time, just curious if those are part of a broader internal opportunity and what's kind of left to cut at this point. Or is any of it been a little more reactive and aided to performance across the portfolio?

Keith Kimmel -- Executive Vice President, Property Operations

Austin, this is Keith. I'll help you through that. Really, when you talk about expense cuts, I would recategorize them. I would categorize them as our focus about being innovative and centralization and being more efficient around how we do things.

In particular, when we think about payroll, there's a lot of different work that happens on-site that is in fractional types of activities. And with our shared service center here in Denver, we have found the opportunity to take that work, centralize it, become more efficient with it and additionally adding innovation around technologies and other things. So we continue to spend more on repairs and maintenance and asset preservation and taking care of our communities, contract services, all those types of things, but it's areas in which we find ways to be more innovative that we believe is really the difference.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Anything, in particular, you can point to that you've rolled out in certain submarkets but haven't rolled out across the entire portfolio that could continue to generate some savings moving forward?

Keith Kimmel -- Executive Vice President, Property Operations

Austin, I appreciate the question. I don't want to get into the secret sauce, so to speak here, but I would say is, is we believe there are still opportunities.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Fair enough. Thanks for the time.

Operator

And our next question today comes from Nick Joseph of Citi. Please go ahead.

Nick Joseph -- Citigroup -- Analyst

Thanks. Going back to Austin's question. For the Boulder asset, how did you weigh redevelopment of the property versus de-leasing and rebuilding new? And then what's the targeted underwritten stabilized yield on the newbuilds?

John Bezzant -- Chief Investment Officer

Well, Nick, this property was built in the late '60s, if I remember correctly, the original Eastpointe, and it was candidly tired and had been owned in the family trust for decades before we bought it. We bought it, seeing an opportunity there, primarily in the land site and in the location within Boulder. We did assess a redevelopment of the site versus a new development of the site and determined that the best -- highest and best use and the best return was through doing a full redevelopment. There's just a lot of asbestos, a lot of deferred maintenance.

It was an old property, and it was tired.

Nick Joseph -- Citigroup -- Analyst

And what's the targeted yield on the development?

John Bezzant -- Chief Investment Officer

Targeted yield is in the mid-5s.

Nick Joseph -- Citigroup -- Analyst

So then, Terry, you mentioned in your prepared remarks a rotation of supply next year. So what are you expecting across your markets in terms of '18 supply versus '17 supply? And in terms of segmentation within markets, which markets are you expecting to compete with more supply next year and which will have favorable comps?

Terry Considine -- Chief Executive Officer, Chairman

Nick, we'll give you a full update on that in January and -- but today, we want to focus on the third quarter and the completion of 2017. But what I did say is that as we planned for next year, we're in the camp that thinks that competitive new supply continues, but we think it will be in different places.

Nick Joseph -- Citigroup -- Analyst

Thanks. And then maybe just finally on the asset sales. You mentioned expecting mid- to late-December for many of the sales. Have any of the prices change relative to your initial expectations? Or has the timing changed at all?

John Bezzant -- Chief Investment Officer

No. No. Some of these have been under contract for nearly a year. Others are newer ones that have come in and they're under contract now, but they're kind of right on top of where we expected them to be.

Nick Joseph -- Citigroup -- Analyst

Thanks.

Operator

And our next question for today comes from Juan Sanabria of Bank of America Merrill Lynch. Please go ahead

Juan Sanabria -- Bank of America / Merrill Lynch -- Analyst

Hi, Thanks for the time. Just hoping you could delve into a couple of your markets, L.A. and D.C., and kind of how you're seeing trends as we think about '18, with new supply obviously being an issue downtown and having previously affected some of your Mid-Wilshire properties there and the D.C. market that everybody seems to be a little bit worried about going into '18.

If you could just give us your latest thoughts on those three.

Keith Kimmel -- Executive Vice President, Property Operations

Hey, Juan, it's Keith. I'll walk through both of those for you. I'll start in D.C. When we look at D.C., our expectations in the beginning of the year was predicated on over the previous number of quarters, where kind of a steady progression of building of rates coming back in occupancy.

It has gotten a little sluggish over the third quarter. And so whether that's a reflection of government jobs or second generations at different lease-ups or a variety of things, it's been a little bit more sluggish. But what I'd point out in our particular case is, is that having occupancy at 96%, we've really put a lot of emphasis on retaining our best customers, and those are our existing ones. Our turnover in D.C.

was at 38% for the quarter, and we were getting 4% in renewals. And so at the end of the day, while there is some sluggishness, we still feel good about D.C. and where it looks going forward. In Los Angeles.

Los Angeles has -- obviously, it's a big place and there's all kinds of submarkets and micro markets within it. At the end of the day, we know there's more supply and staples in other places, but we believe we have some of the best-located assets within Mid-Wilshire and throughout the entire Los Angeles portfolio. And so we've seen improvements there, and we've seen Los Angeles coming strong in the third quarter here for us and we continue to feel good about our position there.

Terry Considine -- Chief Executive Officer, Chairman

And Juan, if I could just add a commentary on the supply side of the question in D.C., in particular, if you look at third-party forecasts, they do expect a significant increase in D.C. supply, but that's mainly within the district itself. And so we only have a single asset in the district. It's a rather small asset at the A price point, and that property will be affected candidly.

But the vast majority of our D.C. portfolio is located in suburban Virginia and other suburban areas, and so we feel comfortable at the price points at which those properties operate, that they will be fairly well insulated.

Juan Sanabria -- Bank of America / Merrill Lynch -- Analyst

Sure, Juan. This is John. I would say that on the acquisition front, we continue to look as we have for many years. And we underwrite a fair number of deals.

We execute on very few of those deals. And as you're fully aware, we have not bought a new deal since Indigo and committed to that one two years ago. So we are, I would say, cautious, but we continue to exercise our Pairs Trade discipline, which is what makes the caution, creates the caution and creates the discipline for us. In terms of Miami, the Yacht Club deal, that is a prospective development deal that continues to work its way through our planning cycle, and we are continuing to underwrite and analyze that one.

We don't have any big pending announcement there in terms of anything in the immediate future. New York is really the same, same story. We have a handful of opportunities around the country on the, what I would call, the development side of the business that we plan and look at. And when the numbers make sense and the project is appropriately planned as Parc Mosaic is, we'll announce them and move forward.

Operator

And our next question today comes from Pete Peikidis of Zelman & Associates.

Pete Peikidis -- Zelman & Associates -- Analyst

Hey, thanks for the time today. So the first question I had here was back -- goes back to your prepared remarks, where you expect the reacceleration of blended rents here through the quarter, the fourth quarter. If you could just speak to some -- what's driving that in terms of specific markets.

Paul Beldin -- Chief Financial Officer

Well, Pete, this is Paul. I'll speak to it related to the portfolio as a whole because that's really how we manage the business. And so as a portfolio, we ended the third quarter with average daily occupancy of 96%. We're up to 96.2% already, forecast for the -- for October.

That's an acceleration of 10 basis points over the prior year, and so we're off to a good start to driving higher levels of occupancy. Additionally, we will see our occupancy lifted slightly by our lease expirations. We have about 200 fewer lease expirations in the fourth quarter of this year than last year. And then the second piece of the acceleration expectation is really driven by what has happened with rate.

If you compare our blended lease rates by quarter, from the first quarter of '17 versus the first quarter of '16, you would have seen there is a deceleration in the growth. However, if you look at it from the fourth quarter of '17, our growth rate for the fourth quarter -- excuse me, of '16, I misspoke, fourth quarter of '16, for this population, it was about 1.6%. We're about 70% done with our fourth quarter leasing activity this year, and we're at 2.7%. So we feel pretty confident that we're going to end up ahead of last year.

Pete Peikidis -- Zelman & Associates -- Analyst

Okay. Great. And then lastly hereon, just, if I could just touch on Boston. It seems like it's been a solid performer here year-to-date, but it softened a bit.

And taking into account sort of the competitive supply that is expected here in the near term, especially in the urban submarkets like Cambridge and City Center there, through the remainder of the year and into early '18. Can you just speak to what you're seeing here in October and sort of how you're positioning that portfolio, and maybe speak to the submarket -- the suburban versus urban kind of dynamic there?

Keith Kimmel -- Executive Vice President, Property Operations

Pete, it's Keith. I'll take it for you. When we think about the urban, first and foremost, really what we have there is we have two buildings in Cambridge and then, of course, One Canal. So those buildings are not within our same-store focus, and so I would categorize those as slightly different.

The rest of our portfolio, of course, is in suburban Boston and outside. So those buildings we don't feel have the same impact or pressures from new supply that's going to be in the city. And while it was a little bit softer than where it was a year ago, it's almost nearly 96% occupied, and we feel quite good about our position there.

All right. Great. That's it for me. Thanks

Operator

And ladies and gentlemen, as a reminder, if you'd like to ask a question please press star one at this time. Today's next question comes from Conor Wagner of Green Street Advisors.

Conor Wagner -- Green Street Advisors -- Analyst

Could you speak to the other income boost in the quarter and if there's any particular market that was driving that?

Paul Beldin -- Chief Financial Officer

Hey, Conor, this is Paul. Thanks for the question on other income. Other income, as you know, comprises roughly about 10% of our total revenue on a year-to-date basis. That has grown at a level that's lower than what our rental rate achievement has been, so it's been a little bit of a drag on our overall revenue number.

And really, the volatility within that number is, in most cases, driven by utility reimbursements. As you all know, that we have about 2/3 of our utility costs are reimbursed by our residents, and so as utility costs move up and down, so do our reimbursement amounts.

Conor Wagner -- Green Street Advisors -- Analyst

And then Lisa, can you give us an update on the Airbnb suit, please?

Lisa Cohn -- Executive Vice President, General Counsel and Secretary of Apartment Investment and Management

Sure. Thanks for the question, Conor. As you all probably saw, we filed a motion for preliminary injunction a couple of weeks ago, maybe last week, I've lost track of time. And that's proceeding through the court, probably a hearing on that in early December or maybe early January.

We continue to really focus onsite to do our most important job, which is selecting our neighbors for our residents and ensuring that we create a community that has longevity and a retention we seek for our residents and delivers great customer service. So we put in place a number of measures on Keith's team to eliminate this trespassing, which we oppose strongly.

Conor Wagner -- Green Street Advisors -- Analyst

And then do you guys have any sense of -- has Airbnb, at least on the rate side or the rent side, has that been a boost in any of your communities, just in terms of people willing to pay more in rent because they plan on essentially wholesaling your unit?

Lisa Cohn -- Executive Vice President, General Counsel and Secretary of Apartment Investment and Management

Conor, I think we see it the other way. And that as we see it as a negative financial impact to us because of the detriment it creates inside the communities.

Conor Wagner -- Green Street Advisors -- Analyst

Okay. Great. Thank you.

Operator

And our next question today comes from Rich Anderson of Mizuho Securities. Please go ahead.

Rich Anderson -- Mizuho Securities -- Analyst

Thanks very much. Paul, first question for you. You back into G&A for the full year. It's a big 3-million-type dollar jump in the fourth quarter.

Can you explain why that's the case?

Paul Beldin -- Chief Financial Officer

Yes, always within the year in G&A, there's a little bit of volatility between the quarters. It's not a real consistent run rate. And so on a year-to-date basis, we are running behind what a pro rata recognition of our G&A cost would be. And so a little bit on year-to-date basis.

We've benefited from that timing of G&A, but we expect it to catch up here in the fourth quarter.

Rich Anderson -- Mizuho Securities -- Analyst

Is it a potential source of upside in the fourth quarter if somehow it doesn't happen the way you plan?

Paul Beldin -- Chief Financial Officer

Well, if the things that we think will happen don't happen, yes, it would be an upside.

Rich Anderson -- Mizuho Securities -- Analyst

Thank you for that statement of the obvious. And then a bigger picture question, maybe for Terry. A lot of growth and maturity in the single-family rental business, and not, I predict you would probably say, it's not impacting lost tenants from your portfolio. But you can confirm or deny that if you like.

But I'm wondering if you think about 5, 10 years from now, just to add a little bit more of a flavorful question on this Friday, do you think that there's a chance that multi-family and single-family could ultimately come together and have a wider net of potential business by bringing two -- the two sort of businesses together. Just out of curiosity, what you think about that since Ernie is now in that business.

Terry Considine -- Chief Executive Officer, Chairman

Rich, with your usual insight, you've asked a really good question, and it would be incorrect to say that Ernie is a Trojan horse and that we are planning this convergence. He's doing quite well independently, but -- and we keep in touch. He's a dear friend and doing a great job there. But I do think that they can and will overlap when they serve the same customer.

And so there's a focus on the division between these two categories based on the physical structure, but I think the more fundamental difference is the customers they serve. Now on the multi-family side, we serve -- about half of our customers are single occupants. And so they're not necessarily attracted to a suburban home with a yard and a swing set. On -- some of our customers though might well want to have a different configuration, a single-story configuration, but all of them are going to want to have that third-party management.

I think that will end up being the distinctive factor, is that whether you live in a one-story structure or a multiple-unit structure, if you're on the, what we now think of as the multi-family side, you'll be getting the very fine management service that Keith is so well-known for. And if you're in the, what's now known as single-family rental, you're going to have to mow your own lawn or arrange for it to be done. So it's going to be that division, and I think you will see some blending and I think you'll see an instance of it in the Aimco portfolio when we add, in another year or so, I think it's 15 single-family structures to our Preserve at Marin project.

Rich Anderson -- Mizuho Securities -- Analyst

Okay. So maybe some of you in that room can most some loans in your retirement someday.

Terry Considine -- Chief Executive Officer, Chairman

We'll keep them in shape.

Rich Anderson -- Mizuho Securities -- Analyst

Thanks, so much. I appreciate it.

Terry Considine -- Chief Executive Officer, Chairman

Yes. Thank you.

Operator

And ladies and gentlemen, our next question comes from Buck Horne of Raymond James. Please go ahead.

Buck Horne -- Raymond James -- Analyst

Hey, good afternoon. I just have one quick one for Paul. Just trying to understand the same-store expense guidance a little bit better. So you're trending up 0.3% year-to-date but looking for full-year expenses to go up to, I guess, midpoint is 1.1%.

So is that a function of the de-leasing at those properties you were talking about in the fourth quarter? Or is there something else that catches up on the expense side in the fourth quarter?

Paul Beldin -- Chief Financial Officer

Buck, thank you for your question. It's actually just a question of a tough comp. If you go back to our fourth quarter last year, we would have talked about some real estate tax appeals that came through as well as much lower-than-typical insurance costs. And so basically, the comp against those two numbers create a large increase in Q4 operating expenses.

And so that gets us from the 30 basis point year-to-date expense growth to the 1.1% that we expect at the midpoint.

Buck Horne -- Raymond James -- Analyst

Check, OK, thanks very much. Appreciate. Thank you.

Operator

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Terry Considine for any closing remarks.

Terry Considine -- Chief Executive Officer, Chairman

Well, thank you, Rocco, and thank you all of you for your interest in Aimco. I want to wish everyone a Happy Halloween and look forward to seeing many of you at NAREIT in a couple of weeks. Thank you very much.

Operator

And thank you, sir. Today's conference has now concluded, and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Duration: 39 minutes

Call participants:

Lisa Cohn -- Executive Vice President, General Counsel and Secretary of Apartment Investment and Management

Terry Considine -- Chief Executive Officer, Chairman

Keith Kimmel -- Executive Vice President, Property Operations

John Bezzant -- Chief Investment Officer

Paul Beldin -- Chief Financial Officer

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Patti Fielding -- Executive Vice President and Treasurer

Nick Joseph -- Citigroup -- Analyst

Juan Sanabria -- Bank of America / Merrill Lynch -- Analyst

Pete Peikidis -- Zelman & Associates -- Analyst

Conor Wagner -- Green Street Advisors -- Analyst

Rich Anderson -- Mizuho Securities -- Analyst

Buck Horne -- Raymond James -- Analyst

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