Apartment Investment and Management Company (“Aimco”) (NYSE:
AIV) announced today first quarter results for 2019.
Chairman and Chief Executive Officer Terry Considine comments:
“Aimco has started 2019 with solid results, the product of an
intentional strategy to create Net Asset Value per share. In our
Same Store portfolio, we maintained 97.0% occupancy for the entire
quarter, increased net operating income by 5.5%, and posted
peer-leading net operating income margins of 73.2%. In
Redevelopment, we started the renovation of 707 Leahy, located in
Redwood City, California; adding another start to this highly
accretive business. In Portfolio Management, we sold seven
apartment communities at prices above our internal estimated gross
asset values for proceeds sufficient to complete the paired trade
funding for the value-creating share repurchases in last year’s
fourth quarter. And last month, we acquired One Ardmore, the fifth
and final community in the Philadelphia portfolio acquisition
announced one year ago.”
Chief Financial Officer Paul Beldin adds: “First quarter 2019
AFFO of $0.55 per share and Pro forma FFO of $0.61 per share were
$0.02 and $0.01 ahead of the midpoint of our respective guidance
ranges due to better than expected operating results at our Same
Store, Redevelopment and Acquisition communities and the timing of
general and administrative expenses. First quarter Same Store
revenue growth of 4.2% was ahead of the assumptions underpinning
the midpoint of our full-year 2019 revenue growth guidance of 3.3%,
leaving us well positioned as we enter the important summer leasing
season.”
“Aimco’s balance sheet is safe and liquid, which creates
opportunity and flexibility. Aimco used proceeds from first quarter
sales to pay down borrowings on our revolving credit facility,
ending the quarter with cash on hand of $198 million and the
capacity to borrow $723 million under our revolving credit
facility. On April 1, we prepaid, at par, $168 million of
property-level debt maturing during the third quarter of 2019. This
repayment of debt added $740 million of property value to Aimco’s
pool of unencumbered properties, now estimated at $3.3
billion.”
Financial Results: First Quarter Pro
forma FFO Up 3%; AFFO Up 2%
FIRST QUARTER (all items per common share -
diluted)
2019 2018
Variance Net income $
1.88 $ 0.54
248 % Pro forma Funds From Operations (Pro
forma FFO) $ 0.61
$ 0.59 3 %
Deduct Capital Replacements $ (0.06 ) $
(0.05 ) 20 %
Adjusted Funds From Operations
(AFFO) $ 0.55
$ 0.54 2 %
Net Income (per diluted common share) - Year-over-year,
first quarter net income increased primarily due to higher gains on
the sale of apartment communities.
Pro forma FFO (per pro forma diluted common share) -
Aimco’s first quarter Pro forma FFO per share increased $0.02
year-over-year due to the following items:
- $0.04 from Same Store Property Net
Operating Income growth of 5.5%, driven by a 4.2% increase in
revenue, offset by a 0.8% increase in expenses;
- $0.05 from Net Operating Income
contributions from redevelopment communities and 2018 property
acquisitions; and
- $0.01 lower interest expense; offset
by
- ($0.08) contribution eliminated
following the 2018 sale of the Asset Management business and sales
in 2018 and 2019 of apartment communities to fund Aimco’s
investment activities.
Adjusted Funds from Operations (per pro forma diluted common
share) - AFFO per share increased $0.01 year-over-year due to
the $0.02 increase in Pro forma FFO, offset $0.01 by an
acceleration of capital replacement spending as compared to the
previous year. For the full year, Aimco expects total capital
replacement spending to decline year-over-year as the Aimco
portfolio continues to be upgraded with Aimco capital invested in
fewer, but more valuable, properties.
Operating Results: First Quarter Same
Store NOI Up 5.5%
FIRST QUARTER Year-over-Year
Sequential 2019
2018 Variance
4th Qtr. Variance Average Rent per
Apartment Home $2,041 $1,977
3.2 % $2,031 0.5 % Other Income
per Apartment Home 124 120
3.3 % 126 (1.6 %) Average
Revenue per Apartment Home $2,165
$2,097 3.2 % $2,157 0.4 %
Average Daily Occupancy 97.0% 96.1%
0.9 % 97.0% — %
$ in Millions
Revenue, before utility
reimbursements $175.7 $168.6
4.2 % $175.1 0.4 % Expenses, net
of utility reimbursements 47.1 46.8
0.8 % 43.9 7.3 % NOI
$128.6 $121.8 5.5 %
$131.2 (1.9 %)
Same Store Rental Rates - Aimco measures changes in
rental rates by comparing, on a lease-by-lease basis, the rate on a
newly executed lease to the rate on the expiring lease for that
same apartment. Newly executed leases are classified as either a
new lease, where a vacant apartment is leased to a new customer, or
as a renewal. The table below details changes in new and renewal
lease rates.
2019 Jan Feb
Mar 1st Qtr. Renewal rent
increases 4.9 % 5.3 % 5.5
% 5.2 % New lease rent increases (0.2
%) 1.2 % 1.5 % 0.8 %
Weighted average rent increases 2.1 %
3.1 % 3.4 % 2.9 % Average Daily
Occupancy 97.1 % 97.0 %
97.0 % 97.0 %
Redevelopment and
Development
Redevelopment is Aimco’s second line of business where Aimco
creates value by repositioning communities within the Aimco
portfolio. Aimco also undertakes limited ground-up development when
warranted by risk-adjusted investment returns, either directly or
in connection with the redevelopment of an existing apartment
community. Aimco invests to earn leverage-neutral risk-adjusted
returns in excess of those expected from the apartment communities
sold in “paired trades” to fund the redevelopment and development.
Of these two activities, Aimco generally favors redevelopment
because it permits adjustment of the scope and timing of spending
to align with changing market conditions and customer
preferences.
During the first quarter, Aimco invested $45 million in
redevelopment and development. Aimco continued phased redevelopment
activities in Miami at its Flamingo South Beach and Bay Parc
communities, and ground-up construction at Parc Mosaic in Boulder,
Colorado, The Fremont on the Anschutz Medical Campus in Denver,
Colorado, and Elm Creek Townhomes in Elmhurst, Illinois.
Aimco also began a $24 million full redevelopment of 707 Leahy
in Redwood City, California. This 110-home community is located in
one of the most dynamic job markets in the world and benefits from
higher density than permitted under the current zoning code. Aimco
expects this investment to generate a Free Cash Flow internal rate
of return of approximately 9%.
Portfolio Management: Revenue Per
Apartment Home Up 6% to $2,181
Aimco’s portfolio of apartment communities is diversified across
“A,” “B,” and “C+” price points, averaging “B/B+” in quality and is
also diversified across several of the largest markets in the
United States.
As part of its portfolio strategy, Aimco seeks to sell up to 10%
of its portfolio annually and to reinvest the proceeds from such
sales in accretive uses such as capital enhancements,
redevelopments, some developments, and selective acquisitions with
projected Free Cash Flow internal rates of return higher than
expected from the communities being sold. Through this disciplined
approach to capital recycling, Aimco significantly increases the
quality and expected growth rate of its portfolio.
FIRST QUARTER 2019
2018 Variance Apartment
Communities 128 134
(6 ) Apartment Homes 34,349
37,228 (2,879 ) Average Revenue
per Apartment Home $ 2,181 $
2,052 6 % Portfolio Average Rents as a
Percentage of Local Market Average Rents 113 %
113 % — % Percentage A (1Q 2019 Average
Revenue per Apartment Home $2,839) 52 %
49 % 3 % Percentage B (1Q 2019 Average Revenue per
Apartment Home $1,918) 32 % 35 %
(3 %) Percentage C+ (1Q 2019 Average Revenue per Apartment
Home $1,727) 16 % 16 % —
% NOI Margin 72 % 71 % 1
% Free Cash Flow Margin 67 % 66 %
1 %
First Quarter Portfolio - For its entire portfolio,
Aimco’s average monthly revenue per apartment home was $2,181 for
first quarter 2019, a 6% increase compared to first quarter 2018.
This increase is due to year-over-year growth in Same Store revenue
as well as Aimco’s acquisition activities, lease-up of
redevelopment communities, and sales of communities with average
monthly revenues per apartment home lower than those of the
retained portfolio.
Acquisitions - Aimco evaluates potential acquisitions
with an eye for unique and opportunistic investments and funds
acquisitions pursuant to its strict “paired trade” discipline.
In the first quarter, Aimco made no acquisitions.
In April, Aimco closed the $65 million acquisition of One
Ardmore, the fifth and final community included in the Philadelphia
portfolio acquisition announced one year ago. This 110-home
community is located in the heart of one of Philadelphia’s Main
Line suburbs and most desirable submarkets. Aimco acquired One
Ardmore at the completion of construction, and expects the
community to be fully occupied before year-end.
Dispositions - In the first quarter, Aimco sold seven
apartment communities with 2,206 apartment homes for gross proceeds
of $409 million. Proceeds, net of debt repayment and transaction
costs, were $340 million. Three communities are located in suburban
Chicago, one in Alexandria, Virginia, one in Virginia Beach,
Virginia, and two in Nashville, Tennessee. Proceeds from the sales
were used to complete the leverage-neutral, “paired trade” funding
for the fourth quarter 2018 common stock repurchases.
Balance Sheet
Aimco Leverage
Aimco’s leverage strategy seeks to increase financial returns by
using leverage with appropriate caution. Aimco limits risk through
its balance sheet structure, employing low leverage, primarily
non-recourse and long-dated property debt; and Aimco builds
financial flexibility by maintaining ample unused and available
credit as well as holding properties with substantial value
unencumbered by property debt; and uses partners’ capital when it
enhances financial returns or reduces investment risk.
Aimco total leverage includes the Aimco share of long-term,
non-recourse, property debt encumbering apartment communities,
outstanding borrowings under its revolving credit facility, and
outstanding preferred equity.
AS OF MARCH 31, 2019 $ in Millions
Amount % of Total
Weighted Avg.Maturity
(Yrs.)
Aimco share of long-term, non-recourse property debt
$ 3,870 96 % 7.8 Outstanding
borrowings on revolving credit facility 70
2 % 2.8 Pro forma Preferred Equity*
101 2 % 40.0**
Pro forma Total Leverage* $ 4,041
100 % 8.5** Pro forma cash, restricted
cash and investments in securitization trust assets*
(162 )
Net
Leverage $ 3,879
* Aimco has adjusted Preferred Equity
and cash on a pro forma basis to reflect the redemption of its
Class A Perpetual Preferred Stock as if it had been redeemed with
cash on hand on March 31, 2019. ** Aimco’s Preferred Equity is
perpetual in nature; however, for illustrative purposes, Aimco has
computed the weighted average maturity of its Pro forma Total
Leverage assuming a 40-year maturity for its Preferred Equity.
Aimco has calculated the weighted average maturity of its Pro forma
Total Leverage assuming that its Class A Perpetual Preferred Stock,
which on April 15, 2019 Aimco called for redemption on May 16,
2019, was redeemed on March 31, 2019 .
Leverage Ratios
Aimco target leverage ratios are Proportionate Debt and
Preferred Equity to Adjusted EBITDAre below 7.0x and Adjusted
EBITDAre to Interest Expense and Preferred Dividends greater than
2.5x. Aimco calculates Adjusted EBITDAre and Adjusted Interest
Expense used in its leverage ratios based on current quarter
amounts, annualized.
Proportionate Debt to Adjusted EBITDAre 7.0x
Proportionate Debt and Pro forma Preferred Equity to Adjusted
EBITDAre 7.2x Adjusted EBITDAre to Pro forma
Adjusted Interest Expense 3.3x Adjusted
EBITDAre to Pro forma Adjusted Interest Expense and Pro forma
Preferred Dividends 3.2x
Aimco’s leverage ratios have been calculated on a pro forma
basis. Please refer to Supplemental Schedule 5 and the Glossary for
additional information and supporting calculations.
During first quarter 2019, Aimco retitled its Adjusted EBITDA
measure to Adjusted EBITDAre in its calculation of leverage ratios.
The computation of Adjusted EBITDAre has been modified from Aimco’s
prior measure to include the amortization of debt issuance costs as
a component of interest expense in both the computation of Adjusted
Interest Expense and Adjusted EBITDAre. The impact of this change
is less than 0.1x to each ratio. Aimco also added to the Glossary a
reconciliation of Net Income to EBITDAre, as defined by Nareit.
Liquidity
At March 31, 2019, Aimco held cash and restricted cash of
$198 million and had the capacity to borrow $723 million under its
revolving credit facility, after consideration of $7 million of
letters of credit backed by the facility. Aimco uses its credit
facility primarily for working capital and other short-term
purposes and to secure letters of credit.
Aimco also manages its financial flexibility by maintaining an
investment grade rating and holding apartment communities that are
unencumbered by property debt. At March 31, 2019, Aimco held
unencumbered apartment communities with an estimated fair market
value of approximately $2.5 billion. In April 2019, Aimco prepaid,
at par, $168 million of property-level debt maturing during the
third quarter 2019, increasing the estimated value of its pool of
unencumbered apartment communities by $740 million to $3.3
billion.
Equity Capital Activities
As previously announced, on February 3, 2019, Aimco's Board of
Directors declared a special dividend valued at $2.02 per share of
common stock that consisted of $67.1 million in cash and 4.5
million shares of common stock, which was distributed on March 22,
2019.
In order to facilitate comparisons with previous periods, Aimco
authorized a reverse split to neutralize the effect of the stock
dividend. Taken together, the total number of shares outstanding
after the stock dividend and reverse-split was unchanged by
the two actions.
On April 29, 2019, the Aimco Board of Directors declared a
quarterly cash dividend of $0.39 per share of Class A Common Stock
for the quarter ended March 31, 2019, representing an increase of
3% compared to the dividends paid in second quarter 2018. This
dividend is payable on May 31, 2019, to stockholders of record on
May 17, 2019.
2019 Outlook
Aimco is herein maintaining Full Year guidance established in
the Fourth Quarter 2018 Earnings Release.
($ Amounts represent Aimco Share)
YEAR-TO-DATE MARCH 31, 2019
FULL YEAR 2019
Net Income per
share $1.88 $3.13 to
$3.63
Pro forma FFO per share $0.61
$2.41 to $2.51
AFFO per share
$0.55 $2.12 to $2.22
Select
Components of Nareit FFO
Same Store Operating Measures
Revenue change
compared to prior year 4.2%
2.80% to 3.80% Expense change compared to prior year
0.8% 2.00% to 3.00% NOI change
compared to prior year 5.5%
2.70% to 4.50%
Other Earnings
Tax Benefit
$4M $7M to $9M
Offsite Costs
Property
management expenses $5M
$20M General and administrative expenses $10M
$47M
Total Offsite Costs
$15M $67M
Capital
Investments
Redevelopment/Development $45M
$225M to $275M Capital Enhancements
$16M $80M to $100M
Transactions
Property
dispositions $409M $750M
to $850M Property acquisitions [1] $0M
$65M
Portfolio Quality
Average revenue per apartment home
$2,181 ~$2,220
Balance
Sheet
Proportionate Debt to Adjusted EBITDAre [2]
7.0x ~6.7x Proportionate Debt and Preferred
Equity to Adjusted EBITDAre [2] 7.2x
~6.9x [1] Aimco does not predict or guide to
acquisitions. Full year 2019 acquisition guidance represents the
purchase price for One Ardmore, which was acquired in April 2019.
Aimco monitors potential transactions with an eye for unique and
opportunistic investments and funds acquisitions pursuant to its
strict “paired trade” discipline. [2] Aimco has calculated pro
forma leverage ratios at March 31, 2019 assuming that its Class A
Perpetual Preferred Stock, which on April 15, 2019 Aimco called for
redemption on May 16, 2019, was redeemed March 31, 2019.
($ Amounts represent Aimco Share)
SECOND QUARTER 2019
Net income per share
$0.39 to $0.43
Pro forma FFO per share
$0.57 to $0.61
AFFO per share $0.48 to
$0.52
Earnings Conference Call
Information
Live Conference Call: Conference
Call Replay: Friday, May 3, 2019 at 1:00 p.m. ET Replay
available until August 3, 2019 Domestic Dial-In Number:
1-888-317-6003 Domestic Dial-In Number: 1-877-344-7529
International Dial-In Number: 1-412-317-6061 International Dial-In
Number: 1-412-317-0088 Passcode: 9077982 Passcode: 10130487
Live webcast and replay:
investors.aimco.com
Supplemental Information
The full text of this Earnings Release and the Supplemental
Information referenced in this release are available on Aimco’s
website at investors.aimco.com.
Glossary & Reconciliations of
Non-GAAP Financial and Operating Measures
Financial and operating measures found in this Earnings Release
and the Supplemental Information include certain financial measures
used by Aimco management that are measures not defined under
accounting principles generally accepted in the United States, or
GAAP. Certain Aimco terms and Non-GAAP measures are defined in the
Glossary in the Supplemental Information and Non-GAAP measures
reconciled to the most comparable GAAP measures.
About Aimco
Aimco is a real estate investment trust focused on the ownership
and management of quality apartment communities located in select
markets in the United States. Aimco is one of the country’s largest
owners and operators of apartments, with ownership interests in 129
communities in 17 states and the District of Columbia. Aimco common
shares are traded on the New York Stock Exchange under the ticker
symbol AIV, and are included in the S&P 500. For more
information about Aimco, please visit our website at www.aimco.com.
Forward-looking
Statements
This Earnings Release and Supplemental Information contain
forward-looking statements within the meaning of the federal
securities laws, including, without limitation, statements
regarding projected results and specifically forecasts of second
quarter and full year 2019 results, including but not limited to:
Nareit FFO, Pro forma FFO and selected components thereof; AFFO;
Aimco redevelopment and development investments and projected yield
on such investments, timelines and Net Operating Income
contribution; expectations regarding sales of Aimco apartment
communities and the use of proceeds thereof; and Aimco liquidity
and leverage metrics.
These forward-looking statements are based on management’s
judgment as of this date, which is subject to risks and
uncertainties. Risks and uncertainties include, but are not limited
to: Aimco’s ability to maintain current or meet projected
occupancy, rental rate and property operating results; the effect
of acquisitions, dispositions, redevelopments and developments;
Aimco’s ability to meet budgeted costs and timelines, and achieve
budgeted rental rates related to Aimco redevelopment and
development investments; expectations regarding Aimco sales of
apartment communities and the use of proceeds thereof; and Aimco’s
ability to comply with debt covenants, including financial coverage
ratios.
Actual results may differ materially from those described in
these forward-looking statements and, in addition, will be affected
by a variety of risks and factors, some of which are beyond Aimco’s
control, including, without limitation:
- Real estate and operating risks,
including fluctuations in real estate values and the general
economic climate in the markets in which Aimco operates and
competition for residents in such markets; national and local
economic conditions, including the pace of job growth and the level
of unemployment; the amount, location and quality of competitive
new housing supply; the timing of acquisitions, dispositions,
redevelopments and developments; and changes in operating costs,
including energy costs;
- Financing risks, including the
availability and cost of capital markets’ financing; the risk that
cash flows from operations may be insufficient to meet required
payments of principal and interest; and the risk that earnings may
not be sufficient to maintain compliance with debt covenants;
- Insurance risks, including the cost of
insurance, and natural disasters and severe weather such as
hurricanes; and
- Legal and regulatory risks, including
costs associated with prosecuting or defending claims and any
adverse outcomes; the terms of governmental regulations that affect
Aimco and interpretations of those regulations; and possible
environmental liabilities, including costs, fines or penalties that
may be incurred due to necessary remediation of contamination of
apartment communities presently or previously owned by Aimco.
In addition, Aimco’s current and continuing qualification as a
real estate investment trust involves the application of highly
technical and complex provisions of the Internal Revenue Code and
depends on Aimco’s ability to meet the various requirements imposed
by the Internal Revenue Code, through actual operating results,
distribution levels and diversity of stock ownership.
Readers should carefully review Aimco’s financial statements and
the notes thereto, as well as the section entitled “Risk Factors”
in Item 1A of Aimco’s Annual Report on Form 10-K for the year ended
December 31, 2018, and the other documents Aimco files from time to
time with the Securities and Exchange Commission.
These forward-looking statements reflect management’s judgment
as of this date, and Aimco assumes no obligation to revise or
update them to reflect future events or circumstances. This press
release does not constitute an offer of securities for sale.
Consolidated Statements of
Operations (in
thousands, except per share data) (unaudited) Three
Months Ended March 31, 2019 2018
REVENUES Rental and other property revenues attributable to
real estate $ 230,235 $ 225,393 Asset Management business rental
and tax credit revenues — 22,327 Total revenues
230,235 247,720
OPERATING EXPENSES
Property operating expenses attributable to real estate 79,184
78,287 Property operating expenses of partnerships served by Asset
Management business — 9,195 Depreciation and amortization 93,565
92,548 General and administrative expenses 10,369 11,355 Other
expenses, net 5,703 2,958 Total operating expenses
188,821 194,343 Interest income 2,726 2,172 Interest expense
(41,409 ) (47,795 ) Gain on dispositions of real estate 291,473
53,195 Other, net 72 224
Income before income tax
(expense) benefit 294,276 61,173 Income tax (expense) benefit
(2,981 ) 34,517
Net income 291,295 95,690
Noncontrolling interests: Net income attributable to noncontrolling
interests in consolidated real estate partnerships (91 ) (6,206 )
Net income attributable to preferred noncontrolling interests in
Aimco OP (1,934 ) (1,937 ) Net income attributable to common
noncontrolling interests in Aimco OP (15,137 ) (3,755 ) Net income
attributable to noncontrolling interests (17,162 ) (11,898 )
Net
income attributable to Aimco 274,133 83,792 Net income
attributable to Aimco preferred stockholders (2,148 ) (2,148 ) Net
income attributable to participating securities (417 ) (119 )
Net income attributable to Aimco common stockholders $
271,568 $ 81,525 Net income attributable to
Aimco per common share – basic and diluted $ 1.88 $ 0.54
Weighted average common shares outstanding – basic
[1] 144,232 151,872 Weighted average common
shares outstanding – diluted [1] 144,445 152,000 [1]
2018 basic and diluted weighted average common shares
outstanding have been restated to reflect the impact of the
February 20, 2019, reverse stock split. Basic and diluted weighted
average common shares outstanding were 156,609 and 156,740,
respectively, as previously reported for the three months ended
March 31, 2018.
Consolidated Balance Sheets
(in thousands) (unaudited) March
31, December 31, 2019 2018
Assets Real estate $ 8,225,519 $ 8,308,590 Accumulated
depreciation (2,581,666 ) (2,585,115 ) Net real estate 5,643,853
5,723,475 Cash and cash equivalents 162,286 36,858 Restricted cash
36,103 35,737 Goodwill 37,808 37,808 Other assets 403,719 313,733
Assets held for sale — 42,393 Total Assets $
6,283,769 $ 6,190,004
Liabilities and
Equity Non-recourse property debt $ 3,879,453 $ 3,937,000 Debt
issue costs (20,430 ) (21,695 ) Non-recourse property debt, net
3,859,023 3,915,305 Revolving credit facility borrowings 70,000
160,360 Accrued liabilities and other 293,279 226,230 Liabilities
related to assets held for sale — 23,177 Total
Liabilities 4,222,302 4,325,072 Preferred
noncontrolling interests in Aimco OP 101,195 101,291 Equity:
Perpetual preferred stock 125,000 125,000 Class A Common Stock
1,488 1,446 Additional paid-in capital 3,495,295 3,515,686
Accumulated other comprehensive income 4,851 4,794 Distributions in
excess of earnings (1,742,998 ) (1,947,507 ) Total Aimco equity
1,883,636 1,699,419 Noncontrolling interests in
consolidated real estate partnerships (2,857 ) (2,967 ) Common
noncontrolling interests in Aimco OP 79,493 67,189
Total Equity 1,960,272 1,763,641 Total Liabilities
and Equity $ 6,283,769 $ 6,190,004
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190502005899/en/
Matt Foster, Director, Investor RelationsInvestor Relations
303-793-4661, investor@aimco.com
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