DENVER--(BUSINESS WIRE)--Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today third quarter 2015 results and raised its full year 2015 guidance.
Chairman and Chief Executive Officer Terry Considine comments: "Aimco enjoyed a solid third quarter. With higher rents and good cost control, Same Store Net Operating Income was up 5.4% year-over-year. At $1,810, average revenue per apartment home was up 10% year-over-year, reflecting both rent growth and portfolio improvements. Construction on redevelopment and development properties was satisfactory and lease-up rents were better than expected. Our balance sheet is strong. Our prospects are good as we work to complete this year and look ahead to 2016."
Chief Financial Officer Paul Beldin adds: "Third quarter Pro forma FFO of $0.57 per share was $0.01 per share above the midpoint of our guidance range, primarily due to strong property operating results. We are increasing guidance for full year NOI, Pro forma FFO and AFFO to reflect third quarter outperformance and our expectations for the remainder of the year."
Financial Results: YTD AFFO Up 11% Year-Over-Year
|(all items per common share - diluted)||2015||2014||2015||2014|
Funds From Operations (FFO) / Pro forma Funds From Operations (Pro forma FFO)
|Deduct Aimco share of Capital Replacements||$||(0.09||)||$||(0.12||)||$||(0.24||)||$||(0.27||)|
|Adjusted Funds From Operations (AFFO)||$||0.48||$||0.39||$||1.40||$||1.26|
Pro forma FFO (per diluted common share) - Year-over-year, third quarter Pro forma FFO increased 12% as a result of: strong Property Net Operating Income growth; increased contribution from redevelopment and acquisition communities; lower interest expense due to lower debt balances; and higher income tax benefit. These increases were partially offset by higher other expenses and by the loss of income from apartment communities that were sold in 2014 and 2015.
Adjusted Funds from Operations (per diluted common share) - Year-over-year, third quarter AFFO increased 23% as a result of higher Pro forma FFO and lower capital replacements spending. As Aimco concentrates its investment capital in higher-quality, higher price point apartment communities, its free cash flow margins are increasing and contributing to higher AFFO.
Operating Results: Third Quarter Conventional Same Store NOI Up 5.4%
|Average Rent Per Apartment Home||$||1,567||$||1,499||4.5||%||$||1,537||2.0||%||$||1,543||$||1,476||4.5||%|
|Other Income Per Apartment Home||183||178||2.8||%||182||0.5||%||182||175||4.0||%|
|Average Revenue Per Apartment Home||$||1,750||$||1,677||4.4||%||$||1,719||1.8||%||$||1,725||$||1,651||4.5||%|
|Average Daily Occupancy||95.6||%||95.7||%||(0.1||)%||96.3||%||(0.7||)%||95.9||%||95.9||%||—||%|
|$ in Millions|
Conventional 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 either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal.
|2015||1st Qtr.||2nd Qtr.||Jul||Aug||Sep||3rd Qtr.||Year-to-Date|
|Renewal rent increases||4.8||%||5.1||%||5.7||%||6.1||%||6.3||%||6.0||%||5.5||%|
|New lease rent increases||1.2||%||5.7||%||6.4||%||7.7||%||5.2||%||6.6||%||5.0||%|
|Weighted average rent increases||2.8||%||5.4||%||6.0||%||7.0||%||5.8||%||6.3||%||5.2||%|
Redevelopment: Scope Expanded at Park Towne Place
During third quarter, Aimco invested $29.9 million in redevelopment and also approved a plan for redevelopment of a second tower at Park Towne Place, located in Center City Philadelphia. Since 2014, Aimco has completed, as planned and at a cost consistent with underwriting, the redevelopment of 179, or 78%, of the apartment homes in one of the four towers that comprise the community. Of the completed apartment homes, 128, or 72%, are leased at rents in excess of Aimco's underwriting. These results led to Aimco’s decision to redevelop a second tower containing 251 apartment homes for an additional net investment of approximately $37 million. During construction, Aimco expects to combine some apartment homes in this building so that the tower, at completion, will include 245 apartment homes. In order to facilitate the extensive construction activity, Aimco began de-leasing the second tower in fourth quarter 2015.
In addition, Preserve at Marin, located in the Bay Area, achieved stabilized occupancy of 95% in September and, at the end of the third quarter, 97% of the apartment homes at Preserve at Marin were occupied.
Development: Progressing as Planned
During third quarter, Aimco invested $40.3 million in two development communities. Construction continued on plan at Aimco's One Canal development, located in the historic Bulfinch Triangle neighborhood of Boston’s West End. One Canal will include 310 apartment homes and 22,000 square feet of commercial space and construction is expected to be complete in second quarter 2016. Construction is also on plan at Aimco's Vivo community, formerly known as 270 on Third, located in Cambridge, Massachusetts. Aimco acquired Vivo with construction-in-progress during the second quarter 2015, and construction of the apartment homes was completed during the third quarter. Aimco began the lease-up of Vivo in October and construction of the community's amenities is expected to be complete by year's end.
Portfolio Management: Revenue Per Apartment Home Up 10% to 1,810
Aimco portfolio strategy seeks predictable rent growth from a portfolio of "A," "B" and "C+" quality apartment communities, averaging "B/B+" in quality, and diversified among the largest coastal and job growth markets in the U.S., as measured by total apartment value. Aimco target markets are primarily coastal markets, and also include several Sun Belt cities and Chicago, Illinois.
Aimco measures asset quality based on rents compared to local market average rents as reported by REIS, a third-party provider of commercial real estate performance information and analysis. Aimco defines asset quality as follows: "A" quality assets are those with rents greater than 125% of the local market average; "B" quality assets are those with rents between 90% and 125% of the local market average; "C+" quality assets are those with rents greater than $1,100 per month but lower than 90% of the local market average. For second quarter 2015, the most recent period for which REIS information is available, Aimco Conventional apartment rents averaged 110% of local market average rents.
Aimco's portfolio strategy is to sell each year the lowest-rated 5% to 10% of its portfolio and to reinvest the proceeds from such sales in redevelopment, selective development, and acquisition of higher quality apartment communities. Through this disciplined approach to capital recycling, Aimco has significantly increased the quality of its portfolio. From December 31, 2011 to September 30, 2015, Aimco:
- Increased its period-end Conventional portfolio average revenue per apartment home by 43% to $1,810. This rate of growth reflects the impact of market rent growth, and more significantly, the impact of portfolio management through dispositions, redevelopment and acquisitions.
- Increased its Conventional portfolio free cash flow margin by 15% through the sale of lower-rent communities and reinvestment in higher-rent communities; and
- Increased to 89% the percentage of its Conventional Property Net Operating Income earned in Aimco's target markets.
As a result of these efforts, as of June 30, 2015, the most recent period for which market information is available, approximately 50%, 33% and 17% of Aimco's portfolio is represented by “A,” “B” and “C+” quality apartment homes, respectively.
As Aimco executes its portfolio strategy, it expects to increase Conventional portfolio average revenue per apartment home at a rate greater than market rent growth; to increase free cash flow margins; and to increase to 95% or more the percentage of its Conventional Property Net Operating Income earned in Aimco's target markets.
Third Quarter 2015 Portfolio Transactions - In the third quarter, Aimco neither acquired nor sold any properties, but did enter into a contract to acquire an apartment community currently under construction in Northern California for $320 million. Closing of the acquisition is expected to occur upon completion of construction in the summer of 2016. Consistent with Aimco’s paired-trade discipline, Aimco intends to fund on a leverage neutral basis a portion of the acquisition with a ten-year property loan and the remainder primarily with proceeds from sales of lower-rated apartment communities. After lease-up and assuming current market rents, Aimco expects revenues per apartment home for this acquisition to average $3,800 per month. At this time, the seller has required that Aimco not disclose nor discuss publicly any additional information related to the transaction.
Quarter-End Portfolio - Third quarter 2015 Conventional portfolio average monthly revenue per apartment home was $1,810, a 10% increase compared to third quarter 2014, as a result of year-over-year Same Store monthly revenue per apartment home growth of 4.4%, the sale of Conventional Apartment Communities with average monthly revenues per apartment home substantially lower than those of the retained portfolio, and reinvestment of the sales proceeds in higher-rent apartment communities through redevelopment and acquisitions.
Balance Sheet and Liquidity: Leverage on Plan
Components of Aimco Leverage
|AS OF SEPTEMBER 30, 2015|
|$ in Millions||Amount||% of Total||
|Aimco share of long-term, non-recourse property debt||$||3,673.6||91||%||8.3|
|Outstanding borrowings on revolving credit facility||128.2||3||%||3.0|
Aimco target leverage ratios are: Debt and Preferred Equity to EBITDA below 7.0x; and EBITDA to Interest and Preferred Dividends greater than 2.5x. Aimco also tracks Debt to EBITDA and EBITDA to Interest ratios. See the Glossary for definitions of these metrics.
|Debt to EBITDA||6.6x||6.6x|
|Debt and Preferred Equity to EBITDA||7.1x||7.1x|
|EBITDA to Interest||3.0x||2.7x|
|EBITDA to Interest and Preferred Dividends||2.7x||2.6x|
Future leverage reduction is expected both from earnings growth, especially as apartment communities now being redeveloped or developed are completed and leased, and from regularly scheduled property debt amortization funded from retained earnings.
Aimco's only recourse debt at September 30 was its revolving credit facility, which Aimco uses for working capital and other short-term purposes, and to secure letters of credit.
At quarter-end, Aimco had outstanding borrowings on its revolving credit facility of $128.2 million and available capacity of $435.4 million, net of $36.4 million of letters of credit backed by the facility. Aimco also held cash and restricted cash on hand of $134.9 million.
Finally, Aimco held 24 apartment communities in its unencumbered asset pool with a total estimated fair market value of approximately $1.5 billion.
Dividend - As previously announced, the Aimco Board of Directors declared a quarterly cash dividend of $0.30 per share of Class A Common Stock for the quarter ended September 30, 2015, an increase of 15% compared to the dividend for the third quarter 2014. This dividend is payable on November 30, 2015, to stockholders of record on November 18, 2015.
|($ Amounts represent Aimco Share)||
|Net income per share||$1.20 to $1.24||$1.16 to $1.26||$||2.06|
|Pro forma FFO per share||$2.20 to $2.24||$2.16 to $2.26||$||2.07|
|AFFO per share||$1.87 to $1.91||$1.83 to $1.93||$||1.68|
|Conventional Same Store Operating Measures|
|NOI change compared to prior year||5.40% to 5.80%||5.00% to 6.00%||5.5||%|
|Revenue change compared to prior year||4.40% to 4.60%||4.25% to 4.75%||4.5||%|
|Expense change compared to prior year||2.10% to 2.30%||2.00% to 2.50%||2.3||%|
|Net income per share||$0.11 to $0.15|
|Pro forma FFO per share||$0.56 to $0.60|
|AFFO per share||$0.47 to $0.51|
|Conventional Same Store Operating Measures|
|NOI change compared to fourth quarter 2014||4.00% to 4.50%|
|NOI change compared to third quarter 2015||2.50% to 3.00%|
Earnings Conference Call Information
Live Conference Call:
Conference Call Replay:
|Wednesday, November 4, 2015 at 1:00 p.m. ET||Replay available until 9:00 a.m. ET on February 4, 2016|
|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: 8171031||Passcode: 10074435|
Live webcast and replay: http://www.aimco.com/investors
The full text of this Earnings Release and the Supplemental Information referenced in this release are available on Aimco's website at http://www.aimco.com/investors.
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. These measures are defined in the Glossary in the Supplemental Information and, where appropriate, reconciled to the most comparable GAAP measures.
Aimco is a real estate investment trust that is focused on the ownership and management of quality apartment communities located in the largest markets in the United States. Aimco is one of the country's largest owners and operators of apartments, with 199 communities in 23 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.
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: fourth quarter and full year 2015 results, including but not limited to: Pro forma FFO and selected components thereof; AFFO; Aimco's redevelopment and development investments, timelines and stabilized rents; and expectations regarding sales of Aimco's apartment communities and the use of proceeds thereof. These forward-looking statements are based on management's judgment as of this date and include certain risks and uncertainties. Risks and uncertainties include, but are not limited to: Aimco's ability to maintain current or meet projected occupancy, rental rates and property operating results; the effect of acquisitions, dispositions, redevelopments and developments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our developments and redevelopments; and our 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 the control of Aimco, including, without limitation: financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that our earnings may not be sufficient to maintain compliance with debt covenants; real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; the timing of acquisitions, dispositions, redevelopments and developments; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; 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 its 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, 2014, 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||Nine Months Ended|
|September 30,||September 30,|
|Rental and other property revenues||$||240,382||$||239,873||$||717,308||$||719,501|
|Tax credit and asset management revenues||6,005||6,970||18,127||22,684|
|Property operating expenses||88,621||95,240||272,043||289,008|
|Investment management expenses||1,905||1,279||4,594||3,552|
|Depreciation and amortization||77,237||69,437||226,819||211,143|
|Provision for real estate impairment losses||—||1,413||—||1,413|
|General and administrative expenses||11,013||10,658||33,727||31,304|
|Other expenses, net||3,590||1,349||7,521||7,223|
|Total operating expenses||182,366||179,376||544,704||543,643|
|Income before income taxes and gain on dispositions||15,490||13,181||45,119||35,059|
|Income tax benefit||8,279||5,005||21,014||13,110|
|Income from continuing operations||23,769||18,186||66,133||48,169|
|Gain on dispositions of real estate, net of tax||—||126,329||130,474||262,483|
Net loss (income) attributable to noncontrolling interests in
Net income attributable to preferred noncontrolling interests in
Net income attributable to common noncontrolling interests in
|Net income attributable to noncontrolling interests||(1,844||)||(16,487||)||(17,553||)||(40,655||)|
|Net income attributable to Aimco||21,925||128,028||179,054||269,997|
|Net income attributable to Aimco preferred stockholders||(2,757||)||(2,875||)||(9,037||)||(5,087||)|
|Net loss (income) attributable to participating securities||11||(447||)||(690||)||(962||)|
|Net income attributable to Aimco common stockholders||$||19,179||$||124,706||$||169,327||$||263,948|
|Earnings attributable to Aimco per common share - basic:|
|Income from continuing operations||$||0.12||$||0.86||$||1.09||$||1.81|
|Earnings attributable to Aimco per common share - diluted:|
|Income from continuing operations||$||0.12||$||0.85||$||1.09||$||1.81|
|Consolidated Balance Sheets|
|(in thousands) (unaudited)|
|September 30, 2015||December 31, 2014|
|Buildings and improvements||$||6,421,572||$||6,259,318|
|Total real estate||8,299,922||8,144,958|
|Net real estate||5,580,271||5,472,779|
|Cash and cash equivalents||45,241||28,971|
|Assets held for sale||19,959||27,106|
|LIABILITIES AND EQUITY|
|Non-recourse property debt||$||3,807,699||$||4,022,809|
|Revolving credit facility borrowings||128,200||112,330|
|Accrued liabilities and other||324,746||279,077|
|Liabilities related to assets held for sale||17,311||28,969|
|Preferred noncontrolling interests in Aimco OP||87,937||87,937|
|Perpetual Preferred Stock||159,126||186,126|
|Class A Common Stock||1,564||1,464|
|Additional paid-in capital||4,064,729||3,696,143|
|Accumulated other comprehensive loss||(6,810||)||(6,456||)|
|Distributions in excess of earnings||(2,616,919||)||(2,649,542||)|
|Total Aimco equity||1,601,690||1,227,735|
|Noncontrolling interests in consolidated real estate partnerships||164,439||233,296|
|Common noncontrolling interests in Aimco OP||(17,365||)||(18,926||)|
|Total liabilities and equity||$||6,217,662||$||6,097,028|