Apartment Investment and Management Company (“Aimco”) (NYSE:
AIV) announced today second quarter 2016 results and raised full
year 2016 guidance.
Chairman and Chief Executive Officer Terry Considine comments:
“At a time when various markets are impacted by new supply, we
appreciate the diversification...both geographic and price
point...of the Aimco portfolio. That diversification reduces
volatility and makes revenue more predictable. Operating results
were in line with guidance. We are on-track with lease-up efforts
at One Canal in Boston and at Indigo in Redwood City,
California. Construction continues at two phased
redevelopments in Center City Philadelphia where new phases were
started. Portfolio quality improved as revenue per apartment home
was up 8% to $1,900.”
Chief Financial Officer Paul Beldin adds: “Second quarter AFFO
of $0.50 per share increased 9% compared to second quarter 2015 and
was $0.03 per share ahead of the midpoint of our guidance range.
This outperformance was due to greater than planned non-core
earnings, including $0.01 per share related to transactional
revenues originally anticipated later in the year. We are
increasing our full year Pro forma FFO and AFFO guidance by $0.01
at the midpoint of our guidance range to take into account the
$0.02 of outperformance, offset by a $0.01 reduction due to the
decision to vacate the North Tower at Park Towne Place as we
accelerate its redevelopment timeline.”
Financial Results: Second Quarter AFFO
Up 9% Year-Over-Year
SECOND
QUARTER YEAR-TO-DATE (all items per common share
- diluted)
2016 2015
Variance 2016 2015
Variance Net income $ 1.41
$ 0.39 262
% $ 1.57 $
0.97 62 % Funds From
Operations (FFO) $ 0.59
$ 0.56 5 %
$ 1.16 $ 1.07
8 % Add back Aimco share of preferred equity
redemption related amounts $ — $ —
— % $ — $ 0.01
(100)
%
Pro forma Funds From Operations (Pro forma FFO)
$ 0.59 $ 0.56
5 % $ 1.16
$ 1.08 7 % Deduct Aimco
share of Capital Replacements $ (0.09 ) $ (0.10 )
(10)
%
$ (0.15 ) $ (0.16 )
(6)
%
Adjusted Funds From Operations (AFFO) $
0.50 $ 0.46
9 % $ 1.01
$ 0.92 10 %
Net Income (per diluted common share) - Year-over-year,
second quarter net income increased primarily due to higher gains
on property sales in second quarter 2016, as compared to 2015.
Pro forma FFO (per diluted common share) -
Year-over-year, second quarter Pro forma FFO increased 5% as a
result of: Conventional Same Store Property Net Operating Income
growth; increased contribution from redevelopment and acquisition
communities; and higher non-core earnings. These increases were
partially offset by the loss of income from apartment communities
that were sold in 2015.
Adjusted Funds from Operations (per diluted common
share) - Year-over-year, second quarter AFFO increased 9% as a
result of higher Pro forma FFO. As Aimco concentrates its
investment capital in higher quality, higher price point apartment
communities, its free cash flow margins are increasing and
contributing to a higher AFFO growth rate.
Operating Results: Second Quarter
Conventional Same Store NOI Up 4.1%
SECOND QUARTER
YEAR-TO-DATE Year-over-Year
Sequential Year-over-Year
2016 2015
Variance 1st Qtr. Variance
2016 2015
Variance Average Rent Per Apartment Home $
1,611 $ 1,530 5.3 % $ 1,595
1.0 % $ 1,603 $ 1,523
5.3 % Other Income Per Apartment Home 188
187 0.5 % 187
0.5 % 187 186
0.5 % Average Revenue Per Apartment Home $
1,799 $ 1,717 4.8 % $ 1,782
1.0 % $ 1,790 $ 1,709
4.7 % Average Daily Occupancy 95.9 %
96.4 %
(0.5)
%
96.0 %
(0.1)
%
96.0 % 96.2 %
(0.2)
%
$ in
Millions
Revenue $ 168.5 $ 161.6 4.2 %
$ 167.1 0.8 % $ 335.6 $
321.2 4.5 % Expenses 52.9
50.6 4.6 % 52.5
0.8 % 105.4 103.0
2.3 % NOI $ 115.6 $ 111.0 4.1 %
$ 114.6 0.8 % $ 230.2 $
218.2 5.5 %
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. The table below details new and renewal
lease rates for Aimco’s second quarter 2016 Same Store
portfolio.
2016 1st Qtr.
Apr May Jun 2nd
Qtr. Year-to-Date Renewal rent increases
6.0 % 6.4 % 5.9 % 6.4 % 6.2 %
6.1 % New lease rent increases 3.5 % 4.0 % 4.3
% 4.9 % 4.4 % 4.0 % Weighted average rent
increases 4.6 % 5.1 % 5.1 % 5.6 %
5.3 % 5.0 %
Conventional Non-Same Store NOI - Aimco’s Conventional
non-Same Store NOI for second quarter 2016 increased 13.4%
year-over-year primarily due to increasing contribution from
Aimco’s Redevelopment apartment communities.
SECOND QUARTER
YEAR-TO-DATE Year-over-Year
Sequential Year-over-Year $ in
Millions 2016 2015
Variance 1st Qtr. Variance
2016 2015 Variance
Conventional Redevelopment and Development $ 15.1 $
12.9 17.1 % $ 15.2
(0.7)
%
$ 30.3 $ 24.3 24.7 % Conventional Acquisition
0.8 0.0 n/a
0.8 — 1.6 0.1 n/a
Conventional Other 6.1 6.5
(6.2)
%
6.0 1.7 % 12.1
12.1 —
Total Conventional non-Same Store
$ 22.0 $ 19.4
13.4 % $ 22.0 —
$ 44.0 $ 36.5
20.5 %
Redevelopment and Development:
Progressing as Planned
During second quarter, Aimco invested $43 million in
redevelopment, $31 million of which related to the ongoing
redevelopment of Park Towne Place and The Sterling, mixed-use
communities located in Center City Philadelphia. At Park Towne
Place, as of June 30, 2016, Aimco had completed redevelopment of
356 apartment homes and had leased 73% of the completed homes.
Rental rates are above underwriting. Based on the success of
earlier phases of the Park Towne Place redevelopment, during the
second quarter, Aimco decided to proceed with redevelopment of a
third tower with 227 apartment homes. At The Sterling, as of
June 30, 2016, Aimco had completed redevelopment of 343 of the
534 apartment homes in the community and had leased 88% of the
completed homes. Rental rates are above underwriting. Based on the
success of earlier phases of redevelopment of The Sterling, in the
second quarter, Aimco decided to proceed with the final phase, and
anticipates completion in spring 2017. Projected returns on these
newly approved phases at both Park Towne Place and The Sterling are
similar to those of the previous phases.
During second quarter, Aimco invested $13.2 million in the
substantial completion of One Canal in Boston. Leasing is
progressing as planned and at June 30, 2016, 35% of the
apartment homes were leased and rental rates are ahead of
underwriting.
Portfolio Management: Revenue Per
Apartment Home Up 8% to $1,900
Aimco portfolio strategy seeks predictable rent growth from a
portfolio of apartment communities that is diversified across “A,”
“B” and “C+” price points, averaging “B/B+” in quality, and that is
also diversified across large coastal and job growth markets in the
U.S. Aimco target markets are primarily coastal markets, and also
include several Sun Belt cities and Chicago, Illinois. Please refer
to the Glossary for a description of Aimco’s Portfolio Quality
Ratings.
As part of its portfolio strategy, Aimco seeks to sell each year
the lowest-rated 5% to 10% of its portfolio and to reinvest the
proceeds from such sales in higher quality apartment communities
through redevelopment of communities in its current portfolio,
occasional development of new communities, and selective
acquisitions. Through this disciplined approach to capital
recycling, Aimco has significantly increased the quality and
expected growth rate of its portfolio.
SECOND QUARTER
2016 2015
Variance Conventional Apartment Communities 137
143
(6)
Conventional Apartment Homes 38,841 41,425
(2,584)
Conventional % NOI in Target Markets 91 % 89 %
2 % Revenue per Apartment Home $ 1,900 $ 1,759
8 % Portfolio Average Rents as a Percentage of Local
Market Average Rents 113 % 110 % 3 %
Percentage A (2Q 2016 Revenue per Apartment Home $2,386) 51
% 50 % 1 % Percentage B (2Q 2016 Revenue per
Apartment Home $1,719) 37 % 33 % 4 %
Percentage C+ (2Q 2016 Revenue per Apartment Home $1,546) 12
% 17 %
(5)
%
NOI Margin 67 % 67 % — Free Cash Flow
Margin* 62 % 61 % 1 %
* Assumes Capital Replacements spending of
$1,200 per apartment home.
Second Quarter 2016 Portfolio Transactions - In second
quarter, Aimco sold two Conventional apartment communities with
1,547 apartment homes for $291.9 million in gross proceeds. Net
sales proceeds after payment of transaction costs were $289.4
million. Aimco did not acquire any apartment communities during the
second quarter.
Quarter-End Portfolio - Second quarter 2016 Conventional
portfolio average monthly revenue per apartment home was $1,900, an
8% increase compared to second quarter 2015, due to: year-over-year
Same Store monthly revenue per apartment home growth of 4.8%; the
sale of Conventional apartment communities in 2015 and 2016 with
average monthly revenues per apartment home substantially lower
than those of the retained portfolio; and reinvestment of the sales
proceeds through redevelopment, development and acquisition of
apartment communities with higher rents and better prospects.
Bay Area Acquisition Update - As previously reported,
Aimco has agreed to acquire for $320 million, Indigo, an apartment
community with 463 apartment homes currently under construction in
Redwood City, California. Closing of the acquisition is expected
upon completion of construction, anticipated to occur by the end of
third quarter 2016. At June 30, 2016, Aimco had leased 18% of
the apartment homes and rental rates are above underwriting.
Move-ins commenced on July 1st.
Balance Sheet and
Liquidity:
Components of Aimco Leverage
AS OF JUNE 30, 2016 $
in Millions Amount % of Total
Weighted Avg.Maturity
(Yrs.)
Aimco share of long-term, non-recourse property debt $
3,680.2 90 % 7.7 Outstanding borrowings on revolving
credit facility 160.5 4 % 2.3 Preferred
securities* 246.0 6 % 34.4 Total leverage
$ 4,086.7 100 % 9.0 * Aimco’s preferred
securities are perpetual in nature; however, for illustrative
purposes, Aimco has computed the weighted average maturity of its
total leverage assuming a 30-day maturity on the Class Z Cumulative
Preferred Stock, which Aimco will redeem on July 29, 2016, and a
40-year maturity on its other preferred securities.
Non-recourse Property Debt - During the second quarter,
Aimco priced two fixed rate, non-recourse, amortizing, 10-year
property loans totaling $166.5 million at interest rates of 2.77%
and 3.34%, spreads of 129 basis points and 152 basis points,
respectively, over the 10-year Treasury rates at the time of
pricing.
Preferred Securities - During the second quarter, Aimco
called for the redemption of all outstanding shares of its Class Z
Cumulative Preferred Stock on July 29, 2016, at a redemption value
including dividends through the redemption date of approximately
$35 million.
Leverage Ratios
Aimco target leverage ratios are: Debt and Preferred Equity to
EBITDA below 7.0x; and EBITDA to Interest Expense and Preferred
Dividends greater than 2.5x. Aimco also focuses on the ratios of
Debt to EBITDA and EBITDA to Interest Expense. Please see the
Glossary for definitions of these metrics and, where appropriate,
reconciliations to GAAP.
TRAILING-TWELVE MONTHSENDED JUNE
30,
2016 2015 Debt to EBITDA
6.4x 6.5x Debt and Preferred Equity to EBITDA 6.8x
7.0x EBITDA to Interest Expense 3.3x 2.9x
EBITDA to Interest Expense and Preferred Dividends 3.0x
2.6x
Future leverage reduction is expected 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.
Liquidity
Aimco’s only recourse debt at June 30, 2016, was its
revolving credit facility, which Aimco uses for working capital and
other short-term purposes, and to secure letters of credit.
At June 30, 2016, Aimco had outstanding borrowings on its
revolving credit facility of $160.5 million and available capacity
of $410.0 million, after consideration of $29.5 million of letters
of credit backed by the facility. Aimco also held cash and
restricted cash on hand of $430.3 million ($428.0 million Aimco
share), which included approximately $290 million of 1031 exchange
proceeds anticipated to be invested during the third quarter.
Finally, Aimco held properties in its unencumbered asset pool
with an estimated fair market value of approximately $1.7
billion.
Dividend - As previously announced, the Aimco Board of
Directors declared a quarterly cash dividend of $0.33 per share of
Class A Common Stock for the quarter ended June 30, 2016. On
an annualized basis, this represents an increase of 12% compared to
the dividends paid during 2015. This dividend is payable on August
31, 2016, to stockholders of record on August 19, 2016.
2016 Outlook: Guidance Raised to
Reflect Second Quarter Outperformance
($ Amounts
represent Aimco Share)
FULL YEAR2016
PREVIOUS FULLYEAR 2016
FULL YEAR2015
Net Income per
share $1.75 to $1.83 $0.41 to $0.51 $1.52
Pro forma FFO per share $2.26 to $2.34 $2.24
to $2.34 $2.23
AFFO per share $1.94 to $2.02
$1.92 to $2.02 $1.88
Conventional Same Store Operating
Measures Revenue
change compared to prior year 4.50% to 5.00% 4.50% to
5.00% 4.5% Expense change compared to prior year
1.75% to 2.25% 1.75% to 2.25% 2.1% NOI change
compared to prior year 5.50% to 6.50% 5.50% to 6.50%
5.6%
Non-Core Earnings
Non-recurring investment management revenues $5M $1M
to $3M $1M ($
Amounts represent Aimco Share)
THIRDQUARTER 2016
Net income per share $0.06 to
$0.10
Pro forma FFO per share $0.52 to $0.56
AFFO
per share $0.43 to $0.47
Conventional Same Store Operating Measures NOI
change compared to second quarter 2016 1.25% to 2.25% NOI
change compared to third quarter 2015 5.50% to 6.50%
Earnings Conference Call
Information
Live Conference Call: Conference
Call Replay: Friday, July 29, 2016 at 1:00 p.m. ET Replay
available until 9:00 a.m. ET on October 29, 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: 5105563 Passcode: 10088380
Live webcast and replay:
http://www.aimco.com/investors
Supplemental Information
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
(“GAAP”). These measures are defined in the Glossary in the
Supplemental Information and, where appropriate, 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 selected
markets in the United States. Aimco is one of the country’s largest
owners and operators of apartments, with 192 communities in 22
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: third
quarter and full year 2016 results, including but not limited to:
Pro forma FFO and selected components thereof; AFFO; Aimco
redevelopment and development investments, timelines and Net
Operating Income contribution; Aimco acquisition and lease-up
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 developments and
redevelopments; Aimco’s ability to meet timelines and budgeted
rental rates related to Aimco lease-up properties; 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 the
control of Aimco, including, without limitation: real estate 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; financing risks, including the availability and
cost of capital markets’ financing and the risk that Aimco’s cash
flows from operations may be insufficient to meet required payments
of principal and interest; the risk that Aimco’s earnings may not
be sufficient to maintain compliance with debt covenants; 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, 2015, 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 Six Months Ended June
30, June 30, 2016 2015 2016
2015 REVENUES Rental and other property revenues $
242,871 $ 238,637 $ 484,352 $ 476,926 Tax credit and asset
management revenues 8,347 6,146 13,105 12,122
Total revenues 251,218 244,783 497,457
489,048
OPERATING EXPENSES Property operating
expenses 88,305 87,930 176,702 183,422 Investment management
expenses 1,017 1,086 1,992 2,689 Depreciation and amortization
80,680 75,150 160,508 149,582 General and administrative expenses
11,254 12,062 23,189 22,714 Other expenses, net 5,526 2,912
7,096 3,931 Total operating expenses 186,782
179,140 369,487 362,338
Operating
income 64,436 65,643 127,970 126,710 Interest income 1,843
1,705 3,678 3,430 Interest expense (48,894 ) (49,605 ) (96,528 )
(103,125 ) Other, net 4,906 350 4,983 2,614
Income before income taxes and gain on dispositions
22,291 18,093 40,103 29,629 Income tax benefit 7,121 5,814
13,007 12,735
Income before gain on
dispositions 29,412 23,907 53,110 42,364 Gain on dispositions
of real estate, net of tax 216,541 44,781 222,728
130,474
Net income 245,953 68,688 275,838
172,838 Noncontrolling interests:
Net income attributable to noncontrolling
interests in consolidated real estate partnerships
(8,677 ) (111 ) (9,607 ) (4,867 )
Net income attributable to preferred
noncontrolling interests in Aimco OP
(1,708 ) (1,736 ) (3,434 ) (3,472 )
Net income attributable to common
noncontrolling interests in Aimco OP
(11,135 ) (2,972 ) (12,307 ) (7,370 ) Net income attributable to
noncontrolling interests (21,520 ) (4,819 ) (25,348 ) (15,709 )
Net income attributable to Aimco 224,433 63,869 250,490
157,129 Net income attributable to Aimco preferred stockholders
(2,758 ) (2,758 ) (5,515 ) (6,280 ) Net income attributable to
participating securities (293 ) (307 ) (370 ) (701 )
Net income
attributable to Aimco common stockholders $ 221,382 $
60,804 $ 244,605 $ 150,148 Net income
attributable to Aimco per common share – basic $ 1.42 $ 0.39
$ 1.57 $ 0.97 Net income attributable to Aimco
per common share – diluted $ 1.41 $ 0.39 $ 1.57
$ 0.97 Weighted average common shares
outstanding – basic 156,375 155,524 155,876
154,672 Weighted average common shares outstanding – diluted
156,793 155,954 156,248 155,115
Consolidated Balance Sheets (in thousands)
(unaudited) June 30, 2016
December 31, 2015 ASSETS Buildings and improvements $
6,283,998 $ 6,446,326 Land 1,847,582 1,861,157 Total
real estate 8,131,580 8,307,483 Accumulated depreciation (2,657,290
) (2,778,022 ) Net real estate 5,474,290 5,529,461 Cash and cash
equivalents 55,225 50,789 Restricted cash 375,092 86,956 Other
assets 360,669 448,405 Assets held for sale 8,952 3,070
Total assets $ 6,274,228 $ 6,118,681
LIABILITIES AND EQUITY Non-recourse property debt, net $
3,795,098 $ 3,822,141 Revolving credit facility borrowings 160,540
27,000 Total indebtedness 3,955,638 3,849,141
Accounts payable 43,414 36,123 Accrued liabilities and other
206,104 317,481 Deferred income 57,819 64,052 Liabilities related
to assets held for sale 6,214 53 Total liabilities
4,269,189 4,266,850 Preferred noncontrolling
interests in Aimco OP 86,198 87,926 Equity: Perpetual Preferred
Stock 159,126 159,126 Class A Common Stock 1,566 1,563 Additional
paid-in capital 4,066,476 4,064,659 Accumulated other comprehensive
loss (710 ) (6,040 ) Distributions in excess of earnings (2,455,302
) (2,596,917 ) Total Aimco equity 1,771,156 1,622,391
Noncontrolling interests in consolidated real estate partnerships
150,257 151,365 Common noncontrolling interests in Aimco OP (2,572
) (9,851 ) Total equity 1,918,841 1,763,905 Total
liabilities and equity $ 6,274,228 $ 6,118,681
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160728006595/en/
AimcoLynn Stanfield, 303-793-4661Senior Vice President,
FinanceorValerie Kimball, 303-793-4661Director, Investor
RelationsorInvestor Relations, 303-793-4661investor@aimco.com
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