AIV
$8.38
Apartment Investment and Management
$.31
3.84%
Earnings Details
Quarter September 2022
Monday, November 7, 2022 4:15:00 PM
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Summary

Apartment Investment and Management (AIV) Recent Earnings

Apartment Investment and Management (AIV) reported a Quarter September 2022 loss of $0.21 per share on revenue of $47.7 million.. Revenue grew 11.2% on a year-over-year basis.

Apartment Investment & Management Company is a self-administered and self-managed real estate investment trust, or REIT, engaged in the ownership and operation of a diversified portfolio of apartment properties.

Results
Reported Earnings
($0.21)
Earnings Whisper
-
Consensus Estimate
Reported Revenue
$47.7 Mil
Revenue Estimate
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Aimco Provides Recent Highlights and Third Quarter Financial Results

DENVER--(BUSINESS WIRE)--Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today third quarter results for 2022 and provided highlights on recent activities.

Wes Powell, Aimco President and Chief Executive Officer, comments: “Aimco had a productive third quarter, building on the accomplishments of the first half of 2022 and effectively positioning the company in the face of rapidly shifting market conditions. Aimco benefits from a strong balance sheet with limited near-term maturities, abundant liquidity and fully funded development commitments. We proactively monetized more than $900 million of assets during 2022, while also substantially adding to our high-quality development pipeline and opportunistically acquiring over one million shares of Aimco common stock.

"Our active developments and redevelopment projects remain on track. At The Hamilton, Aimco's major redevelopment in Miami, we welcomed residents to their new homes in October and are experiencing healthy demand for this unique waterfront property. The building is 35% leased at rental rates ahead of our original expectations.

"Our diversified portfolio of stabilized income producing properties continues to yield strong results, with revenues up 11.0% and net operating income up 15.8% year to date. New customer rent-to-income ratios remain comfortable at 21.6% while Aimco retained 56.1% of our residents whose leases were expiring during the quarter at rents 15.1% higher, on average, than the previous lease."

Mr. Powell continued, "Our work over the past few years has better positioned us to weather what are likely to be stormy business and capital markets conditions to come. We fully intend to execute on the development projects we have underway, we will lean on the steady cashflows produced by our portfolio of stabilized apartment communities, we will continue our efforts to source third party capital and make disciplined decisions in regard to the allocation of AIV’s capital; always focusing on its cost and the expected returns of its use on a risk adjusted basis.

"Finally, I am thankful to the Aimco team for their execution and good work, and to the Aimco Board of Directors for their engagement and guidance, as we continue to build, and unlock, value for Aimco shareholders.”

Financial Results and Recent Highlights

  • Net income attributable to common stockholders per share, on a fully dilutive basis, was $0.19 for the quarter ended September 30, 2022, compared to net income per share of $(0.03) for the same period in 2021, due primarily to net gains from real estate transactions in the third quarter, increased tax benefit, and higher net income from property operations.
  • As of October 31, 2022, total shareholder return ("TSR") since the December 15, 2020 separation from AIR was 57.9% and year-to-date was 3.1%.
  • Year-to-date through October 31, 2022, Aimco has repurchased more than 1.3 million shares of its common stock at a weighted average price of approximately $6.41 per share.
  • Third Quarter 2022 Revenue and NOI from Aimco’s Stabilized Operating Properties were up 11.5% and 17.5%, respectively, year over year, with average revenue per apartment home of $2,173, up $261 year over year.
  • Aimco closed the previously announced $669 million lease termination transaction with AIR that returned the four leased properties to AIR in exchange for a payment to Aimco of $200 million thereby eliminating the $469 million obligation related to these leased assets. Aimco's execution in the development and lease-up of these assets resulted in Value Creation, net of costs of approximately $100 million for shareholders.
  • Aimco completed the early repayment of the $534 million of notes due to AIR, originally scheduled to mature in January 2024.
  • Aimco exited the Seattle market, closing on the sales of two apartment communities for a total of $122 million.

Value Add, Opportunistic & Alternative Investments:

Development and Redevelopment

Aimco generally seeks development and redevelopment opportunities where barriers to entry are high, target customers can be clearly defined, and Aimco has a comparative advantage over others in the market. Aimco’s Value Add and Opportunistic investments may also target portfolio acquisitions, operational turnarounds, and re-entitlements.

As of September 30, 2022, Aimco had four active development and redevelopment projects located in four U.S. markets, in varying phases of construction and lease-up. These projects remain on track, as measured by budget and lease-up metrics. During the third quarter, Aimco invested $60.6 million in development and redevelopment activities. Updates include:

  • At The Hamilton in Miami, Florida, Aimco welcomed the first residents into redesigned and fully renovated units in early October 2022. As of October 31, 2022, 97 units were leased or pre-leased at rental rates more than 20% ahead of underwriting.
  • Construction continues on schedule and on budget at Upton Place in Northwest Washington, D.C., the Benson Hotel and Faculty Club on the Anschutz Medical Campus in Aurora, Colorado, and at our single-family home development project, Oak Shore, in Corte Madera, California.

Alternative Investments

Aimco makes alternative investments where it has special knowledge or expertise relevant to the venture and where opportunity exists for positive asymmetric outcomes. Aimco’s current alternative investments include a mezzanine loan secured by a stabilized multifamily property with an option to participate in future multifamily development as well as three passive equity investments. Updates include:

  • The borrower on Aimco’s $362.8 million mezzanine loan, which is secured by the Parkmerced stabilized multifamily property plus phases two through nine of the site's future development opportunity, remains current on its first mortgage obligations. Due to the relative size of Aimco’s investment and alternative accretive uses of capital, Aimco initiated a marketing effort in July to explore opportunities to monetize all or a portion of its investment. Increased uncertainty within financial and capital markets led us to extend the timeline related to this process and its execution.

Investment Activity

Aimco is focused on development and redevelopment, funded primarily through joint ventures. Aimco will also consider opportunistic investments in related activities. Updates include:

  • As previously announced, in July and August, Aimco closed on the purchase of two development parcels, completing the assemblage it contracted to acquire, for $100 million, in February 2022. The nine-acre assemblage is located in the rapidly growing Flagler Village neighborhood of Fort Lauderdale, Florida, and allows for approximately three million square feet of phased, mixed-use development, which could contain up to 1,500 residential units, more than 300 hotel keys, and more than 100,000 square feet of retail space at full build-out.

Operating Property Results

Aimco owns a diversified portfolio of operating apartment communities located in eight major U.S. markets with average rents in line with local market averages. Aimco also owns one commercial office building that is part of an assemblage with an adjacent apartment building.

Aimco’s operating properties produced solid results for the quarter ended September 30, 2022.

 

Third Quarter

 

Year-to-Date

Stabilized Operating Properties

Year-over-Year

 

Sequential

 

Year-over-Year

($ in millions)

2022

2021

Variance

 

2Q 2022

Variance

 

2022

2021

Variance

Average Daily Occupancy

96.0%

97.9%

(1.9)%

 

97.7%

(1.7%)

 

97.4%

97.7%

(0.3%)

Revenue, before utility reimbursements

$34.7

$31.1

11.5%

 

$33.1

4.7%

 

$100.0

$90.1

11.0%

Expenses, net of utility reimbursements

10.2

10.3

(0.7%)

 

10.4

(2.0%)

 

30.9

30.4

1.5%

Net operating income (NOI)

24.5

20.8

17.5%

 

22.7

7.8%

 

69.1

59.7

15.8%

*Excluded from the table above is one, 40-unit apartment community that Aimco’s ownership includes a partnership share.

  • Revenue in the third quarter 2022 was $34.7 million, up 11.5% year-over-year, resulting from a $261 increase in average monthly revenue per apartment home to $2,173, offset with a 190-basis point decrease in Average Daily Occupancy to 96.0%. In October, Average Daily Occupancy increased to 96.9%.
  • New lease rents increased 15.8% and Aimco retained 56.1% of residents whose leases were expiring during the quarter at rents 15.1% higher, on average, than the previous lease.
  • The median annual household income of new residents was more than $136,300 in the third quarter 2022, representing a rent to income ratio of 21.6%.
  • Expenses in the third quarter 2022 were down 0.7% due to a favorable nonrecurring 2022 real estate tax adjustments made within the quarter. Before real estate taxes, expenses, net of utility reimbursements were up 5.3%.
  • Net operating income in the third quarter 2022 was $24.5 million, up 17.5% year-over-year.

In addition, strong leasing momentum continued at 1001 Brickell Bay Drive, a waterfront office building in Miami, Florida, owned as part of a larger assemblage with substantial development potential. Year to date, September 2022, Aimco executed leases on over 76,000 square feet of office space, at rates per square foot 15% higher than leases executed in the same period of 2021. At the end of the third quarter 2022, the building was 84% occupied, up from 73% at the same time last year. Leases within the building have been executed on terms of less than four years or contain redevelopment provisions as needed to maximize the value of the underlying development rights.

Property Dispositions

Year to date, Aimco has sold three stabilized properties at values exceeding those used in Aimco's internal NAV estimate. Net proceeds from the sales were primarily used to reduce leverage. In the third quarter, Aimco completed the sale of two of the three properties sold:

  • In July, Aimco sold Cedar Rim, a 104-unit apartment community located in Renton, Washington, for $53.0 million.
  • In August, Aimco sold 2900 on First, a 135-unit apartment community with 14,000 square feet of retail located in Seattle, Washington for $69.0 million.
  • As previously announced, in September Aimco closed the $669 million lease termination transaction with AIR that returned the four leased properties to AIR in exchange for a payment to Aimco of $200 million thereby eliminating the $469 million obligation related to these leased assets. Aimco's execution in the development and lease-up of these assets resulted in Value Creation, net of costs, of approximately $100 million for shareholders.

Balance Sheet and Financing Activity

Aimco is highly focused on maintaining a strong balance sheet, including having at all times ample liquidity. As of September 30, 2022, Aimco had access to $375.4 million, including $206.3 million of cash on hand, $19.1 million of restricted cash, and the capacity to borrow up to $150.0 million on its revolving credit facility.

Aimco’s net leverage as of September 30, 2022, was as follows:

 

 

as of September 30, 2022

 

Proportionate, $ in thousands

 

Amount

 

 

Weighted Avg.
Maturity (Yrs.)

 

Total non-recourse fixed rate debt

 

$

781,296

 

 

 

8.4

 

Total non-recourse floating rate debt

 

 

79,712

 

 

 

1.7

 

Total non-recourse construction loan debt

 

 

85,470

 

 

 

1.9

 

Cash and restricted cash

 

 

(225,441

)

 

 

 

Net Leverage

 

$

721,037

 

 

 

 

As of September 30, 2022, Aimco had interest rate cap protection in place for 100% of its floating rate exposure. Aimco's interest hedging instruments, purchased to provide protection against increases in interest rates, were valued at $61.3 million versus a cost basis of $15.7 million.

Debt Repayments

  • Aimco completed the accelerated repayment of $534 million in notes, which carried a rate of 5.2%, prior to their maturity in January 2024. The early payoff, including $17.4 million of spread maintenance costs, was completed in July.
  • In September, Aimco retired the $138.4 million construction loan concurrent with the cancellation of the leasehold at Flamingo Point.

Property Financing

  • In August, Aimco closed a $60 million land loan secured by the three Flagler Village parcels. The loan has an initial term of 24 months with an option to extend for one additional 12-month period and has a floating interest rate equal to one-month Term SOFR plus a spread of 675 basis points with a floor of 8.00%.
  • In October, Aimco placed a non-recourse, $81.3 million property loan on its commercial office building, 1001 Brickell Bay Drive. The loan has an initial term of 36 months with options to extend for two additional 12-month periods and has a floating interest rate equal to one-month Term SOFR plus a spread of 450 basis points with a floor of 6.00%.

Equity Financing

  • In July, Aimco closed a $102 million, 8% preferred equity financing on a portfolio of stabilized assets with an equity partner. The financing has a seven-year term but is fully pre-payable after 48 months.
  • In August, Aimco entered into an agreement with the Alaska Permanent Fund Corporation (APFC) to fund up to $1 billion of future Aimco-led multifamily developments. Pursuant to the agreement, APFC will fund up to $360 million of limited partner equity into projects meeting specific criteria, including, among other items, return thresholds and minimum project size. Aimco will act as the general partner and developer, committing to at least $40 million through funding or the contribution of assets, while earning customary fees and the opportunity for performance-based incentive fees.

Public Market Equity

Common Stock Repurchases

  • In the third quarter, Aimco repurchased 73,444 shares of its common stock at a weighted average price of $7.14 per share. Aimco repurchased an additional 492,445 shares in October at a weighted average price of $7.01 per share. Year to date, as of October 31, 2022, Aimco repurchased 1,308,053 shares of its common stock at a weighted average price of $6.41 per share.
  • As of October 31, 2022, Aimco had the authorization remaining to purchase approximately 14.4 million additional shares of its common stock.

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 diversified real estate company primarily focused on value add, opportunistic, and alternative investments, targeting the U.S. multifamily sector. Aimco’s mission is to make real estate investments where outcomes are enhanced through our human capital so that substantial value is created for investors, teammates, and the communities in which we operate. Aimco is traded on the New York Stock Exchange as AIV. For more information about Aimco, please visit our website www.aimco.com.

Team and Culture

Aimco has a national presence with corporate headquarters in Denver, Colorado and Bethesda, Maryland. Our investment platform is managed by experienced real estate professionals based in four regions of the United States: West Coast, Central and Mountain West, Mid-Atlantic and Northeast, and Southeast. The experience and in-depth local market knowledge of the Aimco team is essential to the execution of our mission and realization of our vision.

Above all else, Aimco is committed to a culture of integrity, respect, and collaboration.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief, or expectations, including, but not limited to, the statements in this document regarding our future plans and goals, including our pipeline investments and projects, our plans to eliminate certain near term debt maturities, our estimated value creation and potential, our timing, scheduling and budgeting, and our plans to form joint ventures. We caution investors not to place undue reliance on any such forward-looking statements.

Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the control of Aimco that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statement. Important factors, among others, that may affect actual results or outcomes include, but are not limited to: (i) the risk that the 2022 plans and goals may not be completed, as expected, in a timely manner or at all, (ii) the inability to recognize the anticipated benefits of the pipeline investments and projects, and (iii) changes in general economic conditions, including, increases in interest rates and as a result of the COVID-19 pandemic. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained.

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, 2021, and subsequent Quarterly Reports on Form 10-Q and other documents Aimco files from time to time with the SEC. These filings identify and address important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements.

These forward-looking statements reflect management’s judgment and expectations as of this date, and Aimco assumes no (and disclaims any) obligation to revise or update them to reflect future events or circumstances.

Consolidated Statements of Operations

(in thousands, except per share data) (unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property revenues

 

$

47,683

 

 

$

42,893

 

 

$

148,375

 

 

$

123,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

 

17,455

 

 

 

18,155

 

 

 

56,384

 

 

 

51,500

 

Depreciation and amortization [1]

 

 

85,438

 

 

 

21,709

 

 

 

143,420

 

 

 

63,065

 

General and administrative expenses [2]

 

 

10,809

 

 

 

8,868

 

 

 

29,243

 

 

 

22,562

 

Total operating expenses

 

 

113,702

 

 

 

48,732

 

 

 

229,047

 

 

 

137,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(9,719

)

 

 

(12,680

)

 

 

(65,865

)

 

 

(37,995

)

Mezzanine investment income, net

 

 

8,423

 

 

 

7,636

 

 

 

24,990

 

 

 

22,654

 

Realized and unrealized gains (losses) on interest rate options

 

 

9,209

 

 

 

2,231

 

 

 

48,005

 

 

 

10,608

 

Realized and unrealized gains (losses) on
equity investments

 

 

(2,145

)

 

 

1,233

 

 

 

20,152

 

 

 

2,107

 

Gains on dispositions of real estate

 

 

75,539

 

 

 

-

 

 

 

170,004

 

 

 

-

 

Lease modification income [1]

 

 

1,577

 

 

 

-

 

 

 

206,963

 

 

 

-

 

Other income (expense), net

 

 

(255

)

 

 

552

 

 

 

(1,743

)

 

 

2,959

 

Income (loss) before income tax benefit

 

 

16,610

 

 

 

(6,867

)

 

 

321,834

 

 

 

(13,679

)

Income tax benefit (expense)

 

 

17,563

 

 

 

2,021

 

 

 

(24,338

)

 

 

9,881

 

Net income (loss)

 

 

34,173

 

 

 

(4,846

)

 

 

297,496

 

 

 

(3,798

)

Net (income) loss attributable to redeemable noncontrolling
interests in consolidated real estate partnerships

 

 

(2,907

)

 

 

(127

)

 

 

(5,446

)

 

 

(41

)

Net (income) loss attributable to noncontrolling interests
in consolidated real estate partnerships

 

 

(240

)

 

 

(296

)

 

 

(585

)

 

 

(862

)

Net (income) loss attributable to common noncontrolling
interests in Aimco Operating Partnership

 

 

(1,554

)

 

 

253

 

 

 

(14,648

)

 

 

209

 

Net income (loss) attributable to Aimco

 

$

29,472

 

 

$

(5,016

)

 

$

276,817

 

 

$

(4,492

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders per
share – basic [3]

 

$

0.19

 

 

$

(0.03

)

 

$

1.82

 

 

$

(0.03

)

Net income (loss) attributable to common stockholders per
share – diluted [3]

 

$

0.19

 

 

$

(0.03

)

 

$

1.81

 

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding –
basic

 

 

149,611

 

 

 

149,762

 

 

 

149,706

 

 

 

149,517

 

Weighted-average common shares outstanding –
diluted

 

 

151,197

 

 

 

149,762

 

 

 

151,076

 

 

 

149,517

 

[1] In the three months ended September 30, 2022, as a result of the lease termination agreement with AIR Communities (AIR) and in accordance with GAAP, Aimco accelerated $69.7 million of depreciation on the associated leasehold improvements. Also, Aimco reduced the right-of-use lease assets associated with these properties to zero and recognized lease modification income of $1.6 million. Per the terms of the lease termination agreement, Aimco received $200 million of cash payments from AIR in exchange for the return of the properties from Aimco to AIR. Aimco received $10 million of cash payments from AIR in the form of a nonrefundable deposit in the second quarter and the remaining $190 million in the third quarter.
[2] General and administrative expense includes $1.7 million and $4.6 million of expenses to be reimbursed to AIR, per agreement upon separation, for consulting services, with respect to strategic growth, direction, and advice, in the three and nine months ended September 30, 2022, respectively. This agreement is expected to conclude at year end.
[3] See Note 6 of Aimco's Third Quarter 2022 SEC Form 10-Q, filed November 7, 2022, for additional details.

 

Consolidated Balance Sheets

(in thousands) (unaudited)

 
 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Buildings and improvements

 

$

1,248,005

 

 

$

1,257,214

 

Land

 

 

639,272

 

 

 

534,285

 

Total real estate

 

 

1,887,277

 

 

 

1,791,499

 

Accumulated depreciation

 

 

(516,857

)

 

 

(561,115

)

Net real estate

 

 

1,370,420

 

 

 

1,230,384

 

Cash and cash equivalents

 

 

206,366

 

 

 

233,374

 

Restricted cash

 

 

19,075

 

 

 

11,208

 

Mezzanine investments

 

 

362,788

 

 

 

337,797

 

Interest rate options

 

 

61,448

 

 

 

25,657

 

Right-of-use lease assets

 

 

95,506

 

 

 

429,768

 

Other assets, net

 

 

180,641

 

 

 

165,913

 

Total assets

 

$

2,296,244

 

 

$

2,434,101

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

Non-recourse property debt, net

 

$

859,593

 

 

$

483,137

 

Construction loans, net

 

 

80,816

 

 

 

163,570

 

Notes payable to AIR

 

 

 

 

 

534,127

 

Total indebtedness

 

 

940,409

 

 

 

1,180,834

 

Deferred tax liabilities

 

 

121,344

 

 

 

124,747

 

Lease liabilities

 

 

98,467

 

 

 

435,093

 

Accrued liabilities and other

 

 

125,132

 

 

 

97,400

 

Total liabilities

 

 

1,285,352

 

 

 

1,838,074

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests in consolidated real estate partnerships

 

 

158,135

 

 

 

33,794

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Common Stock

 

 

1,492

 

 

 

1,498

 

Additional paid-in capital

 

 

514,341

 

 

 

521,842

 

Retained earnings (accumulated deficit)

 

 

250,996

 

 

 

(22,775

)

Total Aimco equity

 

 

766,829

 

 

 

500,565

 

Noncontrolling interests in consolidated real estate partnerships

 

 

45,517

 

 

 

35,213

 

Common noncontrolling interests in Aimco Operating Partnership

 

 

40,411

 

 

 

26,455

 

Total equity

 

 

852,757

 

 

 

562,233

 

Total liabilities and equity

 

$

2,296,244

 

 

$

2,434,101

 

 

Matt Foster, Sr. Director, Capital Markets and Investor Relations
Investor Relations 303-793-4661, investor@aimco.com

Source: Apartment Investment and Management Company