Aimco Reports Fourth Quarter 2012 Results
Aimco Reports Fourth Quarter 2012 Results
DENVER--(BUSINESS WIRE)-- Apartment Investment and Management Company ("Aimco") (NYS: AIV) announced today its fourth quarter 2012 results.
Chairman and Chief Executive Officer Terry Considine comments: "Aimco had a solid 2012. Profitability is up with Conventional Same Store NOI growth of 6.5%, the highest rate of annual growth in six years. Portfolio quality is also up with average revenue per unit in our Conventional portfolio increasing nearly 8% to $1,362. Redevelopment investment tripled to $100 million. But, leverage is down: the ratio of Debt plus Preferred Equity to annualized fourth quarter EBITDA declined by about two times from 9.6 times to 7.7 times."
Considine adds: "We look for 2013 to be another good year with increasing profitability in operations, disciplined upgrading of our portfolio, increased investment in redevelopment, lower leverage, and further simplification leading to lower offsite costs."
Financial Results
Full Year Pro forma FFO Up 12%, AFFO Up 31%*
FOURTH QUARTER | FULL YEAR | |||||||||||||||
(all items per common share) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Net income (loss) | $ | 0.47 | $ | (0.19) | $ | 0.61 | $ | (0.86) | ||||||||
Funds from Operations (FFO) | $ | 0.52 | $ | 0.43 | $ | 1.68 | $ | 1.52 | ||||||||
Add back (deduct) preferred equity redemption related amounts | $ | — | $ | (0.01) | $ | 0.16 | $ | (0.03) | ||||||||
Pro forma Funds from Operations (Pro forma FFO) | $ | 0.52 | $ | 0.42 | $ | 1.84 | $ | 1.49 | ||||||||
Deduct Aimco's share of Capital Replacements | $ | (0.14) | $ | (0.22) | $ | (0.50) | $ | (0.62) | ||||||||
Adjusted Funds From Operations (AFFO) | $ | 0.38 | $ | 0.20 | $ | 1.34 | $ | 0.87 | ||||||||
* Full year 2011 financial results include a deduction of $0.15 per share related to debt prepayment penalties and the write-off of deferred loan costs incurred in connection with a refinancing and securitization transaction during second quarter 2011. Excluding these charges, comparable full year 2011 Pro forma FFO and AFFO per share were $1.64 and $1.02, respectively. On this comparable basis, full year 2012 Pro forma FFO and AFFO increased 12% and 31%, respectively, compared to 2011.
Pro forma FFO - Pro forma FFO increased 24% when compared to fourth quarter 2011 as a result of: improved property operating results; additional income from increased ownership in our consolidated properties; lower preferred stock dividends due to $600.9 million of redemptions during 2012; and lower interest expense. These positive results were somewhat offset by lower income from discontinued operations. Pro forma FFO was $0.02 per share above the midpoint of Aimco's guidance range of $0.47 to $0.53 per share.
Adjusted Funds from Operations - AFFO increased 90% when compared to fourth quarter 2011 as a result of Pro forma FFO growth, the timing of Capital Replacements spending during 2012, and lower Capital Replacements spending due to the sale of nearly 11,000 apartment units during 2012. As Aimco's portfolio is concentrated in fewer properties with higher margins, AFFO is expected to grow at a faster rate than Pro forma FFO growth.
Property Operations
Aimco's property operations consist primarily of Conventional real estate operations, which relate to Aimco's diversified portfolio of market-rate apartment communities. Aimco also operates a portfolio of Affordable Properties, which consists of properties with rents that are generally paid, in whole or in part, by a government agency. Over the next four to five years, Aimco expects to dispose of these Affordable Properties and reinvest capital in its Conventional portfolio.
2012 Total Same Store NOI Up 6.2%
FOURTH QUARTER | FULL YEAR | |||||||||||||||||||||
Year-over-Year | Year-over-Year | |||||||||||||||||||||
% NOI | Revenue | Expenses | NOI | Revenue | Expenses | NOI | ||||||||||||||||
Conventional Same Store | 82% | 5.1% | 3.9% | 5.7% | 4.7% | 1.6% | 6.5% | |||||||||||||||
Affordable Same Store | 10% | 2.3% | 2.1% | 2.5% | 3.8% | 3.9% | 3.7% | |||||||||||||||
Total Same Store | 92% | 4.7% | 3.6% | 5.3% | 4.6% | 1.9% | 6.2% | |||||||||||||||
Conventional Same Store Results
FOURTH QUARTER | FULL YEAR | |||||||||||||||||||||||||||||||||||
Year-over-Year | Sequential | Year-over-Year | ||||||||||||||||||||||||||||||||||
2012 | 2011 | Variance | 3rd Qtr | Variance | 2012 | 2011 | Variance | |||||||||||||||||||||||||||||
Average Rent Per Unit | $ | 1,188 | $ | 1,142 | 4.0% | $ | 1,177 | 0.9% | $ | 1,167 | $ | 1,119 | 4.3% | |||||||||||||||||||||||
Other Income Per Unit | 142 | 124 | 14.5% | 141 | 0.7% | 137 | 124 | 10.5% | ||||||||||||||||||||||||||||
Average Revenue Per Unit | $ | 1,330 | $ | 1,266 | 5.1% | $ | 1,318 | 0.9% | $ | 1,304 | $ | 1,243 | 4.9% | |||||||||||||||||||||||
Average Daily Occupancy | 95.3 | % | 95.3 | % | — | 95.3 | % | — | 95.5 | % | 95.7 | % | -0.2% | |||||||||||||||||||||||
$ in Millions | ||||||||||||||||||||||||||||||||||||
Revenue | $ | 184.9 | $ | 176.0 | 5.1% | $ | 183.2 | 0.9% | $ | 726.5 | $ | 693.8 | 4.7% | |||||||||||||||||||||||
Expenses | 62.8 | 60.5 | 3.9% | 64.9 | (3.1)% | 253.4 | 249.6 | 1.6% | ||||||||||||||||||||||||||||
NOI | $ | 122.1 | $ | 115.5 | 5.7% | $ | 118.3 | 3.1% | $ | 473.1 | $ | 444.2 | 6.5% | |||||||||||||||||||||||
Rental Rates
2012 | 1st Qtr | 2nd Qtr | 3rd Qtr | Oct | Nov | Dec | 4th Qtr | Full Year | |||||||||||||||||
Renewal rent increases | 5.1% | 5.7% | 6.0% | 4.7% | 5.6% | 5.2% | 5.1% | 5.5% | |||||||||||||||||
New lease rent increases | 2.0% | 4.3% | 3.8% | 0.5% | 0.7% | 0.1% | 0.4% | 3.2% | |||||||||||||||||
Weighted average rent increases | 3.4% | 5.0% | 4.8% | 2.6% | 3.3% | 2.2% | 2.6% | 4.2% | |||||||||||||||||
2013 | Jan | ||
Renewal rent increases | 5.3% | ||
New lease rent increases | 3.1% | ||
Weighted average rent increases | 3.8% | ||
Affordable Same Store Results - For fourth quarter 2012, average daily occupancy for the Affordable portfolio was 98.9%, an increase of 1.2% from fourth quarter 2011, while average revenue per unit increased 1.1% from $970 to $981 per unit.
Portfolio Management
Aimco's portfolio strategy seeks predictable rent growth from a portfolio of A, B and C-quality conventional properties, 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 measures Conventional Property 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 local market average; B-quality assets are those with rents 90% to 125% of local market average; and C-quality assets are those with rents less than 90% of local market average. For third quarter 2012, the most recent period for which REIS information is available, Aimco's Conventional Property rents averaged 102% of local market average rents.
Aimco's target markets are primarily coastal markets, and also include several Sun Belt cities and Chicago, Illinois. In executing its portfolio strategy, Aimco expects to sell each year the lowest-rated 5% to 10% of its portfolio and to invest the proceeds from such sales in redevelopment and acquisition of higher-quality properties. Through this disciplined approach to capital recycling, from 2007 through 2012, Aimco increased its year-end conventional portfolio average revenue per unit at a compound annual growth rate of 6.1%, about three times that of market rent growth during the same period. Aimco's outsized growth reflects the impact of portfolio improvements through dispositions, redevelopment and acquisitions.
Conventional Property Revenue per Unit Up 7.9% to $1,362
Fourth quarter 2012 Conventional portfolio average revenue per unit was $1,362, an 7.9% increase compared to fourth quarter 2011, as a result of year-over-year revenue growth of 5.1% and the sale of Conventional Properties during 2011 and 2012 with average revenues per unit substantially lower than those of the retained portfolio.
Dispositions - In fourth quarter 2012, Aimco sold eight Conventional Properties and 16 Affordable Properties with 1,865 and 1,417 units, respectively, for $271.1 million in gross proceeds. Average revenue per unit for the Conventional Properties sold during the quarter was $1,087, compared to the retained portfolio average of $1,362 per unit. Aimco's share of net sales proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $123.7 million.
Sale of Asset-Management Business - During the fourth quarter, Aimco closed on the sale of the NAPICO portfolio, its legacy asset management business. The transaction was primarily seller financed, and the associated notes will be repaid over the next six years. Aimco anticipates recognizing between $6 and $8 million in Funds from Operations over the expected term of the notes.
Redevelopment
During the fourth quarter, Aimco began multi-phase capital projects at Park Towne Place and The Sterling, both located in Center-City Philadelphia. The initial phases of these projects consist of Capital Replacement and Capital Improvement investments, with redevelopment to follow.
Balance Sheet and Liquidity
Components of Aimco Leverage
AS OF DECEMBER 31, 2012 | ||||||||||||||
$ in Millions | Amount | % of Total | Weighted Avg. | Weighted Avg | ||||||||||
Aimco's share of long-term, non-recourse property debt | $ | 4,481.7 | 97% | 7.9 | 5.44% | |||||||||
Outstanding borrowings on revolving line of credit | — | — | 3.9 | n/a | ||||||||||
Preferred securities | 148.1 | 3% | ||||||||||||
