Aimco Reports First Quarter 2013 Results
Aimco Reports First Quarter 2013 Results
Chairman and Chief Executive Officer Terry Considine comments: "Aimco had a solid first quarter and we are on track for a good year. First quarter property operating results were on target and portfolio management activities were executed as planned. In the first quarter we began lease-up at two of our redevelopment properties, Lincoln Place and Elm Creek. As expected, total leverage continues to decline with predictable income growth and scheduled property debt amortization paid from retained earnings. We are off to a good start in 2013."
Chief Financial Officer Ernie Freedman adds: "Pro forma FFO of $0.48 per share exceeded the high end of our guidance by $0.02 primarily due to stronger than expected results in our non-Same Store Conventional portfolio and also due to non-recurring income earned on the repayment of a fully reserved note receivable. We are projecting second quarter Pro forma FFO to be in a range from $0.45 to $0.49 per share."
Pro forma FFO Up 20%, AFFO Up 31%
|(all items per common share)||2013||2012|
|Net income (loss)||$||0.03||$||(0.09||)|
Funds from Operations (FFO)/
|Deduct Aimco's share of Capital Replacements||$||(0.10||)||$||(0.11||)|
|Adjusted Funds From Operations (AFFO)||$||0.38||$||0.29|
Pro forma FFO - Pro forma FFO increased 20% when compared to first quarter 2012 as a result of improved property operating results, increased ownership in consolidated properties, and lower preferred stock dividends due to redemptions during 2012. These positive results were somewhat offset by lower income from discontinued operations. Pro forma FFO was $0.02 per share above the high point of Aimco's guidance range of $0.42 to $0.46 per share.
Adjusted Funds from Operations - AFFO increased 31% when compared to first quarter 2012 as a result of Pro forma FFO growth and lower per share Capital Replacement spending. An increase in 2013 Capital Replacement spending related to multi-phase capital projects was more than offset by a reduction in Capital Replacements due to the sale of approximately 11,000 apartment units during 2012. As Aimco's portfolio is concentrated in fewer properties with higher margins, AFFO is expected to grow at a faster rate than Pro forma FFO.
Aimco's property operations consist primarily of Aimco's diversified portfolio of market-rate apartment communities. Aimco also operates a portfolio of Affordable Properties, which consists of properties with rents that are generally paid, in whole or in part, by a government agency. Over the next four to five years, Aimco expects to dispose of these Affordable Properties and reinvest proceeds in its Conventional portfolio.
Year-Over-Year Conventional Same Store NOI Up 4.6%
Conventional Same Store Results
|Average Rent Per Unit||$||1,201||$||1,150||4.4||%||$||1,194||0.6||%|
|Other Income Per Unit||143||126||13.5||%||142||0.7||%|
|Average Revenue Per Unit||$||1,344||$||1,276||5.3||%||$||1,336||0.6||%|
|Average Daily Occupancy||95.4||%||96.0||%||(0.6||)%||95.3||%||0.1||%|
|$ in Millions|
|Renewal rent increases||5.1||%||6.0||%||4.9||%||5.3||%|
|New lease rent increases||2.1||%||2.4||%||3.1||%||2.6||%|
|Weighted average rent increases||3.7||%||4.2||%||3.9||%||3.9||%|
Affordable Same Store Results - For first quarter 2013, average daily occupancy for the Affordable portfolio was 98.9%, an increase of 0.7% from first quarter 2012, while average revenue per unit increased 1.5% from $963 to $977 per unit.
Aimco's portfolio strategy seeks predictable rent growth from a portfolio of A, B and C-quality market-rate 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 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 fourth quarter 2012, the most recent period for which REIS information is available, Aimco's Conventional Property rents averaged 103% 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 8.0% to $1,370
First quarter 2013 Conventional portfolio average revenue per unit was $1,370, an 8.0% increase compared to first quarter 2012, as a result of year-over-year revenue per unit growth of 5.3% and the sale of Conventional Properties during 2012 with average revenues per unit substantially lower than those of the retained portfolio.
Dispositions - In first quarter 2013, Aimco sold three Affordable Properties with 66 units for $8.0 million in gross proceeds. Aimco's share of net sales proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $0.3 million.
Acquisition - Subsequent to the end of the first quarter, Aimco acquired for $29 million a 60-unit apartment building located two blocks from the Pacific Ocean in La Jolla, California. The acquisition was funded in part by the assumption of $12.4 million of non-recourse property debt and in part by the tax-free exchange of proceeds from the sale of lower-rated properties with average revenues per unit of approximately $975. The property debt assumed has a remaining term of 8.5 years and bears interest at a rate of 4.84%. The property's average revenue per unit is approximately $2,400, and its average rents are approximately 64% greater than the San Diego market average, making this an A-quality asset for Aimco. Aimco intends to add value to the acquisition through significant capital upgrades and operational improvements.
During the first quarter, Aimco continued the redevelopment of nine properties that was started during 2012. In addition, Aimco continued multi-phase capital projects at Park Towne Place and The Sterling, both located in Center City Philadelphia, and 2900 on First, located in Seattle. The initial phases of these projects consist of Capital Replacement and Capital Improvement investments, with redevelopment to follow.
Balance Sheet and Liquidity
Components of Aimco Leverage
|AS OF MARCH 31, 2013|
|$ in Millions||Amount||% of Total|
|Aimco's share of long-term, non-recourse property debt||$||4,459.6||96||%||7.9||5.43||%|
|Outstanding borrowings on revolving line of credit||49.2||1||%||3.7||2.85||%|
Aimco's leverage targets are: Debt and Preferred Equity to EBITDA of less than 7.0x; and EBITDA Coverage of Interest and Preferred Dividends of greater than 2.5x. Aimco also focuses on Debt to EBITDA and EBITDA Coverage of Interest ratios. See the Glossary for definitions of these metrics.
|Trailing-Twelve-Month||Annualized 1st Qtr|
|Debt to EBITDA||7.5x||8.4x||7.6x||8.5x|
|Debt and Preferred Equity to EBITDA||7.8x||9.8x||7.9x||9.9x|
|EBITDA Coverage of Interest||2.4x||2.2x||2.5x||2.2x|
|EBITDA Coverage of Interest and Preferred Dividends||2.3x||1.8x||2.4x||1.8x|
Trailing-Twelve-Month 2013 EBITDA Coverage of Interest and Preferred Dividends ratio is provided on a pro forma basis to exclude dividends on preferred stock redeemed during 2012.
Future leverage reduction is expected from earnings growth generated by the current portfolio and by regularly scheduled property debt amortization funded from retained earnings.
Aimco's recourse debt at March 31, 2013, was limited to its revolving credit facility, which Aimco uses for working capital purposes and to secure letters of credit. Borrowings bear interest at a rate set forth on a pricing grid, which rate varies based on Aimco's leverage. The revolving credit facility matures in December 2014, and may be extended for two additional one-year periods, subject to certain conditions.
At the end of first quarter, Aimco had outstanding borrowings on its revolving credit facility of $49.2 million and available capacity was $405.4 million, net of $45.4 million of letters of credit backed by the facility. Also at the end of the quarter, Aimco's share of cash and restricted cash on hand was $193.9 million and there were three unencumbered properties, which Aimco intends to hold beyond 2013, with estimated fair values of approximately $165 million.
Dividend - As previously announced, Aimco's Board of Directors declared a quarterly cash dividend of $0.24 per share of Class A Common Stock for the quarter ended March 31, 2013. The first quarter 2013 dividend is payable on May 31, 2013, to stockholders of record on May 17, 2013.
Earnings Conference Call
|Friday, May 3, 2013 at 1:00 p.m. EDT||Replay available until 9:00 a.m. EDT on May 20, 2013|
|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: 6425633||Passcode: 10027398|
Live webcast and replay: http://www.aimco.com/investors/events-presentations/webcasts
The full text of this Earnings Release and the Supplemental Information referenced in this release are available on Aimco's website http://www.aimco.com/investors/financial-reports/quarterly-earning-reports.
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 not calculated in accordance with 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 259 communities in 24 states, the District of Columbia and Puerto Rico. 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.
|Net income (loss) per share||-$0.03 to $0.01||$0.05 to $0.21|
|Pro forma FFO per share||$0.45 to $0.49||$1.94 to $2.10|
|AFFO per share||n/a||$1.45 to $1.63|
|Conventional Same Store Operating Measures|
|NOI change compared to fourth quarter 2012||1.50% to 2.50%||n/a|
|NOI change compared to same period 2012||4.50% to 5.50%||4.50% to 6.75%|
|Revenue change compared to 2012||n/a||4.25% to 5.25%|
|Expense change compared to 2012||n/a||2.50% to 4.00%|
|Average daily occupancy||n/a||95.2% to 95.8%|
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 2013 results, including but not limited to Pro forma FFO and selected components thereof, and AFFO . 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 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; 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 and redevelopments; 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 properties presently owned or previously owned by Aimco. In addition, our 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 our 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, 2012, 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
|Rental and other property revenues||$||248,198||$||244,249|
|Tax credit and asset management revenues||7,252||8,071|
|Property operating expenses||101,876||98,792|
|Investment management expenses||1,433||3,388|
|Depreciation and amortization||80,331||86,632|
|Provision for real estate impairment losses||—||6,074|
|General and administrative expenses||11,779||11,624|
|Other expense, net||2,224||5,741|
|Total operating expenses||197,643||212,251|
|Interest income, net||6,425||2,460|
|Equity in income (losses) of unconsolidated real estate partnerships||524||(763||)|
|(Loss) gain on dispositions and other, net||(1,510||)|