On Jun 2, 2014, we issued an updated research report on the
residential real estate investment trust (REIT) -
Apartment Investment and Management Company
) - better known as Aimco.
Aimco's first quarter 2014 pro forma funds from operations (FFO)
of 50 cents per share came a penny ahead of the Zacks Consensus
Estimate and 2 cents above the year-ago quarter figure. Strong
operating portfolio performance, lower offsite costs and interest
expense drove the year-over-year rise in pro forma FFO per share.
However, high casualty losses tied to cold winters, low interest
income and assets divestiture acted as the headwinds. Nevertheless,
Aimco increased its 2014 pro forma FFO per share guidance
Going forward, Aimco's strong portfolio of B/B+ geographically
diversified assets and the expected rise in demand for apartment
properties driven by 'echo boomers' position it well for growth.
Additionally, the company's current focus on lowest-rated portfolio
divestitures and reinvesting the proceeds in select apartment homes
with higher rents, superior margins and greater-than-expected
growth is a strategic fit for strengthening its overall portfolio
Yet, we expect an adverse impact on earnings in the near term
from these asset dispositions. Moreover, an upfront increase in
estimated cost of redevelopment projects and decreased NOI
assumptions from these can weigh upon the 2014 earnings. In
addition, a rise in interest rates is anticipated in the long run,
may raise the company's interest expense and thus remains a
Over the last 30 days, the Zacks Consensus Estimate for 2014 and
2015 FFO per share declined by a cent and 3 cents to $2.06 and
$2.21, respectively. The stock currently has a Zacks Rank #3
Stocks That Warrant a Look
Better-ranked residential REITs include
Spirit Realty Capital, Inc.
Equity LifeStyle Properties, Inc.
Education Realty Trust, Inc.
). Spirit Realty carries a Zacks Rank #1 (Strong Buy) while Equity
LifeStyle and Education Realty have a Zacks Rank #2 (Buy).
FFO, a widely used metric to gauge the performance of REITs, is
obtained after adding depreciation and amortization and other
non-cash expenses to net income.
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