On Dec 4, 2013, we reiterated our long-term Neutral
Apartment Investment & Management Co.
), commonly known as Aimco. The decision was based on the
company's successful portfolio enhancement activity and improving
apartment industry fundamentals. Yet, rising interest rates,
increase in supply of apartment units supply and notable
redevelopment pipeline remain matters of concern.
Driven by improved operating property performance, income earned
on West Harlem property loans and lower interest expenses,
Aimco's third-quarter 2013 pro forma funds from operations (FFO)
of 50 cents per share, came in line with the Zacks Consensus
Estimate and surpassed the year-ago quarter figure by 4 cents.
Additionally, the rise in demand for apartment properties driven
by 'echo boomers' - children of the baby boomer generation -
keeps us positive on the stock.
Moreover, Aimco is currently focusing on spinning off its
Affordable portfolio and reinvesting the proceeds to boost its
Conventional portfolio. This successful divestiture has helped
the company to scale down its affordable assets to 79 at the
third quarter end from 250 properties three years ago, which is
However, rising interest rates and stiff competition from other
housing alternatives remain our concerns. Moreover, the increase
in supply in the Sunbelt region is anticipated to partly offset
the overall growth in rents.
Additionally, Aimco's huge redevelopment pipeline increases
operational risks in the current volatile market and expose it to
rising construction costs, entitlement delays and lease-up risks.
Over the last 30 days, the Zacks Consensus Estimate for 2013
remained stable at $2.03 per share. However, for 2014, it
declined slightly (0.5%) to $2.18 per share. Hence, this
apartment real estate investment trust (REIT) now carries a Zacks
Rank #3 (Hold).
Other Stocks to Consider
Investors interested in REIT- Equity Trust - Residential industry
may consider stocks like
Education Realty Trust, Inc.
Independence Realty Trust, Inc.
Spirit Realty Capital, Inc.
). All of these carry a Zacks Rank #2 (Buy).
Note: FFO, a widely accepted and reported measure of the
performance of REITs is derived by adding depreciation,
amortization and other non-cash expenses to net income.
APARTMENT INVT (AIV): Free Stock Analysis
EDUCATION RLTY (EDR): Free Stock Analysis
INDEP REALTY TR (IRT): Free Stock Analysis
SPIRIT REALTY (SRC): Free Stock Analysis
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