Apartment Investment and Management Company
) - better known as Aimco - reported second-quarter 2014 pro forma
funds from operations (FFO) of 52 cents per share, a penny ahead of
the Zacks Consensus Estimate and 3 cents above the year-ago quarter
figure. Also, this came in line with the higher end of Aimco's
guided range of 48-52 cents.
Improved operating portfolio performance, contribution from
redevelopment communities and lower offsite costs drove the 6.1%
year-over-year rise in pro forma FFO per share. However, loss of
income due to assets divestiture acted as the headwind.
Nevertheless, Aimco increased the lower end of its 2014 pro forma
FFO per share guidance range.
Total revenue was $246.4 million, up 1.9% year over year and
surpassed the Zacks Consensus Estimate of $232 million.
Quarter in Details
In the Conventional real estate portfolio, same-store revenues
increased 4.1% year over year to $176.9 million while expenses rose
0.7% year over year to $58.8 million. Consequently, same-store net
operating income (NOI) climbed 5.9% to $118.1 million on a
Notably, same-store average daily occupancy was up 40 basis
points (bps) year over year to 96.0%. Rental rates on new and
renewals leases were up 4.7% and 5.0%, respectively, from the
expiring lease rates.
As planned, Aimco continues to sell the lowest rated 5%-10% of
its portfolio each year and use the reaped amount for acquisition
and redevelopment of premium assets. Accordingly, the company sold
4 Conventional Properties and 2 Affordable Properties and reaped
$156.6 million as gross proceeds. Of this, Aimco's net share (after
distributions to limited partners, repayment of transaction costs
and existing property debt) was $120.5 million. Also, in the
quarter, Aimco divested its partnership stake in nine Affordable
Additionally, the company spent $8.2 million for development of
its Boston-based apartment community and $54.4 million in
redevelopments in the quarter.
As of Jun 30, 2014, Aimco had cash and restricted cash on hand
of $253.8 million, up from $195.4 million as of Mar 31, 2014.
Moreover, there were 10 unencumbered properties, with an estimated
fair value of around $570.0 million.
Furthermore, as of that date, Aimco had outstanding borrowings
of $53.4 million on its revolving credit facility, while available
capacity was $502.1 million, net of $44.5 million of letters of
credit backed by the revolver.
For 2014, Aimco increased the lower end of its pro forma FFO
guidance to the range of $2.04 to $2.12, from the previous range of
$2.02 to $2.12 per share. The Zacks Consensus Estimate of $2.07 per
share falls within the new guidance range.
For third-quarter 2014, the company expects pro forma FFO per
share in the range of 48-52 cents. The Zacks Consensus Estimate of
52 cents lies within this range.
Aimco's portfolio enhancement activity through continued
developments, redevelopments of core assets and disposal of
non-core assets, continue to strengthen its position in markets
with high-growth potential. Particularly, the company projects its
redevelopment projects, upon stabilization, to add around $1.50 to
Net Asset Value per share in the next two years. Also, the guidance
raise boosts investor's confidence in the stock. Yet, although the
divestitures hold good for long run, the adverse effect on earnings
in the near term cannot be avoided.
Investors interested in apartment REITs may consider stocks like
UDR Inc. (
), Equity LifeStyle Properties, Inc. (
) and Avalonbay Communities Inc. (
). All stocks carry a Zacks Rank #2 (Buy).
Fund from operations, 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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