Apartment Investment and Management Company
) - a real estate investment trust (REIT), better known as Aimco
- reported pro forma funds from operations (FFO) of 48 cents per
share in the first quarter 2013, exceeding the Zacks Consensus
Estimate by a cent and the year-ago quarter's FFO per share by 8
cents. Pro forma FFO was also ahead of the high point of Aimco's
guidance range of 42 cents - 46 cents per share.
The quarterly increase was attributable to improved property
operating results, a rise in ownership in consolidated properties
and lower preferred stock dividends. It was, however, partially
offset by lower income from discontinued operations.
For first-quarter 2013, adjusted FFO jumped 31% to 38 cents per
share from 29 cents in the year-ago period.
Inside the Headlines
During the quarter, total revenue was $255.5 million, increasing
1.2% from the year-ago period. Also, total revenue in the
reported quarter surpassed the Zacks Consensus Estimate of $252
Conventional real estate portfolio: This includes a diversified
range of market-rate apartment communities. In same-store
portfolio, the average daily occupancy was down 60 basis points
(bps) year over year to 95.4% in the reported quarter. However,
average rent per unit in the same-store portfolio increased 4.4%
to $1,201 from $1,150 in the prior-year quarter. Moreover,
average revenue per unit increased 5.3% year over year to $1,344.
Rental rates on new leases and renewals in the portfolio were
2.6% and 5.3% higher, respectively, than the expiring lease
Same-store revenues increased 4.7% year over year to $188.5
million while expenses escalated 4.9% year over year to $67.1
million. As a result, net operating income (NOI) climbed up 4.6 %
from the prior-year quarter to $121.4 million.
Affordable real estate portfolio: This includes properties with
rents that are generally paid (in whole or in part) by a
government agency. In same-store portfolio, the average daily
occupancy upped 0.7% to 98.9% in the quarter. Average revenue per
unit increased 1.5% year over year to $977.
Portfolio Restructuring Activity
Aimco is currently focusing on the largest markets in the U.S.
that are concentrated mostly in the coastal areas including the
Sun Belt cities. Going forward, the company expects to sell the
lowest rated 5%-10% of its portfolio each year and increase its
investment in target markets through redevelopment and
acquisitions. Furthermore, the company intends to completely sell
its affordable portfolio over the next four to five years.
During the first quarter, Aimco sold 3 Affordable Properties (66
units) for $8.0 million in gross proceeds. Aimco's share of net
sales proceeds was $0.3 million, following distributions to
limited partners, paying back of existing property debt and
During the reported quarter, Aimco carried on with the
redevelopment of 9 properties, which it commenced in the prior
year. Also, the company continued redevelopment work on
multi-phase capital projects - Park Towne Place and The Sterling
- in Center-City Philadelphia.
On May 2, 2013, Aimco declared first-quarter 2013 cash dividend
of 24 cents per share of its Class A common stock. The dividend
is payable on May 31 to shareholders of record as of May 17,
As of Mar 31, 2013, Aimco had cash and restricted cash on hand of
$193.9 million. Moreover, there were 3 unencumbered properties
that the company plans to retain beyond 2013, with estimated fair
values of around $165 million.
Furthermore, as of that date, Aimco had outstanding borrowings of
$49.2 million on its revolving credit facility, while available
capacity was $405.4 million, net of $45.4 million of letters of
credit backed by the facility.
Going forward, Aimco aims to achieve leverage targets of Debt and
Preferred Equity to EBITDA of less than 7.0x; and EBITDA Coverage
of Interest and Preferred Dividends greater than 2.5x.
For second-quarter 2013, Aimco expects pro forma FFO per share in
the range of 45 - 49 cents. For full-year 2013, the company has
slightly raised its outlook and now expects pro forma FFO per
share in the range of $1.94-$2.10, compared with the prior
guidance of $1.92-$2.08.
We are encouraged by the better-than-expected first quarter
results of Aimco. Aimco has a strong portfolio and continues to
sell non-core assets to reposition its portfolio and focus on
markets with higher growth potential.
Furthermore, redevelopment activity will help it mitigate
operating risks amid a challenging macroeconomic environment.
However, Aimco faces stiff competition from other players in the
market that undermines its growth potential. Its leverage is also
Aimco currently holds a Zacks Rank #3 (Hold). Other REITs that
are performing better and are worth a look include
Simon Property Group Inc.
Acadia Realty Trust
), all carrying 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.
APARTMENT INVT (AIV): Free Stock Analysis
ACADIA RLTY TR (AKR): Free Stock Analysis
CUBESMART (CUBE): Free Stock Analysis Report
SIMON PROPERTY (SPG): Free Stock Analysis
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