On Sep 6, 2013, we reiterated our long-term Neutral
Apartment Investment & Management Co.
), commonly known as Aimco. The decision was based on the
company's diversified portfolio, portfolio enhancement activity
and rising apartment industry fundamentals. However, rising
interest rates, capital market volatility and stiff competition
from other housing alternatives remain matters of concern.
Driven by improved property operating results and lower
preferred share dividends, Aimco reported second-quarter 2013 pro
forma funds from operations (FFO) of 49 cents per share, beating
the Zacks Consensus Estimate by a penny and the year-ago quarter
figure by 3 cents. Moreover, going forward, we believe that the
rise in apartment demand generated by 'echo boomers' - children
of the baby boomer generation - will offer Aimco ample growth
Aimco is also focused on spinning off its Affordable portfolio
and reinvesting the proceeds to boost its Conventional portfolio.
Consequently, the company, through this disciplined capital
recycling, has upped its year-end Conventional portfolio average
revenue per apartment home at a compound annual growth rate (from
2007-2012) of 6.1%.
However, rising interest rates and the capital market
volatility will likely limit Aimco's ability to refinance
existing debt and undertake portfolio-restructuring initiatives,
thereby denting the company's growth prospects.
Moreover, the steady recovery of the housing market and
increase in supply in the Sunbelt regions are anticipated to
partly impede the overall rent growth in Aimco's operating
regions. Despite attempts to reposition its portfolio in higher
growth markets, much of Aimco's portfolio still remains in areas
where housing is relatively cheap. Its significant exposure to
the weak Florida market can also affect its top-line growth in
the near term.
Over the last 30 days, the Zacks Consensus Estimate for both
2013 and 2014 FFO per share remained stable at $2.04 and $2.19
per share, respectively. Thus, this apartment real estate
investment trust (REIT) now carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better-performing REITs that are worth a look include
Campus Crest Communities, Inc.
Sun Communities Inc.
Douglas Emmett 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
CAMPUS CREST CM (CCG): Free Stock Analysis
DOUGLAS EMMETT (DEI): Free Stock Analysis
SUN CMNTYS INC (SUI): Free Stock Analysis
To read this article on Zacks.com click here.