Apartment Investment and Management Company (Aimco) — Q1 2024 Form 10-Q
Period: Three months ended March 31, 2024; comparisons are with the three months ended March 31, 2023 unless noted. This is a combined filing for Aimco and Aimco OP L.P.; the entities operate as one enterprise. Financial amounts below are in U.S. dollars.
Business context
Aimco is a REIT focused primarily on U.S. multifamily real estate, with operating, development and redevelopment, and other investments. At quarter-end, its operating portfolio included 21 consolidated stabilized apartment communities with approximately 5,600 homes, as well as four unconsolidated apartment properties. It also had active development projects, an office building, a hotel, land and alternative investments.
Financial and operating results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Rental and other property revenue | $50.2 million | $44.3 million |
| Operating expenses | $49.2 million | $42.2 million |
| Net loss | $7.2 million | $5.8 million |
| Net loss attributable to Aimco | $10.2 million; $0.07 per share | $8.8 million; $0.06 per share |
| Net cash provided by operating activities | $21.7 million | $5.6 million |
| Capital expenditures | $40.9 million | $64.8 million |
- Operating-segment revenue rose 5.4% to $38.6 million and proportionate property NOI increased 6.5% to $27.1 million. Average monthly revenue per apartment home was $2,348, up $121; average daily occupancy declined 10 basis points to 97.9%. Operating-segment NOI was approximately 70% of segment revenue.
- Consolidated revenue increased about 13.4%, while operating expenses rose about 16.7%. Interest expense increased 37.5% to $13.4 million, primarily reflecting higher construction-loan interest; depreciation and amortization rose 19.6% to $19.5 million as projects advanced and properties were delivered.
- Operating cash flow improved by $16.1 million, partly due to timing of balance-sheet changes. Investing cash outflow was $41.1 million, mainly capital expenditures. Operating cash flow less reported capital expenditures was approximately negative $19.2 million.
- At March 31, total indebtedness was $1.182 billion, comprising $845.7 million of non-recourse property debt and $336.3 million of non-recourse construction loans. Debt increased about $34.3 million from year-end. Approximately 90% of non-recourse property debt was fixed-rate; variable-rate debt was hedged. Weighted-average contractual rate on non-recourse debt was 4.8%, including caps; average remaining maturity was 6.4 years.
- Cash and cash equivalents were $121.8 million, with $18.6 million of restricted cash. Management reported $290.4 million of available liquidity, including $150.0 million available under its revolving secured credit facility, which had no borrowings outstanding. The facility matures in December 2024 before its one-year extension option.
Material changes and developments
- Aimco’s net loss attributable to common stockholders worsened to $10.2 million from $8.8 million, despite higher operating-segment NOI. Higher interest and depreciation costs were key offsets; gains on interest-rate options also improved year over year.
- Development and redevelopment proportionate NOI increased to $2.1 million from $0.5 million, primarily reflecting lease-up at The Hamilton. Other-segment NOI declined to $1.8 million from $2.1 million, primarily because The Benson Hotel began operating after the prior-year quarter.
- Cash flow from operations increased, while capital expenditures declined year over year. Aimco received $29.0 million of construction-loan proceeds and repurchased 872,759 shares for $6.6 million at an average $7.49 per share.
- St. George Villas was disposed of during the quarter. The company also revised segment presentation, moving The Benson Hotel to the Other segment and recasting prior-period segment data.
Outlook, commentary and risks
- Management said its three active development projects remained on plan. Upton Place had delivered 624 homes, with 100 leased or pre-leased at rates above underwriting; construction completion was expected in Q2 2024. More than 82% of its retail space was leased. The first phase of Strathmore Square was expected to begin delivery in the second half of 2024. At Oak Shore, eight of 16 planned homes had been leased or pre-leased, with initial residences delivered.
- Management reported $42.4 million of remaining construction commitments and $91.7 million undrawn on construction loans. Additional unfunded commitments included $3.0 million for unconsolidated joint ventures and $1.9 million for property-technology funds. It stated that available liquidity and expected sources should meet operating needs for the next 12 months.
- No formal earnings or operating guidance is provided in the supplied filing text. Management said the near-term plan does not contemplate issuing equity and that it does not presently intend to pay a regular quarterly cash dividend, though dividends may be paid for REIT tax purposes or to return profits.
- Key risks include development cost and schedule execution, occupancy and rental-rate conditions, inflation and interest rates, availability and cost of financing, debt-covenant compliance, insurance and severe-weather exposure, and legal, regulatory and environmental matters. Management said it was in compliance with its revolver covenants and expected to remain so over the next 12 months; it also said there were no material changes to previously disclosed risk factors.
- Aimco’s $275 million Parkmerced mezzanine loan had a zero carrying value at quarter-end. A 20% participation was sold in 2023 for $33.5 million, but the transaction is accounted for as a liability rather than a sale under GAAP; the filing describes Aimco’s priority return terms and notes that legal title to the loan-holding subsidiaries had not transferred from AIR.
Important facts for investors to verify
- Confirm the timing and funding plan for the December 2024 revolving-credit-facility maturity, including whether the extension option will be used.
- Track construction budgets, remaining commitments, lease-up, and completion milestones at Upton Place, Strathmore Square, and Oak Shore.
- Assess whether rental growth and occupancy can sustain operating NOI gains as property taxes, insurance, interest expense, and depreciation increase.
- Review the availability and restrictions on liquidity: the reported $290.4 million includes restricted cash and revolving-facility capacity, not solely unrestricted cash.
- Monitor the Parkmerced mezzanine investment’s repayment, priority-return obligations, and unresolved legal transfer; its reported carrying value is zero.
- Reconcile cash-flow trends with capital spending: Q1 operating cash flow was positive, but exceeded by capital expenditures.