Apartment Investment and Management Company (Aimco) — Q1 2011 Form 10-Q
Reporting period: Three months ended March 31, 2011; balance-sheet comparisons are to December 31, 2010. Amounts below are in millions unless otherwise stated. Aimco is a REIT operating conventional and affordable apartment properties, with substantially all business conducted through the Aimco Operating Partnership.
Business context
At quarter-end, Aimco held equity interests in 218 conventional properties with 68,645 units and 217 affordable properties with 25,246 units. It also managed or provided services for 15,460 units in 213 properties, and resigned from management roles for about 100 properties (approximately 11,400 units) as part of its simplification effort.
Financial results and key metrics
| Metric | Q1 2011 | Q1 2010 |
|---|---|---|
| Total revenue | $286.6 | $276.8 |
| Operating income | $41.5 | $23.8 |
| Loss from continuing operations | $(30.6) | $(36.9) |
| Net loss attributable to Aimco common stockholders | $(31.8); $(0.27) per share | $(40.4); $(0.35) per share |
| Net cash from operating activities | $27.7 | $26.8 |
| Funds From Operations attributable to common stockholders, diluted (non-GAAP) | $44.4 | $29.3 |
| Pro forma FFO attributable to common stockholders, diluted (non-GAAP) | $45.8 | $36.9 |
Revenue increased 3.5%, while operating expenses fell to $245.1 from $253.1. Conventional same-store net operating income rose 7.2%; affordable same-store NOI increased 17.8%. Conventional same-store average daily occupancy was 96.4%. Aimco reported conventional monthly rents averaging $1,060 and a 61% operating margin; new-lease and renewal rates were 1.9% and 3.0% above expiring rents, respectively.
Q1 investing cash flow was $(1.0), including $30.2 of capital expenditures and $22.0 of real estate disposition proceeds. Financing cash flow was $(56.6), and cash and cash equivalents declined $30.0 to $81.4. Restricted cash was $199.2.
At March 31, total indebtedness was $5.441 billion, down from $5.478 billion at year-end; total assets were $7.262 billion and total equity $1.277 billion. Aimco reported no outstanding corporate-level debt. Approximately 93% of property-level debt was fixed-rate; its weighted-average maturity was 8.0 years. The company had $263.4 of borrowing capacity under its $300.0 revolving facility after letters of credit.
Material changes versus the prior period
- Common-stockholder net loss narrowed by $8.7; continuing-operations loss narrowed by $6.3. Higher property NOI and asset-management/tax-credit revenue contributed, while lower disposition gains reduced discontinued-operations income.
- Same-store revenue increased 2.1% and expenses declined 6.8%, producing an 8.5% increase in same-store NOI. Conventional same-store revenue rose 1.6% and expenses fell 6.6%.
- Discontinued-operations income declined to $3.3 from $20.2, primarily because net gains on real-estate dispositions were lower. Aimco sold 12 properties in each period, but Q1 2011 gross proceeds were $28.9 versus $82.6 in Q1 2010.
- Equity in unconsolidated partnership results shifted to a $1.6 loss from $9.1 income, substantially reflecting a prior-year reversal of excess losses allocated to noncontrolling interests.
- Aimco issued 1.5 million shares through its at-the-market program, generating $36.3 net proceeds, including $9.1 settled in April. Common dividends declared were $0.12 per share versus none in Q1 2010.
Outlook, commentary, risks and unusual items
The filing gives no specific full-year earnings or FFO guidance. Management said it expected to remain within credit-facility covenants for the next 12 months and planned continued refinancing of near- and intermediate-term property debt. During Q1, Aimco refinanced property debt and completed a new property loan; the filing gives different refinancing totals in different passages ($287.9 of debt scheduled to mature during 2011–2015 in the highlights, versus $337.9 of loans refinanced in the liquidity discussion), which should be reconciled.
Notable items included $4.9 of casualty losses, primarily from Northeast snowstorms; $3.9 of impairment losses on properties in discontinued operations; and $4.5 of net cash receipts on total-return swaps. A potential West Harlem property put could require approximately $30.7 cash plus assumption of $118.5 property debt if specified operating thresholds are met. Aimco also committed to advance $3.4 in loans to certain unconsolidated properties.
Key risks discussed include refinancing and credit availability, interest-rate exposure, property values and local market conditions, debt-covenant compliance, environmental liabilities, litigation and REIT qualification. A 1 percentage-point increase in 30-day LIBOR was estimated to increase Aimco’s annual common-stockholder loss (or reduce income) by about $3.2. A class-action suit was threatened concerning earlier partnership-interest mergers; management did not expect related legal actions to have a material adverse effect. The IRS’s proposed adjustments to 2006 and 2007 partnership tax returns remained pending administratively; Aimco did not expect a material effect.
Important facts for investors to verify
- Reconcile the two disclosed Q1 property-refinancing totals and review debt maturities, loan terms, and covenant headroom, particularly ahead of higher covenant thresholds in Q1 2012.
- Assess the sustainability of same-store NOI gains, including the contribution from reduced property taxes, expense controls, occupancy, and rent increases.
- Track cash generation against $30.2 of quarterly capital expenditures, distributions, and debt obligations; distinguish unrestricted cash from restricted cash.
- Review the West Harlem put and loan exposure, swap collateral requirements and rate sensitivity, and the collectibility and concentration of notes receivable.
- Evaluate disposition-dependent earnings and non-GAAP FFO measures alongside GAAP losses, share issuance and dilution, and the $0.12 common dividend.