Business Context and Reporting Period
Company: Apartment Investment & Management Company (AIMCO)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2002
Business Overview: AIMCO is a real estate investment trust (REIT) owning and managing apartment communities. As of March 31, 2002, the Company owned or controlled 171,059 units in 666 properties and managed an additional 133,278 units in unconsolidated partnerships and 29,159 units for third parties.
Key Financial Metrics
| Metric | Q1 2002 | Q1 2001 |
|---|---|---|
| Net Income | $70.1 million | $14.0 million |
| Net Income Attributable to Common Stockholders | $44.6 million | $(4.7) million |
| Earnings Per Share (Diluted) | $0.58 | $(0.07) |
| Rental and Other Property Revenues | $331.5 million | $316.8 million |
| Income from Property Operations | $204.3 million | $197.7 million |
| Funds From Operations (FFO) - Diluted | $135.2 million | $126.8 million |
| Adjusted Funds From Operations (AFFO) | $100.5 million | $100.8 million |
| Net Cash Provided by Operating Activities | $119.8 million | $85.2 million |
| Total Indebtedness | $5.59 billion | $4.64 billion |
| Cash and Cash Equivalents | $107.3 million | $113.7 million |
Material Changes vs. Prior Period
- Significant Acquisition: Completed the $1.1 billion acquisition of Casden Properties Inc. on March 11, 2002. This included 4,975 conventional units, 11,027 affordable units, and the management of over 41,000 units via NAPICO. The transaction was funded through a mix of cash ($198 million), stock issuance (3.5 million shares), and assumption of debt ($673 million).
- Revenue Growth: Rental revenues increased 4.6% year-over-year, driven primarily by the Casden acquisition (64.0% of the increase) and the consolidation of previously unconsolidated partnerships (44.6% of the increase).
- Depreciation Reduction: Consolidated depreciation decreased by $22.6 million (24.3%) due to a change in accounting estimate regarding the useful lives of buildings and improvements, as well as the adoption of SFAS 142 which eliminated goodwill amortization.
- Interest Expense: Decreased by $2.7 million (3.2%) due to lower average balances on lines of credit and reduced interest rates, partially offset by increased debt from the Casden acquisition.
- Discontinued Operations: Reported income of $4.7 million, compared to a loss of $0.7 million in the prior year, primarily due to a $3.9 million gain on property disposals.
Guidance, Outlook, and Risks
- Liquidity and Capital Resources: The Company maintains a $400 million revolving credit facility with $170.3 million available as of March 31, 2002. A new $287 million term loan (Casden Loan) was secured to fund the acquisition, maturing in March 2004.
- Dividends: Dividends paid per common share were $0.82 for the quarter, compared to $0.78 in the prior year.
- Market Risk: The Company has $1.476 billion in variable-rate debt (26.4% of total debt). A 1% increase in interest rates would reduce annual income and cash flows by approximately $14.8 million.
- Legal Proceedings: AIMCO is a defendant in a lawsuit filed by the City Attorney of San Francisco regarding alleged violations of housing codes at four properties. The Company does not believe the outcome will have a material adverse effect on its financial condition.
- Accounting Changes: Adoption of SFAS 144 resulted in the reclassification of assets held for sale and assets sold in the current period as discontinued operations.
Investor Verification Checklist
- Casden Integration: Verify the performance of the newly acquired Casden portfolio and the realization of projected synergies.
- Debt Covenants: Confirm compliance with financial covenants, specifically the debt-to-gross asset value ratio (max 0.55:1) and fixed charge coverage ratio (min 1.70:1) required by the Casden Loan and credit facility.
- Variable Rate Exposure: Monitor interest rate fluctuations given the $1.476 billion exposure to variable-rate debt.
- Dividend Coverage: Assess the sustainability of the $0.82 per share dividend payout relative to AFFO and FFO generation.
- Legal Resolution: Track the status of the San Francisco housing code lawsuit and potential settlement costs.