AIV

Business Context and Reporting Period

Company: Apartment Investment & Management Co (AIMCO)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2001
Business Overview: AIMCO is a Real Estate Investment Trust (REIT) owning and managing a geographically diversified portfolio of apartment communities. As of March 31, 2001, the Company owned or controlled 157,368 units in 580 properties and managed an additional 156,008 units in equity and third-party properties.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Rental revenues increased 43.6% to $322.2 million, driven primarily by the consolidation of 99 properties (91 in 2000, 8 in 2001) and the acquisition of Oxford properties. "Same store" revenues increased 5.6%.
• Net Income Decline: GAAP Net Income decreased 46% to $14.0 million. This was largely due to a significant drop in "Gain on disposition of properties" (from $5.1 million in 2000 to $0.1 million in 2001) and increased interest expense ($87.2 million vs. $59.2 million).
• Common Stockholder Loss: Net income attributable to common stockholders turned negative at $(4.7) million compared to $11.4 million in the prior year, primarily due to increased preferred stock dividends ($18.7 million vs. $14.5 million) and the loss of property sale gains.
• FFO and AFFO Growth: Despite the GAAP net income decline, FFO increased 29% and AFFO increased 32%, reflecting strong operational performance and the impact of acquisitions.
• Debt Levels: Total indebtedness increased by $241.8 million to $4.6 billion, reflecting new mortgage financings ($228 million) and the assumption of liabilities in the Oxford merger.

Guidance, Outlook, and Risks

• Acquisitions and Mergers: The Company completed a $270 million merger with Oxford Tax Exempt Fund II Limited Partnership (OTEF) on March 26, 2001. Consideration included $100 million in Class P Preferred Stock, $106 million in Common Stock, $17 million in cash, and $47 million in assumed liabilities.
• Capital Markets Activity: AIMCO issued 2.53 million shares of Class Q Cumulative Preferred Stock for net proceeds of approximately $61 million to repay short-term debt. The Company also repurchased approximately 185,000 shares of Class A Common Stock.
• Liquidity: The Company maintains a $400 million credit facility (expanded in April 2001), with $182 million outstanding as of late April 2001. Management considers cash flows and credit facilities adequate for short-term needs.
• Risks and Contingencies:
  • Legal Proceedings: Routine litigation is ongoing with no expected material adverse effect. A grand jury subpoena regarding the National Housing Partnership (NHP) management of HUD-assisted projects remains pending; AIMCO does not expect a material adverse effect but notes potential for fines or penalties.
  • Market Risk: The Company has $420.7 million in variable-rate debt (9.1% of total debt). A 1% increase in interest rates would reduce annual income and cash flows by approximately $4.2 million.
  • Environmental: Potential liability for remediation of hazardous substances on owned or managed properties.

Investor Verification Checklist

• Preferred Stock Obligations: Verify the impact of the new Class P and Class Q preferred stock issuances on future dividend requirements and common stockholder earnings.
• Acquisition Integration: Assess the performance of the newly consolidated Oxford properties and the 99 properties consolidated in 2000/2001 to ensure they meet projected returns.
• Debt Refinancing: Monitor the Company's ability to refinance short-term debt and the term loan used for the Oxford acquisition with long-term fixed-rate debt.
• HUD Investigation: Track the status of the grand jury investigation into NHP management arrangements for potential fines or operational restrictions.
• Same-Store Performance: Review future quarters to confirm the sustainability of the 5.6% same-store revenue growth amidst rising interest rates.