Apartment Investment and Management Company (Aimco) — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Aimco is a multifamily-focused REIT; the combined filing also reports Aimco OP L.P. Unless stated otherwise, amounts below are for the consolidated company. Dollar amounts are in millions.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Rental and other property revenue | $47.7 | $47.7 | $137.6 | $148.4 |
| Net income (loss) | $1.7 | $34.2 | $(4.0) | $297.5 |
| Net income (loss) attributable to Aimco | $(2.3) | $29.5 | $(14.7) | $276.8 |
| Diluted EPS | $(0.02) | $0.19 | $(0.10) | $1.81 |
| Cash provided by operating activities | Not stated separately | Not stated separately | $42.6 | $228.3 |
- Operating-segment proportionate NOI increased 7.6% to $27.0 million in Q3 and 10.0% to $78.0 million for the nine months. Q3 operating-segment revenue rose 6.4%; NOI margin was approximately 71.5%, versus 70.7% a year earlier.
- Q3 average monthly revenue per operating apartment home was $2,358, up $158 year over year; average daily occupancy declined 75 basis points to 95.2%. Nine-month average monthly revenue was $2,292, up $209, while occupancy declined 90 basis points.
- At September 30, total assets were $2.25 billion, net real estate was $1.62 billion, total indebtedness was $1.12 billion, and equity was $585.3 million. Cash and cash equivalents were $95.7 million; restricted cash was $20.2 million.
- Reported available liquidity was $320.2 million, including cash, restricted cash, a $54.3 million Treasury bill and $150.0 million of undrawn revolving credit capacity. The revolving facility had no borrowings and matures in December 2024, subject to a one-year extension option.
- About 88% of non-recourse property debt was fixed-rate; the filing says all such debt was fixed or hedged. Weighted-average contractual rate was 5.0% (4.7% including caps), with 6.8 years average remaining maturity. Variable-rate property debt and construction loans totaled approximately $322.3 million, with interest-rate caps providing protection.
Changes and notable items
- Operating property results improved, but consolidated rental revenue declined 7.2% year to date, largely reflecting properties sold or otherwise absent from the comparable portfolio. Operating cash flow fell $185.7 million year over year, primarily due to lower lease-incentive cash receipts, sold properties and timing of balance-sheet changes.
- Net results were substantially lower than 2022, when reported earnings included $170.0 million of nine-month real estate disposition gains and $207.0 million of lease-modification income. 2022 also included larger interest-rate-option and equity-investment gains. In 2023, Aimco recorded only $1.9 million of disposition gain year to date and no lease-modification income.
- Interest expense declined to $27.6 million for the first nine months from $65.9 million, mainly following repayment of notes payable to AIR and other property debt. Mezzanine investment income also fell after a non-cash impairment in 2022 led Aimco to cease income recognition.
- Investing cash outflow was $264.1 million, including $212.2 million of capital expenditures and a $53.8 million Treasury-bill purchase. Financing cash inflow was $107.7 million, including construction-loan proceeds, proceeds from a mezzanine-loan participation and monetization of interest-rate options. Cash, cash equivalents and restricted cash decreased $113.9 million during the period.
- Aimco repurchased approximately 1.74 million shares during Q3 for an average $7.52 per share. Subsequent to quarter end, the board doubled the repurchase authorization to 30 million shares.
Outlook, risks and contingencies
- Management stated it believes liquidity is sufficient for operating needs over the next 12 months. Long-term funding is expected from property financing, operating cash flow and equity recycling; property sales or reduced capital spending are identified as possible alternatives if financing availability weakens. No specific earnings or FFO guidance is provided.
- Management reported five active development and redevelopment projects on schedule and within budget, and a future pipeline of approximately 14 million gross square feet. The Hamilton (276 apartments) was complete and 97% leased at quarter end; the 106-room Benson Hotel and Faculty Club was also completed. Initial Upton Place deliveries and Oak Shore homes were expected by year end 2023; Strathmore Square’s first-phase delivery was targeted for the second half of 2024.
- Development spending was $220.4 million for the first nine months. Remaining construction-contract commitments were $120.2 million, with $173.8 million undrawn on construction loans; additional commitments included $3.1 million for joint ventures and $2.1 million for property-technology investments.
- Aimco sold a 20% noncontrolling participation in its Parkmerced mezzanine investment in June for $33.5 million and related consideration. It is under contract to sell the remaining 80% for $134.0 million plus accrued interest; the purchaser had prepaid $4.0 million of interest and was expected to pay a further $7.4 million before year end. The remaining sale was not yet completed as of the filing.
- The phased ERP-system implementation is expected to continue into 2024. Management said disclosure controls were effective, but identified implementation disruptions, delays, cost increases, reporting errors and potential impacts on internal controls as risks. No material change to other previously disclosed risk factors was reported.
- Management stated there were no pending legal proceedings expected to materially affect financial condition or results. The filing also notes REIT qualification depends on meeting complex tax requirements. Aimco does not presently intend to pay a regular quarterly cash dividend, while remaining subject to REIT distribution requirements.
Important facts for investors to verify
- Progress, pricing, timing and conditions for the remaining Parkmerced mezzanine-interest sale, including whether the purchaser exercises its option.
- Project delivery schedules, leasing and budgets—particularly Upton Place, Oak Shore and Strathmore Square—and funding of remaining construction commitments.
- Liquidity and refinancing capacity as the revolving facility approaches its December 2024 maturity, alongside debt maturities, construction-loan availability and covenant compliance.
- Whether growth in apartment revenue and NOI can continue despite lower occupancy and higher insurance and other operating costs.
- ERP implementation milestones and any subsequent effects on financial reporting or internal controls.
- Cash-flow comparability: 2022 included unusually large lease-incentive receipts, disposition gains and lease-modification income, so reported earnings and cash-flow changes are not solely indicators of current property operations.