APARTMENT INVESTMENT & MANAGEMENT CO. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Aimco is a multifamily-focused REIT; its operating partnership holds substantially all assets. Unless noted, financial amounts below are in U.S. dollars.
Financial results and key metrics
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Rental and other property revenue | $44.3 million | $50.0 million |
| Net income (loss) | $(5.8) million | $10.1 million |
| Net income (loss) attributable to Aimco | $(8.8) million; $(0.06) per share | $8.2 million; $0.05 per share |
| Net cash provided by operating activities | $5.6 million | $6.5 million |
| Net cash used in investing activities | $(63.2) million | $(111.4) million |
| Net cash from financing activities | $16.5 million | $38.0 million |
| Adjusted EBITDAre (non-GAAP) | $13.9 million | $15.5 million |
At March 31, 2023, total assets were $2.19 billion, total indebtedness was $1.08 billion, and cash and cash equivalents were $166.1 million; restricted cash was $22.5 million. Aimco reported $608.7 million of total equity. Stated available liquidity was $338.6 million, including cash, restricted cash, and $150 million of undrawn revolving-facility capacity.
Approximately 83% of non-recourse property debt carried fixed rates; the weighted-average rate was 5.3% and average remaining maturity was 6.9 years. The revolving secured credit facility had no borrowings outstanding and matures in December 2023, subject to two one-year extension options.
Changes versus the prior comparable period
- Aimco moved from attributable net income of $8.2 million to an attributable net loss of $8.8 million. Management cited lower recognized Mezzanine Investment income and less favorable fair-value changes in interest-rate options. The prior-year quarter included $8.2 million of mezzanine income and $18.8 million of option gains; Q1 2023 recorded a $0.1 million mezzanine loss and a $1.1 million net option loss.
- Consolidated property revenue declined 11.5%, primarily reflecting portfolio changes. In contrast, the stabilized Operating segment’s revenue grew 11.4% and proportionate property NOI grew 13.1% to $25.5 million. Average monthly revenue per apartment home rose $238 to $2,227, while average daily occupancy declined 50 basis points to 98.0%.
- Interest expense fell $4.9 million, or 33.4%, largely due to prepayment of notes payable to AIR. Depreciation and amortization decreased $6.8 million, principally following property dispositions and lease terminations in 2022.
- Operating cash flow decreased $0.9 million. Investing cash outflow was lower than in 2022 because of reduced acquisitions and IQHQ investment funding, partly offset by higher capital expenditures.
Outlook, management commentary, and risks
- Management said it expects available liquidity to meet operational needs over the next 12 months and expects to fund longer-term requirements through property financing, operating cash flow, and equity recycling. No specific earnings or operating guidance was provided.
- Development and redevelopment spending was $64.8 million in the quarter. Management reported five active projects and said they remained on track for budget, lease-up metrics, and current valuations. The Hamilton redevelopment was complete and 88% leased or pre-leased at quarter-end; Upton Place was scheduled for initial delivery in Q4 2023. The Benson Hotel opened in April 2023.
- In February 2023, Aimco agreed to sell its Parkmerced mezzanine investment for $167.5 million; closing was expected in Q2 2023. The buyer’s $5.0 million deposit became nonrefundable in April after specified conditions were cleared. With monetization of the related swaption, management expected gross proceeds of approximately $220 million.
- Development commitments included $133.2 million of construction-related contracts, with $268.4 million undrawn on construction loans. The company also reported $9.5 million of remaining joint-venture commitments and $2.3 million of property-technology investment commitments. It expected to fund most development commitments over the next 24 months.
- Risks highlighted include rising interest rates and inflation, financing availability and cost, debt refinancing and covenant compliance, development cost or schedule overruns, property-market and occupancy changes, supply-chain issues, insurance and weather events, and legal, regulatory, and environmental matters. Management reported compliance with credit-facility covenants and expected to remain compliant over the next 12 months.
- A 100-basis-point increase in variable-rate indices was estimated to increase annual interest expense by $0.5 million, with caps mitigating exposure. The revolving facility’s December 2023 maturity and the pending mezzanine-investment sale are notable near-term items.
Important facts for investors to verify
- Whether the Parkmerced investment and swaption monetizations closed as expected, and the final proceeds and timing.
- Liquidity after excluding restricted cash, and the status of the revolving facility’s maturity, extensions, and covenants.
- Progress, remaining costs, leasing, and delivery timing for active developments, particularly Upton Place and other major projects.
- Drivers of the decline in consolidated revenue and the sustainability of Operating-segment rent and NOI growth amid lower occupancy.
- Performance and collectability of the mezzanine investment and the valuation and risk protection provided by interest-rate derivatives.
- Capital expenditure and development funding needs relative to operating cash flow, debt capacity, and available construction-loan commitments.