AIV

Business Context and Reporting Period

Company: Apartment Investment & Management Company (Aimco)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2009
Business Overview: Aimco is a self-administered REIT engaged in the acquisition, ownership, management, and redevelopment of apartment properties. As of March 31, 2009, the company owned or managed 976 properties containing 160,118 units across 44 states, D.C., and Puerto Rico. The company operates through two primary segments: Real Estate and Investment Management.

Key Financial Metrics

Material Changes vs. Prior Period

• Net Loss Improvement: Net loss attributable to common stockholders decreased slightly by $1.2 million compared to Q1 2008, primarily due to an $8.6 million gain on the disposition of an unconsolidated real estate partnership and favorable changes in noncontrolling interest allocations.
• Discontinued Operations: Income from discontinued operations dropped significantly from $8.2 million in Q1 2008 to $3.7 million in Q1 2009. This decrease is attributed to a lower volume of property sales in 2009 compared to the significant disposition activity in 2008.
• Depreciation: Depreciation and amortization expenses increased by $19.7 million (19.0%) due to completed redevelopments and capital expenditures placed in service.
• Interest Income: Interest income declined by $4.8 million (58.8%) driven by lower interest rates and reduced cash balances.
• Liquidity: Cash and cash equivalents decreased by $206.4 million from the prior year-end, largely due to debt principal repayments, dividend payments, and capital expenditures.

Guidance, Outlook, and Risks

Management Outlook: Management expects financial and economic conditions to remain difficult for the remainder of 2009. The company is focused on property operations, portfolio management, and strengthening the balance sheet. Strategies include retaining residents, maintaining tight expense control, and selling approximately $2.0 billion of assets outside target markets to concentrate capital in the top 20 U.S. markets.

Capital Needs & Refinancing: The company intends to refinance 26 property loans totaling $434.2 million maturing between 2009 and 2011. Net proceeds from asset sales are expected to be used to reduce the $350 million bank term debt maturing in Q1 2011.

Recent Credit Facility Amendment: On May 1, 2009, Aimco amended its Senior Secured Credit Agreement, reducing total commitments from $985 million to $530 million ($350 million term loan and $180 million revolving). The amendment includes restrictions on share repurchases unless 50% of net asset sale proceeds are used to repay the term loan.

Risks and Contingencies:

• Market Risk: Exposure to interest rate fluctuations on $1.27 billion of floating-rate debt. A 1.0% increase in LIBOR would reduce annual net income by approximately $4.9 million.
• Derivatives: The company utilizes total rate of return swaps on $420 million of debt. Declines in property values could trigger requirements for additional cash collateral.
• Legal & Environmental: Ongoing exposure to mold-related litigation and environmental remediation costs, though management does not anticipate material adverse effects.

Investor Verification Checklist

• Refinancing Capability: Verify the company's ability to refinance $434 million in maturing debt given current credit market conditions.
• Asset Disposition Progress: Monitor the pace of sales for the $2.0 billion portfolio of non-target market assets to ensure liquidity targets are met.
• Collateral Requirements: Track potential additional cash collateral calls related to total rate of return swaps if property valuations decline further.
• Occupancy Trends: Review same-store occupancy rates (93.6% in Q1 2009) to assess the impact of the economic downturn on rental demand.
• Dividend Sustainability: Confirm that FFO remains sufficient to cover the 95% payout ratio required to maintain REIT status.