AIV

SEC Filing Summary: Apartment Investment & Management Co. (AIMCO)

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2001. AIMCO is a real estate investment trust (REIT) headquartered in Denver, Colorado, owning and managing a geographically diversified portfolio of apartment communities. As of June 30, 2001, the Company owned or controlled 156,572 units in 575 properties and managed an additional 155,837 units in equity and third-party properties.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Rental revenues increased 33.9% year-over-year, driven primarily by the consolidation of the Oxford Tax Exempt Fund II (OTEF) properties and other acquisitions, alongside a 4.9% increase in "same store" sales revenues.
• Profitability: While consolidated Net Income rose to $44.5 million, Net Income attributable to common stockholders declined to $3.4 million (from $8.6 million) due to increased preferred stock dividends and distributions following the OTEF merger and new preferred stock issuances.
• Interest Expense: Consolidated interest expense increased 35.4% to $169.3 million, reflecting higher debt levels associated with acquisitions and the OTEF merger.
• Accounting Change: Effective January 1, 2001, the Company began consolidating previously unconsolidated subsidiaries under the REIT Modernization Act, significantly impacting balance sheet and income statement comparability.
• Acquisitions: The Company completed $526 million in acquisition and financing transactions in Q2 2001, including the purchase of limited partnership interests and specific apartment communities.

Guidance, Outlook, and Risks

• Liquidity: The Company maintains $135.4 million in cash and $167 million in availability under its $400 million revolving credit facility. Management considers current liquidity adequate for short-term demands.
• Capital Markets: In July 2001 (subsequent to the period end), AIMCO issued $119.6 million in Class R Preferred Stock to repay short-term indebtedness. The Company plans to fund future acquisitions through operations, long-term fixed-rate debt, and equity issuances.
• Market Risk: The Company has $388.5 million in variable-rate debt (8.5% of total debt). A 1% increase in interest rates would reduce annual income and cash flows by approximately $3.9 million.
• Legal and Contingencies: A $4.2 million settlement with HUD regarding management arrangements was finalized in July 2001; this amount was fully reserved and had no impact on current results. Routine litigation is ongoing but not expected to be material.
• Accounting Developments: New FASB standards (No. 141 and 142) regarding goodwill and intangibles will be adopted in 2002, expected to increase annual net income by $6.7 million by eliminating amortization.

Investor Verification Checklist

• Preferred Stock Dilution: Verify the impact of the new Class P and Class Q preferred stock issuances on common shareholder earnings, as preferred dividends significantly reduced net income available to common stock.
• Consolidation Impact: Review the reconciliation of financials to understand the full effect of consolidating previously unconsolidated subsidiaries under the REIT Modernization Act.
• Debt Maturity Profile: Assess the refinancing risk associated with the $4.59 billion total indebtedness, particularly the $233 million credit facility maturing in July 2002.
• Same-Store Performance: Confirm the sustainability of the 4.9% revenue growth in "same store" properties, which excludes the impact of acquisitions.
• Variable Rate Exposure: Monitor interest rate trends given the $388.5 million exposure to variable rates and the potential for increased interest expense.