AIV

Business Context and Reporting Period

Company: Apartment Investment & Management Company (AIMCO)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 1996
Business Overview: AIMCO is a Real Estate Investment Trust (REIT) that owns and manages apartment communities. As of March 31, 1996, the Company owned 58 properties containing 15,028 units and managed an additional 19,984 units for third parties and affiliates, totaling a managed portfolio of 35,012 units across the Southwestern, Southcentral, and Southeastern United States.

Key Financial Metrics

Note: Debt figures include secured notes payable, tax-exempt bond financing, and short-term financing. Q1 1995 Net Income included $1,836,000 allocable to preferred stockholders, which was repurchased in September 1995.

Material Changes vs. Prior Period

• Revenue Growth: Rental revenues increased 22.3% to $22.45 million, driven primarily by the acquisition of 10 new properties in late 1995 and early 1996. On a "same-store" basis (46 properties), revenue increased 3.7% due to higher rental rates.
• Net Income Decline: Consolidated net income decreased 29.8% to $2.81 million. This decline is attributed to a 115.4% increase in interest expense ($5.40 million vs. $2.50 million) resulting from significant debt financing for acquisitions and the repurchase of preferred stock in 1995.
• Occupancy and Rent: Weighted average physical occupancy decreased slightly from 95% to 94%. Average monthly rent per occupied unit for same-store properties increased 4.4% to $517.
• Acquisitions: The Company acquired Peachtree Park (Atlanta, GA) and Villa Ladera (Albuquerque, NM) in January 1996, assuming approximately $18.9 million in debt and issuing Operating Partnership Units.

Guidance, Outlook, and Risks

Management Commentary and Outlook

• Liquidity: The Company maintains a $32 million Credit Facility with $19.5 million available as of March 31, 1996. Management expects to fund remaining 1996 capital expenditures ($10.9 million projected) through operating cash flow and credit facility borrowings.
• Asset Sales: AIMCO has agreed to sell four Texas properties for approximately $17.9 million. Proceeds will be used to reduce credit facility borrowings and provide working capital. This sale is expected to reduce the credit facility's maximum availability to approximately $20 million.
• Capital Markets: The Company has a shelf registration for $200 million of debt and equity securities, with $145.6 million remaining available as of March 31, 1996.

Risks and Contingencies

• Tax Ruling: The Company is seeking an IRS private letter ruling regarding advances to service business subsidiaries. An adverse ruling could result in a potential tax liability of up to $1.4 million plus interest, though it would not affect REIT status.
• Environmental: The Montecito property in Austin, Texas, is adjacent to a former landfill. Methane remediation is substantially complete, but final approval is contingent on continued monitoring. Groundwater testing has not indicated actionable contamination.

Investor Verification Checklist

• Debt Servicing Capacity: Verify the impact of the 115% increase in interest expense on future cash flows and dividend sustainability.
• Acquisition Integration: Confirm the performance of the 10 properties acquired in late 1995/early 1996 against pro forma expectations.
• Credit Facility Utilization: Monitor the reduction in credit facility availability following the planned sale of the four Texas properties.
• Tax Contingency: Track the status of the IRS private letter ruling regarding service business advances.
• Occupancy Trends: Observe if the slight decline in occupancy (95% to 94%) stabilizes or worsens in subsequent quarters.