Apartment Investment and Management Company (Aimco) — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Aimco is a REIT focused on owning, managing, redeveloping and developing apartment communities. At quarter-end, its portfolio comprised 124 communities and 32,846 homes across 17 states and Washington, D.C. Amounts below are in millions except per-share data and where noted.
Key financial results
| Metric | Q1 2020 | Q1 2019 | Change / context |
|---|---|---|---|
| Rental and other property revenue | $224.6 | $230.2 | Down 2.5% |
| Net income attributable to Aimco common stockholders | $6.7 | $271.6 | EPS was $0.04 vs. $1.88 |
| Same Store proportionate property NOI | $139.2 | $132.5 | Up 5.0%; margin 74.0%, up 100 basis points |
| Operating cash flow | $77.4 | $81.6 | Down $4.2 |
| Capital expenditures in cash flow statement | $94.8 | $85.5 | Includes redevelopment and development spending |
| Nareit FFO per diluted share | $0.67 | $0.61 | Up $0.06 |
| AFFO per diluted share | $0.60 | $0.55 | Up $0.05 |
Q1 2019 earnings included a $291.5 million gain from selling seven communities; no communities were sold in Q1 2020. This largely explains the year-over-year decline in GAAP net income and EPS. Same Store revenue rose 3.5%, supported by higher rents and occupancy; average daily occupancy was 97.6%, up 60 basis points. Renewal and new-lease increases averaged 5.8% and 1.7%, respectively.
Balance sheet, debt and liquidity
- At March 31, total assets were $7.05 billion, total indebtedness was $4.80 billion, and cash and cash equivalents were $340.9 million; restricted cash was an additional $33.9 million.
- Debt comprised $4.21 billion of non-recourse property debt and $593.8 million drawn on the revolving credit facility. Property debt was 96% fixed-rate, with a 7.3-year weighted-average remaining term.
- Net leverage to Adjusted EBITDAre was 7.7x, above Aimco’s target of less than 7.0x. Adjusted EBITDAre coverage of interest and preferred distributions was 3.6x, above the target of more than 2.5x. Trailing-twelve-month fixed-charge coverage was 2.08x against a 1.40x covenant.
- Quarter-end available revolver capacity was $198.7 million. Subsequent financing included a $350 million term loan secured April 20, primarily used to repay revolver borrowings, and property loans. Management reported expected total liquidity of approximately $1.2 billion after additional financings close.
- Operating cash flow was less than capital expenditures in the quarter. Financing activities included $318.8 million of net revolver borrowings, $61.1 million of common dividends and $10.0 million of share repurchases.
Material changes, outlook and risks
- COVID-19: Management warned that the pandemic and economic downturn could increase bad debt, reduce occupancy and rents, delay projects, and lead to future real-estate or mezzanine-investment impairments. Q1 included write-offs of $2.9 million of straight-line commercial rent receivables and $2.2 million of deferred leasing costs. No real-estate impairment provision was recorded in the quarter.
- Early Q2 indicators: April average daily occupancy was 96.6%, down 40 basis points year over year; blended lease-rate increases were 4.2%. Management reported approximately 1% residential bad debt for April under a revised collectability methodology. These are preliminary management figures, not Q1 results.
- Capital plans: Aimco paused short-cycle redevelopment and delayed new projects, reducing expected 2020 capital spending by about $150 million, or 45%. Five long-cycle projects continued, with approximately $212 million of remaining costs; when stabilized, they were expected to contribute about $30 million of NOI. Project timing and costs could be affected by COVID-related restrictions.
- Financing and asset sales: Management said the financing plan was expected to eliminate 2020 loan maturities and reduce 2021–2024 maturities by $229 million. In early May, Aimco sold an Annandale, Virginia community for $58.9 million. Management expected leverage to decline through property sales and lease-up of development projects; leverage remained above target at quarter-end.
- Contingencies: The filing discusses environmental matters involving a former Indiana property and a Lake Tahoe site; management did not expect either matter to have a material adverse effect, though outcomes remain uncertain. Redevelopment and development commitments totaled approximately $219 million at March 31.
- The filing provides no specific full-year earnings or FFO guidance. Management stated it believed liquidity was sufficient for operational needs, while emphasizing uncertainty from the pandemic and recession.
Important facts for investors to verify
- Whether subsequent property-loan closings and the reported liquidity increase to approximately $1.2 billion were completed as planned.
- Rent collections, concessions, delinquencies, occupancy and bad-debt trends after the preliminary April disclosures.
- Progress in reducing leverage below 7.0x and maintaining covenant compliance as operating conditions evolve.
- Whether development costs, schedules and expected NOI contributions remain achievable, and whether any impairment charges or further commercial rent write-offs arise.
- The effects of property sales, including the May Annandale transaction, on debt maturities, liquidity and recurring operating results.