Apartment Investment and Management Company (Aimco) — Q1 2016 Form 10-Q
Business context and period. Unaudited results cover the three months ended March 31, 2016, compared with Q1 2015. Aimco is a REIT whose operating partnership owns and manages apartment communities, primarily in large coastal and job-growth U.S. markets. At quarter-end, Aimco held interests in 139 conventional communities with 40,376 homes and 56 affordable communities with 8,685 homes.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 / prior period |
|---|---|---|
| Total revenue | $246.2 million | $244.3 million |
| Operating income | $63.5 million | $61.1 million |
| Net income | $29.9 million | $104.2 million |
| Net income attributable to Aimco common stockholders; diluted EPS | $23.2 million; $0.15 | $89.3 million; $0.58 |
| Operating cash flow | $74.0 million | $64.7 million |
| Capital expenditures | $79.6 million | $71.7 million |
| Cash and cash equivalents at March 31 | $64.5 million | $50.8 million at December 31, 2015 |
| Total indebtedness at March 31 | $3.92 billion | $3.85 billion at December 31, 2015 |
| Common dividend declared per share | $0.33 | $0.28 |
Conventional same-store NOI increased 7.1%, on revenue growth of 4.8% and expense growth of 0.1%. Management reported same-store NOI and free-cash-flow margins of 68% and 62%, respectively. Affordable-segment NOI rose 6.0%. These segment and margin measures are company-defined, non-GAAP measures.
Q1 net income fell sharply mainly because net gains on real estate dispositions were $6.2 million versus $85.7 million in Q1 2015. Excluding that comparison effect, operating performance improved: revenue and operating income grew, while interest expense declined 11% to $47.6 million. Net cash provided by investing activities was negative $65.6 million; financing activities provided $5.3 million. Cash increased $13.7 million during the quarter.
At March 31, total liabilities were $4.32 billion and total equity was $1.74 billion. The company had $90.2 million of restricted cash, which is not equivalent to freely available cash. Revolver borrowings were $106.1 million; $463.9 million remained available under the $600 million facility after letters of credit. Approximately 98% of property-level debt was fixed-rate, and its weighted-average maturity was 7.9 years.
Changes, outlook, and management commentary
- Trailing-twelve-month leverage measures improved year over year: proportionate debt to adjusted EBITDA was 6.4x versus 6.5x; debt plus preferred equity to adjusted EBITDA was 6.8x versus 6.9x. Adjusted EBITDA coverage of interest and preferred dividends was 2.9x versus 2.6x. These are non-GAAP measures.
- Management expected 2016 general and administrative expense of approximately $42 million, about 3% below 2015. It anticipated $70–$75 million of property upgrades and $180–$220 million of total development and redevelopment spending for 2016.
- Redevelopment and development projects had $351.6 million of inception-to-date net investment at quarter-end. One Canal was expected to complete construction and begin initial occupancy in Q2 2016; stabilization dates for projects extend into 2018.
- Aimco agreed to acquire a 463-home Northern California community for $320 million, with closing expected after construction completion in summer 2016. A $25 million nonrefundable deposit had been paid.
- Capital commitments for redevelopment, development and improvements totaled about $85 million, mostly expected within 12 months, plus approximately $7 million of expected but uncommitted spending. A $20.1 million portion of the One Canal loan remained available to draw.
- Management expected to provide notice before June 30, 2016 to redeem $35 million of 7% Class Z perpetual preferred stock, first eligible for redemption July 29, 2016. It expected to remain in compliance with credit-facility covenants over the next 12 months.
- Key risks include apartment-market conditions and competition, access to financing and covenant compliance, project cost/timing and lease-up, REIT qualification, litigation, and environmental liabilities. The filing describes ongoing environmental matters in Indiana and Lake Tahoe but says their resolution is not expected to have a material adverse effect. Management also reported no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Whether same-store rent growth, occupancy and expense trends continue, and whether reported NOI growth converts into cash flow.
- Disposition-adjusted earnings and the comparability of Q1 2015, which included substantially larger real-estate sale gains.
- Funding and execution of the $320 million acquisition and committed project spending, including construction, lease-up and stabilization assumptions.
- Liquidity after dividends, capital spending and the planned preferred-stock redemption; also confirm revolver availability and covenant headroom.
- Exposure and potential costs from environmental proceedings, tax-credit compliance and other contingencies; the filing does not quantify a clear maximum exposure.