Business Context and Reporting Period
Company: Apartment Investment & Management Company (Aimco)
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2009
Business Overview: Aimco is a self-administered and self-managed Real Estate Investment Trust (REIT) engaged in the acquisition, ownership, management, and redevelopment of apartment properties. As of September 30, 2009, the company owned or managed 916 properties containing 146,581 units across 44 states, the District of Columbia, and Puerto Rico.
Key Financial Metrics
| Metric (in thousands) | Three Months Ended Sep 30, 2009 | Nine Months Ended Sep 30, 2009 | Nine Months Ended Sep 30, 2008 |
|---|---|---|---|
| Total Revenues | $319,346 | $961,930 | $1,007,169 |
| Net Operating Income (Real Estate Segment) | $161,903 | $500,788 | $489,160 |
| Net (Loss) Income Attributable to Aimco Common Stockholders | $(40,490) | $(108,112) | $360,457 |
| Funds From Operations (FFO) Attributable to Common Stockholders | $22,287 | $109,851 | $214,101 |
| Net Cash Provided by Operating Activities | N/A | $137,371 | $348,818 |
| Total Indebtedness | $6,172,596 | $6,172,596 | $6,396,670 |
| Cash and Cash Equivalents | $107,034 | $107,034 | $299,676 |
Material Changes vs. Prior Period
- Net Income Decline: Net loss attributable to Aimco common stockholders for the nine months ended September 30, 2009, was $108.1 million, a decrease of $468.6 million compared to net income of $360.5 million in the same period in 2008.
- Discontinued Operations: The decline was primarily driven by a $426.0 million decrease in income from discontinued operations, largely due to fewer property sales in 2009 compared to 2008. In 2008, significant gains were recognized from the sale of 88 consolidated properties versus 57 in 2009.
- Impairment Losses: The company recognized $24.7 million in operating real estate impairment losses for the nine months ended September 30, 2009, compared to zero in the prior year period.
- Asset Management Revenues: Asset management and tax credit revenues decreased significantly ($51.2 million for the nine-month period) due to a reduction in promote income from joint venture dispositions.
- Expense Reductions: General and administrative expenses decreased by 29% ($22.2 million) for the nine-month period, attributed to organizational restructuring and workforce reductions.
Guidance, Outlook, and Risks
- Portfolio Strategy: Management is focused on reducing leverage and financial risk. The company intends to sell approximately $450 million of conventional and affordable assets located outside target markets by year-end to fund the repayment of term debt.
- Debt Maturities: As of September 30, 2009, property debt maturing through 2011 totaled $265.4 million. Refunding risk has been eliminated on all but four loans totaling $234.5 million, which are expected to be refinanced in 2011.
- Liquidity: Cash and cash equivalents decreased by $192.6 million to $107.0 million. The company has $119.5 million available under its revolving credit facility. Management expects difficult financial and economic conditions to continue into 2010.
- Risks: Key risks include the availability and cost of capital, fluctuations in real estate values, competition for tenants, and the impact of government regulations. The company also faces potential environmental liabilities and litigation risks related to mold and fiduciary duties.
Investor Verification Checklist
- Discontinued Operations Impact: Verify the extent to which the reported net loss is driven by the lack of one-time gains from property sales compared to the prior year, rather than a deterioration in core operating performance.
- Impairment Charges: Review the specific properties subject to the $24.7 million impairment charge and the assumptions used regarding future cash flows and holding periods.
- Debt Refinancing: Confirm the status of the $234.5 million in debt maturing in 2011 and the company's ability to refinance these obligations given current credit market conditions.
- FFO vs. GAAP Earnings: Analyze the divergence between the GAAP net loss and the positive Funds From Operations (FFO) of $109.9 million to understand the company's underlying cash-generating ability.
- Restructuring Costs: Assess the remaining accruals for restructuring ($7.7 million total) and the expected timeline for realizing the full benefit of cost reductions.