Apartment Investment and Management Company (Aimco) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. This combined filing covers Aimco and Aimco OP L.P.; the entities operate as one enterprise, and their consolidated financial results are substantially the same. Aimco is a multifamily-focused REIT that owns, leases, develops, and redevelops U.S. real estate.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / prior balance-sheet date |
|---|---|---|
| Rental and other property revenue | $50.0 million | $39.8 million; up 25.6% |
| Net income attributable to Aimco | $8.2 million; $0.05 per diluted share | $20.2 million; $0.14 per diluted share |
| Net cash from operating activities | $6.5 million | $2.3 million |
| Net cash used in investing activities | $111.4 million | $37.9 million |
| Cash, cash equivalents and restricted cash at quarter-end | $177.6 million | $244.6 million at year-end 2021 |
| Total indebtedness | $1.227 billion | $1.181 billion at year-end 2021 |
| Total assets | $2.594 billion | $2.434 billion at year-end 2021 |
Operating-segment revenue rose 9.4% and proportionate property NOI rose 14.3% year over year; occupancy was 98.5%, up 90 basis points. Across all segments, proportionate property NOI increased 19.8% to $32.6 million. The filing does not present a single consolidated operating-margin measure. Adjusted EBITDAre, a company-defined non-GAAP measure, was $13.6 million versus $15.5 million.
Q1 net income declined 59.4%. Management attributed the change primarily to lower unrealized gains on interest-rate options ($18.8 million versus $25.3 million), valuation changes in investments, and higher expenses. Property operating expenses were $19.2 million; depreciation and amortization was $23.1 million; general and administrative expense was $9.5 million; and interest expense was $14.6 million. The $4.1 million income-tax benefit was below the prior-year $5.1 million benefit.
Quarter-end debt included $512.3 million of non-recourse property debt, $180.6 million of construction loans, and $534.1 million of notes payable to AIR. The AIR notes bear fixed interest at 5.2% and mature January 2024. Management reported 83% of property-level debt was fixed-rate, with a 3.2% weighted-average rate and 5.1-year average remaining maturity. The company had no revolver borrowings and $120 million available under its $150 million secured revolver after a $30 million letter of credit.
Management reported available liquidity of $297.5 million, comprising $109.0 million cash, $68.6 million restricted cash, and $120.0 million revolver capacity. It also cited $240.1 million of undrawn construction loans and $15.8 million of limited-partner equity commitments. Cash-flow figures reflect substantial investment: capital expenditures were $49.7 million, land purchases $47.5 million, and the final $14.2 million funding of the IQHQ investment was made in the quarter.
Material changes and notable transactions
- Fort Lauderdale joint venture acquired three undeveloped parcels for $49.0 million; Aimco’s share was $25.0 million. One parcel was classified as held for sale.
- Aimco contracted to acquire a nine-acre Fort Lauderdale development site for $100 million. It placed $70 million in cash into escrow and provided $30 million in letters of credit; closing timing is uncertain and the agreement allows closing no later than February 2025.
- Aimco formed a Miami Edgewater development joint venture with a total Aimco capital commitment of $8 million, of which $6 million remained unfunded at quarter-end.
- Development and redevelopment commitments totaled approximately $217.9 million, mostly expected to be incurred over the next 24 months.
- After quarter-end, Aimco sold Pathfinder Village for $127 million and used proceeds to repay debt. It also monetized a $500 million-notional swaption for $13.7 million, recognizing a $7.1 million gain.
Outlook, risks and contingencies
Management said liquidity was sufficient for operating needs over the next 12 months and that it expected to meet longer-term needs through property financing, operating cash flow, and recycling equity. It stated that near-term plans did not contemplate issuing equity. The company targets redeployment of more than $500 million of equity over four to five years and cited expected annualized equity returns of 12%–16% once optimal capital allocation is achieved; these are strategic targets, not a guarantee or formal quarterly earnings forecast. Aimco does not presently intend to pay a regular quarterly cash dividend, while remaining subject to REIT distribution requirements.
Management highlighted risks from rising rates, financing availability and refinancing, construction costs and supply-chain disruption, development budgets and schedules, real-estate market conditions, COVID-19 impacts, and natural disasters. A 100-basis-point change in 30-day LIBOR was estimated to change interest expense by approximately $2.7 million. Aimco was in compliance with revolver covenants and expected to remain compliant over the next 12 months. The filing reported no material change in previously disclosed risk factors and no pending legal matter expected to materially affect financial condition or results.
The $346.0 million Parkmerced mezzanine investment bears 10% annual interest, but legal ownership of the loan-holding subsidiaries had not transferred from AIR pending third-party consents. The loan carries repayment and impairment risk; management specifically cited lingering pandemic-related risks. Aimco also provided $250.8 million of residual-value guarantees on finance leases. For one consolidated VIE construction loan, customary guarantees may create recourse exposure, with maximum exposure estimated at the $129.6 million outstanding balance.
Important facts for investors to verify
- How much of reported earnings and future cash realization depends on non-cash option gains, investment valuations, and accrued-but-unpaid mezzanine interest.
- Mezzanine loan repayment prospects, Parkmerced collateral performance, and timing of the AIR subsidiary transfer and required consents.
- Funding and completion costs for the $217.9 million development commitments and the Fort Lauderdale acquisition, including uncertain closing timing and escrow/letter-of-credit requirements.
- Liquidity availability after considering restricted cash, construction-loan draw conditions, upcoming debt maturities, and the January 2024 AIR-note maturity.
- Whether development lease-up, occupancy, rents, and targeted returns meet underwriting; management reported Flamingo Point stabilized ahead of schedule and above underwriting, and The Hamilton pre-leasing was ahead of underwriting.