Business context and reporting period
Apartment Investment and Management Company (Aimco; NYSE: AIV) filed this combined Form 10-K with Aimco OP L.P. for the fiscal year ended December 31, 2021. Aimco is a REIT focused on U.S. multifamily investments, including development and redevelopment, stabilized apartment communities, and alternative investments. Aimco completed its separation from Apartment Income REIT Corp. (AIR) on December 15, 2020. Pre-separation financial statements are presented on a carve-out basis, and 2021 results reflect a more fully standalone cost structure; comparisons with 2020 therefore require care.
Financial and operating performance
| Metric | 2021 | 2020 | Change or context |
|---|---|---|---|
| GAAP rental and other property revenue | $169.8 million | $151.5 million | Up 12.1% |
| Net loss | $5.0 million | $5.8 million | Loss narrowed by $0.8 million |
| Net loss attributable to Aimco common stockholders | $5.9 million; $0.04 per share | $5.0 million; $0.03 per share | Per-share loss increased |
| Operating cash flow | $12.6 million | $47.8 million | Down $35.3 million |
| Net cash used in investing activities | $271.4 million | $129.3 million | Higher development and capital spending |
| Adjusted EBITDAre (non-GAAP) | $81.4 million | $77.2 million | Up $4.2 million; excludes, among other items, accrued but unpaid mezzanine interest |
Operating properties generated $136.3 million of revenue before utility reimbursements, up 4.2%, and $92.8 million of proportionate property NOI, up 4.1%. Average occupancy rose 160 basis points to 97.9%. Property operating expenses for this segment increased 4.3%, primarily due to real estate taxes and insurance. Across segments, proportionate property NOI was $107.4 million, up 9.0%.
Interest expense increased 92.3% to $52.9 million, mainly reflecting a full year of interest on the $534.1 million Notes Payable to AIR issued in connection with the separation. General and administrative expense rose $22.7 million to $33.2 million, primarily because 2020 allocated predecessor costs were lower than the costs of operating independently in 2021. Depreciation and amortization increased to $84.7 million as additional assets entered service. The company recorded no impairment in 2021; 2020 included $15.9 million of impairment charges related to office-space and software assets.
Debt, liquidity and investment
At year-end, total indebtedness was $1.181 billion, consisting of $483.1 million of net non-recourse property debt, $163.6 million of construction loans, and $534.1 million of Notes Payable to AIR. Cash and cash equivalents were $233.4 million, with $11.2 million of restricted cash. Reported available liquidity was $394.6 million, including $150 million of undrawn revolving-credit capacity. The revolving facility matures in December 2023, with two one-year extension options; no borrowings were outstanding at year-end.
The AIR notes bear fixed interest at 5.2% and mature January 31, 2024. About 89% of property-level debt was fixed-rate; the two construction loans carried floating LIBOR-based rates and had $168.4 million outstanding. Management reported compliance with revolving-facility covenants. Lease liabilities were $435.1 million, and lease agreements include aggregate residual-value guarantees of $250.8 million.
Aimco invested approximately $215 million in eight development and redevelopment projects and reported $265.5 million of remaining project commitments, supported in part by $256.5 million of undrawn construction-loan capacity. Capital expenditures were $177.8 million. The Parkmerced mezzanine investment had a reported balance of $337.8 million, including accrued interest; Aimco recognized $30.4 million of related income in 2021. The loan earns 10% annually, is subordinate to a $1.5 billion first mortgage, and repayment is exposed to property and market conditions.
Material changes, outlook and risks
- Revenue growth, higher occupancy, and lease-up activity improved property operating results. More than 630 leases were executed on newly constructed homes, at rents averaging approximately 115% of target, according to management.
- Despite the narrower consolidated net loss, operating cash flow declined substantially, while interest expense, standalone corporate costs, and investment spending increased.
- Management said its near-term plan does not contemplate issuing equity and that existing liquidity should meet operational needs for 2022 and beyond. It expects to fund longer-term needs through operating cash flow, property financing, and recycling capital. Aimco does not presently intend to pay a regular quarterly cash dividend, preferring to reinvest earnings.
- Management described approximately $1 billion of development and redevelopment projects underway, more than $2 billion of controlled future opportunities, and over $500 million of equity targeted for redeployment over four to five years. It cited an expected 12%–16% annualized return on equity once optimal capital allocation is achieved; this is a stated target, not a guarantee or formal earnings forecast.
- Principal risks include construction-cost inflation and supply-chain disruption, delays or cost overruns, interest-rate and refinancing exposure, debt covenant compliance, COVID-19 effects, geographic concentration, rent regulation, and the possibility that Parkmerced’s borrower cannot repay the mezzanine loan. Aimco also relies on AIR for property management and certain support services; related agreements, transactions, and potential conflicts merit attention.
- Additional contingencies include $265.5 million of development commitments, the residual-value guarantees on leased assets, and the pending transfer from AIR of legal ownership of subsidiaries holding the Parkmerced loan and related options. The company said no pending legal proceedings were expected to have a material effect. Auditors issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Reconcile the reported $394.6 million of liquidity with cash, restricted cash, and the undrawn revolver, and assess cash needs against project commitments and debt maturities.
- Review the January 2024 maturity and refinancing terms of the AIR notes, construction-loan exposure to floating rates, and compliance with debt covenants.
- Assess whether Parkmerced’s accrued interest and $337.8 million reported investment balance are recoverable, including the status of the legal-title transfer and the borrower’s ability to service and repay the loan.
- Track construction budgets, completion and stabilization schedules, lease-up, and achieved rents against management’s targets, including the $1 billion active-project portfolio.
- Account for the post-separation cost base and carve-out presentation when comparing periods; assess whether reported earnings and cash flows support management’s return targets and capital-allocation plans.