Apartment Investment and Management Company (Aimco) — 2010 Form 10-K
Reporting period: Fiscal year ended December 31, 2010; the filing also reports fourth-quarter results. Aimco is a self-managed REIT operating conventional market-rate and affordable apartment properties. At year-end, its owned or managed portfolio comprised 768 properties and 122,694 units.
Key financial results
| Metric | 2010 | 2009 |
|---|---|---|
| Total revenue | $1,144.9 million | $1,131.1 million |
| Operating income | $130.5 million | $95.7 million |
| Loss from continuing operations | $165.9 million | $201.6 million |
| Net loss attributable to Aimco common stockholders | $125.3 million; $1.08 per share | $114.8 million; $1.00 per share |
| Net cash provided by operating activities | $257.5 million | $233.8 million |
| Cash and cash equivalents at year-end | $111.3 million | $81.3 million |
| Restricted cash at year-end | $201.4 million | $218.7 million |
| Total indebtedness | $5,504.8 million | $5,479.5 million |
| Total assets | $7,378.6 million | $7,906.5 million |
- Operating margin, calculated as operating income divided by revenue, was approximately 11.4%, versus 8.5% in 2009. GAAP net loss persisted, in part because depreciation and interest expense were substantial.
- Capital expenditures were $178.9 million. Operating cash flow less capital expenditures was approximately $78.6 million; this is a simple calculation, not Aimco’s stated FFO or Adjusted FFO measure.
- FFO attributable to common stockholders (diluted) rose to $161.0 million from $126.0 million. Pro forma FFO fell to $176.7 million from $178.8 million.
- Conventional same-store occupancy increased to 96.1% from 94.1%. Same-store conventional NOI rose 0.2%; total same-store NOI rose 0.8%; continuing-operations real estate portfolio NOI rose 2.3%.
- Fourth-quarter conventional monthly rent averaged $1,052, up about 1% year over year; the reported operating margin was 62%.
Changes versus prior year
- Revenue increased 1.2%, while operating income rose by $34.8 million. Common-stockholder net loss nevertheless widened by $10.5 million, primarily because income from discontinued operations and asset-management and tax-credit revenues declined.
- Discontinued-operations income fell to $76.3 million from $156.8 million, largely reflecting fewer property sales and lower disposition gains. Aimco sold 51 consolidated properties in 2010 versus 89 in 2009.
- Operating cash flow increased $23.7 million. Capital expenditures declined from $300.3 million to $178.9 million, while cash and cash equivalents rose by $30.1 million.
- Year-end debt edged up by $25.3 million despite repayment of the remaining $90 million term loan; property-loan balances and accounting changes affected the comparison.
- Conventional same-store revenue decreased 0.2%, but expenses declined 1.0%. Affordable segment NOI increased 6.6%.
Debt, liquidity and capital allocation
- Approximately 86% of leverage was property-level, non-recourse debt and 13% perpetual preferred equity; Aimco reported no corporate-level debt at year-end. About 91% of property-level debt was fixed-rate, and its weighted-average maturity was 7.8 years.
- Consolidated property debt was approximately $5.46 billion, with a weighted-average interest rate of 5.52%. Debt maturities included $289.0 million in 2011 and $556.1 million in 2012. Aimco refinanced $79.4 million of 2011 maturities in February 2011.
- The expanded revolving credit facility was $300 million, with $260.3 million available after letters of credit; no revolving borrowings were outstanding at year-end. Reported covenant ratios exceeded required thresholds, and management expected compliance during 2011.
- Cash, cash equivalents and restricted cash totaled approximately $312.7 million. The filing’s broader $450.4 million liquidity/interest-rate discussion also includes notes receivable.
- Aimco issued $96.1 million net of 7.75% preferred stock and redeemed its 9.375% Class G preferred stock for approximately $101 million plus accrued dividends. It also issued 600,000 common shares for $14.4 million net proceeds.
Outlook, risks and unusual items
- Management expected conventional redevelopment spending to increase from approximately $30 million in 2010 to $50–$75 million in 2011. It anticipated similar quarterly common dividends for the rest of 2011, subject to Board review; a $0.12-per-share dividend for the quarter ended December 31, 2010 was declared in February 2011. The filing provides no specific earnings or revenue forecast.
- Interest-rate exposure remains: $470.3 million of variable-rate debt and $57.0 million of variable-rate preferred stock were reported at year-end. Aimco estimated that a 100-basis-point increase in 30-day LIBOR, with specified assumptions, could reduce annual net income attributable to common stockholders by about $3.9 million.
- Rate-of-return swaps had $277.3 million of notional exposure and produced $20.9 million of net cash receipts in 2010. Higher rates, counterparty default, collateral requirements or refinancing into higher-cost debt could adversely affect liquidity.
- Government-agency rental subsidies were $131.4 million in 2010. About 10.7% of the 2010 subsidy amount related to housing-assistance contracts expiring in 2011; Aimco anticipated renewal. Loss or non-renewal could affect revenue and liquidity.
- Other principal risks include refinancing and credit-market access, debt covenants, property-market conditions and competition, redevelopment costs and delays, environmental and casualty exposures, and continued REIT qualification. Most properties were encumbered by debt.
- In 2010, Aimco adopted revised variable-interest-entity consolidation guidance, consolidating previously unconsolidated partnerships and deconsolidating others. The filing also reports $12.7 million of real-estate impairment losses in discontinued operations and a $9.8 million reduction in certain low-income tax-credit investment balances.
- No legal proceedings were reported under Item 3. The independent auditor expressed unqualified opinions on the financial statements and internal controls; management also concluded disclosure controls and internal controls were effective.
Investor verification priorities
- Reconcile the $125.3 million common-stockholder net loss with FFO and Pro forma FFO, and assess how much recurring cash generation supports distributions.
- Review the 2011–2015 debt maturity schedule, refinancing completed after year-end, available credit, and covenant headroom as covenant minimums were scheduled to increase in 2012.
- Test the assumptions behind the planned $50–$75 million redevelopment program, expected returns, funding and execution risks.
- Check renewal status and timing for housing-assistance contracts, including contracts expiring in 2011, and monitor subsidy concentration.
- Assess variable-rate debt, swap maturities and terms, and the potential $30.6 million cash payment plus assumption of approximately $118.6 million of property debt under the West Harlem put arrangement if specified performance thresholds are met.