Business Context and Reporting Period
Apartment Investment and Management Company (Aimco; NYSE: AIV) filed a combined 10-K with Aimco OP L.P. for the fiscal year ended December 31, 2020. Aimco is a multifamily-focused REIT pursuing development, redevelopment, and other value-add investments alongside a stabilized apartment portfolio.
Aimco completed its separation from Apartment Income REIT Corp. (AIR) on December 15, 2020. Because Aimco is presented as the accounting spinnee, historical results are carved out of the predecessor’s combined business and include allocations; they do not represent a standalone Aimco legal entity for all periods. Comparisons therefore require care.
Financial and Operating Performance
Unless otherwise indicated, amounts are in millions of dollars. Year-over-year comparisons are 2020 versus 2019.
| Metric | 2020 | 2019 |
|---|---|---|
| Rental and other property revenue | $151.5 | $143.7 |
| Net income (loss) | $(5.8) | $0.1 |
| Net income (loss) attributable to Aimco common stockholders | $(5.0) | $0.3 |
| Diluted loss per share | $(0.03) | $0.00 |
| Cash provided by operating activities | $47.8 | $57.9 |
| Capital expenditures | $23.9 | $39.3 |
| Total assets at year-end | $1,840.5 | $1,260.1 |
| Total indebtedness at year-end | $982.1 | $558.9 |
- Revenue increased 5.4%, while the stabilized Operating Portfolio’s proportionate NOI declined 1.8% to $86.8 million. NOI is a company-defined, non-GAAP operating measure.
- Operating Portfolio average daily occupancy was 96.3% for 2020 and 96.9% in Q4; average revenue per occupied unit was $1,873, up 0.1% year over year. Aimco reported collection of 98.3% of residential amounts owed during 2020.
- Management estimated $4.5 million of pandemic-related impact: $1.9 million of lost commercial revenue, $1.3 million of higher bad-debt expense, and $1.3 million of other costs.
- Adjusted EBITDAre, a non-GAAP measure, was $104.7 million versus $80.0 million. The 2020 result included substantial mezzanine investment income; it should not be read as a direct measure of recurring property performance.
- Q4 revenue was $38.6 million and net loss was $15.4 million, including a $15.9 million impairment charge. Q4 2019 revenue was $38.2 million and net loss was $1.3 million.
Liquidity, Debt and Capital
- Year-end liquidity was $448.7 million: $289.6 million cash and cash equivalents, $9.2 million restricted cash, and $150 million available under an undrawn revolving facility. Operating cash flow fell $10.1 million year over year.
- Indebtedness totaled $982.1 million: $449.5 million of non-recourse property debt and $534.1 million of Notes Payable to AIR. The latter notes bear fixed interest of 5.2% and mature January 2024; they are secured by equity in a subsidiary whose assets also secure senior loans.
- Property debt had a weighted-average rate of about 3.1% and 5.7-year weighted-average maturity; approximately 88% was fixed-rate. The company had $55 million of variable-rate property debt and estimated that a 100-basis-point LIBOR change would affect annual interest expense by about $0.6 million.
- The new $150 million secured revolving facility matures in December 2023, with two possible one-year extensions. Aimco reported compliance with its covenants. A construction loan of up to $174.2 million for Upton Place was undrawn at year-end.
- Aimco’s board had not declared a dividend or set an expectation for future regular dividends. REIT distribution requirements and debt covenants remain relevant to future distributions.
Changes, Outlook and Key Risks
- Major portfolio and investment actions included the $89.6 million acquisition of Hamilton on the Bay, a 90% economic interest in the consolidated Upton Place development joint venture (689 apartments and about 100,000 square feet of retail), and a $50 million IQHQ investment commitment, of which $12.5 million was funded by year-end.
- Aimco’s $275 million Parkmerced mezzanine loan bears 10% interest. Aimco recognized $27.6 million of net mezzanine investment income in 2020, primarily accrued interest. Legal transfer of the related investment from AIR remained pending required third-party consents.
- The Parkmerced borrower reported a 2020 net loss of $117.2 million, year-end occupancy of 75.7% versus 93.7% a year earlier, and a failure to meet its required debt coverage ratio. Lenders had not indicated an intent to impose a cash trap or accelerate the loans as of the financial statement issuance date. The borrower’s auditor disclosed material uncertainty that could cast significant doubt on its ability to continue as a going concern.
- Four leased development/redevelopment properties began lease terms on January 1, 2021. Aimco expected about $70 million of incremental direct completion costs; the leases involve aggregate payments of approximately $601.6 million over their terms. The filing also reports substantial lease commitments, including long-term ground leases.
- Management stated it believed liquidity was sufficient for operational needs in 2021 and beyond, expecting to meet longer-term needs through operating cash flow and property financing. No earnings or dividend guidance was provided in the supplied filing text.
- Key risks include COVID-19 effects on rent collection, occupancy and development; concentration in California, Chicago, Florida and the Northeast; reliance on AIR for property management, services, and some development opportunities; execution and cost risks in development; debt refinancing and covenant risks; and potential conflicts or disputes arising from the separation. Aimco also bears the first $17.5 million in aggregate of specified pre-separation legal and environmental liabilities, with AIR responsible above that threshold.
Important Facts for Investors to Verify
- Review the separation-related carve-out accounting and allocations, and assess how standalone costs and AIR service arrangements affect comparability and future margins.
- Verify the recoverability, payment status, and transfer of the Parkmerced mezzanine investment, including the borrower’s covenant breach, occupancy, cash position, and refinancing outlook.
- Assess debt maturities and security, particularly the $534.1 million AIR notes due in 2024, property-level collateral, and covenant headroom.
- Evaluate the economics and risks of Upton Place, IQHQ, and the four AIR-leased projects, including construction funding, lease obligations, and completion or lease-up assumptions.
- Confirm subsequent operating trends in occupancy, rent collections, bad debt, property expenses, and the board’s dividend policy; the filing provides no regular dividend commitment.