05/09/2022
DENVER–(BUSINESS WIRE)– Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today first quarter results for 2022 and provided highlights on recent activities.
Wes Powell, Aimco President and Chief Executive Officer, comments: “Aimco had a solid first quarter and I offer my sincere thanks to our dedicated team for delivering strong results across each of our business segments. Our development planning and construction activities remain on track, and newly delivered apartment homes are leasing more quickly and at higher rental rates than originally planned. Our acquisitions team added four million square feet of phased development opportunities to an already deep pipeline, and our national portfolio of stabilized apartment properties remains highly occupied and is realizing strong revenue growth.”
Mr. Powell continued, “At Aimco, our experienced local professionals and our disciplined development process have led to more predictable outcomes. We maintain a healthy balance sheet and have plans in place to smooth our debt maturity ladder, and reduce near-term repricing and refunding risk. Our allocation to stabilized apartment properties allows for the relatively frequent repricing of rents, a valuable tool during inflationary periods. Most importantly, while the near-term economic outlook is far from certain, the fundamentals of the country’s housing market put the Aimco platform and strategy in excellent position for long-term success.”
Lynn Stanfield, Aimco Chief Financial Officer, adds: “During the first quarter Aimco’s stabilized properties produced solid year-over-year growth with occupancy at 98.5%, up 90 bps, and net operating income of $24.6 million, up 14.3%. These communities, where approximately 50% of Aimco capital is currently invested, plus the strong Aimco balance sheet, provide stability and support to the investment platform.”
Mrs. Stanfield continued, “Also in the first quarter, the successful recapitalization of the initial phase of development at Parkmerced gives us increased confidence that our mezzanine loan, secured by later phases of development at Parkmerced, is adequately collateralized. In April, Aimco made significant progress on its plan to refinance nearly $1 billion of debt, the majority of which comes due in the next two years, and reducing future refinancing risk.”
Financial Results and Recent Highlights
- Net income attributable to common stockholders per share, on a fully dilutive basis, was $0.05 for the quarter ended March 31, 2022, compared to net income per share of $0.14 for the same period in 2021, due primarily to the change in fair market valuation of Aimco’s interest rate options and entity investments.
- The North Tower at Flamingo Point in Miami Beach, Florida reached stabilized occupancy in April, more than six months ahead of schedule and at rental rates more than 25% ahead of underwriting.
- Initial demand for fully renovated apartment homes at The Hamilton in Miami, Florida has been strong. Aimco has pre-leased 17 homes in anticipation of initial apartment home deliveries scheduled to occur in the coming months, at rental rates ahead of underwriting.
- Aimco secured two new development pipeline assets in South Florida with the potential to construct approximately four million square feet of phased, mixed-use developments.
- First Quarter 2022 Revenue and NOI from Aimco’s Stabilized Operating Properties were up 9.4% and 14.3%, respectively, year over year, with occupancy of 98.5%, up 90 basis points year over year.
- Aimco ended the first quarter with $298 million of liquidity, including cash and capacity on its revolving credit facility, net of letters of credit outstanding.
- Aimco plans to restructure nearly $1 billion of debt, including $534 million of notes payable to AIR, funded with proceeds from (i) long-dated, fixed-rate, non-recourse financing, (ii) the disposition of one stabilized asset, and (iii) the unwind of the initial AIR leases by early 2023.
Value Add, Opportunistic & Alternative Investments:
Development and Redevelopment
Aimco generally seeks development and redevelopment opportunities where barriers to entry are high, target customers can be clearly defined, and Aimco has a comparative advantage over others in the market. Aimco’s Value Add and Opportunistic investments may also target portfolio acquisitions, operational turnarounds, and re-entitlements.
Aimco currently has eight active development and redevelopment projects, located across five U.S. markets, in varying phases of construction and lease-up. These projects remain on track, as measured by project-level budget and schedule, lease-up metrics, and current market valuations. During the first quarter, Aimco invested $65.7 million in development and redevelopment activities. Updates include:
- At the North Tower of Flamingo Point in Miami Beach, Florida, construction is largely complete and the property is 98% occupied. The property reached stabilized occupancy in April, more than six months ahead of plan and at rental rates more than 25% ahead of underwriting.
- The Fremont on the Anschutz Medical Campus in Aurora, Colorado was 92% leased as of April 30, 2022, and is expected to reach stabilized occupancy in the third quarter of 2022.
- Prism in Cambridge, Massachusetts, and 707 Leahy in Redwood City, California, reached stabilized occupancy in the second half of 2021.
- Pre-leasing began at The Hamilton in Miami, Florida in anticipation of initial apartment home deliveries scheduled to occur in the coming months. As of April 30, 2022, 17 units had been pre-leased at rental rates ahead of underwriting.
- At Upton Place in Northwest Washington, D.C., construction remains on schedule and on budget. As of April 30, 2022, more than 80% of the 106,000 square feet of planned retail space has been leased to two anchor tenants, more than 18 months ahead of delivery and at terms ahead of underwriting.
- Construction continues on schedule and on budget at The Benson Hotel and Faculty Club in Aurora, Colorado and at our single-family rental project, Oak Shore, in Corte Madera, California.
Alternative Investments
Aimco makes alternative investments where it has special knowledge or expertise relevant to the venture and opportunity exists for positive asymmetric outcomes. Aimco’s current alternative investments include a mezzanine loan secured by a stabilized multi-family property with an option to participate in future multi-family development as well as three passive equity investments. Updates include:
- Aimco’s $346 million mezzanine loan is secured by the Parkmerced stabilized multi-family property plus phases two through nine of the site’s future development opportunity. Members of Aimco’s borrower also own phase one, which was recently recapitalized by an alternative investment firm with $57 billion under management. The recapitalization provides the borrower with additional liquidity and added capacity to advance capital and service the first priority debt that is senior to the Aimco loan. It is now expected that the neighboring San Francisco State University will return to full in-person learning this fall, increasing the demand for the apartments that serve as collateral for our loan.
- Aimco funded the remaining $14.2 million of a total commitment of a $50.0 million passive equity investment in IQHQ Inc., a life sciences developer.
Investment Activity
Aimco is focused on development and redevelopment, funded through joint ventures. Aimco will also consider opportunistic investments in related activities. In the first quarter 2022:
- Aimco’s joint venture with The Kushner Companies closed on the previously announced acquisition of three undeveloped land parcels located in downtown Fort Lauderdale, Florida. The total purchase price for the land was $49 million ($25 million at Aimco’s 51% share) and current zoning allows for the development of approximately three million square feet of multifamily homes and commercial space. The venture is under contract to sell one of the parcels for $18.3 million, nearly double its allocation of the purchase price. The venture expects to close this sale in the third quarter of 2022.
- Aimco formed a joint venture for the construction of approximately one million square feet of mixed-use development in the Edgewater neighborhood of Miami, Florida. Aimco has a 20% share of the joint venture, which includes the initial contribution of an eighth of an acre of land that Aimco purchased for $1.7 million in January 2022. The development site is situated as the gateway to Aimco’s Edgewater land assemblage and its redevelopment of The Hamilton. Aimco will serve as the development manager for the venture and expects to begin construction in 2023.
- Aimco entered into a contract to acquire, for $100 million, a nine-acre development site in Fort Lauderdale, Florida. The site is located in the rapidly growing Flagler Village neighborhood and allows for approximately three million square feet of phased, mixed-use development, which could contain up to 1,500 residential units at full build-out. Pursuant to the agreement, Aimco reserved funds for the transaction by placing $70 million of cash and $30 million in letters of credit into escrow. In conjunction with the purchase, Aimco entered into a short-term cancelable operating lease with the seller to obtain the development rights. Aimco plans to form a joint venture or joint ventures to execute the planned development activity.
Operating Property Results
Aimco owns a diversified portfolio of stabilized apartment communities located in ten major U.S. markets with average rents in line with local market averages. Aimco also owns one commercial office building that is part of an assemblage with an adjacent apartment building.
Aimco’s operating properties produced solid results for the quarter ended March 31, 2022.
| First Quarter | |||||||||
| Stabilized Operating Properties | Year-over-Year | Sequential | |||||||
| ($ in millions) | 2022 | 2021 | Variance | 4Q 2021 | Variance | ||||
| Average Daily Occupancy | 98.5% | 97.6% | 0.9% | 98.7% | (0.2%) | ||||
| Revenue, before utility reimbursements | $35.8 | $32.7 | 9.4% | $35.6 | 0.4% | ||||
| Expenses, net of utility reimbursements | 11.2 | 11.2 | 0.1% | 10.1 | 10.9% | ||||
| Net operating income (NOI) | $24.6 | $21.5 | 14.3% | $25.5 | (3.8%) | ||||
| *Excluded from the table above is one, 40-unit apartment community that Aimco’s ownership includes a partnership share. |
- Revenue in the first quarter 2022 was $35.8 million, up 9.4% year-over-year, resulting from a $155 increase in average monthly revenue per apartment home to more than $2,000, and a 90-basis point increase in Average Daily Occupancy to 98.5%.
- New lease rents increased 15.4% and the median annual income of new residents was more than $110,000 in the first quarter 2022.
- Renewal lease rents increased 14.7% in the first quarter and 62.0% of residents were retained over the past twelve months.
- Net operating income in the first quarter 2022 was $24.6 million, up 14.3% year-over-year.
1001 Brickell Bay Drive, a waterfront office building in Miami, Florida, is owned as part of a larger assemblage with substantial development potential. At the end of the first quarter 2022, the building was 83% occupied, up from 72% at the same time last year.
Balance Sheet and Financing Activity
Aimco is highly focused on maintaining a strong balance sheet, including having at all times ample liquidity. As of March 31, 2022, Aimco had access to $298 million, including $109 million of cash on hand, $69 million of restricted cash, and the capacity to borrow up to $120 million on our revolving credit facility.
Aimco’s net leverage as of March 31, 2022, was as follows:
| as of March 31, 2022 | ||||||||
| Proportionate, $ in thousands | Amount | Weighted Avg.Maturity (Yrs.) | ||||||
| Total non-recourse property debt | $ | 505,684 | 5.1 | |||||
| Total non-recourse construction loan debt | 184,788 | 2.1 | ||||||
| Notes payable to AIR | 534,127 | 1.8 | ||||||
| Cash and restricted cash | (177,623 | ) | ||||||
| Net Leverage | $ | 1,046,976 |
- Aimco made significant progress on a plan to restructure nearly $1 billion of debt, the majority of which comes due in the next two years, mitigating future refinancing risk. Once complete, Aimco expects its leverage to be primarily non-recourse property level debt either in fixed rate loans or floating with interest rate caps. Components of the plan include:
- Aimco has rate-locked $555 million of property level loans with a weighted average term of 9.4 years and a weighted average fixed interest rate, net of monetized swaption proceeds, of 4.37%. Aimco estimates $320 million of proceeds, net of the repayment of existing property debt balances and prepayment penalties.
- In early May, Aimco sold Pathfinder Village in Fremont, California for $127 million, ~8% more than in Aimco’s estimated Net Asset Value calculation published in October 2021. Proceeds, net of the repayment of the existing property debt and transaction related costs, were $70 million.
- Aimco reached agreement with AIR for the accelerated repayment of $534 million in notes, which carry a rate of 5.2%, prior to their maturity in January 2024. The early payoff is expected to be completed during the third quarter 2022. Aimco expects to incur approximately $24 million in associated spread maintenance costs.
- Finally, Flamingo Point North Tower reached stabilized occupancy in April, allowing for lease termination and satisfaction of the $150 million construction loan by early 2023.
- In the first quarter 2022, Aimco’s joint venture in Fort Lauderdale, Florida secured a $40 million loan ($20.4 million Aimco share) to facilitate the previously announced purchase of three land parcels for $49 million ($25 million Aimco share).
Supplemental Information
The full text of this Earnings Release and the Supplemental Information referenced in this release are available on Aimco’s website at investors.aimco.com.
Glossary & Reconciliations of Non-GAAP Financial and Operating Measures
Financial and operating measures found in this Earnings Release and the Supplemental Information include certain financial measures used by Aimco management that are measures not defined under accounting principles generally accepted in the United States, or GAAP. Certain Aimco terms and Non-GAAP measures are defined in the Glossary in the Supplemental Information and Non-GAAP measures reconciled to the most comparable GAAP measures.
About Aimco
Aimco is a diversified real estate company primarily focused on value add, opportunistic, and alternative investments, targeting the U.S. multifamily sector. Aimco’s mission is to make real estate investments where outcomes are enhanced through our human capital so that substantial value is created for investors, teammates, and the communities in which we operate. Aimco is traded on the New York Stock Exchange as AIV. For more information about Aimco, please visit our website www.aimco.com.
Team and Culture
Aimco has a national presence with corporate headquarters in Denver, Colorado, and Bethesda, Maryland. Our investment platform is managed by experienced real estate professionals based in four regions of the United States: West Coast, Central and Mountain West, Mid-Atlantic and Northeast, and Southeast. The experience and in-depth local market knowledge of the Aimco team is essential to the execution of our mission and realization of our vision.
Above all else, Aimco is committed to a culture of integrity, respect, and collaboration.
Forward-Looking Statements
This document contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief, or expectations, including, but not limited to, the statements in this document regarding our 2022 plans and goals, including our 2022 pipeline investments and projects, and our plans to eliminate certain near term debt maturities. We caution investors not to place undue reliance on any such forward-looking statements.
Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the control of Aimco that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statement. Important factors, among others, that may affect actual results or outcomes include, but are not limited to: (i) the risk that the 2022 plans and goals may not be completed, as expected, in a timely manner or at all, (ii) the inability to recognize the anticipated benefits of the pipeline investments and projects, and (iii) changes in general economic conditions, including, increases in interest rates and as a result of the COVID-19 pandemic. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained.
Readers should carefully review Aimco’s financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of Aimco’s Annual Report on Form 10-K for the year ended December 31, 2021, and subsequent Quarterly Reports on Form 10-Q and other documents Aimco files from time to time with the SEC. These filings identify and address important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements.
These forward-looking statements reflect management’s judgment and expectations as of this date, and Aimco assumes no (and disclaims any) obligation to revise or update them to reflect future events or circumstances.
| Consolidated Statements of Operations(in thousands, except per share data) (unaudited) | ||||||||
| Three Months EndedMarch 31, | ||||||||
| 2022 | 2021 | |||||||
| REVENUES: | ||||||||
| Rental and other property revenues | $ | 49,994 | $ | 39,804 | ||||
| OPERATING EXPENSES: | ||||||||
| Property operating expenses | 19,221 | 16,942 | ||||||
| Depreciation and amortization | 23,118 | 20,717 | ||||||
| General and administrative expenses [1][2] | 9,472 | 6,311 | ||||||
| Total operating expenses | 51,811 | 43,970 | ||||||
| Interest expense | (14,601 | ) | (12,677 | ) | ||||
| Mezzanine investment income, net | 8,237 | 7,467 | ||||||
| Unrealized gains (losses) on interest rate options | 18,778 | 25,347 | ||||||
| Other expenses, net [3] | (4,541 | ) | 363 | |||||
| Income before income taxes | 6,056 | 16,334 | ||||||
| Income tax benefit (expense) | 4,056 | 5,100 | ||||||
| Net income | 10,112 | 21,434 | ||||||
| Net loss (income) attributable to redeemable noncontrolling interests in consolidated real estate partnership | (1,470 | ) | 152 | |||||
| Net loss (income) attributable to noncontrolling interests in consolidated real estate partnership | 2 | (291 | ) | |||||
| Net loss (income) attributable to common noncontrolling interests in Aimco Operating Partnership | (435 | ) | (1,081 | ) | ||||
| Net income attributable to Aimco common stockholders | $ | 8,209 | $ | 20,214 | ||||
| Net income attributable to common stockholders per share – basic | $ | 0.05 | $ | 0.14 | ||||
| Net income attributable to common stockholders per share – diluted | $ | 0.05 | $ | 0.14 | ||||
| Weighted-average common shares outstanding – basic | 149,790 | 148,914 | ||||||
| Weighted-average common shares outstanding – diluted | 150,348 | 149,046 | ||||||
| [1] General and administrative expense includes $1.0 million of expenses to be reimbursed to AIR Communities, per agreement upon separation, for consulting services, with respect to strategic growth, direction, and advice, in the three months ended March 31, 2022 and 2021. This agreement is expected to conclude at year end. | ||||||||
| [2] General and administrative expense for the three months ended March 31, 2021 was prior to the full build out of Aimco’s platform and are not representative of Aimco’s anticipated expenses. | ||||||||
| [3] The increase in Other expenses, net variance is primarily due to the valuation change at our closely held technology investments funds. |
| Consolidated Balance Sheets(in thousands) (unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Assets | ||||||||
| Buildings and improvements | $ | 1,323,647 | $ | 1,257,214 | ||||
| Land | 574,434 | 534,285 | ||||||
| Total real estate | 1,898,081 | 1,791,499 | ||||||
| Accumulated depreciation | (576,243 | ) | (561,115 | ) | ||||
| Net real estate | 1,321,838 | 1,230,384 | ||||||
| Cash and cash equivalents | 109,011 | 233,374 | ||||||
| Restricted cash | 68,612 | 11,208 | ||||||
| Mezzanine investments | 346,034 | 337,797 | ||||||
| Interest rate options | 44,414 | 25,657 | ||||||
| Right-of-use lease assets | 522,874 | 429,768 | ||||||
| Other assets, net | 181,061 | 165,913 | ||||||
| Total assets | $ | 2,593,844 | $ | 2,434,101 | ||||
| Liabilities and Equity | ||||||||
| Non-recourse property debt, net | $ | 512,301 | $ | 483,137 | ||||
| Construction loans, net | 180,562 | 163,570 | ||||||
| Notes payable to AIR | 534,127 | 534,127 | ||||||
| Total indebtedness | 1,226,990 | 1,180,834 | ||||||
| Deferred tax liabilities | 123,641 | 124,747 | ||||||
| Lease liabilities | 509,235 | 435,093 | ||||||
| Accrued liabilities and other | 114,761 | 97,400 | ||||||
| Total liabilities | 1,974,627 | 1,838,074 | ||||||
| Redeemable noncontrolling interests in consolidated real estate partnership | 37,232 | 33,794 | ||||||
| Equity: | ||||||||
| Common Stock | 1,497 | 1,498 | ||||||
| Additional paid-in capital | 523,455 | 521,842 | ||||||
| Retained earnings (accumulated deficit) | (14,571 | ) | (22,775 | ) | ||||
| Total Aimco equity | 510,381 | 500,565 | ||||||
| Noncontrolling interests in consolidated real estate partnerships | 44,629 | 35,213 | ||||||
| Common noncontrolling interests in Aimco Operating Partnership | 26,975 | 26,455 | ||||||
| Total equity | 581,985 | 562,233 | ||||||
| Total liabilities and equity | $ | 2,593,844 | $ | 2,434,101 |
Matt Foster, Senior Director, Capital Markets and Investor Relations
Investor Relations 303-793-4661, [email protected]Source: Apartment Investment and Management Company