08/04/2022
DENVER–(BUSINESS WIRE)– Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today second quarter results for 2022 and provided highlights on recent activities.
Wes Powell, Aimco President and Chief Executive Officer, comments: “Aimco has accomplished a great deal during 2022 and we are well positioned for continued success. The early monetization of our four development assets leased from AIR Communities (“AIR”) highlights our team’s ability to execute and will lead to $100 million dollars of value creation for Aimco shareholders.
“Our diversified portfolio of income producing properties continues to yield strong results, with net operating income up 14.9% during the first half of 2022.
“During the year we sold two stabilized multifamily assets above the values used in our internal Net Asset Value (“NAV”) estimate and also added multi-phase development opportunities in South Florida and Washington, D.C. Through opportunities directly sourced by the Aimco team, our future development pipeline has nearly tripled since the start of 2021, and now, in total, has the potential for more than 15 million square feet of residential and mixed-use development.
“We have agreements in place that will retire or refinance more than $1.0 billion of near-term liabilities and in doing so improved our balance sheet which is now comprised of primarily fixed-rate debt with an average term to maturity of 8.4 years.”
Mr. Powell continued, “I am pleased with the ongoing value creation being delivered by the Aimco team but also recognize that Aimco shares have traded at sizable discounts to our most recently published NAV. As such, in the first half of the year Aimco repurchased nearly 750,000 shares and, in July, Aimco’s Board of Directors updated the authorization for the purchase of up to 15 million additional shares.
“I am thankful to the Aimco team for their dedication and good work, and to the Aimco Board of Directors for their engagement and guidance, as we execute on our shared commitment to building, and unlocking, value for Aimco shareholders.”
Financial Results and Recent Highlights
- Net income attributable to common stockholders per share, on a fully dilutive basis, was $1.57 for the quarter ended June 30, 2022, compared to net income per share of $(0.13) for the same period in 2021, due primarily to the recognition of income resulting from the agreement to terminate the AIR leases and gains related to the sale of Pathfinder Village.
- As of July 31, 2022, total shareholder return (“TSR”) since the December 15, 2020 separation from AIR was 65.1% and year-to-date was 7.8%.
- Second Quarter 2022 Revenue and NOI from Aimco’s Stabilized Operating Properties were up 11.2% and 14.4%, respectively, year over year, with occupancy of 97.7%, up 20 basis points year over year.
- Aimco reached an agreement with AIR that will result in more than $100 million of realized Value Creation, net of costs for Aimco shareholders and eliminate the $469 million obligation related to the four leased properties from AIR.
- Aimco completed the early repayment of the $534 million of notes due to AIR, originally scheduled to mature in January 2024 and carrying an annual rate of 5.2%, with proceeds from property level financings, the sales of Pathfinder Village and Cedar Rim, and the placement of preferred equity secured by a portfolio of stabilized properties.
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.
As of June 30, 2022, Aimco had eight active development and redevelopment projects located in five U.S. markets, in varying phases of construction and lease-up. These projects remain on track, as measured by budget, lease-up metrics, and current market valuations. During the second quarter, Aimco invested $62.5 million in development and redevelopment activities. Updates include:
- As previously announced, following the successful development and lease-up of 707 Leahy in Redwood City, California, Prism in Cambridge, Massachusetts, Flamingo Point North Tower in Miami Beach, Florida, and The Fremont on the Anschutz Medical Campus in Aurora, Colorado, Aimco and AIR have agreed to cancel Aimco’s leasehold interest in each property on September 1, 2022. In return for the termination of the leases, Aimco will receive $200 million, resulting in Value Creation, net of costs, of approximately $100 million, which will be realized about 18 months sooner than originally anticipated.
- At The Hamilton in Miami, Florida, Aimco now expects to welcome the first residents into redesigned and fully renovated units in August 2022. As of July 31, 2022, 61 units were leased or pre-leased at rental rates more than 20% ahead of underwriting.
- Construction continues on schedule and on budget at Upton Place in Northwest Washington, D.C., the Benson Hotel and Faculty Club on the Anschutz Medical Campus in Aurora, Colorado, and at our single-family home development 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 multifamily property with an option to participate in future multifamily development as well as three passive equity investments. Updates include:
- The borrower on Aimco’s $354.4 million mezzanine loan, which is secured by the Parkmerced stabilized multifamily property plus phases two through nine of the site’s future development opportunity, remains current on its first mortgage obligations. The neighboring San Francisco State University is expected to return to full in-person learning this fall, with hybrid options, increasing the demand for the apartments that serve as collateral for the Aimco loan. Due to the relative size of Aimco’s investment and alternative accretive uses of capital, Aimco recently initiated a marketing effort to explore potential opportunities to monetize all or a portion of its investment.
- Aimco redeemed 22% of its passive equity investment in IQHQ Inc., a life sciences developer. In July, Aimco received proceeds of $16.5 million from the sale resulting in a greater than 50% internal rate of return over the hold period for this portion of its investment. Aimco retains 2.4 million shares worth $59.7 million and the opportunity to collaborate with IQHQ on future development opportunities that include a multifamily component.
Investment Activity
Aimco is focused on development and redevelopment, funded through joint ventures. Aimco will also consider opportunistic investments in related activities. Updates include:
- In May, Aimco executed a joint venture agreement to act as a co-GP on the development of a phased multifamily community in Bethesda, Maryland. The project is fully entitled and includes approvals for over 2,200 units in six phases. Aimco will participate in the first two multifamily phases totaling 574 units with an expected Aimco investment of approximately $18 million. Aimco also has rights to increase our investment and to choose to participate in future phases of development.
- In June, July, and August, Aimco closed on the purchase of three development parcels it contracted to acquire, for $100 million, in February 2022. The nine-acre assemblage is located in the rapidly growing Flagler Village neighborhood of Fort Lauderdale, Florida, and allows for approximately three million square feet of phased, mixed-use development, which could contain up to 1,500 residential units, more than 300 hotel keys, and more than 100,000 square feet of retail space at full build-out. Aimco intends to execute the planned development activity through joint venture financing.
Operating Property Results
Aimco owns a diversified portfolio of operating apartment communities located in ten major U.S. markets with average rents in line with local market averages. Aimco also owns one commercial office building that is part of an assemblage with an adjacent apartment building.
Aimco’s operating properties produced solid results for the quarter ended June 30, 2022.
| Second Quarter | Year-to-Date | |||||||||
| Stabilized Operating Properties | Year-over-Year | Sequential | Year-over-Year | |||||||
| ($ in millions) | 2022 | 2021 | Variance | 1Q 2022 | Variance | 2022 | 2021 | Variance | ||
| Average Daily Occupancy | 97.7% | 97.5% | 0.2% | 98.5% | (0.8%) | 98.1% | 97.6% | 0.5% | ||
| Revenue, before utility reimbursements | $33.1 | $29.8 | 11.2% | $32.2 | 2.7% | $65.3 | $59.0 | 10.7% | ||
| Expenses, net of utility reimbursements | 10.4 | 9.9 | 4.8% | 10.2 | 1.7% | 20.7 | 20.1 | 2.6% | ||
| Net operating income (NOI) | 22.7 | 19.8 | 14.4% | 22.0 | 3.2% | 44.7 | 38.9 | 14.9% |
*Excluded from the table above is one, 40-unit apartment community that Aimco’s ownership includes a partnership share.
- Revenue in the second quarter 2022 was $33.1 million, up 11.2% year-over-year, resulting from a $203 increase in average monthly revenue per apartment home to $2,039, and a 20-basis point increase in Average Daily Occupancy to 97.7%.
- New lease rents increased 17.4% and renewal lease rents increased 16.8% in the second quarter and 62.4% of residents were retained over the past twelve months.
- The median annual household income of new residents was more than $115,000 in the second quarter 2022, representing a rent to income ratio of 20.2%.
- Net operating income in the second quarter 2022 was $22.7 million, up 14.4% 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. In the first half of 2022, Aimco executed leases on over 60,000 square feet of office space, at rates per square foot 20% higher than leases executed in the first half of 2021. At the end of the second quarter 2022, the building was 85% occupied, up from 73% at the same time last year.
Property Dispositions
- In May, Aimco sold Pathfinder Village, a 246-unit apartment community located in Fremont, California, for $127.0 million. Proceeds, net of the repayment of the existing property debt and transaction related costs, were $71.8 million.
- In July, subsequent to quarter end, Aimco sold Cedar Rim, a 104-unit apartment community located in Renton, Washington, for $53.0 million. The property was owned free and clear of debt prior to the sale.
- Aimco is under contract to sell 2900 on First, a 135-unit apartment community with 14,000 square feet of retail located in Seattle, Washington for $69.0 million. This sale of this property is expected to close in August.
- These properties sold, or are under contract to sell, for more than the values used in Aimco’s internal NAV estimate.
Balance Sheet and Financing Activity
Aimco is highly focused on maintaining a strong balance sheet, including having at all times ample liquidity. As of June 30, 2022, Aimco had access to $215.5 million, including $81.8 million of cash on hand, $12.5 million of restricted cash, and the capacity to borrow up to $121.2 million on its revolving credit facility.
Aimco’s net leverage as of June 30, 2022, was as follows:
| as of June 30, 2022 | as of June 30, 2022 (proforma the final payoff of the notes payable to AIR) | |||||||||||||||
| Proportionate, $ in thousands | Amount | Weighted Avg. Maturity (Yrs.) | Amount | Weighted Avg. Maturity (Yrs.) | ||||||||||||
| Total non-recourse property debt | $ | 798,492 | 8.4 | $ | 798,492 | 8.4 | ||||||||||
| Total non-recourse construction loan debt | 203,395 | 1.9 | 203,395 | 1.9 | ||||||||||||
| Notes payable to AIR | 147,039 | 1.6 | – | |||||||||||||
| Cash and restricted cash | (94,308 | ) | (94,308 | ) | ||||||||||||
| Net Leverage | $ | 1,054,618 | $ | 907,579 |
Debt Refinancings
- Aimco reached agreement with AIR for the accelerated repayment of $534 million in notes, which carried a rate of 5.2%, prior to their maturity in January 2024. The early payoff, including $17 million of spread maintenance costs, was completed in July with proceeds generated from:
- The financing of $575 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 received $337 million of proceeds, net of the repayment of existing property debt balances and prepayment penalties;
- The sale of Pathfinder Village in Fremont, California for $127 million in May, and Cedar Rim in Renton, Washington for $53 million in July. Proceeds, net of the repayment of the existing property debt and transaction related costs, were $122 million; and
- A $102 million, 8% preferred equity financing placement on a portfolio of stabilized assets with an institutional equity partner.
Construction Lending
- In the second quarter 2022, Aimco secured a $23 million non-recourse construction loan to fund the development of Oak Shore in Corte Madera, California.
Private Equity Financing
- In July, Aimco closed a $102 million, 8% preferred equity financing on a portfolio of 14 stabilized assets with an institutional equity partner. The financing has a seven-year term but is fully pre-payable after 48 months.
Public Market Equity
Common Stock Repurchases
- In the second quarter, Aimco repurchased 539,764 shares of its common stock at a weighted average price of $5.73 per share, an approximate 45% discount to its most recently published estimated NAV. Year to date, Aimco has repurchased 742,164 shares of its common stock at a weighted average price of $5.93 per share.
- In July, Aimco’s Board of Directors updated the authorization to repurchase up to 15 million additional shares.
Special Dividend
- On July 27, 2022, Aimco’s Board of Directors declared a special cash dividend of $0.02 per share payable on September 30, 2022, to Aimco shareholders of record on September 14, 2022.
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.
Aimco added a new Supplemental Schedule that presents the components of Aimco’s NAV to its Second Quarter 2022 Earnings Release and Supplemental Information. This information can be found in Supplemental Schedule 8, on page 19 of this release.
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, our plans to eliminate certain near term debt maturities, our estimated value creation and potential, our timing, scheduling and budgeting, our plans to form joint ventures, and the return to in-person activities. 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 Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUES: | ||||||||||||||||
| Rental and other property revenues | $ | 50,697 | $ | 40,418 | $ | 100,691 | $ | 80,222 | ||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Property operating expenses | 19,708 | 16,403 | 38,929 | 33,345 | ||||||||||||
| Depreciation and amortization [1] | 34,863 | 20,639 | 57,981 | 41,356 | ||||||||||||
| General and administrative expenses [2][3] | 8,961 | 7,383 | 18,433 | 13,694 | ||||||||||||
| Total operating expenses | 63,532 | 44,425 | 115,343 | 88,395 | ||||||||||||
| Interest expense | (41,546 | ) | (12,638 | ) | (56,147 | ) | (25,315 | ) | ||||||||
| Mezzanine investment income, net | 8,330 | 7,551 | 16,567 | 15,018 | ||||||||||||
| Realized and unrealized gains (losses) on interest rate options | 20,017 | (16,970 | ) | 38,795 | 8,377 | |||||||||||
| Realized and unrealized gains (losses) on equity investments [4] | 26,630 | 875 | 22,297 | 875 | ||||||||||||
| Gain (Loss) on the disposition of real estate | 94,598 | – | 94,465 | – | ||||||||||||
| Lease modification income [1] | 205,387 | – | 205,387 | – | ||||||||||||
| Other income (expenses), net | (1,413 | ) | 2,043 | (1,488 | ) | 2,406 | ||||||||||
| Income before income tax benefit | 299,168 | (23,146 | ) | 305,224 | (6,812 | ) | ||||||||||
| Income tax benefit (expense) | (45,957 | ) | 2,760 | (41,901 | ) | 7,860 | ||||||||||
| Net income | 253,211 | (20,386 | ) | 263,323 | 1,048 | |||||||||||
| Net (income) loss attributable to redeemable noncontrolling interests in consolidated real estate partnerships | (1,069 | ) | (66 | ) | (2,539 | ) | 86 | |||||||||
| Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships | (346 | ) | (275 | ) | (344 | ) | (566 | ) | ||||||||
| Net (income) loss attributable to common noncontrolling interests in Aimco Operating Partnership | (12,659 | ) | 1,037 | (13,094 | ) | (44 | ) | |||||||||
| Net income (loss) attributable to Aimco | $ | 239,137 | $ | (19,690 | ) | $ | 247,346 | $ | 524 | |||||||
| Net income (loss) attributable to common stockholders per share – basic [5] | $ | 1.58 | $ | (0.13 | ) | $ | 1.63 | $ | 0.00 | |||||||
| Net income (loss) attributable to common stockholders per share – diluted [5] | $ | 1.57 | $ | (0.13 | ) | $ | 1.62 | $ | 0.00 | |||||||
| Weighted-average common shares outstanding – basic | 149,600 | 149,166 | 149,694 | 149,082 | ||||||||||||
| Weighted-average common shares outstanding – diluted | 150,423 | 149,166 | 150,660 | 149,442 |
[1] In the three months ended June 30, 2022, as a result of the lease termination agreement with AIR Communities (AIR) and in accordance with GAAP, Aimco accelerated $13.9 million of depreciation on the associated leasehold improvements. The remaining $66.1 million of depreciation will be recognized over the remaining lease terms ending September 1, 2022. Also, in accordance with GAAP, Aimco reduced the right-of-use lease assets associated with these properties to zero and recognized lease modification income of $205.4 million. Per the terms of the lease termination agreement, Aimco will receive $200 million of cash payments from AIR in exchange for the return of the properties from Aimco to AIR, in the three months ended June 30, 2022, Aimco received $10 million of these payments in the form of a nonrefundable deposit.
[2] General and administrative expense includes $1.0 million and $2.0 million of expenses to be reimbursed to AIR, per agreement upon separation, for consulting services, with respect to strategic growth, direction, and advice, in the three and six months ended June 30, 2022, respectively. This agreement is expected to conclude at year end.
[3] General and administrative expense for the three months and six months ended June 30, 2021 was prior to the full build out of Aimco’s platform and are not representative of Aimco’s anticipated expenses.
[4] Realized and unrealized gains (losses) on equity investments increased due primarily to the change in the fair market value of Aimco’s investment in IQHQ, a life science real estate developer. In the three months ended June 30, 2022, Aimco realized a gain of $5.7 million in conjunction with the redemption of 22% of its investment in IQHQ.
[5] See Note 6 of Aimco’s Second Quarter 2022 SEC Form 10-Q, filed August 4, 2022, for additional details.
| Consolidated Balance Sheets(in thousands) (unaudited) | ||||||||
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Assets | ||||||||
| Buildings and improvements | $ | 1,269,624 | $ | 1,257,214 | ||||
| Land | 601,757 | 534,285 | ||||||
| Total real estate | 1,871,381 | 1,791,499 | ||||||
| Accumulated depreciation | (519,868 | ) | (561,115 | ) | ||||
| Net real estate | 1,351,513 | 1,230,384 | ||||||
| Cash and cash equivalents | 81,799 | 233,374 | ||||||
| Restricted cash | 12,510 | 11,208 | ||||||
| Mezzanine investments | 354,365 | 337,797 | ||||||
| Interest rate options | 51,286 | 25,657 | ||||||
| Right-of-use lease assets | 130,532 | 429,768 | ||||||
| Receivable from lease termination | 186,318 | — | ||||||
| Other assets, net | 251,089 | 165,913 | ||||||
| Total assets | $ | 2,419,412 | $ | 2,434,101 | ||||
| Liabilities and Equity | ||||||||
| Non-recourse property debt, net | $ | 801,434 | $ | 483,137 | ||||
| Construction loans, net | 199,715 | 163,570 | ||||||
| Notes payable to AIR | 147,039 | 534,127 | ||||||
| Total indebtedness | 1,148,188 | 1,180,834 | ||||||
| Deferred tax liabilities | 136,950 | 124,747 | ||||||
| Lease liabilities | 123,785 | 435,093 | ||||||
| Accrued liabilities and other | 133,653 | 97,400 | ||||||
| Total liabilities | 1,542,576 | 1,838,074 | ||||||
| Redeemable noncontrolling interests in consolidated real estate partnership | 51,814 | 33,794 | ||||||
| Equity: | ||||||||
| Common Stock | 1,492 | 1,498 | ||||||
| Additional paid-in capital | 515,065 | 521,842 | ||||||
| Retained earnings (accumulated deficit) | 224,567 | (22,775 | ) | |||||
| Total Aimco equity | 741,124 | 500,565 | ||||||
| Noncontrolling interests in consolidated real estate partnerships | 44,665 | 35,213 | ||||||
| Common noncontrolling interests in Aimco Operating Partnership | 39,233 | 26,455 | ||||||
| Total equity | 825,022 | 562,233 | ||||||
| Total liabilities and equity | $ | 2,419,412 | $ | 2,434,101 |
Matt Foster, Sr. Director, Capital Markets and Investor Relations
Investor Relations 303-793-4661, [email protected]
Source: Apartment Investment and Management Company