05/04/2023
DENVER–(BUSINESS WIRE)– Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today first quarter results for 2023 and provided highlights on recent activities.
Wes Powell, Aimco President and Chief Executive Officer, comments: “The fundamentals of the U.S. apartment market in general, and Aimco’s business in particular, remain strong. Demand for living space continues to outpace supply in most markets and that trend is evident across the Aimco portfolio as Net Operating Income (“NOI”) for our stabilized properties has grown by 10% or more, year-over-year, for six consecutive quarters. In the first quarter of 2023, revenue and NOI were up 11.4% and 13.1% respectively over the prior year. Leasing activity for the month of April proved promising with double digit blended lease to lease growth.
“The Aimco team continues its track record of adding value through our development program. Active projects remain on budget and on track to produce more than $55 million of annual NOI upon their stabilization. At The Hamilton, in Miami, Florida, construction was completed in April and the property is now 90% leased at rental rates well ahead of initial projections.
“We are also adding value through the planning and entitlement of our future development opportunities having invested approximately $6 million in those activities during the first quarter. Aimco maintains considerable optionality in regard to its development pipeline given the ability to extract value, and maximize risk adjusted returns, at various points in the pre-development process.
“The previously announced sale of our Parkmerced mezzanine loan investment remains on track. The buyer’s deposit became non-refundable in April and closing is scheduled for the second quarter. Together with the monetization of the swaption purchased to hedge against interest rate increases, we expect the sale to result in gross proceeds of approximately $220 million and the further simplification of the Aimco business.
“Our balance sheet remains safe and benefits from attractive, primarily assumable, in place financing. Including extensions, we have only $75 million of debt coming due over the next 36 months, the majority of which we plan to opportunistically retire when the loans are open for repayment, without penalty, later in 2023.
“The Aimco board and management team remain committed to maximizing and unlocking value for Aimco shareholders. Year-to-date, through April 30, we acquired more than 2.4 million shares of Aimco common stock at an average price of $7.36 per share.
“I offer my thanks to the Aimco team for their hard work and continued good results.”
Financial Results and Recent Highlights
- Net loss attributable to common stockholders per share, on a fully dilutive basis, was $0.06 for the quarter ended March 31, 2023, compared to net income per share of $0.05 for the same period in 2022, due primarily to a reduction in accrued mezzanine loan income recognition and fair value adjustments on Aimco’s interest hedging instruments.
- First Quarter 2023 Revenue, Expenses, and NOI from Aimco’s Stabilized Operating Properties were up 11.4%, 7.6%, and 13.1%, respectively, year over year, with average revenue per apartment home of $2,227, up $238 year over year.
- Construction has been completed at The Hamilton, in Miami, Florida, where, as of April 30, 2023, the building’s 276 apartment homes were 90% leased at rental rates well ahead of underwritten estimates.
- As of April 30, 2023, total shareholder return (“TSR”) since the December 15, 2020 spin-off of AIR Communities was 43.2% and year-to-date was 9.8%.
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 March 31, 2023, Aimco had five active development and redevelopment projects located in four U.S. markets, in varying phases of construction and lease-up. These projects remain on track, as measured by construction budget and lease-up metrics. Additionally, Aimco has a pipeline of future value-add opportunities totaling approximately 14 million gross square feet of development in Aimco’s target markets of Southeast Florida, the Washington D.C. Metro, and Colorado’s Front Range. During the first quarter, Aimco invested $64.8 million in development and redevelopment activities. Updates include:
- In Miami, Florida, construction and repositioning of The Hamilton is now complete. Demand for rental housing in Southeast Florida remains robust, especially for unique waterfront properties. As of April 30, 2023, 90% of the building’s 276 units were leased or pre-leased at rates well ahead of underwritten rents.
- In Bethesda, Maryland, construction is progressing on plan at the first phase of Strathmore Square, which will contain 220 highly tailored apartment homes when complete in 2025. This suburban infill project is located adjacent to the Grosvenor-Strathmore Metro station and the Strathmore Performing Arts Campus, and is 1.5 miles from The National Institutes of Health main campus. Funding for the $164.0 million project is fully secured with Aimco having a remaining equity commitment, as of April 30, 2023, of $7.4 million.
- In upper northwest Washington D.C., construction at Upton Place continues on schedule and on budget. Aimco plans to start pre-leasing Upton’s 689 apartment homes during the summer of 2023 in anticipation of initial delivery in the fourth quarter of 2023. To date, 80% of the project’s 105K square feet of retail space has been leased and Aimco has received letters of intent from retailers on another 16%.
- In Corte Madera, California, construction is ongoing at Oak Shore where 16 luxury single family rental homes and eight accessory dwelling units are being developed. Aimco expects to deliver the first homes in the third quarter with pre-leasing efforts having begun in the first quarter of 2023.
- In Aurora, Colorado, The Benson Hotel and Faculty Club, a 106-key boutique hotel and event center with 18K square feet of event space, is complete and open to guests. As the only ‘on campus’ accommodations, The Benson is garnering strong interest from the many departments and offices located on the surrounding Anschutz Medical Campus, which includes The University of Colorado Medical School, UC Health Hospital, Children’s Hospital Colorado, The Rocky Mountain VA Medical Center and the burgeoning Fitzsimons Innovation Community.
- In the first quarter 2023, Aimco invested $5.7 million into future development pipeline projects located in Southeast Florida, the Washington D.C. Metro, and Colorado’s Front Range. Programming, design, documentation and entitlement efforts continue with projected unit counts and rentable square footage on track to meet or exceed initial projections. Aimco has received Urban Development Review Board approvals related to its 34th Street and Biscayne Boulevard properties in Miami’s Edgewater neighborhood, conditional approvals on its Broward Boulevard sites in Fort Lauderdale, and earlier this month submitted a major amendment to the existing approval for the first phase of development at its site in Fort Lauderdale’s Flagler Village neighborhood. As part of Aimco’s capital allocation strategy, it may choose to monetize certain pipeline assets prior to vertical construction in an effort to maximize value add and risk adjusted returns.
Alternative Investments
Aimco’s current alternative investments are primarily those investments originated prior to the separation from AIR Communities and 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. Over time, we plan to significantly reduce capital allocated to these investments. Updates include:
- In February 2023, Aimco entered into an agreement to sell the Parkmerced mezzanine loan for $167.5 million. The initial $5 million deposit received by the purchaser became nonrefundable in April 2023 when various conditions, including transfer consents, were cleared. The sale is scheduled to close in the second quarter of 2023. Together with the monetization of the $1.5 billion notional swaption, purchased in conjunction with the mezzanine loan investment to protect against future interest rate increases, Aimco expects gross proceeds from these transactions to be approximately $220 million.
Investment Activity
Aimco is focused on growing the business, and delivering strong investment returns, through development and redevelopment activities, funded primarily through third-party capital. Updates include:
- In February 2023, Aimco entered into an option agreement with the Fitzsimons Redevelopment Authority. If exercised, the option allows for the long-term lease of 4.8 acres of land located on the Anschutz Medical Campus in Aurora, Colorado that can accommodate approximately 850K square feet of commercial life science development built out over multiple phases. The option’s annual cost is approximately $0.5 million.
Operating Property Results
Aimco owns a diversified portfolio of operating apartment communities located in eight major U.S. markets with average rents in line with local market averages.
Aimco’s operating properties produced solid results for the quarter ended March 31, 2023.
| First Quarter | ||||||
| Stabilized Operating Properties | Year-over-Year | Sequential | ||||
| ($ in millions) | 2023 | 2022 | Variance | 4Q 2022 | Variance | |
| Average Daily Occupancy | 98.0% | 98.5% | (0.5)% | 97.4% | 0.6% | |
| Revenue, before utility reimbursements | $36.7 | $32.9 | 11.4% | $35.9 | 2.1% | |
| Expenses, net of utility reimbursements | 11.2 | 10.4 | 7.6% | 10.1 | 11.1% | |
| Net operating income (NOI) | 25.5 | 22.5 | 13.1% | 25.9 | (1.5%) | |
- Revenue in the first quarter 2023 was $36.7 million, up 11.4% year-over-year, resulting from a $238 increase in average monthly revenue per apartment home to $2,227, offset by a 50-basis point decrease in Average Daily Occupancy to 98.0%.
- New lease rents increased 7.0% and Aimco retained 54.5% of residents whose leases were expiring during the quarter at rents 9.0% higher, on average, than the previous lease.
- The median annual household income of new residents was more than $125,000 in the first quarter 2023, representing a rent to income ratio of 19.5%.
- Expenses in the first quarter 2023 were up 7.6% year over year due primarily to higher net utilities and insurance. Sequentially, expenses in the first quarter 2023 were higher than the fourth quarter 2022 due primarily to seasonally higher costs related to winter weather in Boston and Chicago.
- Net operating income in the first quarter 2023 was $25.5 million, up 13.1% year-over-year.
- During April, the preliminary results show steady demand with 10.3% blended rent increases for transactions across the portfolio.
Other Real Estate Operations
Aimco also owns 1001 Brickell Bay Drive, a waterfront office building in Miami, Florida, owned as part of a larger assemblage with substantial development potential. Leases within the building have been executed on terms of less than four years or contain redevelopment provisions as needed to maximize the value of the underlying development rights.
The Miami office market remains active. Following first quarter lease expirations, as of March 31, 2023, the building was 77% occupied, and by the end of April the building was 79% leased.
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, 2023, Aimco had access to $336.1 million, including $163.6 million of cash on hand, $22.5 million of restricted cash, and the capacity to borrow up to $150.0 million on its revolving credit facility.
Aimco’s net leverage as of March 31, 2023, was as follows:
| as of March 31, 2023 | ||||||||
| Proportionate, $ in thousands | Amount | Weighted Avg. Maturity (Yrs.) | ||||||
| Total non-recourse fixed rate debt | $ | 779,395 | 7.9 | |||||
| Total non-recourse floating rate debt | 156,486 | 1.9 | ||||||
| Total non-recourse construction loan debt | 152,734 | 2.8 | ||||||
| Cash and restricted cash | (186,090 | ) | ||||||
| Net Leverage | $ | 902,525 | ||||||
As of March 31, 2023, 98% of Aimco’s total debt was either fixed rate or hedged with interest rate cap protection. Aimco’s total debt maturities for the next 36 months, inclusive of all contractual extension rights, total approximately $75 million and the majority of which are higher cost loans prepayable at par later this summer when Aimco intends to retire approximately $60 million.
Partner Equity Financing
- In March, Alaska Permanent Fund Corporation made an initial funding payment to Aimco towards its share of land and pre-development costs at Aimco’s Fitzsimons 4 pipeline project, located on the Anschutz Medical Campus in Aurora, Colorado, representing the first investment to be funded pursuant to the programmatic equity agreement signed in August 2022. Land and pre-development costs are estimated to be approximately $7 million, of which Aimco’s share is $1.75 million.
Public Market Equity
Common Stock Repurchases
- In the first quarter, Aimco repurchased 2.0 million shares of its common stock at a weighted average price of $7.27 per share. In 2023, through April 30, Aimco has repurchased more than 2.4 million shares of its common stock at a weighted average price of approximately $7.36 per share.
Commitment to Enhance Stockholder Value
- As previously announced, the Aimco Board of Directors, in consultation with management and its corporate advisory team, is overseeing the review of a broad range of options to further enhance and unlock value for Aimco stockholders. The review, and the timing of any action that may result, is taking into consideration a host of factors including the health and stability of financial markets as well as the continued advancement of Aimco’s previously defined strategic plan. There can be no assurance that the ongoing review will result in any transaction.
2023 Outlook
| 2023 Outlook | |||||||
| $ in millions (except per share amounts), Square Feet in millions | 2023 Full YearForecast | First Quarter2023 | |||||
| Net income (loss) per share – diluted | $(0.33) – $(0.23) | $(0.06) | |||||
| Active Developments and Redevelopments | |||||||
| Total Direct Costs of Projects Underway [1] | $815 | $815 | |||||
| Direct Project Costs | $165 – $185 | $47.7 | |||||
| Other Capitalized Costs | $30 – $31 | $10.0 | |||||
| Construction Loan Draws | $150 – $170 | $36.5 | |||||
| JV Partner Equity Funding | $0 | $0 | |||||
| AIV Equity Funding | ~$45 | $21.2 | |||||
| Pipeline Projects | |||||||
| Pipeline Size Gross Square Feet [1] | 14.0 | 14.0 | |||||
| Pipeline Size Multifamily Units [1] | 6,544 | 6,544 | |||||
| Pipeline Size Commercial Sq Ft [1] | 1.7 | 1.7 | |||||
| Planning Costs | $20 – $25 | $5.7 | |||||
| Real Estate Transactions | |||||||
| Acquisitions | None | None | |||||
| Dispositions [2] | $220 | None | |||||
| Operating Properties | |||||||
| Revenue Growth, before utility reimbursements | 5.0% – 7.0% | 11.4% | |||||
| Operating Expense Growth, net of utility reimbursements | 5.25% – 7.25% | 7.6% | |||||
| Net Operating Income Growth | 5.0% – 7.0% | 13.1% | |||||
| Recurring Capital Expenditures | $11 – $13 | $2.3 | |||||
| General and Administrative | $33 – $35 | $8.6 | |||||
| Leverage | |||||||
| Interest Expense, net of capitalization [3] | $38 – $41 | $7.0 | |||||
[1] Includes land or leasehold value, calculated as the quarterly average.
[2] Dispositions include the expected gross proceeds from the sale of the Parkmerced mezzanine investment and the monetization of the related swaption.
[3] Includes contractual interest expense, exclusive of the amortization of deferred financing costs, and reduced by interest rate option payments which are included in the Realized and unrealized gains (losses) on interest rate options line on Aimco’s income statement.
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 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 Washington, D.C. Our investment platform is managed by experienced professionals based in three regions, where it will focus its new investment activity: Southeast Florida, the Washington D.C. Metro Area and Colorado’s Front Range. By regionalizing this platform, Aimco is able to leverage the in-depth local market knowledge of each regional leader, creating a comparative advantage when sourcing, evaluating, and executing investment opportunities and 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 future plans and goals, including our pipeline investments and projects, our plans to eliminate certain near term debt maturities, our estimated value creation and potential, our timing, scheduling and budgeting, projections regarding lease growth, our plans to form joint ventures, our plans for new acquisitions or dispositions, our strategic partnerships and value added therefrom, and changes to our corporate governance. 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 2023 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 other force-majeure events. 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, 2022, 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 March 31, | ||||||||
| 2023 | 2022 | |||||||
| REVENUES: | ||||||||
| Rental and other property revenues | $ | 44,268 | $ | 49,994 | ||||
| OPERATING EXPENSES: | ||||||||
| Property operating expenses | 17,504 | 19,221 | ||||||
| Depreciation and amortization | 16,271 | 23,118 | ||||||
| General and administrative expenses | 8,403 | 9,472 | ||||||
| Total operating expenses | 42,178 | 51,811 | ||||||
| Interest income | 2,058 | 555 | ||||||
| Interest expense | (9,725 | ) | (14,601 | ) | ||||
| Mezzanine investment income (loss), net | (128 | ) | 8,237 | |||||
| Realized and unrealized gains (losses) on interest rate options | (1,057 | ) | 18,778 | |||||
| Realized and unrealized gains (losses) on equity investments | 137 | (4,332 | ) | |||||
| Income from unconsolidated real estate partnerships | 174 | 256 | ||||||
| Other income (expense), net | (3,498 | ) | (1,020 | ) | ||||
| Income (loss) before income tax benefit | (9,949 | ) | 6,056 | |||||
| Income tax benefit (expense) | 4,196 | 4,056 | ||||||
| Net income (loss) | (5,753 | ) | 10,112 | |||||
| Net (income) loss attributable to redeemable noncontrolling interests in consolidated real estate partnerships | (3,274 | ) | (1,470 | ) | ||||
| Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships | (264 | ) | 2 | |||||
| Net (income) loss attributable to common noncontrolling interests in Aimco Operating Partnership | 474 | (435 | ) | |||||
| Net income (loss) attributable to Aimco | $ | (8,817 | ) | $ | 8,209 | |||
| Net income (loss) attributable to common stockholders per share – basic | $ | (0.06 | ) | $ | 0.05 | |||
| Net income (loss) attributable to common stockholders per share – diluted | $ | (0.06 | ) | $ | 0.05 | |||
| Weighted-average common shares outstanding – basic | 145,827 | 149,790 | ||||||
| Weighted-average common shares outstanding – diluted | 145,827 | 150,348 | ||||||
| Consolidated Balance Sheets(in thousands) (unaudited) | ||||||||
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Buildings and improvements | $ | 1,391,963 | $ | 1,322,381 | ||||
| Land | 640,892 | 641,102 | ||||||
| Total real estate | 2,032,855 | 1,963,483 | ||||||
| Accumulated depreciation | (545,604 | ) | (530,722 | ) | ||||
| Net real estate | 1,487,251 | 1,432,761 | ||||||
| Cash and cash equivalents | 166,149 | 206,460 | ||||||
| Restricted cash | 22,485 | 23,306 | ||||||
| Mezzanine investments | 158,430 | 158,558 | ||||||
| Interest rate options | 60,508 | 62,387 | ||||||
| Unconsolidated real estate partnerships | 16,470 | 15,789 | ||||||
| Notes receivable | 39,363 | 39,014 | ||||||
| Right-of-use lease assets – finance leases | 110,625 | 110,269 | ||||||
| Other assets, net | 127,894 | 132,679 | ||||||
| Total assets | $ | 2,189,175 | $ | 2,181,223 | ||||
| Liabilities and Equity | ||||||||
| Non-recourse property debt, net | $ | 929,291 | $ | 929,501 | ||||
| Construction loans, net | 155,691 | 118,698 | ||||||
| Total indebtedness | 1,084,982 | 1,048,199 | ||||||
| Deferred tax liabilities | 114,883 | 119,615 | ||||||
| Lease liabilities – finance leases | 116,212 | 114,625 | ||||||
| Accrued liabilities and other | 97,220 | 106,600 | ||||||
| Total liabilities | 1,413,297 | 1,389,039 | ||||||
| Redeemable noncontrolling interests in consolidated real estate partnerships | 167,129 | 166,826 | ||||||
| Equity: | ||||||||
| Common Stock | 1,448 | 1,466 | ||||||
| Additional paid-in capital | 489,304 | 496,482 | ||||||
| Retained earnings | 41,087 | 49,904 | ||||||
| Total Aimco equity | 531,839 | 547,852 | ||||||
| Noncontrolling interests in consolidated real estate partnerships | 48,321 | 48,294 | ||||||
| Common noncontrolling interests in Aimco Operating Partnership | 28,589 | 29,212 | ||||||
| Total equity | 608,749 | 625,358 | ||||||
| Total liabilities and equity | $ | 2,189,175 | $ | 2,181,223 | ||||
Matt Foster, Sr. Director, Capital Markets and Investor Relations
Investor Relations 303-793-4661, [email protected]Source: Apartment Investment and Management Company