Aimco Reports Third Quarter 2011 Results

DENVER--(BUSINESS WIRE)--Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today its third quarter and year-to-date 2011 results.

Chairman and Chief Executive Officer Terry Considine comments: “Aimco’s business was good during the third quarter with strong rental rate growth and real estate investments in both Northern and Southern California. Going into the fourth quarter, we remain focused on operating our properties well, reducing off-site costs, lowering our cost of leverage and making accretive investments.”

Chief Financial Officer Ernie Freedman adds: “Year-to-date, Aimco’s Pro forma FFO of $1.22 per share, excluding one-time items, is up 11% compared to last year. Rental rate growth and diligent operating cost management have provided for Total Same Store NOI growth of 5.8% and off-site costs are down approximately 10% year-to-date. We are establishing fourth quarter guidance of $0.39 to $0.43 per share and narrowing our full year guidance range from $1.45 to $1.51 per share to $1.46 to $1.50 per share.”

Financial Results
Pro forma FFO, Excluding One-Time Items, Up 11% Year-to-Date*
	THIRD QUARTER				YEAR-TO-DATE
	2011		2010		2011		2010
Net loss per share	($0.12	)	($0.25	)	($0.67	)	($0.75	)
Funds from Operations (FFO)	$0.36		$0.42		$1.01		$1.07
Add back (deduct) Aimco’s share of operating real estate impairment   losses (recoveries)	$0.04		($0.01	)	$0.08		$0.09
Add back (deduct) Aimco’s share of preferred equity redemption   related amounts	$0.01		($0.01	)	($0.02	)	($0.03	)
Pro forma Funds from Operations (Pro forma FFO)	$0.41		$0.40		$1.07		$1.13
Deduct Aimco’s share of Capital Replacements	($0.17	)	($0.14	)	($0.40	)	($0.38	)
Adjusted Funds from Operations (AFFO)	$0.24		$0.26		$0.67		$0.75

*

Year-to-date 2011 Pro forma FFO of $1.07 per share includes a one-time charge of $0.15 per share related to debt prepayment penalties and write-off of deferred loan costs incurred in connection with a refinancing and securitization transaction completed during the second quarter. Year-to-date 2010 Pro forma FFO of $1.13 per share includes a net benefit of $0.03 per share related to several, mostly offsetting, one-time items during second quarter 2010. Excluding these one-time items from each period, year-to-date 2011 Pro forma FFO increased 11% when compared to the same period last year.

Net loss – Net loss attributable to Aimco common stockholders for the quarter was $14.8 million, compared to net loss of $28.5 million for third quarter 2010. Third quarter 2011 net loss decreased as compared to third quarter 2010 primarily due to: an increase in net operating income of our properties included in continuing operations, reflecting improved operations; an increase in income from discontinued operations, net of noncontrolling interest allocations, primarily due to an increase in gains on dispositions of real estate; and a decrease in depreciation and amortization expense.

Funds from Operations – FFO is a non-GAAP financial measure defined in the glossary in Aimco’s Supplemental Information (the Glossary). FFO calculated in accordance with the definition prescribed by the National Association of Real Estate Investment Trusts (NAREIT) was $43.6 million, or $0.36 per share, compared to $48.9 million, or $0.42 per share, in third quarter 2010. Pro forma FFO, which represents FFO as prescribed by NAREIT but excludes operating real estate impairment losses and preferred equity redemption related amounts, was $49.7 million, or $0.41 per share, compared to $46.7 million, or $0.40 per share, in third quarter 2010.

Property Operations

Property operating results discussed below, including property net operating income (NOI), relate to properties that Aimco owns and manages, and that are classified within continuing operations. To ensure comparability between periods, results are based on Aimco’s current period ownership. See the Glossary for property definitions and reconciliation of non-GAAP measures and Schedules 1 and 2 in the Supplemental Information for financial and statistical information for these portfolios.

Diversified Operating Portfolio – Aimco’s property operations consist primarily of Conventional, with some Affordable, real estate operations. Conventional real estate operations relate to Aimco’s diversified portfolio of market rate apartment communities and include Same Store Properties, Redevelopment Properties, Acquisition Properties and Other Properties.

Affordable real estate operations consist of Aimco’s portfolio of properties with rents that are generally paid, in whole or in part, by a government agency. Affordable properties tend to have more stable rents and higher occupancy than Conventional properties due to government rent payments and thus are less affected by market fluctuations.

Total Same-Store NOI Up 5.8% Year-to-Date
	THIRD QUARTER				YEAR-TO-DATE
		Year-over-year Variance			Year-over-year Variance
	% NOI	Revenue	Expenses	NOI	% NOI	Revenue	Expenses	NOI
Conventional Same Store	80%	3.5%	4.3%	3.0%	79%	2.5%	-1.3%	4.9%
Affordable Same Store	13%	3.6%	-2.8%	8.6%	12%	4.2%	-5.5%	12.4%
Total Same Store	93%	3.5%	3.1%	3.8%	91%	2.7%	-2.0%	5.8%
Other Conventional	7%	-4.2%	1.7%	-9.1%	8%	-0.6%	0.8%	-1.7%
Affordable Redevelopment	-	-	-	-	1%	5.7%	6.3%	5.4%
Total Portfolio	100%	2.8%	2.9%	2.8%	100%	2.5%	-1.6%	5.2%

Conventional Same Store Results – In third quarter 2011, the Conventional Same Store portfolio included 162 communities with 57,209 units, in which Aimco had a weighted average ownership of 94%.

	THIRD QUARTER Year-over-year					THIRD QUARTER Sequential			YEAR-TO-DATE Year-over-year
	2011		2010		Variance	2nd Qtr		Variance	2011		2010		Variance
Average Daily Occupancy		95.2%		96.0%	-0.8%		95.9%	-0.7%		95.9%		95.9%	-
Average Rent Per Unit	$	1,094	$	1,061	3.1%	$	1,078	1.5%	$	1,086	$	1,067	1.8%
$ in Millions
Revenue	$	186.7	$	180.4	3.5%	$	183.8	1.6%	$	548.0	$	534.6	2.5%
Expenses		(70.1)		(67.2)	4.3%		(66.6)	5.3%		(202.0)		(204.7)	-1.3%
NOI	$	116.6	$	113.2	3.0%	$	117.2	-0.6%	$	346.0	$	329.9	4.9%

Rental Rates Accelerating
	THIRD QUARTER	SECOND QUARTER	FIRST QUARTER	YEAR-TO-DATE
New lease	6.1%	5.1%	1.9%	4.7%
Renewal	5.6%	3.6%	3.0%	4.4%
Weighted average	5.8%	4.3%	2.5%	4.6%

Aimco measures changes in rental rates by comparing, on a lease-by-lease basis, the rate on a newly executed lease to the rate on the expiring lease for that same apartment. Newly executed leases are classified as either a new lease, where a vacant apartment is leased to a new customer, or a renewal of an existing lease.

Refer to Supplemental Schedules 6a through 6c for additional details on Conventional Same Store operating results.

Affordable Same Store Results – In third quarter 2011, the Affordable Same Store portfolio included 144 communities with 18,212 units, in which Aimco had a weighted average ownership of 70%. For third quarter 2011, average month-end occupancy for the affordable portfolio was 97.6%, a decrease of 0.2% from third quarter 2010, while average rent per unit increased 3.4% from $814 to $842 per unit.

Portfolio

Aimco’s portfolio strategy focuses on B/B+ quality Conventional apartment communities located in the 20 largest U.S. markets as measured by total apartment value, with a target capital allocation of 10% to Affordable apartment communities.

Aimco measures Conventional Property asset quality based on average rents compared to local market average rents as reported by REIS, a third-party provider of commercial real estate performance information and analysis. Aimco defines A-quality assets as those with rents greater than 125% of local market average, B-quality assets as those with rents 90% to 125% of local market average and C-quality assets as those with rents less than 90% of local market average. For second quarter 2011, the most recent period for which REIS information is available, Aimco’s Conventional Property rents averaged approximately 100% of local market average rents.

For third quarter 2011, average rents for the Conventional portfolio were $1,112 per unit, a 6.9% increase compared to third quarter 2010, as a result of year-over-year rent growth and the sale of Conventional properties during 2010 and 2011 with rents substantially lower than those of the retained portfolio.

Aimco’s geographic allocation strategy focuses on the 20 largest U.S. markets. Aimco believes these markets to be deep, relatively liquid and possessing desirable long-term growth characteristics. These target markets are primarily coastal markets, and also include a number of Sun Belt cities and Chicago, Illinois. In executing this strategy, Aimco expects to reduce its investment in markets outside the 20 largest markets and to increase its investment in the 20 largest markets through redevelopment, acquisitions and increasing ownership in properties Aimco already owns through limited partnerships. During third quarter 2011, net operating income generated by Conventional properties located in Aimco’s target markets accounted for 85% of total Conventional Property net operating income, an increase of 2% compared to third quarter 2010.

Acquisitions – As previously announced, during third quarter 2011, Aimco acquired a vacant, 126-unit property located in San Francisco’s Marin County submarket. Aimco intends to redevelop the property, increasing its total investment in the property to approximately $65.0 million. Additionally, Aimco also increased its investment in San Diego, another target market, by acquiring approximately one half of the ownership of four entities owning four contiguous properties with 142 units located in La Jolla, California and overlooking Tourmaline Beach.

Dispositions – In third quarter 2011, Aimco sold nine Conventional properties and three Affordable properties with 2,395 and 266 units, respectively, for $154.5 million in gross proceeds. Aimco’s share of net proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $60.4 million.

See Supplemental Schedules 7a and 7b for additional details regarding Aimco’s Conventional portfolio quality and capital allocation, and Supplemental Schedule 8 for additional details on acquisition and disposition activity.

Balance Sheet and Liquidity

Components of Aimco Leverage
	AS OF SEPTEMBER 30, 2011
	Amount		% of Total	Weighted Avg Maturity (Yrs)	Weighted Avg Rate
Aimco leverage ($ in millions)
Aimco’s share of long-term, non-recourse property debt	$	4,746.2	86%	8.2	5.47%
Revolving credit facility		26.2	<1%	1.6	5.87%
Subtotal debt	$	4,772.4	86%	8.2	5.48%
Preferred securities		751.0	14%	Perpetual	7.46%
Total leverage	$	5,523.4	100%	n/a	5.75%

See Supplemental Schedule 4 for additional details about Aimco’s non-recourse property debt and Supplemental Schedule 5 for information related to Aimco’s preferred securities.

Revolving Credit Facility – Aimco’s recourse debt at September 30, 2011, was limited to its revolving credit facility, which Aimco uses for working capital purposes and to secure letters of credit. At the end of third quarter, Aimco had $26.2 million outstanding on its revolving credit facility and available capacity was $247.8 million, net of $26.0 million of letters of credit backed by the facility.

Coverage Ratios – Aimco’s third quarter EBITDA Coverage of Interest and EBITDA Coverage of Interest and Preferred Dividends ratios were 2.14:1 and 1.75:1, compared to third quarter 2010 ratios of 2.05:1 and 1.67:1, respectively. Separately, in connection with its revolving credit facility, Aimco is subject to Debt Service and Fixed Charge Coverage covenants, as defined in the Glossary. For third quarter 2011, Aimco’s Debt Service and Fixed Charge Coverage ratios were 1.60:1 and 1:36.1, compared to covenants in place during the quarter of 1.40:1 and 1:20.1, respectively, and third quarter 2010 ratios of 1.58:1 and 1.34:1. Aimco expects to remain in compliance with these covenants.

Equity Activity – During third quarter 2011, Aimco issued 0.1 million shares under its Common Stock At-the-Market (Common Stock ATM) offering program at a weighted average price of $26.33 per share, generating gross proceeds of $3.0 million. Year-to-date, Aimco has issued 2.9 million shares under its Common Stock ATM offering program at a weighted average price of $25.27 per share, generating gross proceeds of $73.6 million, which were used to match-fund investment activity including partnership transactions, acquisitions, redevelopment and other capital investment activities.

As previously announced, on July 26, 2011, Aimco priced an underwritten public offering of 800,000 shares of its 7.00% Class Z Cumulative Preferred Stock at $24.25 per share, equating to a yield of 7.216%, for gross proceeds to Aimco of approximately $19.4 million. During third quarter 2011, Aimco also issued approximately 23,800 shares of Class Z Cumulative Preferred Stock through its Class Z Preferred Stock At-the-Market offering program (Class Z ATM) at $24.21 per share, equating to a yield of 7.228%, for gross proceeds to Aimco of approximately $0.6 million. We intend to accumulate the proceeds from further ATM issuances of our Class Z Preferred Stock and use them for further redemptions of outstanding preferred securities with higher rates.

Also during third quarter 2011, Aimco redeemed 862,500 shares, or 25% of the amount outstanding, of its Class V Cumulative Preferred Stock. This redemption was for cash at a price equal to $25.00 per share, or $21.6 million in aggregate, plus accumulated and unpaid dividends of approximately $0.2 million.

Dividend – Aimco’s Board of Directors declared a cash dividend of $0.12 per share on its Class A Common Stock for the quarter ended September 30, 2011. The dividend is payable November 30, 2011 to shareholders of record on November 18, 2011.

2011 Outlook
	FOURTH QUARTER	FULL YEAR
Net loss per share	-$0.28 to -$0.24	-$0.95 to -$0.91
Pro forma FFO per share	$0.39 to $0.43	$1.46 to $1.50
Conventional Same Store Operating Measures
NOI change compared to prior quarter 2011	3.0% to 4.0%
NOI change compared to same period 2010	4.0% to 5.0%	5.0%
Average daily occupancy		95.7%
Revenue change compared to 2010		2.7%
Expense change compared to 2010		-1.0%
Affordable Same Store NOI change compared to 2010		11.0%
Total Same Store NOI change compared to 2010	4.5% to 5.5%	5.5%
Total Portfolio NOI change compared to 2010		4.5%

*	Full year guidance includes a one-time charge of $0.15 per share related to debt prepayment penalties and write-off of deferred loan costs incurred in connection with a refinancing and securitization transaction completed during second quarter.

Earnings Conference Call
Live Conference Call Friday, October 28, 2011 at 1:00 p.m. EDT Domestic Dial-In Number:  1-866-843-0890 International Dial-In Number:  1-412-317-9250 Passcode:  4623268	Conference Call Replay Available until 9:00 a.m. EDT on November 7, 2011 Domestic Dial-In Number: 1-877-344-7529 International Dial-In Number: 1-412-317-0088 Passcode: 10004851

Live webcast and replay: www.aimco.com/CorporateInformation/About/Financial/news.aspx

Supplemental Information

The full text of this Earnings Release and the Supplemental Information referenced in this release are available on Aimco’s website www.aimco.com/CorporateInformation/About/Financial/QEarnRelease.aspx.

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 not calculated in accordance with accounting principles generally accepted in the United States, or GAAP. These measures are defined in the glossary in the Supplemental Information and, where appropriate, reconciled to the most comparable GAAP measures.

Forward-looking Statements

This Earnings Release and Supplemental Information contain forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of fourth quarter and full year 2011 results. These forward-looking statements are based on management’s judgment as of this date and include certain risks and uncertainties. Risks and uncertainties include, but are not limited to, Aimco’s ability to maintain current or meet projected occupancy, rental rates and property operating results. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the control of Aimco, including, without limitation: financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; earnings may not be sufficient to maintain compliance with debt covenants; real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; the timing of acquisitions and dispositions; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by Aimco. In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on our ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership. 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, 2010, and the other documents Aimco files from time to time with the Securities and Exchange Commission. These forward-looking statements reflect management’s judgment as of this date, and Aimco assumes no obligation to revise or update them to reflect future events or circumstances. This press release does not constitute an offer of securities for sale.

About Aimco

Aimco is a real estate investment trust that is focused on the ownership and management of quality apartment communities located in the 20 largest markets in the United States. Aimco is one of the country’s largest owners and operators of both conventional and affordable apartments, with 565 communities serving approximately 500,000 residents in 38 states, the District of Columbia and Puerto Rico. Aimco common shares are traded on the New York Stock Exchange under the ticker symbol AIV and are included in the S&P 500. For more information about Aimco, please visit our website at www.aimco.com.

Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
REVENUES:
Rental and other property revenues	$	269,525		$	263,481		$	805,749		$	788,057
Asset management and tax credit revenues		11,885			9,711			28,772			24,208
Total revenues		281,410			273,192			834,521			812,265
OPERATING EXPENSES:
Property operating expenses		119,903			116,786			356,634			362,784
Investment management expenses		2,386			2,609			7,604			10,979
Depreciation and amortization		97,321			101,704			287,739			305,066
Provision for operating real estate impairment losses		149			-			149			-
General and administrative expenses		12,664			12,096			36,162			39,015
Other expense, net		4,870			4,416			13,952			2,173
Total operating expenses		237,293			237,611			702,240			720,017
Operating income		44,117			35,581			132,281			92,248
Interest income		3,273			2,362			7,771			7,437
Recovery of (provision for) losses on notes receivable		233			(6	)		180			(284	)
Interest expense		(73,152	)		(74,544	)		(243,169	)		(225,305	)
Equity in losses of unconsolidated real estate partnerships		(4,987	)		(15,653	)		(8,432	)		(11,799	)
Gain on dispositions of unconsolidated real estate and other, net		3,095			883			5,115			5,368
Loss before income taxes and discontinued operations		(27,421	)		(51,377	)		(106,254	)		(132,335	)
Income tax benefit		1,110			4,385			5,704			11,042
Loss from continuing operations		(26,311	)		(46,992	)		(100,550	)		(121,293	)
Income from discontinued operations, net [1]		30,968			18,510			50,959			65,881
Net income (loss)		4,657			(28,482	)		(49,591	)		(55,412	)
Noncontrolling interests:
Net (income) loss attributable to noncontrolling interests in   consolidated real estate partnerships		(5,464	)		11,213			4,612			1,795
Net (income) loss attributable to preferred noncontrolling interests   in Aimco Operating Partnership		(1,670	)		84			(5,012	)		(3,292	)
Net loss attributable to common noncontrolling interests in   Aimco Operating Partnership		1,035			2,263			5,838			6,644
Total noncontrolling interests		(6,099	)		13,560			5,438			5,147
Net loss attributable to Aimco		(1,442	)		(14,922	)		(44,153	)		(50,265	)
Net income attributable to Aimco preferred stockholders		(13,301	)		(13,576	)		(35,429	)		(36,626	)
Net income attributable to participating securities		(58	)		(2	)		(169	)		-
Net loss attributable to Aimco common stockholders	$	(14,801	)	$	(28,500	)	$	(79,751	)	$	(86,891	)
Weighted average common shares outstanding - basic and diluted		120,339			116,434			118,939			116,264
Earnings (loss) per common share - basic and diluted:
Loss from continuing operations attributable to Aimco   common stockholders	$	(0.26	)	$	(0.35	)	$	(0.92	)	$	(1.10	)
Income from discontinued operations attributable to Aimco   common stockholders		0.14			0.10			0.25			0.35
Net loss attributable to Aimco   common stockholders	$	(0.12	)	$	(0.25	)	$	(0.67	)	$	(0.75	)
Notes to Consolidated Statements of Operations
[1] Income from discontinued operations consists of the following (in thousands):
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Rental and other property revenues	$	3,428		$	21,202		$	23,917		$	77,596
Property operating expenses		(2,816	)		(12,489	)		(13,355	)		(42,761	)
Depreciation and amortization		(931	)		(6,340	)		(7,695	)		(21,909	)
Provision for operating real estate impairment losses		(5,522	)		(1,429	)		(11,829	)		(9,550	)
Operating (loss) income		(5,841	)		944			(8,962	)		3,376
Interest income		44			111			361			298
Interest expense		(862	)		(4,082	)		(5,252	)		(14,209	)
Loss before gain on dispositions of real estate and   income taxes		(6,659	)		(3,027	)		(13,853	)		(10,535	)
Gain on dispositions of real estate		37,467			21,084			64,901			74,406
Income tax benefit (expense)		160			453			(89	)		2,010
Income from discontinued operations, net	$	30,968		$	18,510		$	50,959		$	65,881
Income from discontinued operations attributable to:
Noncontrolling interests in consolidated real estate partnerships	$	(12,734	)	$	(5,205	)	$	(18,689	)	$	(21,372	)
Noncontrolling interests in Aimco Operating Partnership		(1,274	)		(890	)		(2,211	)		(2,983	)
Total noncontrolling interests		(14,008	)		(6,095	)		(20,900	)		(24,355	)
Income from discontinued operations attributable to Aimco	$	16,960		$	12,415		$	30,059		$	41,526

Consolidated Balance Sheets
(in thousands) (unaudited)
	September 30, 2011			December 31, 2010
ASSETS
Buildings and improvements	$	6,959,172		$	6,979,467
Land		2,097,137			2,084,987
Total real estate		9,056,309			9,064,454
Accumulated depreciation		(2,876,894	)		(2,766,897	)
Net real estate		6,179,415			6,297,557
Cash and cash equivalents		75,831			111,325
Restricted cash		209,481			200,025
Accounts receivable, net		40,848			49,855
Deferred financing costs, net		46,670			46,454
Notes receivable, net		114,630			116,726
Investment in unconsolidated real estate partnerships		63,942			59,282
Other assets		250,296			199,886
Deferred income tax assets, net		61,589			58,736
Assets held for sale		-			238,720
Total assets	$	7,042,702		$	7,378,566
LIABILITIES AND EQUITY
Non-recourse property debt	$	5,233,525		$	5,291,612
Revolving credit facility borrowings		26,200			-
Total indebtedness		5,259,725			5,291,612
Accounts payable		24,999			27,322
Accrued liabilities and other		278,606			297,121
Deferred income		150,357			150,453
Security deposits		34,516			33,829
Liabilities related to assets held for sale		-			168,029
Total liabilities		5,748,203			5,968,366
Preferred noncontrolling interests in Aimco Operating Partnership		83,385			83,428
Preferred stock subject to repurchase agreement		10,000			20,000
Equity:
Perpetual Preferred Stock		656,015			657,601
Class A Common Stock		1,209			1,176
Additional paid-in capital		3,106,079			3,070,296
Accumulated other comprehensive loss		(8,312	)		(2,076	)
Distributions in excess of earnings		(2,803,679	)		(2,680,955	)
Total Aimco equity		951,312			1,046,042
Noncontrolling interests in consolidated real estate partnerships		279,997			291,458
Common noncontrolling interests in Aimco Operating Partnership		(30,195	)		(30,728	)
Total equity		1,201,114			1,306,772
Total liabilities and equity	$	7,042,702		$	7,378,566