Aimco Reports First Quarter 2021 Results

DENVER--(BUSINESS WIRE)--Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today first quarter results for 2021.

Wes Powell, Aimco President and Chief Executive Officer, comments: “The first three months of 2021 have proven highly productive with Aimco now well positioned for growth as a premier real estate developer and investor. Aimco’s strategy, focused on long-term value creation, is being put to work and we are on track to produce superior results. Broadly, demand for housing remains robust, supply in many U.S. markets is relatively constrained, and the economy is improving rapidly. Aimco teams across the country are utilizing their deep relationships and creativity to source and devise new investment opportunities that will expand our already robust pipeline. I am thankful for the good work produced by the Aimco team during the first quarter and encouraged by what lies ahead.”

Lynn Stanfield, Aimco Executive Vice President and Chief Financial Officer, comments: “Apartment operations continue to improve with occupancy at our portfolio of stabilized properties having increased by 70 basis points quarter-over-quarter and pricing power recovering in many of our markets. Aimco’s active development and redevelopment projects are tracking on time and on budget, lease-up results have been promising, and we’ve added about $330 million to our investment pipeline with the start of construction at Upton Place in Washington, D.C. and The Benson Hotel on the Anschutz Medical Campus in Colorado. Additionally, Aimco’s strong balance sheet, with limited use of corporate credit, abundant liquidity, and a diversified portfolio of stabilized properties provides a strong foundation for Aimco’s growing investment platform.”

Financial Results

Net income attributable to common stockholders per common share, on a dilutive basis, was $0.14 per share, an increase of $0.11 during the quarter ended March 31, 2021, compared to the same period in 2020, due primarily to unrealized gains on interest rate options.

Development and Redevelopment

Aimco’s dedicated team sources and executes development and redevelopment projects across its national platform. Aimco seeks outsized returns on incremental capital invested, for itself and its partners, through its team’s local insights regarding sub-market fundamentals, the specific property location, a deep understanding of how best to meet the end users’ needs and wants, a disciplined commitment to mitigating risk during the construction process, and a passion for quality. Aimco believes that each of these components are critical to the creation of an investment platform that is both sustainable and viable independent of broader market conditions.

Construction Activity

During the three months ended March 31, 2021, Aimco invested approximately $45.8 million at its development and redevelopment projects.

• At the North Tower of Flamingo Point in Miami Beach, Florida, the major redevelopment continues on plan with approximately $43.0 million remaining to invest and a target to complete construction in 2022 and reach stabilization in 2023.
• At Upton Place in Washington, D.C., construction activities began in January 2021 and are progressing on budget with approximately $221.1 million remaining to complete construction and on schedule for completion in 2024.
• As previously announced, Aimco began construction on The Benson Hotel and Faculty Club on the Anschutz Medical Campus in Aurora, Colorado. Aimco expects a remaining investment of approximately $52.0 million with completion planned for the first quarter of 2023.

Lease-up Progress

During the three months ended March 31, 2021, Aimco held three properties where newly constructed or renovated homes had been delivered but stabilization had not yet been reached.

• At 707 Leahy in Redwood City, California, all apartment homes had been delivered and construction was complete as of 4Q 2020. As of March 31, 2021, the 110-unit property was 71% leased.
• At The Fremont on the Anschutz Medical Campus in Aurora, Colorado, all apartment homes had been delivered and construction was complete as of 4Q 2020. As of March 31, 2021, the 253-unit property was 54% leased.
• At Prism, located in Cambridge, Massachusetts, all apartment homes had been delivered and construction was complete as of 1Q 2021. As of March 31, 2021 the 136-unit property was 22% leased.

The pace of absorption at these properties accelerated during April and early May as local economies reopen and we enter the prime leasing season. In April, leasing volume increased by more than a third when compared to March, and leasing in May is projected to outpace April.

Asset Management

Operating Properties

Aimco owns a geographically diversified portfolio of operating properties that produces stable cash flow and serves to balance the risk and highly variable cashflows associated with its portfolio of development and redevelopments and value-add investments. Aimco expects to maintain, at any given time, an allocation of capital to stabilized operating properties of no less than 30% of Aimco equity. At March 31, 2021, Aimco had approximately 54% of equity in stabilized operating properties.

Aimco’s Operating Portfolio produced solid results for the quarter ended March 31, 2021, showing sequential improvement in revenue as our business recovers from the pandemic related impacts of 2020.

	First Quarter
	Year-over-Year							Sequential
($ in thousands)	2021		2020		Variance			4Q 2020		Variance
Average Daily Occupancy		97.6%		97.6%		—			96.9%		0.7	%
Revenue, before utility reimbursements	$	32,674	$	33,345		(2.0	%)	$	32,477		0.6	%
Expenses, net of utility reimbursements		11,161		10,497		6.3	%		10,613		5.2	%
Net operating income (NOI)		21,513		22,848		(5.8	%)		21,864		(1.6	%)

Highlights for the Operating Portfolio include the following:

• Average Daily Occupancy was 97.6% for the quarter ended March 31, 2021, equal to the same period last year, and a 70-basis point improvement from the quarter ended December 31, 2020.
• Average revenue per occupied unit was $1,852 for the quarter ended March 31, 2021, down 2.0% year over year and essentially flat to the quarter ended December 31, 2020.
• Revenue, before utility reimbursements, was $32.7 million for the quarter ended March 31, 2021, down 2.0% year over year but up 0.6% from the quarter ended December 31, 2020.
• Expenses, net of utility reimbursements were $11.2 million for the quarter ended March 31, 2021, up 6.3% year over year and up 5.2% from the quarter ended December 31, 2020. The year over year increase is due primarily to higher real estate taxes and insurance with the sequential increase due primarily to seasonal net utility costs and snow removal. Sequentially, expenses outside of these seasonal items were favorable 50 basis points.
• Net Operating Income was $21.5 million for the quarter ended March 31, 2021, down 5.8% year over year and down 1.6% from the quarter ended December 31, 2020.

Aimco measures residential rent collection as the amount of payments received as a percentage of all residential amounts owed. In the first quarter, Aimco collected 97.5% of all amounts owed by Aimco residents and recognized 98.4% of revenue, reserving 160 basis points as bad debt.

1001 Brickell Bay Drive, a waterfront office building in Miami, FL owned as part of a larger assemblage, is currently 72.4% occupied with 100% of rents due collected, in the first quarter.

Investment Activity

Aimco expects to have a broad set of investment opportunities due to its national platform, management’s deep connections in the local markets in which we invest, and various strategic relationships. These opportunities may include, but are not limited to, development, redevelopment, portfolio acquisitions, programmatic joint ventures, debt placements, operational turnarounds, and re-entitlements. Aimco will undertake such opportunistic value-add transactions when warranted by the prospect of outsized risk-adjusted returns.

• On January 1, 2021, terms commenced on leasehold agreements with Apartment Income REIT Corp. (“AIR Communities”) for 707 Leahy, The Fremont, Prism, and Flamingo Point North Tower.
  • The combined initial value of leasehold interest, as indicative of the initial fair market values of the leased assets at the time of lease inception, was $469.0 million.
  • The combined annual leasehold payment for these four assets is $25.3 million.
  • Aimco expects its total development and redevelopment expenditures related to these assets to be approximately $70.8 million with $24.1 million having been invested as of March 31, 2021.
  • The lease agreements provide Aimco the right to terminate each lease once the leased property is stabilized, with AIR Communities then having the option to retain ownership of the land and purchase the improvements from Aimco. Should AIR Communities exercise its option, Aimco would be due the difference between the property’s fair-market value at stabilization and the initial value of leasehold interest, less a 5% discount. Should AIR Communities not exercise its option, Aimco has the right, but not the obligation, to force a sale of the asset to monetize its investment.
• In the first quarter, Aimco purchased for $6.2 million, 1.5-acres of fully entitled land on the Anschutz Medical Campus in Aurora, CO plus options allowing for the purchase of an additional 5.2 acres that will accommodate more than 750,000 square feet of new development. The 1.5-acre site is now being developed as The Benson Hotel and Faculty Club and represents a critical step in advancement of the campus masterplan.

Balance Sheet and Financing Activity

Aimco capitalizes its activities through a combination of non-recourse property debt, construction loans, third-party equity, and the recycling of Aimco equity, including through retained earnings. Aimco plans to limit the use of recourse leverage, with a strong preference towards property-level debt in order to limit risk to the Aimco enterprise. When warranted, Aimco plans to seek equity capital from joint venture partners to improve its cost of capital, further leverage Aimco equity, reduce exposure to a single investment and, in certain cases, for strategic benefits.

Aimco is highly focused on the importance of maintaining ample liquidity. As of March 31, 2021, Aimco had access to $385.3 million, including $226.1 million of cash on hand, $9.2 million of restricted cash, and the capacity to borrow up to $150 million on our revolving credit facility.

Aimco’s net leverage as of March 31, 2021 was as follows:

	as of March 31, 2021
Proportionate, $ in thousands	Amount			Weighted Avg. Maturity (Yrs.)*
Total non-recourse property debt	$	438,729			5.6
Notes payable to AIR	$	534,127			2.8
Cash and restricted cash		(235,305	)
Net Leverage	$	737,551

Financing Activity

Subsequent to quarter end, Aimco closed a $150 million construction loan secured by our leasehold interest in the North Tower at Flamingo Point. The initial term of the loan is three years with two one-year extension options at an interest rate floating at One Month LIBOR plus 360 basis points. The floating interest rate has a 3.85% floor. Loan proceeds will be used to fund the completion of construction of the North Tower at Flamingo Point and other investment activity.

Dividend

Aimco does not presently intend to pay a regular cash dividend.

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 high performance, collaboration, and respect for all.

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 Real Estate Investment Trust focused on property development, redevelopment, and various other value-creating investment strategies, targeting the U.S. multifamily market. Aimco’s mission is to make real estate investments where outcomes are enhanced through human capital and 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.

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. 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 statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. 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, 2020, and in Item 1A of Aimco’s Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2020, September 30, 2020, and March 31, 2021 and the 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 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,
	2021			2020
REVENUES:
Rental and other property revenues		39,804			38,309
OPERATING EXPENSES:
Property operating expenses		16,942			15,349
Depreciation and amortization		20,717			19,347
General and administrative expense [1]		6,311			1,762
Total operating expenses		43,970			36,458
Interest expense		(12,677	)		(5,651	)
Mezzanine investment income, net		7,467			6,747
Unrealized gains on interest rate options [2]		25,347			—
Other expenses, net		363			(415	)
(Loss) income before income taxes		16,334			2,532
Income tax benefit (expense)		5,100			2,023
Net (loss) income		21,434			4,555
Net Income attributable to redeemable noncontrolling Interests consolidated real estate partnership		152			103
Net Income attributable to noncontrolling Interests consolidated real estate partnership		(291	)		5
Net Income attributable to common noncontrolling Interests in Aimco Operating Partnership		(1,081	)		(236	)
Net Income attributable to common stockholders		20,214			4,427
Net Income attributable to common stockholders per share - basic		0.14			0.03
Net Income attributable to common stockholders per share - diluted		0.14			0.03
Weighted average common shares outstanding – basic		148,914			148,549
Weighted average common shares outstanding – diluted		149,046			148,569
[1] General and administrative expense in 1Q 2020 is represented as a carve-out of Aimco predecessor expenses and are not representative of Aimco’s current expenses. [2] Unrealized gains on interest rate options is primarily the quarterly market-to-market adjustment recorded as required to fair value Aimco’s interest rate options.

Consolidated Balance Sheets (in thousands) (unaudited)
	March 31, 2021			December 31, 2020
Assets
Buildings and improvements		1,050,817			995,116
Land		506,968			505,153
Total real estate		1,557,785			1,500,269
Accumulated depreciation		(511,615	)		(495,010	)
Net real estate		1,046,170			1,005,259
Cash and cash equivalents		226,081			289,582
Restricted cash		9,224			9,153
Mezzanine Investments		314,829			307,362
Right-of-use lease assets		443,111			98,280
Other Assets, net		178,475			130,856
Total assets		2,217,890			1,840,492
Liabilities
Non-recourse property debt, net		429,873			447,967
Notes payable to AIR		534,127			534,127
Total indebtedness		964,000			982,094
Deferred tax liabilities		125,732			131,560
Lease liabilities		446,962			100,496
Accrued liabilities and other		95,733			62,988
Total liabilities		1,632,427			1,277,138
Redeemable noncontrolling interest in consolidated real estate partnership		4,111			4,263
Equity
Common Stock		1,491			1,490
Additional paid-in capital		516,051			515,127
Retained earnings accumulated (deficit)		3,375			(16,839	)
Total Aimco equity		520,917			499,778
Noncontrolling interests in consolidated real estate partnerships		31,884			31,877
Common noncontrolling interests in Aimco Operating Partnership		28,551			27,436
Total equity		581,352			559,091
Total liabilities and equity		2,217,890			1,840,492