Aimco Reports Third Quarter Results, Updates 2023 Guidance, and Provides Highlights on Recent and Planned Activities

DENVER--(BUSINESS WIRE)--Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today third quarter results for 2023, updated guidance, and provided highlights on recent and planned activities.

Wes Powell, Aimco President and Chief Executive Officer, comments:

“Thank you for your interest in Aimco. The apartment business remains on sound footing and Aimco is well positioned given the composition of our assets and the quality of our investment platform. Our diversified portfolio of apartment communities located within neighborhoods that have largely avoided the pressure of competitive new supply, has continued to generate strong performance and has experienced NOI growth of nearly 20% over the past 18 months. During the third quarter, average monthly revenues per apartment home increased by 7.2% on a year-over-year basis and we have increased our full year NOI guidance by more than 100 basis points at the midpoint.

"Aimco's regional investment teams are successfully advancing our active development projects and are on track to deliver more than 600 of those new units by the end of 2023 and another 700 in 2024. It is projected that this current class of projects will produce more than $55 million of NOI annually when fully stabilized, an amount equal to more than half of the NOI currently produced by Aimco's portfolio of stabilized apartment communities and representing an accretive yield on direct capital investment of 6.8%. While we are advancing plans for a select number of new projects, which offer the prospect of strong risk adjusted returns, we anticipate reducing the amount of Aimco capital that is allocated to development activity over the year ahead given market conditions and the relative attractiveness of other capital allocation opportunities.

“We continue to view the repurchase of Aimco common stock as being very attractive. Over the past 22 months, we have opportunistically repurchased 8.8 million shares at an average price of $7.33 per share. The Aimco Board of Directors recently increased our share repurchase authorization to 30 million shares, doubling the size of our previous authorization.

"Aimco’s balance sheet remains rock solid. Our near-term debt maturities are extremely limited with less than 2% of the total coming due over the next 30 months inclusive of extension options. Fixed-rate loans tied to our stabilized portfolio, representing 70% of our total leverage, carry an interest rate of 4.25%, are fully assumable and have a weighted average time to maturity of 7.4 years.

"Consistent with our capital allocation strategy, at times we may choose to monetize certain pipeline assets prior to vertical construction in order to maximize value and risk adjusted returns. As such, we are preparing to market for sale our Brickell Assemblage located in Miami, as well as certain recently completed development projects and select land holdings. In addition, we remain under agreement to sell our 80% stake in the Parkmerced mezzanine loan. We expect these sales to take place during the course of 2024, provided pricing and terms are favorable. The proceeds will be prudently allocated to return capital to stockholders, reduce leverage, and/or accretive new investments.

"Above all else, the Aimco management team and Board remain intently focused on creating and unlocking value for Aimco stockholders.”

Financial Results and Recent Highlights

• Net loss attributable to common stockholders per share, on a fully dilutive basis, was $(0.02) for the quarter ended September 30, 2023, compared to net income per share of $0.19 for the same period in 2022, due primarily to lower real estate transaction proceeds and reduced tax benefit.
• Third Quarter 2023 revenue, expenses, and NOI from Aimco’s Stabilized Operating Properties were up 6.4%, 3.5%, and 7.6%, respectively, year-over-year, with average monthly revenue per apartment home increasing by 7.2% to $2,358, while maintaining an average rent to income below 20% for new Aimco residents.
• Aimco updated full year 2023 guidance related to Stabilized Property Operations as follows:

	Full Year 2023 Year-Over-Year Growth Rates
Stabilized Operating Properties	Revised Guidance Range			Prior Guidance Range
	Low		High	Low		High
Revenue, before utility reimbursements	8.25%	-	8.75%	7.75%	-	8.75%
Expenses, net of utility reimbursements	5.75%	-	6.75%	8.00%	-	9.00%
Net operating income (NOI)	9.00%	-	9.75%	7.50%	-	9.00%

• As of October 31, 2023, Aimco delivered the 276-apartment home Hamilton in Miami, Florida, the 106-key Benson Hotel and Faculty Club in Aurora, Colorado, and 81 apartment homes at Upton Place in Upper Northwest Washington, D.C. Aimco expects to deliver, before year end, 153 additional apartment homes at Upton Place and the initial homes at Oak Shore in Corte Madera, California.
• Aimco remains under contract to sell our remaining 80% stake in the Parkmerced mezzanine loan for $134 million plus accrued interest and is preparing to market additional assets for sale, including the Brickell Assemblage located in Miami, Florida.
• Aimco acquired 1.7 million shares of its common stock during the third quarter 2023 at an average cost of $7.52 per share. Year to date, as of October 31, 2023, Aimco acquired more than 5.3 million shares at an average price of $7.40 per share.
• Subsequent to quarter end, the Aimco Board of Directors increased the number of shares authorized for repurchase to 30 million, doubling the size of the Board’s previous authorization.
• As of November 3, 2023, total shareholder return ("TSR") since the December 15, 2020 spin-off of AIR Communities was 15.9% outperforming the Russell 2000 over the same period by more than 2,300 basis points.

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 September 30, 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 third quarter, Aimco invested $74.4 million in development and redevelopment activities. Updates include:

• In Miami, Florida, construction, repositioning, and lease-up of The Hamilton is complete. Demand for rental housing in Southeast Florida remains robust, especially for unique waterfront properties such as The Hamilton. As of October 31, 2023, 96% of the building's 276 units were occupied with in-place leases at rates more than 20% 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 with initial delivery on track for the second half of 2024. 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 already funded 100% of its equity commitment.
• In Upper Northwest Washington D.C., construction at Upton Place continues on schedule and on budget. The initial delivery of 81 apartment homes occurred, on schedule, in mid-October with the first residents at Upton Place having moved into their new homes on November 1, 2023. As of October 31, 2023, 13 units had been leased or pre-leased, at rates ahead of our initial projections. To date, 80% of the project's 105K square feet of retail space has been leased and Aimco is in final lease negotiations with retailers on another 7%.
• 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. Construction has been completed on the initial homes and they will be ready for occupancy in November. As of October 31, 2023, two of the eight accessory dwelling units had been pre-leased at rates ahead of our initial projections.
• In the third quarter 2023, Aimco invested $4.8 million into programming, design, documentation, and entitlement efforts related to select pipeline projects located in Southeast Florida, the Washington D.C. Metro, and Colorado’s Front Range.

Investment & Disposition Activity

Aimco is focused on delivering strong investment returns, through the ownership of apartment properties as well as development and redevelopment activities, funded primarily through third-party capital.

• No new investment or disposition activity occurred during the third quarter.
• Aimco remains under contract to sell its 80% stake in the Parkmerced mezzanine loan for $134 million plus accrued interest. In June, at the time of closing on the sale of a 20% non-controlling position, the purchaser pre-paid $4 million of interest to Aimco and is expected to pay another $7 million prior to year end.
• Subsequent to quarter end, Aimco initiated plans to market for sale the Brickell Assemblage located in Miami, Florida, as well as certain recently completed developments and select land holdings. Aimco expects the sales to occur by the end of 2024, pending favorable pricing and terms. The proceeds will be allocated to return capital to stockholders, reduce leverage, and/or accretive new investments.

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 Stabilized Operating Properties produced solid results for the quarter ended September 30, 2023.

	Third Quarter					Year-to-Date
Stabilized Operating Properties	Year-over-Year			Sequential		Year-over-Year
($ in millions)	2023	2022	Variance	2Q 2023	Variance	2023	2022	Variance
Average Daily Occupancy	95.2%	96.0%	(0.7)%	96.2%	(0.9)%	96.5%	97.4%	(0.9)%
Revenue, before utility reimbursements	$37.7	$35.5	6.4%	$37.0	1.9%	$111.4	$102.2	9.0%
Expenses, net of utility reimbursements	10.7	10.4	3.5%	11.5	(6.5)%	33.4	31.3	6.6%
Net operating income (NOI)	27.0	25.1	7.6%	25.5	5.7%	78.0	70.9	10.0%

• Revenue in the third quarter 2023 was $37.7 million, up 6.4% year-over-year, resulting from a 7.2% increase in average monthly revenue per apartment home to $2,358, partially offset by a 75-basis point decrease in Average Daily Occupancy to 95.2%. As of October 31, 2023, occupancy had increased to 97.3%.
• New lease rents increased 8.0% and Aimco retained 58.3% of residents whose leases were expiring during the quarter at rents 4.5% higher, on average, than the previous lease.
• The median annual household income of new residents was $133,000 in the third quarter 2023, representing a rent-to-income ratio of 19.5%.
• Expenses in the third quarter 2023 were up 3.5% year-over-year primarily from higher insurance costs, during the quarter we received favorable real estate tax valuations in Chicago largely offsetting the impact of the prior unfavorable real estate tax valuation in Miami, which has since been successfully appealed.
• NOI in the third quarter 2023 was $27.0 million, up 7.6% year-over-year. Aimco raised full year 2023 NOI guidance by more than 100 basis points at the midpoint, to a range of 9.00% to 9.75%.

Balance Sheet and Financing Activity

Aimco is highly focused on maintaining a strong balance sheet, including ample liquidity at all times. As of September 30, 2023, Aimco had access to $320.2 million, including $95.7 million of cash on hand, $20.2 million of restricted cash, $54.3 million in a short-term treasury investment, and the capacity to borrow up to $150.0 million on its revolving credit facility.

Aimco’s net leverage as of September 30, 2023, was as follows:

	as of September 30, 2023
Proportionate, $ in thousands	Amount			Weighted Avg. Maturity (Yrs.) [1]
Total non-recourse fixed rate debt	$	777,480			7.4
Total non-recourse floating rate debt		101,154			1.6
Total non-recourse construction loan debt		238,800			2.1
Cash and restricted cash [2]		(114,469	)
Net Leverage	$	1,002,965

[1]	Weighted average maturities presented exclude contractual extension rights.
[2]	On September 30, 2023, Aimco had $54.3 million invested in a four-month treasury bill that was excluded from cash in accordance with U.S. GAAP.

As of September 30, 2023, 100% of Aimco's total debt was either fixed rate or hedged with interest rate cap protection and, including contractual extensions, Aimco has only $19.9 million, or less than 2% of its total debt, maturing over the next 30 months.

Aimco Credit Facility

• In October, subsequent to quarter end, Aimco exercised an option to extend the duration of its revolving credit facility for twelve months. Aimco will now retain the capacity to borrow up to $150.0 million through December 2024 and has one remaining 12-month extension option.

Public Market Equity

Common Stock Repurchases

• In the third quarter, Aimco repurchased 1.7 million shares of its common stock at a weighted average price of $7.52 per share. In 2023, through October 31, Aimco repurchased more than 5.3 million shares of its common stock at a weighted average price of approximately $7.40 per share.
• Subsequent to quarter end, the Aimco Board of Directors increased the number of shares authorized for repurchase to 30 million, doubling the size of the Board's previous authorization.

Commitment to Enhance Stockholder Value

• The Aimco Board of Directors, in coordination with management, remains intently focused on maximizing and unlocking value for Aimco stockholders. During the ongoing review, the Board continues to engage regularly with several leading advisory firms, including Morgan Stanley & Co. LLC, to review current market conditions.

Aimco believes it is well positioned for long term growth given its high-quality development pipeline and investment platform, diversified portfolio of core and opportunistic multifamily assets, and long-duration, low-cost balance sheet. As such, the timing of any broad strategic action to unlock stockholder value will take into consideration a host of factors, including the health and stability of both the financial and capital markets.

There can be no assurance that the ongoing review will result in any particular transaction or transactions or other strategic changes or outcomes and the timing of any such event is similarly uncertain. The Company does not intend to disclose or comment on developments related to the foregoing unless or until it determines that further disclosure is appropriate or required.

2023 Outlook

		2023 Outlook
$ in millions (except per share amounts), Square Feet in millions	Third Quarter 2023 YTD	2023 Full Year Forecast		Prior Full Year Forecast
Net income (loss) per share – diluted	$(0.10)		$(0.21) - $(0.11)		$(0.28) - $(0.18)
Active Developments and Redevelopments
Total Direct Costs of Projects Underway [1]	$814		$773		$773
Direct Project Costs [2]	$164.2		$200 - $210		$175 - $185
Other Capitalized Costs	$26.8		$36 - $38		$36 - $38
Construction Loan Draws [2]	$132.5		$190 - $200		$170 - $175
JV Partner Equity Funding	$0.2		$0.4		$0.4
AIV Equity Funding [3]	$49.5		~$50		~$50
Pipeline Projects
Pipeline Size Gross Square Feet [4]	14.1		14.1		14.1
Pipeline Size Multifamily Units [4]	6,544		6,544		6,544
Pipeline Size Commercial Sq Ft [4]	1.7		1.7		1.7
Planning Costs	$13.7		$16 - $18		$20 - $25
Real Estate Transactions
Acquisitions	None		None		None
Dispositions [5]	$91.5		$98.5		$98.5
Operating Properties
Revenue Growth, before utility reimbursements	9.0%		8.25% - 8.75%		7.75% - 8.75%
Operating Expense Growth, net of utility reimbursements [6]	6.6%		5.75% - 6.75%		8.0% - 9.0%
Net Operating Income Growth	10.0%		9.00% - 9.75%		7.5% - 9.0%
Recurring Capital Expenditures	$9.2		$12 - $13		$11 - $13
General and Administrative	$24.5		$33 - $34		$33 - $34
Leverage
Interest Expense, net of capitalization [7]	$19.2		$28 - $30		$33 - $35

[1]	Includes land or leasehold value, calculated as the quarterly average and is reduced from prior guidance due to the accelerated stabilization of The Hamilton in 3Q 2023 and its corresponding removal from projects underway in 4Q 2023.
[2]	Direct project costs and construction loan draws increased due primarily to timing and an acceleration of investment to optimize construction activities ahead of winter.
[3]	AIV equity funding at the end of the third quarter 2023 was ahead of the full year target due to the timing of partnership reimbursements.
[4]	Includes pipeline projects as presented on Supplemental Schedule 5b, calculated as the quarterly average.
[5]	Dispositions include the gross proceeds from the partial sale of the Parkmerced mezzanine investment and the monetization of the related swaption. Full year guidance includes the additional $7 million payment expected by the end of the year. Aimco may receive additional proceeds if the buyer chooses to exercise its option to purchase the remaining Aimco interest in 2023.
[6]	Full year operating expense guidance decreased by 225 basis points at the midpoint from prior guidance due to favorable tax bills in Chicago, Illinois and a successful real estate tax appeal in Miami, Florida.
[7]	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 and 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 can leverage the in-depth local market knowledge of each regional leader, creating a comparative advantage when sourcing, evaluating, and executing investment opportunities.

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 and 2024 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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
REVENUES:
Rental and other property revenues	$	47,701		$	47,683		$	137,643		$	148,375
OPERATING EXPENSES:
Property operating expenses		18,328			17,455			54,648			56,384
Depreciation and amortization		17,804			85,438			51,106			143,420
General and administrative expenses [1]		8,198			10,809			24,487			29,243
Total operating expenses		44,330			113,702			130,241			229,047
Interest income [2]		2,486			915			7,022			2,036
Interest expense [3]		(8,252	)		(9,719	)		(27,633	)		(65,865	)
Mezzanine investment income (loss), net		(757	)		8,423			(1,013	)		24,990
Realized and unrealized gains (losses) on interest rate options		955			9,209			3,280			48,005
Realized and unrealized gains (losses) on equity investments		(1,066	)		(2,145	)		165			20,152
Gains on dispositions of real estate		-			75,539			1,878			170,004
Lease modification income		-			1,577			-			206,963
Income from unconsolidated real estate partnerships		320			159			614			459
Other income (expense), net		(1,593	)		(1,329	)		(6,490	)		(4,238	)
Income (loss) before income tax benefit		(4,536	)		16,610			(14,775	)		321,834
Income tax benefit (expense)		6,210			17,563			10,823			(24,338	)
Net income (loss)		1,674			34,173			(3,952	)		297,496
Net (income) loss attributable to redeemable noncontrolling interests in consolidated real estate partnerships		(3,610	)		(2,907	)		(10,460	)		(5,446	)
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships		(447	)		(240	)		(1,060	)		(585	)
Net (income) loss attributable to common noncontrolling interests in Aimco Operating Partnership		123			(1,554	)		775			(14,648	)
Net income (loss) attributable to Aimco	$	(2,260	)	$	29,472		$	(14,697	)	$	276,817
Net income (loss) attributable to common stockholders per share – basic	$	(0.02	)	$	0.19		$	(0.10	)	$	1.82
Net income (loss) attributable to common stockholders per share – diluted	$	(0.02	)	$	0.19		$	(0.10	)	$	1.81
Weighted-average common shares outstanding – basic		143,299			149,611			144,431			149,706
Weighted-average common shares outstanding – diluted		143,299			151,197			144,431			151,076

[1]	General and administrative expenses decreased in the three and nine months ended September 30, 2023 from the same periods ending September 30, 2022, due primarily to a decrease in expenses for consulting services paid to AIR Communities; this service agreement concluded on December 31, 2022.
[2]	Interest income increased in the three and nine months ended September 30, 2023 from the same periods ending September 30, 2022, due primarily to increased interest earned on greater amounts of invested cash at higher rates in the current year versus the prior year.
[3]	Interest expense decreased in the three and nine months ended September 30, 2023 from the same periods ending September 30, 2022, due primarily to the prepayment of debt during 2022.
See Item 2 of Aimco's Third Quarter 2023 SEC Form 10-Q, filed November 6, 2023, for additional discussion and analysis of Aimco's operations.

Consolidated Balance Sheets

(in thousands) (unaudited)

	September 30,			December 31,
	2023			2022
Assets
Buildings and improvements	$	1,546,503		$	1,322,381
Land		638,007			641,102
Total real estate		2,184,510			1,963,483
Accumulated depreciation		(564,686	)		(530,722)
Net real estate		1,619,824			1,432,761
Cash and cash equivalents		95,680			206,460
Restricted cash		20,205			23,306
Mezzanine investments		158,173			158,558
Interest rate options		9,161			62,387
Unconsolidated real estate partnerships		22,667			15,789
Notes receivable		39,802			39,014
Right-of-use lease assets - finance leases		109,311			110,269
Other assets, net		176,043			132,679
Total assets	$	2,250,866		$	2,181,223
Liabilities and Equity
Non-recourse property debt, net	$	869,586		$	929,501
Construction loans, net		250,630			118,698
Total indebtedness		1,120,216			1,048,199
Deferred tax liabilities		112,068			119,615
Lease liabilities - finance leases		117,666			114,625
Mezzanine investment - participation sold		34,402			—
Accrued liabilities and other		111,049			106,600
Total liabilities		1,495,401			1,389,039
Redeemable noncontrolling interests in consolidated real estate partnerships		170,201			166,826
Equity:
Common Stock		1,420			1,466
Additional paid-in capital		472,261			496,482
Retained earnings		35,207			49,904
Total Aimco equity		508,888			547,852
Noncontrolling interests in consolidated real estate partnerships		48,703			48,294
Common noncontrolling interests in Aimco Operating Partnership		27,673			29,212
Total equity		585,264			625,358
Total liabilities and equity	$	2,250,866		$	2,181,223