Apartment Investment and Management Company Announces Third Quarter 2008 Results
By:
PR Newswire
October 31, 2008 at 07:00 AM EDT
DENVER, Oct. 31 /PRNewswire-FirstCall/ -- SUMMARY FINANCIAL RESULTS: Apartment Investment and Management Company (Aimco) (NYSE: AIV) today announced results for the third quarter 2008. In accordance with Generally Accepted Accounting Principles (GAAP), all previously reported share and per share data have been adjusted to take into account the special dividends paid on January 30, 2008 and August 29, 2008, which resulted in the issuance of approximately 4.6 million and 5.7 million additional shares of Aimco's Class A Common Stock, respectively.
-- Net income attributable to common stockholders for the quarter was
$163.6 million, compared with a loss of $21.4 million for the
third quarter 2007. Higher results were driven primarily by
higher gains on dispositions of real estate of $205.4 million,
higher investment management income, net of tax, of $14.2 million
and higher property net operating income of $6.9 million. These
items were partially offset by lower income from discontinued
operations (excluding gains on dispositions of real estate) of
$18.2 million, higher depreciation and amortization of $9.8
million, higher general and administrative expenses of $6.7
million and lower interest income of $5.4 million. Earnings per
share (EPS) attributable to common stockholders was $1.81 on a
diluted basis, compared with a loss of $0.20 per share in the
third quarter 2007.
-- Funds from operations (diluted) (FFO) is a non-GAAP financial
measure defined in the glossary in the Supplemental Information
(the Glossary).
-- FFO calculated in accordance with the definition prescribed
by the National Association of Real Estate Investment Trusts
(NAREIT) was $75.9 million, or $0.82 per share, compared with
$80.2 million, or $0.74 per share, in the third quarter 2007.
-- FFO, before the deduction of impairment losses of $0.04 per
share and the benefit of net preferred redemption gains of
$0.02 per share, was $78.3 million, or $0.84 per share.
-- Before the $0.06 effect of casualty losses associated with
Hurricane Ike and Tropical Storm Fay, the deduction of
impairment losses, and the benefit of net redemption gains,
FFO was $0.90 per share, or $0.07 per share higher than the
mid-point of guidance as restated for the August 29, 2008
special dividend. Higher investment management income, net
of tax, contributed $0.14 per share to the FFO outperformance
and Same Store operating results contributed an additional
$0.02 per share. Negative variances included higher property
management expenses, general and administrative expenses and
provisions for loan losses.
-- Adjusted funds from operations (diluted) (AFFO; a non-GAAP financial
measure defined in the Glossary) was $51.8 million, or $0.57 per share,
compared with $55.9 million, or $0.52 per share, in the third quarter
2007. AFFO includes deductions of $0.27 and $0.25 per share for
capital replacement expenditures in the third quarter 2008 and the
third quarter 2007, respectively.
Diluted Per Share Results
THIRD QUARTER
2008 2007*
Earnings - EPS $1.81 ($0.20)
Funds from operations - FFO $0.82 $0.74
FFO before impairment losses and net
preferred redemption gains $0.84 $0.77
Adjusted funds from operations - AFFO $0.57 $0.52
* Adjusted to reflect special dividends paid in 2008, see Special Supplement following the Outlook schedule in this earnings release for additional details. Management Comments Chairman and Chief Executive Officer Terry Considine comments: "We had a solid third quarter. Property operations produced conventional same-store net operating income growth of 4.3% when compared to the third quarter 2007. Conventional redevelopment leased approximately 1,700 units at substantial increases to rents in place prior to redevelopment. Our redevelopment inventory is down, which will reduce future 'drag' from units held vacant. Our transactions teams successfully executed approximately $816 million in property sales during the quarter generating $348 million in net proceeds to Aimco to reduce leverage and fund investments, including redevelopment and share repurchases. We enjoy substantial liquidity and our occupancies are at 95%. Looking forward, we recognize that the environment has become more challenging. Accordingly, we are focused on serving and retaining customers; controlling costs and capital spending; building cash and reducing leverage; and recycling capital to our target markets." Chief Financial Officer Tom Herzog adds: "Our liquidity remains sound and we continue to maintain a safe balance sheet. Our full year FFO guidance is $3.06 to $3.16 per share, which represents guidance provided in our second quarter earnings release with adjustments for the $0.21 per share impact of the August 29th special dividend and $0.06 per share effect of casualty losses associated with Hurricane Ike and Tropical Storm Fay. When taking into consideration these two adjustments, our full year FFO guidance is unchanged." Property Operations Conventional Real Estate Operations Aimco is among the nation's largest owners and operators of market rate apartment communities. Conventional real estate operations consist of Aimco's diversified portfolio of market rate apartment communities. At the end of the third quarter 2008, this portfolio included 358 properties with 105,280 units in which Aimco had a weighted average ownership of 90%. During the third quarter 2008, conventional real estate operations generated net operating income of $147.2 million. "Same Store" Results In the third quarter 2008, the Same Store portfolio included 255 communities with 71,319 Effective Units (see the Glossary) based on Aimco's weighted average ownership of 91% (See Supplemental Schedules 6a through 6c). Comparing Same Store results in the third quarter 2008 with the third quarter 2007, total revenue increased $4.7 million, or 2.3%. The increase in revenue was primarily generated by higher average rent, up $13 per unit, or 1.4%, from $924 per unit to $937 per unit, and higher occupancy, which was up 40 basis points from 94.7% to 95.1%. Same Store expenses of $82.3 million decreased $0.5 million, or 0.6%, compared with the prior year, primarily due to decreases in several areas including personnel and related expenses, marketing and contract services. These decreases were partially offset by increases in utilities, repairs and maintenance, real estate taxes and insurance. Same Store portfolio net operating income was $124.7 million for the third quarter 2008, up 4.3% from the third quarter 2007.
Same Store Operating Results
THIRD QUARTER
Year-over-year Sequential
2008 2007 Variance 2nd Qtr Variance
Same Store Operating
Measures
Average Physical
Occupancy 95.1% 94.7% 0.4% 94.8% 0.3%
Average Rent Per
Unit $937 $924 1.4% $934 0.3%
Total Same Store ($mm)
Revenue $207.0 $202.3 2.3% $205.5 0.7%
Expenses (82.3) (82.8) -0.6% (80.5) 2.2%
NOI $124.7 $119.5 4.3% $125.0 -0.2%
Comparing Same Store results on a sequential basis, total revenue increased $1.5 million, or 0.7%, in the third quarter 2008 compared with the second quarter 2008, driven by a $3 per unit increase in average rental rates and an increase in occupancy of 30 basis points. Expenses increased $1.8 million, or 2.2%, primarily due to higher turnover costs, personnel expenses, real estate taxes and insurance, partially offset by lower utilities and contract services. Net operating income decreased $0.3 million, or 0.2%, on a sequential basis. Affordable Real Estate Operations Aimco is among the nation's largest owners and operators of affordable apartment communities. At the end of the third quarter 2008, Aimco's owned affordable portfolio included 305 properties with 35,805 units in which Aimco had an average ownership of 51%. During the third quarter 2008, affordable property operations generated net operating income of $21.1 million. Average month-end occupancy for the affordable portfolio increased 30 basis points from 97.4% for the third quarter 2007 to 97.7 % for the third quarter 2008, while average rent per unit increased 3.5% from $744 to $770 per unit. Investment Management Investment management includes portfolio strategy, capital allocation, joint ventures, tax credit syndication, acquisitions, dispositions and other transaction activities. Within our owned portfolio, we refer to these activities as Portfolio Management, and their benefit is seen in property operating results and in investment gains. For affiliated partnerships, we refer to these activities as Asset Management for which we are separately compensated through fees paid by third party investors. Investment management income includes the fees earned for providing asset management services to third party investors, syndication fees and deferred income related to tax credit activities, and portfolio management income earned through investment gains on our owned assets. Consolidated investment management income, net of tax, was $29.9 million in the third quarter 2008 compared to $15.7 million in the third quarter 2007. See Supplemental Schedule 11 for additional information on investment management income. Portfolio Management Portfolio management includes the ongoing allocation of investment capital to meet our geographic and product type goals. Our geographic allocation strategy focuses on the largest 20 U.S. markets as measured by total market capitalization. We believe these markets to be deep, relatively liquid and possessing desirable long-term growth characteristics. They are primarily coastal markets, and also include a number of Sun Belt cities and Chicago, Illinois. We may also invest in other markets on an opportunistic basis. As we implement this strategy, we expect to reduce our investment in markets outside the largest 20 markets and to increase our investment in the largest 20 markets both by making acquisitions and through redevelopment spending. See Supplemental Schedules 6 and 7 for additional details regarding Aimco's portfolio allocation. ACQUISITIONS -- During the third quarter 2008, Aimco had no significant acquisition activity. DISPOSITIONS -- Aimco regularly reviews its portfolio to identify properties that do not meet its long-term investment criteria. In the third quarter 2008, Aimco sold 40 conventional properties and five affordable properties with 9,493 and 1,196 units, respectively, for $815.9 million in gross proceeds (Aimco share $653.5 million). Aimco's share of net proceeds after repayment of existing property debt and transaction costs was $347.9 million. Aimco exited three markets during the third quarter: Hartford, CT, Las Vegas, NV and Tucson, AZ. Aimco's property dispositions resulted in gains on dispositions of real estate (including gains on dispositions of unconsolidated real estate and other and gains within discontinued operations) of $228.7 million for the third quarter 2008, compared with gains of $23.2 million for the third quarter 2007. See Supplemental Schedule 8 for additional information on acquisition and disposition activity. Redevelopment Aimco actively reinvests in and upgrades its portfolio through property redevelopments. At the end of the third quarter 2008, Aimco had 43 active conventional redevelopment projects and 18 active tax credit redevelopment projects in process. Aimco's share of total redevelopment expenditures was $90.2 million during the third quarter 2008. Conventional redevelopment project expenditures totaled $54.2 million and tax credit redevelopment project expenditures totaled $36.0 million for the quarter. Further information on redevelopment projects is provided in Supplemental Schedule 10. Additional Financial Information INTEREST INCOME -- Consolidated interest income was $5.3 million for the third quarter 2008 compared with $10.8 million for the third quarter 2007. Interest income is earned in part from money market and interest bearing accounts as well as on notes receivable from unconsolidated partnerships and non-affiliates. The decrease in interest income of $5.5 million is primarily the result of lower interest rates. DEBT ACTIVITY -- During the nine months ended September 30, 2008, Aimco closed loans on 53 properties generating gross proceeds of $509.1 million at a weighted average interest rate of 5.45%. This included refinancing $190.9 million in existing mortgage loans. After repayment of existing property debt, transaction costs and distributions to limited partners, Aimco's share of net proceeds was $279.4 million. As of September 30, 2008, Aimco had $6.9 billion of consolidated debt outstanding, which consisted of: $5.3 billion of fixed rate mortgage debt; $1.5 billion of floating rate property and corporate debt; and $81.5 million of other borrowings. In addition, Aimco had $73.0 million of floating rate preferred stock outstanding. The fixed and floating rate property debt is primarily non-recourse. Aimco's FFO exposure to changes in floating interest rates is mitigated by $609.0 million of tax-exempt bonds with rates tied to the Securities Industry and Financial Markets Association Municipal Swap Index (SIFMA) (previously named the Bond Market Association Index), which has historically moved at approximately 0.69% for a 1.00% change in LIBOR, although a dislocation in this relationship occurred in the latter part of the third quarter. Aimco's exposure is further offset by floating rate assets, such as cash and notes receivable, and interest capitalized on entitlement and redevelopment properties. Based on Aimco's proportionate share of quarter-end balances (see Supplemental Schedule 3), Aimco estimates its sensitivity to a 100 basis point change in LIBOR to be approximately $0.015 per share per quarter. See Supplemental Schedule 5 for more detail on debt characteristics and activity. INTEREST EXPENSE -- Consolidated interest expense was $94.6 million for the third quarter 2008 compared with $92.7 million for the third quarter 2007. The $1.9 million increase in interest expense is the result of higher balances on property debt, partially offset by lower weighted average interest rates. STOCKHOLDERS' EQUITY -- During the third quarter 2008, Aimco repurchased approximately 2.9 million shares of its Class A Common Stock at an average price of $34.45 per share for a total cost of $100.0 million. During the month of October 2008, Aimco repurchased approximately 2.0 million shares of its Class A Common Stock at an average price of $24.77 per share for a total cost of $50.0 million. Since Aimco began repurchasing shares during the third quarter 2006, the company has repurchased approximately 23.7 million shares, or approximately 24% of shares outstanding on June 30, 2006, at an average price of $38.84 per share for a total cost of $919.6 million. Although for financial statement purposes GAAP requires that historical share repurchases be restated to reflect shares issued in connection with the special dividends paid on January 30, 2008 and August 29, 2008, the number of shares repurchased as described above has not been adjusted. We are currently authorized to repurchase approximately 19.3 million additional shares. Repurchases may be made from time to time in the open market or in privately negotiated transactions. Also during the third quarter 2008, Aimco repurchased 54 shares, or $27.0 million in liquidation preference, of our Series A Community Reinvestment Act Perpetual Preferred Stock, $0.01 par value per share, for cash totaling $24.8 million. The $2.2 million excess of the carrying value over the redemption price, offset by $0.7 million of issuance costs, represents a net preferred stock redemption gain. Consistent with the treatment of preferred stock redemption costs, these amounts are reflected as an adjustment to NAREIT FFO. See Supplemental Schedule 1 for more detail on the components of FFO and AFFO. G&A -- General and administrative expenses for the third quarter 2008 of $27.3 million increased $6.7 million when compared with the third quarter 2007 primarily due to personnel and related costs and timing of certain expenditures. Outlook For the fourth quarter 2008, FFO, before impairment losses and preferred redemption charges, is expected to be in a range from $0.71 to $0.81 per share and we are adjusting our full year FFO guidance from a range of $3.33 to $3.43 per share to a range of $3.06 to $3.16 per share to take into consideration additional shares issued in connection with the August 29, 2008 special dividend and casualty losses associated with Hurricane Ike and Tropical Storm Fay. Please refer to the Outlook Schedule, which follows the Consolidated Financial Statements in this release, for more detail on fourth quarter and full year 2008 guidance. Dividends on Common Stock As announced on October 16, 2008, the Aimco Board of Directors declared a special dividend of $1.80 per share of Class A Common Stock, to be paid on December 1, 2008, to stockholders of record on October 27, 2008. A portion of the special dividend in the amount of $0.60 per share represents payment of the regular dividend for the quarter ended September 30, 2008, and a portion represents an additional dividend payment in the amount of $1.20 per share associated with taxable gains arising from property dispositions in 2008. The special dividend will be payable in a combination of cash and additional shares of Class A Common Stock. The aggregate amount of cash payable to stockholders in the special dividend, other than cash payable in lieu of fractional shares, will not exceed $53.2 million. Subject to this limitation on the aggregate amount of cash payable, stockholders may elect to receive payment of the special dividend in cash or in shares, except that cash will be paid in lieu of fractional shares. Stockholders who do not make an election will receive $0.60 per share in cash. Stockholders who elect to receive the special dividend in all cash will receive payment in the form of at least $0.60 per share in cash. A prospectus and election form was filed with the Securities and Exchange Commission on October 28, 2008 and mailed to stockholders of record as of October 27, 2008. The prospectus describes in detail the terms of the special dividend, including the ability of stockholders to elect to receive the special dividend in the form of cash or shares of Aimco's Class A Common Stock, and a limitation on the aggregate amount of cash to be included in the special dividend. The cash or stock election must be exercised prior to 5:00 p.m. (EDT) on November 19, 2008. Aimco expects the special dividend to be a taxable dividend to its stockholders, without regard to whether a particular stockholder receives the dividend in the form of cash or shares. It therefore allows Aimco to satisfy its REIT distribution requirement while preserving cash for other corporate purposes, including debt reduction and share repurchases. Share and per share amounts disclosed in the accompanying earnings release and supplemental schedules have not been retroactively adjusted for the effect of shares to be issued pursuant to this special dividend, as the number of shares is not presently determinable. Such retroactive adjustments will be reflected in earnings releases and financial information prepared subsequent to the payment date. Cash dividends declared on Class A Common Stock attributable to the nine months ended September 30, 2008, totaled $1.80 per share, or 98% of AFFO (undiluted) and 69% of FFO (diluted), on a per share basis, and a 6.9% cash yield based on the $35.02 closing price of Aimco's Class A Common Stock on September 30, 2008. Cash dividends attributable to the nine months ended September 30, 2008, include that portion of the October 2008 special dividend that represents payment of the regular dividend for the third quarter 2008. Earnings Conference Call Please join Aimco management for the Third Quarter 2008 earnings conference call to be held Friday, October 31, 2008, at 1:00 p.m. Eastern time. You may join the conference call through an Internet audiocast by clicking on the Webcast link on Aimco's website at http://www.aimco.com/CorporateInformation/Overview.aspx. Alternatively, you may join the conference call via telephone by dialing 800.860.2442, or 412.858.4600 for international callers, and indicating that you wish to join the Apartment Investment and Management Company Third Quarter 2008 earnings conference call. If you are unable to join the live conference call, you may access the conference call replay for seven days by dialing 877.344.7529, or 412.317.0088 for international callers, passcode 423670, or you may access the audiocast replay by clicking on the Webcasts link on Aimco's website at http://www.aimco.com/CorporateInformation/About/Financial/news.aspx. Supplemental Information The full text of this release and the Supplemental Information referenced in this release is available on Aimco's Website at the link http://www.aimco.com/CorporateInformation/About/Financial/QEarnRelease.aspx Forward-looking Statements This earnings release and Supplemental Information contain forward-looking statements, including statements regarding projected results and specifically forecasts of fourth quarter and full year 2008 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, rent levels and Same Store results and Aimco's ability to close transactions necessary to generate fee income as anticipated. 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 that are beyond the control of Aimco including, without limitation: natural disasters and severe weather such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; financing risks, including the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which Aimco operates and competition for tenants in such markets; insurance risk; acquisition and development risks, including failure of such acquisitions to perform in accordance with projections; the timing of acquisitions and dispositions; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; 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 notes thereto, as well as the risk factors described in Aimco's Annual Report on Form 10-K for the year ended December 31, 2007, 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 any securities for sale. About Aimco Aimco is a real estate investment trust headquartered in Denver, Colorado that owns and operates a geographically diversified portfolio of apartment communities. Aimco, through its subsidiaries and affiliates, is one of the largest owners and operators of apartment communities in the United States with 1,067 properties, including 178,083 apartment units, and serves approximately 750,000 residents each year. Aimco's properties are located in 46 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 http://www.aimco.com.
GAAP Income Statements
Consolidated Statements of Income
(in thousands, except per share data) (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
REVENUES:
Rental and other property
revenues $361,996 $345,197 $1,070,604 $1,023,390
Property management
revenues, primarily from
affiliates 1,227 1,824 4,746 5,192
Asset management and tax
credit revenues 32,755 12,747 83,782 39,554
Total revenues 395,978 359,768 1,159,132 1,068,136
OPERATING EXPENSES:
Property operating expenses 172,705 162,829 506,546 473,446
Property management
expenses 1,560 1,333 4,018 5,268
Investment management
expenses 5,842 5,812 15,859 15,799
Depreciation and
amortization 120,771 110,946 343,636 318,691
General and administrative
expenses 27,332 20,663 75,820 66,763
Other (income) expenses,
net (3,944) (4,953) 7,316 (5,776)
Total operating
expenses 324,266 296,630 953,195 874,191
Operating income 71,712 63,138 205,937 193,945
Interest income 5,349 10,765 14,248 30,551
(Provision for) recoveries of
losses on notes receivable (2,093) 153 (3,786) (2,124)
Interest expense (94,611) (92,699) (285,723) (271,461)
Deficit distributions to
minority partners (17,798) (11,640) (22,981) (13,998)
Equity in (losses) earnings of
unconsolidated real estate
partnerships (1,559) 348 (3,431) (1,710)
Provision for real estate
impairment losses (2,319) - (2,319) -
Gain on dispositions of
unconsolidated real estate
and other 100,359 5,841 100,345 7,546
Gain on extinguishment of debt - - - 19,373
Income (loss) before minority
interests and discontinued
operations 59,040 (24,094) 2,290 (37,878)
Minority interests:
Minority interest in
consolidated real estate
partnerships 11,355 381 15,563 (1,923)
Minority interest in Aimco
Operating Partnership,
preferred [1] (1,962) (1,782) (5,669) (5,346)
Minority interest in Aimco
Operating Partnership,
common [1] (4,438) 4,080 2,376 8,996
Total minority interests 4,955 2,679 12,270 1,727
Income (loss) from continuing
operations 63,995 (21,415) 14,560 (36,151)
Income from discontinued
operations, net [3] 111,804 19,074 392,732 78,343
Net income (loss) 175,799 (2,341) 407,292 42,192
Net income attributable to
preferred stockholders 12,224 19,020 40,102 51,715
Net income (loss) attributable
to common stockholders $163,575 $(21,361) $367,190 $(9,523)
Weighted average common shares
outstanding [2] 89,650 106,208 93,463 106,888
Weighted average common shares
and common share
equivalents outstanding [2] 90,266 106,208 93,463 106,888
Earnings (loss) per common
share - basic [2]:
Income (loss) from
continuing operations (net
of income
attributable to preferred
stockholders) $0.58 $(0.38) $(0.27) $(0.82)
Income from discontinued
operations 1.24 0.18 4.20 0.73
Net income (loss)
attributable to common
stockholders $1.82 $(0.20) $3.93 $(0.09)
Earnings (loss) per common
share - diluted [2]:
Income (loss) from
continuing operations (net
of income
attributable to preferred
stockholders) $0.57 $(0.38) $(0.27) $(0.82)
Income from discontinued
operations 1.24 0.18 4.20 0.73
Net income (loss)
attributable to common
stockholders $1.81 $(0.20) $3.93 $(0.09)
GAAP Income Statements (continued)
Notes to Consolidated Statements of Income
[1] The Aimco Operating Partnership is AIMCO Properties, L.P., the
operating partnership in Aimco's UPREIT structure.
[2] Weighted average share, common share equivalent and earnings per
share amounts for the periods presented above have been retroactively
adjusted for the effect of shares of common stock issued pursuant to
the special dividends paid in January and August 2008.
[3] Income from discontinued operations of consolidated properties
consists of the following (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
Rental and other property
revenues [4] $31,044 $76,902 $167,450 $246,806
Property operating expenses [4] (13,882) (41,210) (81,695) (124,201)
Depreciation and amortization (7,238) (18,773) (39,397) (59,936)
Other expenses, net (4,967) (1,771) (6,502) (4,099)
Operating income 4,957 15,148 39,856 58,570
Interest income 420 517 974 1,662
Interest expense (6,194) (15,038) (31,453) (49,467)
Gain on extinguishment of debt - - - 22,852
Minority interest in
consolidated real estate
partnerships [4] 298 2,126 855 (1,427)
Income (loss) before gain
on dispositions of real
estate, impairment
losses, deficit
distributions to
minority partners,
income taxes and
minority interest in
Aimco Operating
Partnership (519) 2,753 10,232 32,190
Gain on dispositions of real
estate, net of minority
partners' interest 128,301 17,406 443,795 57,296
Real estate impairment losses,
net (1,798) - (8,334) (783)
Recovery of deficit
distributions (deficit
distributions) to minority
partners 909 (282) 8,325 (726)
Income tax arising from
disposals (4,027) 1,151 (21,091) (1,610)
Minority interest in Aimco
Operating Partnership (11,062) (1,954) (40,195) (8,024)
Income from discontinued
operations, net $111,804 $19,074 $392,732 $78,343
[4] Income for the three months ended September 30, 2008, attributable to
properties classified as held for sale at September 30, 2008,
includes rental and other property revenues, property operating
expenses and minority interest in consolidated real estate
partnerships of $14.9 million, $6.9 million and $0.1 million
(benefit), respectively.
GAAP Balance Sheets
Consolidated Balance Sheets
(in thousands)
(unaudited)
September 30, 2008 December 31, 2007
ASSETS
Buildings and improvements $8,752,890 $8,302,059
Land 2,440,154 2,397,070
Accumulated depreciation (2,822,045) (2,527,393)
Total real estate 8,370,999 8,171,736
Cash and cash equivalents 219,047 210,461
Restricted cash 306,999 314,890
Accounts receivable 91,703 71,463
Accounts receivable from affiliates 32,842 34,958
Deferred financing costs 61,782 68,548
Notes receivable from unconsolidated
real estate partnerships 30,326 35,186
Notes receivable from non-affiliates 150,460 143,054
Investment in unconsolidated real
estate partnerships 114,493 117,217
Other assets 202,029 207,857
Deferred income tax asset, net 12,706 14,426
Assets held for sale 303,829 1,216,736
Total assets $9,897,215 $10,606,532
LIABILITIES AND STOCKHOLDERS' EQUITY
Property tax-exempt bond financing $792,280 $779,737
Property loans payable 5,511,840 5,271,044
Term loans 475,000 475,000
Credit facility 5,100 -
Other borrowings 81,511 75,057
Total indebtedness 6,865,731 6,600,838
Accounts payable 36,477 56,792
Accrued liabilities and other 395,110 449,485
Deferred income 190,617 200,714
Security deposits 45,840 42,912
Liabilities related to assets held
for sale 267,890 951,046
Total liabilities 7,801,665 8,301,787
Minority interest in consolidated
real estate partnerships 401,351 441,778
Minority interest in Aimco Operating
Partnership 109,533 113,263
Stockholders' equity:
Perpetual preferred stock 696,500 723,500
Class A Common Stock 902 961
Additional paid-in capital 2,850,649 3,049,417
Notes due on common stock purchases (4,016) (5,441)
Distributions in excess of earnings (1,959,369) (2,018,733)
Total stockholders' equity 1,584,666 1,749,704
Total liabilities and
stockholders' equity $9,897,215 $10,606,532
Outlook and Forward Looking Statement
Fourth Quarter and Full Year 2008
(unaudited)
This Earnings Release and Supplemental Information contain forward-looking statements, including statements regarding projected results and specifically forecasts of fourth quarter and full year 2008 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, rent levels and Same Store results and Aimco's ability to close transactions necessary to generate transactional income as anticipated. 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 that are beyond the control of Aimco including, without limitation: natural disasters and severe weather such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; financing risks, including the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets; insurance risk; acquisition and development risks, including failure of such acquisitions to perform in accordance with projections; the timing of acquisitions and dispositions; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; 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 notes thereto, as well as the risk factors described in Aimco's Annual Report on Form 10-K for the year ended December 31, 2007, 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.
Fourth Quarter 2008 Full Year 2008
GAAP earnings per
share [1][4] -$0.65 to -$0.55 $3.48 to $3.58
FFO per share [2][5] $0.70 to $0.80 $3.06 to $3.16
AFFO per share [5][6] [3] $2.10 to $2.20
2008 Same Store
operating assumptions:
Weighted average
daily occupancy 94% to 95% 94% to 95%
NOI change - sequential 0.0% to 0.6%
NOI change - 2008 vs. 2007 2.0% to 3.0% 3.25% to 3.75%
[1] Aimco's earnings per share guidance does not include estimates for
(i) gains on dispositions or impairment losses due to the
unpredictable timing of transactions, (ii) gains or losses on early
repayment of debt, (iii) preferred stock redemption related costs or
(iv) potential future share repurchases beyond October or special
dividends.
[2] FFO per share represents FFO before impairment losses and preferred
redemption related charges or gains. Full year 2008 FFO per share
represents guidance provided in our second quarter earnings release
with adjustments for the impact of the August 29, 2008 special
dividend and casualty losses associated with Hurricane Ike and
Tropical Storm Fay. When taking into consideration these two
adjustments, our full year FFO guidance is unchanged.
[3] Outlook for AFFO is provided on an annual basis. AFFO per share has
been adjusted for the impact of the August 29, 2008 stock dividend
and casualty losses associated with Hurricane Ike and Tropical Storm
Fay.
[4] The GAAP earnings per share is calculated based on 87.4 million and
92.0 million weighted average common shares (diluted) for fourth
quarter 2008 and full year 2008, respectively. These share counts
include approximately 10.3 million shares issued in connection with
the January and August 2008 special dividends, and exclude
approximately 2.0 million shares repurchased in October. Weighted
average common shares (diluted) for the fourth quarter 2008 and full
year 2008 do not include shares to be issued on December 1, 2008, in
connection with the special dividend announced on October 16, 2008,
as the number of shares to be issued will not be determinable until
the valuation dates of November 20 and 21, 2008, have passed.
[5] FFO per share and AFFO per share are calculated based on 87.7 million
and 94.1 million weighted average common shares (diluted) for the
fourth quarter 2008 and full year 2008, respectively. These share
counts include approximately 10.3 million shares issued in connection
with the January and August 2008 special dividends, and exclude
approximately 2.0 million shares repurchased in October. Weighted
average common shares (diluted) for the fourth quarter 2008 and full
year 2008 do not include shares to be issued on December 1, 2008, in
connection with the special dividend announced on October 16, 2008,
as the number of shares to be issued will not be determinable until
the valuation dates of November 20 and 21, 2008, have passed.
[6] Projected cash dividends are expected to be covered by AFFO,
excluding the dividends paid on shares issued in connection with the
January and August stock dividends. When taking into consideration
cash dividends paid on these additional shares, total projected 2008
cash dividends are expected to exceed AFFO by approximately 5%. The
January and August stock dividends were required to avoid corporate
level income tax generated from gains on sales of real estate assets
in 2008.
Special Supplement to Third Quarter 2008 Earnings Release
December 2007 and July 2008 Special Dividends
In December 2007, Aimco declared a special dividend, which was paid on January 30, 2008, in a combination of cash and stock. In July 2008, Aimco declared a second special dividend, which was paid on August 29, 2009, in a combination of cash and stock. Accounting principles generally accepted in the United States (GAAP) require that all reported per share data, for current and prior periods, be adjusted to reflect the issuance of the shares in connection with these special dividends as if such shares had been issued at the beginning of the earliest period presented. The following table provides Aimco's results for the three and nine months ended September 30, 2007, as reported in 2007, prior to the special dividends, and as currently reported, after the effect of the special dividends:
Three Months Ended Nine Months Ended
Financial Results September 30, 2007 September 30, 2007
Earnings - EPS, excluding special
dividends $(0.22) $(0.10)
Earnings - EPS, including special
dividends $(0.20) $(0.09)
Funds from operations - FFO,
excluding special dividends $0.83 $2.45
Funds from operations - FFO,
including special dividends $0.74 $2.20
FFO before impairment and preferred
redemption charges, excluding
special dividends $0.86 $2.48
FFO before impairment and preferred
redemption charges, including
special dividends $0.77 $2.22
Adjusted funds from operations -
AFFO, excluding special dividends $0.58 $1.80
Adjusted funds from operations -
AFFO, including special dividends $0.52 $1.61
Calculation of Weighted Average Shares
Earnings - EPS
Weighted average common shares -
diluted, excluding the special
dividends 95,017 95,654
Effect of December 2007 special
dividend 4,522 4,522
Effect of July 2008 special dividend 6,669 6,712
Weighted average common shares -
diluted, including the special
dividends 106,208 106,888
Funds from operations - FFO
Weighted average common shares -
diluted, excluding the special
dividends 96,287 98,490
Effect of December 2007 special
dividend 4,587 4,641
Effect of July 2008 special dividend 6,755 6,902
Weighted average common shares -
diluted, including the special
dividends 107,629 110,033
FFO before impairment and preferred
redemption charges
Weighted average common shares -
diluted, excluding the special
dividends 96,287 98,490
Effect of December 2007 special
dividend 4,587 4,641
Effect of July 2008 special dividend 6,755 6,902
Weighted average common shares -
diluted, including the special
dividends 107,629 110,033
Adjusted funds from operations - AFFO
Weighted average common shares -
diluted, excluding the special
dividends 96,201 98,437
Effect of December 2007 special
dividend 4,583 4,638
Effect of July 2008 special dividend 6,749 6,898
Weighted average common shares -
diluted, including the special
dividends 107,533 109,973
SOURCE Apartment Investment and Management Company Related Stocks:
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