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Aimco Reports Second Quarter 2021 Results and Provides Strategic Overview

Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today second quarter results for 2021.

Wes Powell, Aimco President and Chief Executive Officer, comments: “The fundamentals of the apartment market have largely recovered from the impacts of 2020 and investor demand for multifamily properties is strong. Aimco’s experienced team, diversified portfolio and pipeline of future opportunities have us well positioned for growth. Results within our stabilized operating portfolio are accelerating, our active development projects are on track to create significant value for shareholders, and our pipeline is steadily expanding... having recently secured new investment opportunities with the potential for approximately four million square feet of new development in high-growth markets. The first half of 2021 has been productive, I am thankful for the dedication of the Aimco team and energized by what lies ahead.”

Lynn Stanfield, Aimco Executive Vice President and Chief Financial Officer, comments: “In the second quarter, we invested $49 million into our active development and redevelopment projects, started construction on a luxury single-family rental development in Corte Madera, California, and began the major redevelopment of Hamilton on the Bay in Miami, Florida. When complete and fully stabilized, our currently active development and redevelopment projects are expected to produce approximately $60 million of net operating income. Aimco’s balance sheet and today’s liquid capital markets provide a strong foundation for our growing investment platform. In the second quarter, Aimco closed two construction loans with commitments of $251 million and currently has access to $445 million of cash and capacity on its revolving credit facility.”

Financial Results and Recent Highlights

  • Net loss attributable to common stockholders per share, on a dilutive basis, was $0.13 for the quarter ended June 30, 2021, compared to net income per share of $0.02 for the same period in 2020, due primarily to unrealized losses on interest rate options which provide a hedge against the re-pricing of future debt maturities.
  • Aimco Total Shareholder Return was 32%, year-to-date through July 2021.
  • Aimco invested $49 million in development and redevelopment activities during the second quarter and leased more than 200 homes at properties currently in lease-up.
  • Aimco closed $251 million of construction financing and ended the second quarter with $445 million of liquidity, including cash and capacity on its revolving credit facility.
  • Aimco entered into agreements totaling $53 million to acquire property for development in Colorado Springs, Colorado, and Fort Lauderdale, Florida.
  • Aimco acquired, for $19 million, property adjacent to its Hamilton on the Bay asset located in Miami, Florida, providing additional development opportunity.
  • Revenue from Aimco’s Operating Properties was up 2.3% year-over-year, with occupancy up 140 basis points and average revenue per apartment home up 0.8%.
  • Net Operating Income from Aimco’s Operating Properties was up 4.0% from the first quarter of 2021 and up 0.7% year-over-year.

Development and Redevelopment

Aimco’s dedicated team sources and executes development and redevelopment projects across Aimco’s 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.

In the second quarter, Aimco had eight active development and redevelopment projects located in five different markets across the United States. These projects remain on track, as evidenced by project-level budget and schedule, lease-up metrics, and current market valuations.

Construction Activity

During the three months ended June 30, 2021, Aimco invested approximately $49 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 $27 million remaining to invest. Apartment homes are planned for initial delivery in the third quarter with construction completion scheduled for 2022 and stabilization targeted for 2024. Pre-leasing has been strong, as of July 31, 2021, approximately one-third of the units have been leased prior to delivery at rates ahead of initial targets.
  • Upton Place in Upper-Northwest Washington, D.C., is progressing on schedule and on-budget, with approximately $213 million remaining to complete construction. The project is scheduled for completion in 2024 and stabilization is targeted for 2026.
  • The Benson Hotel and Faculty Club on the Anschutz Medical and Life Sciences Campus in Aurora, Colorado, is on budget and on schedule with a remaining investment of approximately $53 million. The project is scheduled for completion in early 2023 and stabilization in late 2026.
  • In Corte Madera, California, Aimco began development activity on 16 luxury single family rental homes, each averaging approximately 3,200 sf, plus eight accessory dwelling units. The land for this development is being leased from AIR Communities and is located adjacent to AIR Communities’ Preserve at Marin apartment community. Aimco expects the total development cost to be $47 million with deliveries beginning in 2023 and stabilization occurring in 2025.
  • In the Edgewater neighborhood of Miami, Florida, Aimco began the major redevelopment of the existing apartment building at Hamilton on the Bay. The scope of Aimco’s investment will completely renew the waterfront high-rise which benefits from spacious apartment homes (averaging 1,411 sf) and an abundance of outdoor and amenity space that was previously underutilized. Aimco expects the redevelopment investment at Hamilton on the Bay will be $92 million with apartment homes coming back online in 2022 and stabilization targeted for 2024.

Lease-up Progress

During the three months ended June 30, 2021, Aimco held three properties where newly constructed, or fully 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 July 31, 2021, the 110-unit property was 98% 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 July 31, 2021, the 253-unit property was 74% leased.
  • At Prism, located in Cambridge, Massachusetts, all apartment homes had been delivered and construction was complete as of 1Q 2021. As of July 31, 2021, the 136-unit property was 82% leased.

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’s Operating Portfolio produced solid results for the quarter ended June 30, 2021, showing continued improvement as our business recovers from the pandemic related impacts of 2020.

Second Quarter

Year-to-Date

Year-over-Year

Sequential

Year-over-Year

($ in millions)

2021

2020

Variance

1Q 2021

Variance

2021

2020

Variance

Average Daily Occupancy [1]

97.3%

95.9%

1.4

%

97.6%

(0.3

%)

97.4%

96.7%

0.9

%

Revenue, before utility reimbursements

$33.3

$32.6

2.3

%

$32.7

2.0

%

$66.0

$65.9

0.1

%

Expenses, net of utility reimbursements [2]

11.0

10.4

5.5

%

11.2

(1.9

%)

22.1

20.9

5.9

%

Net operating income (NOI)

22.4

22.2

0.7

%

21.5

4.0

%

43.9

45.1

(2.6

%)

*Excluded from the table above is one, 40-unit apartment community that Aimco’s ownership includes a partnership share.

[1] The intentional increase in lease expirations during the late spring and summer months resulted in a 30-basis point decline in Average Daily Occupancy from the quarter ended March 31, 2021.

[2] The year over year increase in expenses, net of utility reimbursements is due primarily to higher real estate taxes and insurance.

Aimco measures residential rent collection as the total amount of payments received as a percentage of all residential amounts owed. In the second quarter, Aimco collected 98.3% of all amounts owed by residents and recognized 98.8% of contractual revenue, reserving 120 basis points as bad debt.

1001 Brickell Bay Drive, a waterfront office building in Miami, Florida owned as part of a larger assemblage, is currently 73.3% occupied with the pace of tours and inquiries showing favorable indications of future leasing. Through July 31, 2021, 99.8% of second quarter rents due have been collected.

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 intends to undertake such opportunistic value-add transactions when warranted by the prospect of outsized risk-adjusted returns.

  • During the second quarter Aimco acquired six properties adjacent to its Hamilton on the Bay apartment community in Miami’s Edgewater neighborhood, for $12 million. Subsequent to quarter end Aimco acquired an additional two properties for $7 million. In total this land assemblage allows for, as-of-right, the construction of more than 700K square feet. As part of its initial acquisition of Hamilton on the Bay, Aimco acquired waterfront land that allows for the future development of more than 400K square feet. Combined, Aimco can now construct more than 1.1M square feet of new development in this rapidly growing submarket.
  • Subsequent to quarter end, Aimco entered into a joint venture with Kushner Companies to purchase three undeveloped land parcels located in downtown Fort Lauderdale, Florida. The total contract price for the land is $49 million ($25 million at Aimco’s 51% share) and entitlements are in place for the development of approximately three million square feet of multifamily homes and commercial space. The land purchase is expected to close in January 2022.
  • Subsequent to quarter end Aimco’s investment committee approved a seven-acre land purchase in Colorado Springs, Colorado with a contract price of $4 million that allows for the development of 119 apartment and townhomes that is targeted to close during the third quarter.

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 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 maintaining ample liquidity. As of June 30, 2021, Aimco had access to $445 million, including $286 million of cash on hand, $9 million of restricted cash, and the capacity to borrow up to $150 million on our revolving credit facility.

Aimco’s net leverage as of June 30, 2021 was as follows:

as of June 30, 2021

Proportionate, $ in thousands

Amount

Weighted Avg.

Maturity (Yrs.)*

Total non-recourse property debt

$

436,436

5.3

Total non-recourse construction loan debt

119,747

2.9

Notes payable to AIR

534,127

2.6

Cash and restricted cash

(295,233

)

Net Leverage

$

795,077

In the second quarter, Aimco closed two construction loans.

  • As previously announced, a $150 million 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.
  • A $101 million construction loan for the redevelopment of Hamilton on the Bay. 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 320 basis points. The floating interest rate has a 3.45% floor.

Subsequent to quarter end, in July, Aimco closed a $13 million supplemental, non-recourse property loan on a stabilized operating property. Additionally, Aimco rate-locked a $40 million non-recourse property loan. The terms of these loans are 10 years at a 3.1% weighted average interest rate. Loan proceeds will be used to fund Aimco investment activity.

Dividend

Aimco plans to reinvest earnings to facilitate growth and, therefore, does not presently intend to pay a regular cash dividend.

Strategic Overview

Aimco’s mission is to make real estate investments, primarily focused on the multifamily sector within the continental United States, 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’s value proposition includes the benefits of an established multifamily investment platform coupled with significant growth potential resulting from the redeployment of Aimco equity to a deep and growing pipeline of highly accretive investment opportunities.

  • Platform: Aimco has successfully developed or redeveloped multifamily assets worth in excess of $4.5 billion and overseen real estate transactions totaling more than $7 billion over the past decade.
  • Growth: Aimco offers investors a high performing, high return, vehicle with expected annualized returns on equity between 12-16% once target capital allocation is achieved.
  • Pipeline: Aimco benefits from a deep and growing investment pipeline with $1.0 billion of development and redevelopment projects currently underway, over nine million square feet of future opportunities under Aimco-control and more being actively explored.

Aimco’s financial objectives are to produce superior, project-level, risk-adjusted returns on equity as measured by the investment period Internal Rate of Return (IRR) and the Multiple on Invested Capital (MOIC).

Aimco is focused on providing superior total-return performance to shareholders, primarily through capital appreciation driven by accretive investment and active portfolio management over multi-year periods. Aimco does not plan to pay a regular cash dividend.

Aimco’s capital allocation strategy has been designed to leverage the Aimco investment platform and optimize risk adjusted returns for Aimco shareholders.

Overall, Aimco targets a growth-oriented capital allocation, primarily weighted toward direct investment in ‘Value Add’ and ‘Opportunistic’ multifamily real estate.

Aimco has policies in place that support its strategy and guide its investment allocations, including to hold at all times a sizeable portion of its net equity in a diversified portfolio of ‘Core’ and ‘Core-Plus’ assets.

From time to time, Aimco will allocate a defined portion of its capital into Alternative Investments including passive debt and equity investments (both direct and indirect). Aimco also plans to utilize its established platform and existing relationships to generate fees through service offerings.

Aimco seeks returns on invested equity commensurate with the specific characteristics, risk profile and financing of each individual investment. The table below presents the basis for Aimco expected annualized returns on equity once Aimco’s capital allocation targets are achieved over an expected transition period.

Approximate
Current
Allocation

Target
Allocation*

Target
Leverage

Avg. Annualized
Project-Level
Return on
Equity**

Value Add & Opportunistic Real Estate

10

%

40% - 60%

65

%

~18%

Core & Core Plus Real Estate

55

%

30% - 35%

50

%

~ 9%

Alternative Investments

20

%

5% - 15%

0

%

~15%

Cash, Hedges, & Other Net Assets

15

%

5% - 10%

0

%

0%

Total Expected Annualized Returns on Equity

12% - 16%

*Aimco expects to achieve targeted reallocation of equity over the next three to five years. The timing and ultimate level of such reallocation is subject to general market conditions and investment specific factors.

**Individual project-level return on equity is subject to specific investment risk profiles and market dynamics, a range of outcomes is likely.

Value Add and Opportunistic Real Estate

Current Investments: The Aimco Development and Redevelopment portfolio currently includes $1.0 billion of projects in construction and lease-up, located across five major US markets. In addition, Aimco controls property with the potential for an additional nine million square feet of development over time.

Targeted Opportunities: Aimco is actively advancing planning efforts on pipeline projects under our control with the potential for an additional five million square feet of development and redevelopment. The Aimco portfolio contains additional assets that have the capacity for approximately four million square feet of development over time. In addition, Aimco has the opportunity to add to its investment pipeline based on strategic relationships and through sourcing by regional investment teams. Generally, Aimco seeks Development and Redevelopment opportunities in locations where barriers to entry are high, target customers can be clearly defined and where 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.

Core and Core Plus Real Estate

Current Investments: Aimco’s current portfolio includes 28 apartment communities located in ten major US markets and with average rents in line with local market averages (generally defined as B class). Aimco also owns one commercial office building that is part of an assemblage with an adjacent apartment building.

Targeted Opportunities: The target composition of our stabilized portfolio will continue to include primarily B multifamily assets, spread across a nationally diversified portfolio and with a bias toward long established residential neighborhoods which are supply constrained and rank highly in regard to schools, employment fundamentals and state and regional governance. Core Plus opportunities offer the opportunity for incremental capital investment while maintaining stabilized cash flow to accelerate income growth and improve asset values.

Alternative Investments

Current Investments: Aimco’s current allocation to Alternative Investments includes: its mezzanine loan to the Parkmerced partnership which owns 3,165 apartment homes and significant future development rights in San Francisco, California; its passive equity investments in IQHQ, a privately-held life sciences developer; and RET Ventures, an early-stage real estate technology fund.

Targeted Opportunities: Aimco expects to allocate a portion of its capital to passive debt and equity investments, both directly and at the entity level. These prove attractive when warranted by risk adjusted returns, when Aimco has special knowledge or expertise relevant to the particular investment or when the opportunity exists for positive asymmetric outcomes through strategic partnerships or otherwise. In addition, from time to time, Aimco will use its established platform and existing relationships to generate fees through service offerings to third party real estate investors, owners, and capital allocators.

Cash, Hedges, and Other Net Assets

At all times Aimco will guard its liquidity by maintaining cash and equivalents at no less than 5% of total equity.

From time to time Aimco will allocate capital to financial assets designed to mitigate risks elsewhere in the Aimco enterprise. Existing examples include Aimco’s option to acquire an interest rate swap designed to protect against repricing risk on maturing Aimco liabilities.

Upcoming Event

The Aimco team plans to welcome members of the investment community to Miami, FL during the fall of 2021 where they will have the opportunity to meet and hear from members of management and to tour Aimco assets in order to experience the quality of the real estate owned and being constructed.

More details to follow. For additional information please reach out to:

Matt Foster
303-793-4661
investor@aimco.com

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 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 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.

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 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 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

June 30,

Six Months Ended

June 30,

2021

2020

2021

2020

REVENUES:

Rental and other property revenues

$

40,418

$

37,165

$

80,222

$

75,474

OPERATING EXPENSES:

Property operating expenses

16,403

15,322

33,345

30,671

Depreciation and amortization

20,639

19,030

41,356

38,377

General and administrative expenses [1]

7,383

1,625

13,694

3,387

Total operating expenses

44,425

35,977

88,395

72,435

Interest expense

(12,638

)

(5,809

)

(25,315

)

(11,460

)

Mezzanine investment income, net

7,551

6,936

15,018

13,683

Unrealized gains (losses) on interest rate options [2]

(16,970

)

(1,080

)

8,377

(1,080

)

Other expenses, net

2,918

(154

)

3,281

(569

)

(Loss) income before income taxes

(23,146

)

1,081

(6,812

)

3,613

Income tax benefit (expense)

2,760

2,032

7,860

4,055

Net (loss) income

(20,386

)

3,113

1,048

7,668

Net income attributable to redeemable noncontrolling interests in consolidated real estate partnership

(66

)

125

86

228

Net loss (income) attributable to noncontrolling interests in consolidated real estate partnership

(275

)

(10

)

(566

)

(5

)

Net loss (income) attributable to common noncontrolling interests in Aimco Operating Partnership

1,037

(165

)

(44

)

(400

)

Net (loss) income attributable to Aimco common stockholders

$

(19,690

)

$

3,063

$

524

$

7,491

Net (loss) income attributable to common stockholders per share – basic

$

(0.13

)

$

0.02

$

$

0.05

Net (loss) income attributable to common stockholders per share – diluted

$

(0.13

)

$

0.02

$

$

0.05

Weighted-average common shares outstanding – basic

149,166

148,549

149,082

148,549

Weighted-average common shares outstanding – diluted

149,166

148,569

149,442

148,569

[1] General and administrative expense in the three and six months ended June 30, 2020 are represented as a carve-out of Aimco predecessor expenses and are not representative of Aimco’s anticipated expenses.

[2] Unrealized gains (losses) on interest rate options are primarily the quarterly market-to-market adjustment required to mark to fair value Aimco’s interest rate options.

Consolidated Balance Sheets

(in thousands) (unaudited)

 

June 30,

December 31,

2021

2020

Assets

Buildings and improvements

$

1,107,929

$

995,116

Land

518,954

505,153

Total real estate

1,626,883

1,500,269

Accumulated depreciation

(527,976

)

(495,010

)

Net real estate

1,098,907

1,005,259

Cash and cash equivalents

286,066

289,582

Restricted cash

9,167

9,153

Mezzanine investments

322,380

307,362

Right-of-use lease assets

443,460

98,280

Other assets, net

152,159

130,856

Total assets

$

2,312,139

$

1,840,492

Liabilities and Equity

Non-recourse property debt, net

$

427,881

$

447,967

Construction loans, net

114,309

Notes payable to AIR

534,127

534,127

Total indebtedness

1,076,317

982,094

Deferred tax liabilities

128,279

131,560

Lease liabilities

450,648

100,496

Accrued liabilities and other

91,496

62,988

Total liabilities

1,746,740

1,277,138

Redeemable noncontrolling interests in consolidated real estate partnership

4,177

4,263

Equity:

Common Stock

1,496

1,490

Additional paid-in capital

517,540

515,127

Retained earnings (accumulated deficit)

(16,315

)

(16,839

)

Total Aimco equity

502,721

499,778

Noncontrolling interests in consolidated real estate partnerships

31,847

31,877

Common noncontrolling interests in Aimco Operating Partnership

26,654

27,436

Total equity

561,222

559,091

Total liabilities and equity

$

2,312,139

$

1,840,492

Contacts:

Matt Foster, Director, Capital Markets and Investor Relations
Investor Relations 303-793-4661, investor@aimco.com

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