Aimco Reports Second Quarter 2021 Results and Provides Strategic Overview
August 13, 2021 at 18:10 PM EDT
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
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.
During the three months ended June 30, 2021, Aimco invested approximately $49 million at its development and redevelopment projects.
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.
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.
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.
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.
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:
In the second quarter, Aimco closed two construction loans.
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.
Aimco plans to reinvest earnings to facilitate growth and, therefore, does not presently intend to pay a regular cash dividend.
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.
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.
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.
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.
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:
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.
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.
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.