June 14, 2010



|Apartment Investment and Management Co. |(AIV-NYSE) |$41.20 |

Note: FLASH REPORT; more details to come, changes are highlighted. Except where noted, and highlighted, no other sections of this report have been updated.

Reason for Report: FLASH UPDATE: 1Q18 Earnings

Previous Ed.: 4Q17 Earnings Update, Apr 2, 2018

Flash Update (earnings update to follow)

On May 7, 2018, Apartment Investment and Management Company, better known as Aimco, reported 1Q18 pro forma funds from operations (FFO) of 60 cents per share, in line with the Zacks Consensus Estimate. The figure indicates a 3% increase from the year-ago quarter tally of 58 cents.

Results displayed growth in property net operating income (NOI), supported by same-store properties, and lease-up of redevelopment and acquisition communities. However, these positives were partially offset by lower NOI from apartment sales in 2017 and 2018.

In the reported quarter, total revenues of $247.7 million comfortably outpaced the Zacks Consensus Estimate of $243.7 million. In addition, the reported figure came in marginally higher than the prior-year quarter tally of $246.5 million.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 2.6% year over year to $144.9 million while expenses (net of utility reimbursements) increased 2.1% from the prior-year quarter to $38.9 million. Consequently, same-store NOI climbed 2.7% to $106 million on a year-over-year basis.

Same-store average daily occupancy expanded 30 basis point (bps) year over year to 96.3%. Rental rates on new leases were up 0.4% whereas rental rates on renewal leases were up 4.9% from the expiring lease rates.

As of Mar 31, 2018, Aimco had cash and restricted cash on hand of $91 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $2 billion.

Further, at the end of the quarter under review, Aimco’s outstanding borrowings on its revolving credit facility were $79 million and available capacity was $509 million, after considering $12 million of letters of credit, backed by the facility.

Portfolio Activity

During the reported quarter, Aimco invested $47 million in redevelopment and development.

In addition, Aimco is revamping its portfolio through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth.

Through these efforts, the company increased its revenues per apartment home by 7% to $2,052. Additionally, it enhanced the quality and expected growth rate of its portfolio. Specifically, the percentage of A, B and C+ home was 49%, 35% and 16%, respectively, in 1Q18 compared with 51%, 35% and 14% recorded in the year-ago quarter.

Guidance

For full-year 2018, the company updated its pro forma FFO per share guidance to $2.39-$2.49 from $2.42-$2.52 provided earlier. The company projects same-store NOI growth to be in the range of 1.70-3.10% and revenue growth to be in the range of 2.10-3.10%.

For 2Q18, Aimco provided pro forma FFO per share guidance of 57-61 cents.

Dividend

On May 2, Aimco announced a quarterly cash dividend of 38 cents per share of Class A common stock for 1Q18. This marks a 6% year-over-year increase. The dividend will be paid on May 31 to stockholders of record as of May 18, 2018.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

MORE DETAILS WILL COME IN THE IMMINENT EDITIONS OF ZACKS RD REPORTS ON AIV.

Portfolio Manager Executive Summary [Note: Only highlighted material has been changed.]

Apartment Investment & Management Co. — better known as Aimco — is a real estate investment trust (REIT) and one of the leading owners and operators of apartment communities in the United States.

Trend of Broker Opinions: Broker sentiment on the stock remains skewed toward the neutral side, with 61.5% of the firms rating the stock neutral, 38.5% giving it a positive rating and none of them rendering a negative rating. The target prices provided by these firms range from a low of $42.00 to a high of $49.00 per share. The average came in at $45.44, indicating a positive return of 12.3%.

Neutral or equivalent outlook — 8 firms or 61.5% — According to these firms, Aimco’s concerted efforts to enhance its portfolio through investment in profitable redevelopment projects augur well for long-term growth. These firms are of the opinion that the sale of lower-graded assets and re-investing the proceeds in premium properties would improve the quality of its portfolio over time. Moreover, as new supply remains focused in the urban areas, firms believe Aimco’s suburban portfolio base will be less impacted by this new supply. Nonetheless, structural weakness in the DC Metro area is expected to impede Aimco’s growth until the market overcomes from the government related employment situation. Moreover, even if the divestitures pay off in the long run, its near-term adverse impact on earnings cannot be bypassed and hence the firms have a neutral stance on the stock.

Positive or equivalent outlook — 5 firms or 38.5% — The bullish firms believe Aimco’s portfolio is well positioned with lower exposure to New York City as compared with other multi-family REITs. This is expected to cushion the company from new supply pressures prevalent in the market. Firms believe that Aimco’s diversified portfolio, both in terms of geography and price point, is best protected against the supply pressure. Firms are of the view that Aimco’s growing redevelopment pipeline will be accretive for long-term growth and contains lower risk. Further, the firms anticipate the company’s efforts to improve the balance sheet, together with its investments in high-yielding development properties, to help it outperform the market.

Apr 2, 2018

Overview [Note: Only highlighted material has been changed.]

Headquartered in Denver, CO, Apartment Investment and Management Company — commonly known as Aimco — is a real estate investment trust (REIT) engaged in the acquisition, ownership, management and redevelopment of apartment properties situated in some of the major coastal and job-growth markets in the United States.

Aimco has classified its apartment communities either under its Real Estate portfolio or those owned through partnerships served by its Asset Management business.

As of Dec 31, 2017, Real Estate portfolio included 136 mainly market-rate apartment communities with 36,904 apartment homes. The company held an average ownership of around 99% in these properties.

On the other hand, as of the same date, the company held nominal ownership positions in a number of partnerships, holding 46 low-income housing tax credit communities with 6,898 apartment homes. Aimco provides asset management and other services to these partnerships and in return, collects fees and other payments.

Further information on the company is available on its website

Key investment considerations according to the firms are as follows:

|Key Positive Arguments |Key Negative Arguments |

|Aimco has a solid portfolio that is diversified both in terms of geography|High cost of redevelopment and development projects can weigh upon |

|and price point. This aids it to enjoy relatively stable revenues despite |earnings. |

|new supply in various markets. | |

| |The company’s accelerated pace of dispositions could lead to earnings|

|A strong portfolio of B/B+ (on an average) geographically diversified |dilution. |

|assets shield it from local downturns. | |

| |Aimco is expected to continue to suffer from rising supply in some of|

|Management is commendably executing its re-development and deleveraging |its markets. |

|strategies. | |

| |Any rise in interest rate and the consequent adverse impact on |

|Quality of portfolio improves every quarter as Aimco sells off older |Aimco’s interest expense remains a concern. |

|low-income and non-core properties. | |

Note: Aimco operates on a calendar-year basis.

Mar 29, 2018

Long-Term Growth [Note: Only highlighted material has been changed.]

Aimco has a balanced portfolio that is diversified across both markets and price points. Its portfolio is well positioned for difficult times, with planned repositioning over the next few years. The company intends to take the following steps to improve property operations: 1) focus on improving diversified apartment portfolios by selling lower-rated properties and investing the proceeds for upgrades, capital enhancement, redevelopment, development and acquisition of higher quality apartment portfolios; and 2) improve financial leverage to hedge against high rate of interest.

Aimco’s portfolio management activity includes the ongoing allocation of investment capital to meet the geographic and product-oriented goals. The company plans to continue selling affordable and lowest-rated conventional properties, with proceeds reinvested in the acquisition of tax-efficient paired trades and higher-quality, higher-growth properties.

According to the firms, Aimco is in a good position to achieve top-line growth, going forward. The company’s efforts to increase the redevelopment and development pipeline and achieve increased density entitlements on its projects will add to its growth. Over the long term, the firms believe that higher quality assets should offer better growth, implying a higher internal rate of return (IRRs) for the company, than that of the assets it is selling.

Mar 29, 2018

Target Price/Valuation [Note: Only highlighted material has been changed.]

Provided below is a summary of valuations and ratings as compiled by Zacks Research Digest:

|Rating Distribution |

|Positive |38.5% |

|Neutral |61.5%↑ |

|Negative |0.0%↓ |

|Average Target Price |$45.44↓ |

|Maximum Upside from Current Price |21.0% |

|Minimum Upside from Current Price |3.8% |

|Upside from Current Price |12.3% |

|Digest High |$49.00↓ |

|Digest Low |$42.00 |

|No. of Analysts with target price/total |9/13 |

Risks to the price target revolve around general economic trends including job growth, immigration, demand for single-family housing, population migration trends, new multifamily apartment supply, the need for tax credit transactions among various financial institutions and access to capital. Higher raw material and labor costs related to development or redevelopment activities, along with government allocations and tax credits with regard to Aimco's affordable housing portfolio and capital platforms, could also have an adverse impact.

Recent Events [Note: Only highlighted material has been changed.]

On Mar 7, 2018, Aimco announced ground breaking for the construction of Park Mosaic and people associated with Boulder Chamber of Commerce joined the event. The apartment community is being developed on the premises of Eastpointe Apartment Homes at 1550 Eisenhower Boulevard.

On Feb 22, 2018, Aimco announced the acquisition of Bent Tree apartment community in Fairfax County, VA. In the first 12 months of ownership, this $160-million deal is likely to benefit the company's adjusted funds from operations (FFO) per share by about a cent.

On Feb 1, 2018, Aimco announced 4Q17 earnings results. The company reported 4Q17 pro forma FFO of 63 cents per share, in line with the Zacks Consensus Estimate. The figure indicates a 5% increase from the year-ago quarter tally of 60 cents.

Results display growth in same-store property NOI and lease-up of redevelopment and acquisition communities. However, these positives were partially offset by the loss of income from apartment sales in 2016.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Revenue [Note: Only highlighted material has been changed.]

According to the company, for 4Q17, total revenues of $255.2 million outpaced the Zacks Consensus Estimate of $249.8 million. In addition, the reported figure was 2.3% higher than the prior-year quarter tally of $249.5 million.

For full-year 2017, total revenues were $1.01 billion, exceeding the prior-year figure by about 1%. It also surpassed the Zacks Consensus Estimate of $988.6 million.

In 4Q17, same-store revenues increased 2.8% year over year (y/y) to $148.4 million. Moreover, same-store average daily occupancy expanded 20 basis points (bps) y/y to 96.3%. During 4Q17, rental rates on new leases were down 0.8%, whereas rental rates on renewal leases were up 4.5% from the expiring lease rates.

Outlook

Management anticipates growth in average daily occupancy of 10 bps from 96.3% recorded in 2017. Further, Aimco continues to focus on geographic diversification and redevelopment activities to improve customer retention, reduce costs and improve pricing power. For full-year 2018, the company projects same-store revenue growth in the range of 2.1-3.1%.

According to the firms, amid high competition, same store revenue growth is likely to slow down.

Margins [Note: Only highlighted material has been changed.]

According to the company, in 4Q17, total operating expenses flared up 25.6% y/y to $237.9 million, whereas operating income decreased 71.2% y/y to $17.3 million.

For full-year 2017, total operating expenses came in at $811.5 million, up 8.3% y/y, whereas operating income decreased 21.4% y/y to nearly $194 million.

In 4Q17, same-store expenses rose 2.1% y/y to $40.4 million. Consequently, same-store net operating income (NOI) climbed 3.1% to $108 million on a y/y basis.

Outlook

The company anticipates its full-year 2018 same-store expenses to grow in the range of 2.6-3.6%. Also, mangement expects its NOI growth to be 1.7-3.1% for the year.

According to the firms, NOI growth is likely to be affected by slowdown in same store revenues and increase in expenses.

FFO per Share [Note: Only highlighted material has been changed.]

According to the company, pro forma FFO per share was 63 cents in 4Q17, 5% higher than the year-ago quarter tally of 60 cents. Also, the company reported 4Q17 adjusted FFO of 56 cents per share, 12% higher than the year-ago tally of 50 cents.

Results display growth in property NOI, supported by same-store properties, and lease-up of redevelopment and acquisition communities. However, these positives were partially offset by the loss of income from apartment sales in 2016.

For full-year 2017, pro forma FFO per share was $2.45, in line with the Zacks Consensus Estimate. The bottom-line figure for full-year 2016 was $2.32 per share.

Outlook

For 1Q18, Aimco provided pro forma FFO per share guidance in the band of 57-61 cents. For full-year 2018, the company expects the pro forma FFO per share in the band of $2.42-$2.52. Notably, management has excluded legal costs, relating to the case filed against Airbnb from this guidance because of the unpredictable nature of the costs.

Some firms have decreased their 2018 FFO per share estimates, based on the assumption of increased supply in Aimco’s markets and the guidance issued by the management for 2018.

Balance Sheet /Portfolio Activity /Others [Note: Only highlighted material has been changed.]

Liquidity

As of Dec 31, 2017, Aimco held cash and restricted cash on hand of $95 million. At the end of the quarter, Aimco’s outstanding borrowings on its revolving credit facility were $67 million and available capacity was $521 million, after considering $12 million of letters of credit backed by the facility.

In addition, as of Dec 31, 2017, the estimated fair market value of the company’s unencumbered apartment communities was around $1.8 billion.

Outlook

Aimco remains focused on improving its leverage position. The company is targeting net leverage of $3.8 billion. It aims at disciplined capital allocation, based on paired trades and fortification of the balance sheet.

Further, at year-end 2018, the company expects to achieve debt to trailing 12-month EBITDA of around 6.5x, debt and preferred equity to trailing 12-month EBITDA of approximately 6.9x.

Portfolio Restructuring Activity

As intended, Aimco continues to sell up to 10% of its lowest-rated portfolio each year, and use the proceeds for acquisition and redevelopment of higher-quality apartments. Through these measures, the company increased its revenues per apartment home by 7% y/y to $2,123. It has enhanced the quality and expected growth rate of its portfolio. Specifically, the percentages of A, B and C+ home were 53%, 32% and 15% in 4Q17 compared with 51%, 36% and 13%, respectively, in the year-ago quarter.

Further, during the quarter, Aimco invested $51 million in redevelopment and developmental activities.

Outlook

Aimco expects property dispositions in full-year 2018 to aggregate $180-$220 million.

Dividend Update

On Jan 31, 2018, Aimco announced a quarterly cash dividend of 38 cents per share of class A common stock for 4Q17. This marked a 6% year-over-year increase. The dividend was paid on Feb 28 to stockholders of record as of Feb 16, 2018.

Others

On Mar 7, 2018, Aimco announced ground breaking for the construction of Park Mosaic and people associated with Boulder Chamber of Commerce joined the event.

The apartment community is being developed on the premises of Eastpointe Apartment Homes at 1550 Eisenhower Boulevard.

Park Mosaic, which is likely to be completed by mid-2019, is a 226-unit apartment home community. It is strategically located near major employers and with easy access to public transportation.

Additionally, in Boulder, Aimco owns two more market rate communities.

On Feb 22, 2018, Aimco announced the acquisition of Bent Tree apartment community in Fairfax County, VA. In the first 12 months of ownership, this $160-million deal is likely to benefit the company's adjusted FFO per share by about a cent.

Situated in suburban Fairfax County, the Bent Tree apartment community consists of 748-apartment homes. It is located beside two other communities owned by Aimco, having 1000-apartment homes. Bent Tree is a B-quality community with the average rent of approximately $1500 per unit. The acquisition is a strategic fit for the company, as with some capital investments, the units have the capability to generate higher than market rate revenue growth.

The transaction is in line with Aimco’s strategy of revamping its portfolio through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth.

As this community is located a few minutes away from the Dulles International Airport and within traveling distance from downtown D.C., the residents are provided with opportune access to employment. In fact, onsite amenities and comfortable homes will likely hold significance for educated and high-income customers.

Aimco plans to put up for sale the same value of communities that have the probability of lower rental growth and lower expected free cash flow internal rates of return (FCF IRR), in sync with its paired trade discipline. The company expects Bent Tree’s FCF IRR to surpass the FCF IRR of the properties that will be vended to support the acquisition by minimum 300 basis points.

This acquisition was financed with bank borrowings awaiting the anticipated third-quarter sales to complete the paired trade funding.

|Coverage Team |11C |

|QCA |Kalyan Nandy |

|Lead Analyst |Moumita C. Chattopadhyay |

|Analyst |Darshni Rupani |

|Copy Editor |N/A |

|Content Ed. |Moumita C. Chattopadhyay |

|No. of brokers reported/Total brokers |N/A |

|Reason for Update |Flash |

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May 7, 2018

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