Apartment Investment and Management Company (AIV), better known as Aimco, recently disclosed the collection of $230 million associated with the West Harlem property loan deal. This has helped Aimco to significantly improve its balance sheet as it utilized the proceeds to pay off its outstanding debt on the revolving credit line.
Shares of Aimco gained 4 cents during the regular trading session on the New York Stock Exchange on Dec 10. But on broader market concerns, elevated 10-year Treasury notes yield and taper issues, the stock slipped 2.1% during yesterday’s trading session.
In particular, property loans aggregating $218.8 million were collected by Aimco. The loans were secured by 84 buildings located in the West Harlem neighborhood of New York City. Aimco also received $11.0 million for its unexercised option to acquire the properties.
West Harlem Property Loans Buyouts
As a matter of fact, in 2006, Aimco financed $100.1 million of second mortgage loans collateralized by these 84 buildings in West Harlem. Simultaneously, Aimco inked a deal with the borrower, according to which the former had the option to buy the properties and the borrower had the right to put the assets to Aimco upon realization of certain revenue benchmarks.
In second-quarter 2013, Aimco acquired at par the first mortgage loans related to those buildings for $119.1 million. Out of this amount, $106.0 million matured on Jun 1, 2013. As part of the first mortgage loans acquisition deal, Aimco was scheduled to receive all loans from the borrower in the fourth quarter and $11 million for the unexercised option to buy the properties. Notably, the borrower’s right was terminated.
We appreciate Aimco’s collection of loans as it has effectively helped this apartment real estate investment trust (:REIT) improve its balance sheet and lower interest expense. Moreover, the relief of debt following the loan collection lowered Aimco’s third-quarter 2013 Debt and Preferred Equity to EBITDA to 7.6x from 8.0x, on a pro-forma basis.
Currently, Aimco has a Zacks Rank #3 (Hold). Investors interested in REIT industry may consider stocks like Independence Realty Trust, Inc. (IRT), Spirit Realty Capital, Inc. (SRC) and EastGroup Properties Inc. (EGP). All of these carry a Zacks Rank #2 (Buy).