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Aimco (AIV) FFO Surpasses Estimates in Q1, Revenues Miss

Zacks Equity Research

Apartment Investment and Management Company AIV, better known as Aimco, reported first-quarter 2020 Nareit funds from operations (FFO) of 67 cents per share, surpassing the Zacks Consensus Estimate of 66 cents. Also, the figure improved 10% from the year-ago quarter number of 61 cents.

Quarterly results benefited from decent growth in same-store property net operating income (NOI), higher occupancy and increase in rents.

Notably, rental and other property revenues of $224.6 million in the reported quarter missed the Zacks Consensus Estimate of $227.9 million. Further, the revenue figure was 2.4% lower than the prior-year quarter’s $230.2 million.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 3.5% year over year to $188 million, while expenses (net of utility reimbursements) edged down 0.4% to $48.8 million. Consequently, same-store NOI climbed 5% year over year to $139.2 million.

Same-store average daily occupancy expanded 60 basis points (bps) year over year to 97.6%. Rental rates on new leases inched up 0.6%, whereas renewal rental rates increased 0.5%.

Portfolio Activity

During the reported quarter, Aimco invested $67 million in redevelopment and development activities. In March, the company halted its redevelopment and property upgrade activities due to the COVID-19 outbreak. Further, it reduced expected 2020 capital spending by 45% or $150 million. The company made no acquisitions or dispositions during the March-end quarter.

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

Through the moves, Aimco increased its average revenues per apartment home by 5% (year over year) to $2,280. Also, NOI margin improved to 73% from the year-ago quarter’s 72%. The company’s percentage of A, B and C+ home was 53%, 30% and 17%, respectively, in first-quarter 2020.

Liquidity

As of Mar 31, 2020, Aimco’s total liquidity of $558 million consisted of cash and restricted cash of $359 million as well as a borrowing capacity of $199 million under its revolving credit facility.

Further, in efforts to bolster its liquidity position, the company is making moves to increase available creditby placing $688 million of new property loans (that will generate incremental proceeds of $367 million) and a $350-million bank term loan. Further, it drew down $300 million on its bank lines. After taking into account the financing activities, Aimco’s total liquidity is expected to increase to $1.2 billion.

Moreover, when the financings and property loans are completed, Aimco will have eliminated loan maturities for 2020 and will have average annual maturities of $265 million between 2021 and 2024.

Share Buyback

During the January-March quarter, Aimco repurchased 0.2 million shares of its common stock for $10 million. The buyback was executed at a weighted-average price of $42.79 per share.

Conclusion

In response to the public health crisis, Aimco provided a business update for April 2020. The company’s resident turnover reached an all-time low of 41.1% in the month, suggesting a year-over-year decline of 270 bps. However, average daily occupancy declined 40 bps year over year to 96.6%.

In April, the company recognized 99% of its multi-family revenue owed, amounting to nearly $69 million. It also derives $2.5 million of monthly revenues from commercial tenants, consisting of office uses and other commercial uses. In April, it collected 90% of dues from office tenants and 30% from the other commercial users.

Moreover, Aimco continues to focus on redevelopment and development efforts. Its five apartment communities under development or redevelopment have an estimated remaining cost of completion of around $212 million. The company projects nearly $140 million to be spent in the ongoing year.

Apartment Investment and Management Company Price, Consensus and EPS Surprise
 

Apartment Investment and Management Company Price, Consensus and EPS Surprise

Apartment Investment and Management Company price-consensus-eps-surprise-chart | Apartment Investment and Management Company Quote

Aimco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other REIT Performances

SL Green Realty Corp. SLG reported first-quarter 2020 FFO per share of $2.08, surpassing the Zacks Consensus Estimate of $1.70. The figure also compared favorably with the year-ago quarter’s $1.68.

Essex Property Trust Inc. ESS reported first-quarter 2020 core FFO per share of $3.48, surpassing the Zacks Consensus Estimate of $3.40. The figure also improved 7.7% from the year-ago quarter’s $3.23.

Vornado Realty Trust VNO reported first-quarter 2020 FFO plus assumed conversions as adjusted of 72 cents per share, missing the Zacks Consensus Estimate of 76 cents. The reported figure declined 8.9% year over year.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Apartment Investment and Management Company (AIV) : Free Stock Analysis Report
 
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