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Aimco (AIV) Meets FFO Estimates in Q4, Issues '20 Outlook

Zacks Equity Research
·4 min read

Apartment Investment and Management Company AIV, better known as Aimco, reported fourth-quarter 2019 pro forma funds from operations (FFO) of 65 cents per share, meeting the Zacks Consensus Estimate. Also, the figure improves 5% from the year-ago quarter tally of 62 cents.

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

Notably, total revenues of $230.03 million in the reported quarter missed the Zacks Consensus Estimate of $230.53 million. Further, the revenue figure comes in 0.8% lower than the prior-year quarter’s reported tally.

For full-year 2019, the FFO per share came in at $2.5, in line with the Zacks Consensus Estimate and 2% higher than the prior-year tally of $2.45. However, total revenues witnessed a 6% decline, year over year, to $914.3 million.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 3.3% year over year to $174.8 million, while expenses (net of utility reimbursements) flared up 4.4% to $44 million. Consequently, same-store NOI climbed 2.9% year over year to $130.8 million.

Same-store average daily occupancy expanded 40 basis points (bps) year over year to 97.4%. Rental rates on new leases inched up 0.7%, whereas renewal rental rates increased 5%.

As of Dec 31, 2019, Aimco had cash and restricted cash of $177 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $2.4 billion.

Furthermore, at the end of the fourth quarter, Aimco had borrowing capacity of $518 million under its revolving credit facility, after consideration of $7 million of letters of credit backed by the facility.

Portfolio Activity

During the October-December period, Aimco disposed four apartment communities consisting of 991 apartment homes. Net proceeds of $201 million were generated from these sales.

During the reported quarter, Aimco invested $58 million in redevelopment and development activities. In addition, the company 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 these moves, Aimco increased its average revenues per apartment home by 7% to $2,272. However, NOI margin improved to 74% from the year-ago quarter’s 73%. The company’s percentage of A, B and C+ home was 54%, 29% and 17%, respectively, in fourth-quarter 2019.

Guidance

For full-year 2020, the company has provided pro forma FFO per share guidance of $2.62-$2.72. The Zacks Consensus Estimate for the same is $2.67.

The company’s full-year projections are backed by assumptions of same-store revenue growth of 3-3.8% and same-store expense growth of 1.6-2.4%, resulting in same-store NOI improvement of 3.2-4.6%.

For first-quarter 2020, Aimco has issued pro forma FFO per share guidance of 64-68 cents. The Zacks Consensus Estimate for the same is pegged at 64 cents.

Bottom Line

Aimco’s better-than-anticipated quarterly pro forma FFO is encouraging. Notably, earnings contribution from the Parkmerced loan was conducive to bottom-line growth. Moreover, the company continues revamping its portfolio through property sales and reinvesting the proceeds in select apartment homes with projected free cash flow internal rates of return higher than expected from the communities being sold.

This, along with a diversified portfolio of residential properties in key markets, favorable demographics and household formation trends as well as a healthy job market, will drive its long-term growth.

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 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 #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We, now, look forward to the earnings releases of other REITs like AvalonBay Communities, Inc. AVB, Alexandria Real Estate Equities, Inc. ARE and Simon Property Group, Inc. SPG, which are slated to report their quarterly numbers next week.

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

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