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Aimco's (AIV) Q1 FFO Meets Estimates, Revenues Lag, NOI Up

Zacks Equity Research

Apartment Investment and Management Company AIV, better known as Aimco, reported first-quarter 2019 pro forma funds from operations (FFO) of 61 cents per share, in line with the Zacks Consensus Estimate. Also, the figure comes in higher than the year-ago quarter’s reported tally of 59 cents.

The company recorded decent growth in same-store property net operating income (NOI). However, the top line for the first quarter was negatively impacted by revenues lost from the company’s Asset Management business sale. 

Notably, total revenues of $230.2 million in the reported quarter lagged the Zacks Consensus Estimate of $229.33 million. Further, the revenue figure comes in 7% lower than the prior-year quarter’s reported tally.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 4.2% year over year to $175.7 million, while expenses (net of utility reimbursements) were up 0.8% from the prior-year quarter to $47.1 million. Consequently, same-store NOI climbed 5.5% to $128.6 million on a year-over-year basis.

Same-store average daily occupancy expanded 90 basis point (bps) year over year to 97%. Rental rates on new leases were up 0.8%, whereas rental rates on renewal leases were up 5.2% from the expiring lease rates.

As of Mar 31, 2019, Aimco had cash and restricted cash of $198 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $2.5 billion.

Furthermore, at the end of the first quarter, Aimco had borrowing capacity of $723 million under its revolving credit facility, after consideration of $7 million of letters of credit backed by the facility.

Portfolio Activity

During the reported quarter, Aimco invested $45 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-expected growth.

Through these efforts, the company increased its average revenues per apartment home by 3.2% to $2,165. Additionally, NOI margin expanded 100 bps year over year to 72%. The company’s percentage of A, B and C+ home was 52%, 32% and 16%, respectively, in first-quarter 2019.

Guidance

For full-year 2019, the company provided pro forma FFO per share guidance of $2.41-$2.51. The Zacks Consensus Estimate for the same is $2.52.

The company’s full-year projections are backed by assumptions of same-store revenue growth of 2.8-3.8% and same-store expense growth of 2-3%, resulting in same-store NOI improvement of 2.7-4.5%.

For second-quarter 2019, Aimco provided pro forma FFO per share guidance of 57-61 cents. The Zacks Consensus Estimate for the same is pinned at 62 cents.

Bottom Line

Aimco’s efforts to improve portfolio mix through property sales, and reinvesting the proceeds in accretive acquisitions, capital enhancements and redevelopments have driven the company’s performance. Its diversified portfolio is well positioned to absorb demand for apartment properties driven by echo boomers.

Although, Aimco’s initiatives to sell non-core assets and buy property in higher-growth infill areas are a strategic fit for the long term, the dilutive impact on earnings from such asset dispositions cannot be avoided in the near term. In fact, the company’s top-line performance in the first quarter was affected by revenues lost from sale of its Asset Management business.

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 Quote

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

Performance of Other REITs

Cousins Properties Incorporated CUZ reported FFO per share of 20 cents during the January-March quarter, in line with the Zacks Consensus Estimate. The figure came in higher than the prior-year quarter’s reported tally of 15 cents. 

Duke Realty Corporation’s DRE first-quarter 2019 core FFO per share of 33 cents surpassed the Zacks Consensus Estimate of 32 cents. Moreover, the figure came in higher than the year-ago quarter’s reported tally of 30 cents.

Ventas, Inc. VTR delivered first-quarter normalized FFO of 99 cents, beating the Zacks Consensus Estimate of 96 cents. The reported figure, however, came in lower than the prior year’s $1.05.

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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