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Aimco's (AIV) Q2 FFO & Revenues Miss Estimates, NOI Climbs

Zacks Equity Research

Apartment Investment and Management Company AIV, better known as Aimco, reported second-quarter 2019 pro forma funds from operations (FFO) of 60 cents per share, missing the Zacks Consensus Estimate by a whisker. Also, the figure comes in lower than the year-ago quarter’s reported tally of 61 cents.

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

Notably, total revenues of $224.2 million in the reported quarter lagged the Zacks Consensus Estimate of $229.06 million. Further, the revenue figure comes in roughly 10.4% lower than the prior-year quarter’s reported tally.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 3.8% year over year to $176.4 million, while expenses (net of utility reimbursements) were up 1.8% from the prior-year quarter to $47.2 million. Consequently, same-store NOI climbed 4.6% to $129.2 million on a year-over-year basis.

Same-store average daily occupancy expanded 60 basis points (bps) year over year to 96.9%. Rental rates on new leases were up 2%, whereas rental rates on renewal leases were up 5% from the expiring lease rates.

As of Jun 30, 2019, Aimco had cash and restricted cash of $65 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $3.2 billion.

Furthermore, at the end of the second quarter, Aimco had borrowing capacity of $498 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 $52 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, the company increased its average revenues per apartment home by 6% to $2,218. Additionally, NOI margin remained unchanged at 72% year over year. The company’s percentage of A, B and C+ home was 52%, 31% and 17%, respectively, in second-quarter 2019.

Guidance

For full-year 2019, the company revised pro forma FFO per share guidance to $2.44-$2.52 from $2.41-$2.51. The Zacks Consensus Estimate for the same is $2.49.

The company’s full-year projections are backed by assumptions of same-store revenue growth of 3.6-3.8% and same-store expense growth of 2-2.6%, resulting in same-store NOI improvement of 4-4.4%.

For third-quarter 2019, Aimco issued pro forma FFO per share guidance of 60-64 cents. The Zacks Consensus Estimate for the same is pinned at 62 cents.

Bottom Line

Aimco’s lower-than-expected second-quarter results were disappointing. Notably, earnings headwinds resulting from the sale of Asset Management business continue to dampen the company’s growth. This is expected to continue in the current quarter as well, as management expects pro forma FFO per share to be diluted by the lost contribution from the sale.

Nonetheless, the company’s efforts to improve its portfolio and invest in valuable properties have encouraged management to raise the same-store guidance as well as increase the pro-forma outlook by 2 cents at the mid-point.

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

Performance of Other REITs

AvalonBay Communities, Inc.’s AVB second-quarter 2019 core FFO per share of $2.27 inched up 1.8% year over year. However, the figure missed the Zacks Consensus Estimate of $2.31.

Mid-America Apartment Communities, Inc. MAA, commonly referred to as MAA, reported second-quarter FFO of $1.57 per share, surpassing the Zacks Consensus Estimate of $1.53. The bottom line was higher than the prior-year quarter figure of $1.55.

Equity Residential EQR posted second-quarter 2019 normalized FFO per share of 86 cents, which surpassed the Zacks Consensus Estimate by a whisker. Moreover, normalized FFO per share figure came in 6.2% higher than the 81 cents reported in the year-ago quarter.

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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