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Aimco's (AIV) Q4 FFO Misses Estimates, Revenues Decline Y/Y

Zacks Equity Research

Apartment Investment and Management Company AIV, better known as Aimco, reported fourth-quarter 2018 pro forma funds from operations (FFO) of 63 cents per share, missing the Zacks Consensus Estimate of 64 cents. Also, the figure remained flat compared with the year-ago tally.

The company recorded decent growth in same-store property net operating income (NOI). Owing to expected taxable gains from the company’s 2019 property sales, it announced a special dividend on its common stock. However, the top line for the fourth quarter was negatively impacted by revenues lost from the company’s Asset Management business sale. 

Notably, total revenues of $232.02 million in the reported also lagged the Zacks Consensus Estimate of $237.24 million. Further, the revenue figure came in around 9% lower than the prior-year tally.

For full-year 2018, pro forma FFO per share came in at $2.47, missing the Zacks Consensus Estimate of $2.48. Nonetheless, the figure improved 1% year over year. Revenues for full-year 2018 declined 3.2% year over year to $972.4 million. The revenue figure, however, outpaced the Zacks Consensus Estimate of $970.53 million.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 3.4% year over year to $147.1 million, while expenses (net of utility reimbursements) flared up 3% from the prior-year quarter to $35.9 million. Consequently, same-store NOI climbed 3.6% to $111.2 million on a year-over-year basis.

Same-store average daily occupancy expanded 60 basis point (bps) year over year to 96.9%. Rental rates on new leases were up 0.2%, whereas rental rates on renewal leases were up 4.3% from the expiring lease rates.

As of Dec 31, 2018, Aimco had cash and restricted cash of $73 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $2.7 billion.

Furthermore, at the end of the quarter, Aimco had borrowing capacity of $633 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 $51 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 4% to $2,126. Additionally, NOI margin expanded by 100 bps year over year to 73%. The company’s percentage of A, B and C+ home was 51%, 33% and 16%, respectively, in fourth-quarter 2018.

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 $2.56.

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 first-quarter 2019, Aimco provided pro forma FFO per share guidance of 58-62 cents. The Zacks Consensus Estimate for the same is pinned at 64 cents.

Dividend

On Feb 3, Aimco's board of directors announced a special dividend on the common stock consisting of $67.1 million in cash and 4.5 million shares of common stock. This includes a regular quarterly cash dividend for 2019 of 39 cents per share. The special dividend will be paid on Mar 22, to stockholders of record as of Feb 22, 2019.

Additionally, stockholders can choose to receive the special dividend in the form of all cash or all stock, subject to proration in case of oversubscription of either option. In fact, based on the company’s closing price of $49.07 (as of Feb 1, 2019), stockholders will receive $1.54 per share predominantly in stock.

Bottom Line

During the Oct-Dec quarter, Aimco made progress with its share-repurchase program by purchasing 8.7 million shares of its common stock for $394 million. This buyback was partly funded with 2018 property sale proceeds. These activities are likely to raise investors’ confidence in the stock. Further, the company’s efforts to unlock embedded value through community repositioning and redevelopment initiatives bode well.

Also, this January, the company sold two apartment communities for gross proceeds of $141 million. While such dispositions are strategic for the long run, the dilutive impact on near-term earnings from such asset sales cannot be avoided.

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

Performance of Other REITs

Kimco Realty Corp.’s KIM fourth-quarter 2018 FFO as adjusted were 35 cents per share, in line with the Zacks Consensus Estimate. However, the reported tally was lower than the year-ago figure of 39 cents.

SL Green Realty Corp. SLG reported fourth-quarter 2018 FFO of $1.61 per share, missing the Zacks Consensus Estimate of $1.72. This tally was net of $14.9 million, related to early repayment of loan at One Madison Avenue. Nonetheless, results compared favorably with the year-ago figure of $1.60.

Boston Properties Inc.’s BXP fourth-quarter 2018 FFO per share of $1.59 missed the Zacks Consensus Estimate of $1.68. The figure, however, came in 7% higher than the prior-year tally.

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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