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Aimco Reports Third Quarter 2014 Results, Raises Same Store Guidance

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Apartment Investment and Management Company (“Aimco”) (NYSE:AIV) announced today its third quarter 2014 results.

Chairman and Chief Executive Officer Terry Considine comments: “Aimco enjoyed an excellent third quarter with strong revenue and income growth. We upgraded the Aimco portfolio through the sale of lower rated apartment communities and reinvestment in communities with higher rents and brighter prospects. In our total portfolio of Conventional Apartment Communities, average revenues per apartment home reached a record $1,649. We expect to finish 2014 on track and with a solid foundation for another good year in 2015.”

Financial Results: Third Quarter AFFO Up 11% Year-Over-Year; Up 15% Year-to-Date

(all items per common share – diluted) 2014 2013 2014 2013
Net income $ 0.85 $ 0.46 $ 1.81 $ 0.56
Funds From Operations (FFO)/ Pro forma Funds From Operations (Pro forma FFO) $ 0.51 $ 0.50 $ 1.53 $ 1.47
Deduct Aimco share of Capital Replacements $ (0.12 ) $ (0.15 ) $ (0.27 ) $ (0.37 )
Adjusted Funds From Operations (AFFO) $ 0.39 $ 0.35 $ 1.26 $ 1.10

Chief Financial Officer Ernie Freedman comments: “Third quarter Pro forma FFO of $0.51 per share was $0.01 above the midpoint of our guidance and AFFO per share exceeded the high end of our guidance by $0.01. These results include $0.02 of prepayment penalties incurred in connection with increasing our unencumbered pool, which was also contemplated in this quarter’s guidance. We expect to end the year with an unencumbered asset pool valued at $1 billion. We are projecting fourth quarter Pro forma FFO per share to be in a range from $0.53 to $0.57 and we are narrowing our full year 2014 Pro forma FFO per share guidance to a range of $2.06 to $2.10. We are also narrowing our AFFO per share guidance to a range of $1.67 to $1.71.”

Pro forma FFO - Year-over-year, third quarter Pro forma FFO increased 2% as a result of improved property operating results, increased contribution from redevelopment communities, lower offsite costs and lower interest expense as Aimco reduces leverage and builds its unencumbered asset pool. These positive results were somewhat offset by: $0.02 per share of prepayment penalties associated with the early repayment of property debt; the loss of income from apartment communities that were sold; lower interest income as a result of repayment in fourth quarter 2013 of notes receivable; higher casualty losses; and higher preferred stock dividends attributable to Aimco’s second quarter 2014 offering of its Class A Preferred Stock.

Adjusted Funds from Operations – Third quarter AFFO increased 11% when compared to third quarter 2013, as a result of Pro forma FFO growth, lower Capital Replacement spending associated with multi-phase capital projects started in prior years, and lower Capital Replacement spending due to the sale of approximately 7,000 apartment homes during 2013 and an additional 8,400 apartment homes year-to-date. As Aimco concentrates its investment capital in higher quality, higher price point apartment communities, Capital Replacements are declining as a percentage of net operating income. As a result, AFFO is increasing at a faster rate than is Pro forma FFO.

Operating Results: Third Quarter Conventional Same Store NOI Up 4.4%, Year-to-Date Up 5.2%

Year-over-Year Sequential Year-over-Year
2014 2013 Variance 2nd Qtr. Variance 2014 2013 Variance
Average Rent Per Apartment Home $1,434 $1,383 3.7 % $1,407 1.9 % $1,412 $1,366 3.4 %
Other Income Per Apartment Home 175 161 8.7 % 172 1.7 % 174 158 10.1 %
Average Revenue Per Apartment Home $1,609 $1,544 4.2 % $1,579 1.8 % $1,586 $1,524 4.1 %
Average Daily Occupancy 95.7 % 95.5 % 0.2 % 96.2 % (0.5 )% 95.9 % 95.6 % 0.3 %
$ in Millions
Revenue $168.0 $160.9 4.4 % $165.8 1.3 % $497.9 $476.8 4.4 %
Expenses 55.7 53.3 4.5 % 54.4 2.4 % 165.2 160.6 2.8 %
NOI $112.3 $107.6 4.4 % $111.4 0.8 % $332.7 $316.2 5.2 %

Rental Rates - Aimco measures changes in rental rates by comparing, on a lease-by-lease basis, the rate on a newly executed lease to the rate on the expiring lease for that same apartment. Newly executed leases are classified either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal.

2014 1st Qtr. 2nd Qtr. Jul Aug Sep 3rd Qtr.


Renewal rent increases 4.9% 5.0% 5.3% 6.0% 5.6% 5.6% 5.3%
New lease rent increases 1.0% 4.7% 6.4% 7.0% 5.7% 6.4% 4.5%
Weighted average rent increases 2.8% 4.9% 5.8% 6.5% 5.6% 6.0% 4.9%

Portfolio Management: Revenue Per Apartment Home Up 15.6% to $1,649

Aimco portfolio strategy seeks predictable rent growth from a portfolio of “A”, “B” and “C+” quality market-rate apartment communities, averaging “B/B+” in quality, and diversified among the largest coastal and job growth markets in the U.S., as measured by total apartment value. Aimco target markets are primarily coastal markets, and also include several Sun Belt cities and Chicago, Illinois.

Aimco measures asset quality based on rents compared to local market average rents as reported by REIS, a third-party provider of commercial real estate performance information and analysis. Aimco defines asset quality as follows: “A” quality assets are those with rents greater than 125% of local market average; “B” quality assets are those with rents 90% to 125% of local market average; and “C+” quality assets are those with rents lower than 90% of local market average, but greater than $1,100 per month. For second quarter 2014, the most recent period for which REIS information is available, Aimco Conventional Apartment Community rents averaged 107% of local market average rents.

Aimco expects to sell each year the lowest-rated 5% to 10% of its portfolio and to reinvest the proceeds from such sales in redevelopment and acquisition of higher-quality apartment communities. Through this disciplined approach to capital recycling, from 2010 through third quarter 2014, Aimco increased its period-end Conventional portfolio average revenue per apartment home at a compound annual growth rate of more than 10%. This rate of growth reflects the impact of market rent growth, and more significantly, the impact of portfolio management through dispositions, redevelopment and acquisitions.

Third quarter 2014 Conventional portfolio average monthly revenue per apartment home was $1,649, a 15.6% increase compared to third quarter 2013, as a result of year-over-year Same Store monthly revenue per apartment home growth of 4.2% and the sale of Conventional Apartment Communities during 2013 and 2014 with average monthly revenues per apartment home substantially lower than those of the retained portfolio and reinvestment of the sales proceeds in higher-rent apartment communities through redevelopment and acquisitions.

Dispositions - In third quarter 2014, Aimco sold 15 Conventional Apartment Communities with 4,635 apartment homes for $362.6 million in gross proceeds. Aimco’s share of net sales proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $215.4 million.

Acquisition - In third quarter 2014, Aimco acquired for $118.5 million 21 Fitzsimons Apartment Homes, a 600-apartment home community located in Aurora, Colorado, ten miles east of Denver. The community is located on the Anschutz Medical Campus in the heart of the Fitzsimons Life Sciences District, which is anchored by the University of Colorado Health Sciences Center, Children’s Hospital Colorado, and the U.S. Department of Veteran’s Affairs Hospital. The Campus is currently home to more than 20,000 jobs, a total expected to increase to 45,000 upon completion of planned medical, bioscience, and research facilities. 21 Fitzsimons has been designated as the “Town Center” for residential and retail use in the Fitzsimons master plan and is located on the only land within the Campus currently zoned for multifamily use.

21 Fitzsimons was constructed in three phases. The first phase, consisting of 240 apartment homes, state-of-the-art amenities and approximately 16,000 square feet of commercial space, was completed in 2008. In 2012, 187 additional apartment homes were constructed. The third phase of construction, consisting of 173 apartment homes, additional amenities and an additional 1,400 square feet of commercial space, was completed in September 2014. The apartment community was 96.2% occupied as of the end of the third quarter with average monthly revenues of $1,365 per apartment home, making this an “A” quality asset. This acquisition increases Aimco exposure to Denver, which is a robust market to which Aimco is underallocated.

Redevelopment: Creating Value and Maintaining Investment Pace

During third quarter 2014, Aimco invested $41 million in redevelopment. Construction continues at Aimco’s two largest redevelopment projects, Lincoln Place, in Venice, California, and Preserve at Marin, in Corte Madera, California. Work at these communities is progressing as planned. As of September 30, 2014, 483 of the 540 completed apartment homes at Lincoln Place were occupied and 44 of the 72 completed apartment homes at Preserve at Marin were occupied.

As expected, Pacific Bay Vistas, located in San Bruno, California, achieved stabilized occupancy during the third quarter.

Also during third quarter 2014, Aimco approved two new redevelopments, which are discussed below.

Ocean House on Prospect, La Jolla, California - Aimco acquired this 60-apartment home community in 2013, with the intent of redeveloping the community at a future date. The $14.8 million redevelopment of Ocean House includes renovation of all apartment homes, common areas, exteriors and amenities. During construction, Aimco expects to combine some apartment homes so that the community, at completion, will include 53 apartment homes. In order to facilitate the extensive construction activity, Aimco began de-leasing the building in fourth quarter 2014. Based on current rents, upon stabilization, Aimco expects revenues per apartment home at this community to average $4,070, an increase of 51%.

Park Towne Place, Philadelphia, Pennsylvania – Earlier this year, Aimco completed a multi-phase capital project at this community in anticipation of subsequent redevelopment, which is now underway. Aimco expects to redevelop Park Towne in several phases, the first of which includes renovating existing commercial space, upgrading common areas and amenities, and redeveloping one of the four residential towers. During construction, Aimco expects to combine some apartment homes in this 234-apartment home building so that the tower, at completion, will include 229 apartment homes. In order to facilitate the extensive construction activity, Aimco began de-leasing the one tower in fourth quarter 2014.

Based on current rents, upon stabilization, Aimco expects revenues per apartment home for the redeveloped building to average $2,750, an increase of 55%. Across the entire 954-apartment home community, revenues per apartment home are expected to average $2,090, an increase of 18%.

Aimco’s net investment in the first phase of the redevelopment of Park Towne is projected to be $60 million, reflecting a gross investment of $71 million, reduced by $11 million of historic tax credits.

Depending on the success of this initial phase and other investment alternatives, Aimco may redevelop additional apartment homes at Park Towne. Should Aimco elect to redevelop the other three residential towers, its net investment, including the work described above, could be between $148 and $160 million, reflecting a gross investment of $180 to $195 million reduced by $32 to $35 million of historic tax credits.

Development: Progressing as Planned

During third quarter 2014, Aimco invested $14.6 million in the development of its One Canal Street apartment community in Boston. One Canal Street will include 310 apartment homes and 22,000 square feet of commercial space. Aimco expects completion of construction in second quarter 2016 with lease-up to follow.

Balance Sheet and Liquidity: Leverage on Target and Declining

Components of Aimco Leverage

$ in Millions Amount % of Total

Weighted Avg.
Maturity (Yrs.)

Avg Rate

Aimco share of long-term, non-recourse property debt $ 3,829.2


8.4 5.25%
Outstanding borrowings on revolving credit facility 14.5

4.0 3.75%
Preferred securities 265.7


Perpetual 6.71%
Total leverage $ 4,109.4


n/a 5.34%

Leverage Ratios

Aimco leverage targets are: Debt and Preferred Equity to EBITDA below 7.0x; and EBITDA Coverage of Interest and Preferred Dividends greater than 2.5x. Aimco also focuses on Debt to EBITDA and EBITDA Coverage of Interest ratios. See the Glossary for definitions of these metrics.


2014 2013
Debt to EBITDA 6.6x 7.8x
Debt and Preferred Equity to EBITDA 7.1x 8.0x
EBITDA Coverage of Interest 2.7x 2.5x
EBITDA Coverage of Interest and Preferred Dividends 2.6x 2.4x

Future leverage reduction is expected from both earnings growth, especially as apartment communities now being redeveloped or developed are completed, and from regularly scheduled property debt amortization funded from retained earnings.


Aimco recourse debt at September 30, 2014, was limited to its revolving credit facility, which Aimco uses for working capital and other short-term purposes, and to secure letters of credit.

At the end of the third quarter, Aimco had outstanding borrowings on its revolving credit facility of $14.5 million and available capacity of $543.1 million, net of $42.4 million of letters of credit backed by the facility. At the end of the third quarter, Aimco’s share of cash and restricted cash on hand was $192.1 million. In addition, Aimco held 13 apartment communities in its unencumbered asset pool with a total estimated fair market value of approximately $750 million. During fourth quarter, Aimco expects to unencumber an additional two apartment communities, bringing its year-end unencumbered asset pool to approximately $1.0 billion.

Equity Activity

Dividend - As previously announced, the Aimco Board of Directors declared a quarterly cash dividend of $0.26 per share of Class A Common Stock for the quarter ended September 30, 2014. This dividend is payable on November 28, 2014, to stockholders of record on November 14, 2014.




YEAR 2014

Net income per share $0.11 to $0.15 $1.91 to $1.95 $1.10 to $1.18
Pro forma FFO per share $0.53 to $0.57 $2.06 to $2.10 $2.04 to $2.12
AFFO per share $0.41 to $0.45 $1.67 to $1.71 $1.64 to $1.74
Conventional Same Store Operating Measures
NOI change compared to prior quarter 2014 2.75% to 3.75% n/a n/a
NOI change compared to same period 2013 4.75% to 5.75% 5.25% 4.50% to 5.25%
Revenue change compared to 2013 n/a 4.40% 3.90% to 4.20%
Expense change compared to 2013 n/a 2.75% 2.25% to 2.50%
Other Guidance Updates
Real estate value of property acquisitions n/a $131M n/a
Real estate value of property dispositions n/a $650M to $700M $300M to $350M
Aimco net proceeds from property dispositions* n/a $400M to $425M $180M to $220M
Real estate value of unencumbered apartment communities n/a ~$1B $900M to $950M
* Net proceeds from property dispositions are expected to be used to fund 2014 and 2015 investment activities. As a result of the increased volume of 2014 property dispositions, and taxable gains related thereto, Aimco may be required to pay a special dividend in 2015. The amount of any such special dividend will depend on the amount of 2015 sales and related taxable gains. If a special dividend is required, Aimco may elect to pay a portion in stock.

Earnings Conference Call Information

Live Conference Call:

Conference Call Replay:
Friday, October 31, 2014 at 1:00 p.m. ET Replay available until 9:00 a.m. ET on November 14, 2014
Domestic Dial-In Number: 1-888-317-6003 Domestic Dial-In Number: 1-877-344-7529
International Dial-In Number: 1-412-317-6061 International Dial-In Number: 1-412-317-0088
Passcode: 3460620 Passcode: 10053890

Live webcast and replay:

Supplemental Information

The full text of this Earnings Release and the Supplemental Information referenced in this release are available on Aimco’s website at

Glossary & Reconciliations of Non-GAAP Financial and Operating Measures

Financial and operating measures found in this Earnings Release and the Supplemental Information include certain financial measures used by Aimco management that are not calculated in accordance with accounting principles generally accepted in the United States, or GAAP. These measures are defined in the Glossary in the Supplemental Information and, where appropriate, reconciled to the most comparable GAAP measures.

About Aimco

Aimco is a real estate investment trust that is focused on the ownership and management of quality apartment communities located in the largest markets in the United States. Aimco is one of the country’s largest owners and operators of apartments, with 204 communities in 23 states and the District of Columbia. Aimco common shares are traded on the New York Stock Exchange under the ticker symbol AIV, and are included in the S&P 500. For more information about Aimco, please visit our website at

Forward-looking Statements

This Earnings Release and Supplemental Information contain forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of: fourth quarter and full year 2014 results, including but not limited to: Pro forma FFO and selected components thereof; AFFO; Aimco’s development and redevelopment investments, timelines and stabilized rents; expectations regarding sales of Aimco’s apartment communities and the use of proceeds thereof; and possible payment of special dividends to shareholders. These forward-looking statements are based on management’s judgment as of this date and include certain risks and uncertainties. Risks and uncertainties include, but are not limited to: Aimco’s ability to maintain current or meet projected occupancy, rental rates and property operating results; the effect of acquisitions, dispositions, developments and redevelopments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our developments and redevelopments; and our ability to comply with debt covenants, including financial coverage ratios.

Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the control of Aimco, including, without limitation: financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that our earnings may not be sufficient to maintain compliance with debt covenants; real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; the timing of acquisitions, dispositions, developments and redevelopments; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by Aimco. In addition, Aimco’s current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on its ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership.

Readers should carefully review Aimco’s financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of Aimco’s Annual Report on Form 10-K for the year ended December 31, 2013, and the other documents Aimco files from time to time with the Securities and Exchange Commission. These forward-looking statements reflect management’s judgment as of this date, and Aimco assumes no obligation to revise or update them to reflect future events or circumstances. This press release does not constitute an offer of securities for sale.

Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Rental and other property revenues $ 239,873 $ 236,546 $ 719,501 $ 700,734
Tax credit and asset management revenues 6,970 7,397 22,684 22,458
Total revenues 246,843 243,943 742,185 723,192
Property operating expenses 95,174 93,898 288,816 282,064
Investment management expenses 1,279 373 3,552 3,503
Depreciation and amortization 69,437 72,040 211,143 221,588
Provision for real estate impairment losses 1,413 1,413
General and administrative expenses 10,665 10,962 31,322 33,894
Other expenses, net 1,408 2,158 7,397 6,281
Total operating expenses 179,376 179,431 543,643 547,330
Operating income 67,467 64,512 198,542 175,862
Interest income 1,787 3,587 5,187 12,652
Interest expense (57,806 ) (59,648 ) (168,613 ) (175,724 )
Other, net 1,733 (1,563 ) (57 ) (4,812 )
Income before income taxes, discontinued operations and gain on dispositions 13,181 6,888 35,059 7,978
Income tax benefit (expense) 5,005 87 13,110 (187 )
Income from continuing operations 18,186 6,975 48,169 7,791
Income from discontinued operations, net 72,435 81,431
Gain on dispositions of real estate, net of tax 126,329 262,483
Net income 144,515 79,410 310,652 89,222
Noncontrolling interests:
Net (income) loss income attributable to noncontrolling interests in consolidated real estate partnerships (8,337 ) (6,776 ) (21,952 ) 4,336
Net income attributable to preferred noncontrolling interests in Aimco OP (1,601 ) (1,606 ) (4,808 ) (4,818 )
Net income attributable to common noncontrolling interests in Aimco OP (6,549 ) (3,796 ) (13,895 ) (4,668 )
Net income attributable to noncontrolling interests (16,487 ) (12,178 ) (40,655 ) (5,150 )
Net income attributable to Aimco 128,028 67,232 269,997 84,072
Net income attributable to Aimco preferred stockholders (2,875 ) (702 ) (5,087 ) (2,105 )
Net income attributable to participating securities (447 ) (262 ) (962 ) (418 )
Net income attributable to Aimco common stockholders $ 124,706 $ 66,268 $ 263,948 $ 81,549
Earnings attributable to Aimco per common share – basic:
Income from continuing operations $ 0.86 $ 0.04 $ 1.81 $ 0.03
Net income $ 0.86 $ 0.46 $ 1.81 $ 0.56
Earnings attributable to Aimco per common share – diluted:
Income from continuing operations $ 0.85 $ 0.04 $ 1.81 $ 0.03
Net income $ 0.85 $ 0.46 $ 1.81 $ 0.56
Consolidated Statements of Operations (continued)
Income from Discontinued Operations

In first quarter 2014, Aimco adopted a new accounting standard which generally eliminates, on a prospective basis, the requirement that sales of individual apartment communities be presented within discontinued operations. Under the new standard, the results of operations related to apartment communities sold or classified as held for sale during 2014 or subsequent periods are included in continuing operations for both the current period and prior periods, and any gain or loss on such sales is included as a separate line item below income from discontinued operations within Aimco’s Consolidated Statements of Operations.
Income from discontinued operations for apartment communities sold prior to Aimco’s January 1, 2014 adoption of the new standard consists of the following (in thousands):

Three Months Ended
September 30, 2013

Nine Months Ended
September 30, 2013

Rental and other property revenues $ 17,969 $ 55,236
Property operating expenses (8,843 ) (25,471 )
Depreciation and amortization (4,741 ) (14,459 )
(Provision for) recovery of real estate impairment losses (108 ) 16
Operating income 4,277 15,322
Interest income 123 316
Interest expense (3,700 ) (12,074 )
Income before gain on dispositions of real estate and income taxes 700 3,564
Gain on dispositions of real estate 74,664 80,656
Income tax expense (2,929 ) (2,789 )
Income from discontinued operations, net $ 72,435 $ 81,431
Income from discontinued operations attributable to:
Noncontrolling interests in consolidated real estate partnerships $ (8,079 ) $ (548 )
Noncontrolling interests in Aimco OP (3,443 ) (4,309 )
Total noncontrolling interests (11,522 ) (4,857 )
Income from discontinued operations attributable to Aimco $ 60,913 $ 76,574
Consolidated Balance Sheets
(in thousands) (unaudited)
September 30, 2014 December 31, 2013
Buildings and improvements $ 6,069,042 $ 6,332,723
Land 1,771,545 1,881,358
Total real estate 7,840,587 8,214,081
Accumulated depreciation (2,615,712 ) (2,822,872 )
Net real estate 5,224,875 5,391,209
Cash and cash equivalents 29,186 55,751
Restricted cash 166,024 127,037
Other assets 470,328 505,416
Assets held for sale [1] 47,050
Total assets $ 5,937,463 $ 6,079,413
Non-recourse property debt $ 3,947,786 $ 4,337,785
Revolving credit facility borrowings 14,450 50,400
Total indebtedness 3,962,236 4,388,185
Accounts payable 40,166 43,161
Accrued liabilities and other 288,688 287,595
Deferred income 86,853 107,775
Liabilities related to assets held for sale [1] 37,056
Total liabilities 4,414,999 4,826,716
Preferred noncontrolling interests in Aimco OP 78,909 79,953
Perpetual Preferred Stock 186,126 68,114
Class A Common Stock 1,462 1,459
Additional paid-in capital 3,694,101 3,701,339
Accumulated other comprehensive loss (5,517 ) (4,602 )
Distributions in excess of earnings (2,647,921 ) (2,798,853 )
Total Aimco equity 1,228,251 967,457
Noncontrolling interests in consolidated real estate partnerships 234,076 233,008
Common noncontrolling interests in Aimco OP (18,772 ) (27,721 )
Total equity 1,443,555 1,172,744
Total liabilities and equity $ 5,937,463 $ 6,079,413
[1] As of September 30, 2014, Aimco had five apartment communities with a total of 667 apartment homes classified as held for sale.

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