Aimco Offers Mid-Quarter Update (AIV) (EQR)

Zacks

Apartment Investment and Management Company (AIV), or Aimco as the real estate investment trust (REIT) is popularly known, recently provided a mid-quarter update of its portfolio management activities as well as the rental rate trends exhibited by it. The company is expected to report its third quarter 2011 results in late October or early November.

Aimco is one of the largest owners and operators of multifamily apartments in the U.S., with a diversified portfolio of Conventional, Affordable and Student Housing communities. Quarter-to-date, the company had sold 8 Conventional properties (2,179 units) and 4 Affordable properties (286 units) for gross proceeds of $133 million. After repayment of existing property debt and transaction costs, Aimco raised net proceeds of $59 million from the asset sale.

In August 2011, Aimco acquired Madera Vista, a strategic redevelopment asset in San Francisco’s Marin County submarket. The property offers panoramic view of the San Francisco Bay and Mount Tamalpais, and provides easy access to all the natural preserves in its proximity. The acquisition of the 126-unit property was funded through the proceeds from the sale of non-core assets, and through $40 million 10-year non-recourse fixed-rated property level debt. Aimco further intends to renovate the asset in the next four to six months, which will bring its total investment in the property to approximately $65 million.

Quarter-to-date, Conventional same-store rental rate increased 5.1% for new leases and 3.6% for renewals on a year-over-year basis. Year-to-date, average increase in the Conventional same-store new lease and renewal rental rates was 4.9% and 3.8%, respectively.

Aimco has a strong portfolio of Class ‘B’ and Class ‘C’ properties primarily catering to the middle-income market. However, despite attempts to reposition its portfolio in higher growth markets, much of the company’s portfolio still resides in areas where housing is relatively cheap. As the company continues to sell non-core assets and buy in high-growth infill areas, we expect continued earnings dilution.

We maintain our ‘Neutral’ rating on Aimco, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating, indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Equity Residential (EQR), one of the competitors of Aimco.

APARTMENT INVT (AIV): Free Stock Analysis Report

EQUITY RESIDENT (EQR): Free Stock Analysis Report

Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.

Be the first to comment

Leave a Reply