Apartment Investment and Management Company (AIV), popularly known as Aimco, reported third quarter 2011 funds from operations (FFO) of $43.6 million or 36 cents per share compared with $48.9 million or 42 cents in the year-ago period. Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Excluding one-time items, recurring FFO in the reported quarter stood at $49.7 million or 41 cents per share compared with $46.7 or 40 cents per share.
Reported FFO beat the Zacks Consensus Estimate by a penny. During the quarter, total revenue was $281.4 million, compared with $273.2 million in the year-ago period. Total revenue in the reported quarter was ahead of the Zacks Consensus Estimate of $267 million. Total same-store net operating income (NOI) increased 3.8% year over year
In the conventional real estate portfolio, Aimco had a weighted average ownership of 94%. Average rents in the same-store conventional real estate portfolio spiked 3.1% during the quarter to $1,094 per unit from $1,061 per unit in the year-ago quarter.
Rental rate exhibited a 6.1% growth in new lease rates during the reported quarter, while renewal rate stood at 5.6%. Same-store revenue in the conventional portfolio increased 3.5% year over year to $187.0 million, while operating expenses increased 4.3% to $70.1 million, resulting in a NOI upside of 3.0%.
In the affordable real estate portfolio, Aimco had a weighted average ownership of 70% during the reported quarter. Average occupancy was 97.6% at quarter end, down 0.2% year over year, while average rent per unit increased 3.4% from $814 in the prior-year quarter to $842. Conventional property operations generated 85% of Aimco’s third quarter 2011 property NOI, while affordable real estate portfolio generated the remaining 15%.
Aimco is continuing with its strategy of focusing on the 20 largest markets in the U.S. that are concentrated mostly in the coastal areas and also includes a number of Sun Belt cities, Chicago and Illinois.
During third quarter 2011, Aimco acquired a 126-unit property located in San Francisco’s Marin County submarket. The acquisition increased the company’s total investment in the property to approximately $65.0 million. Additionally, Aimco also increased its investment in San Diego, by acquiring approximately one half of the ownership of four entities, which include four neighboring properties with 142 units located in La Jolla, California.
During third quarter 2011, Aimco sold 9 conventional properties and 3 affordable properties totaling 2,395 and 266 units, respectively, for $154.5 million. The company used the bulk of the proceeds to repay debt.
At quarter end, Aimco had a total debt of $4.7 billion with debt service and fixed charge coverage ratios of 1.60x and 1.36x, respectively. Aimco had cash and cash equivalents of $75.8 million at quarter end.
At quarter end, Aimco had $26.2 million in outstanding debt under its revolving credit facility with an available capacity of $247.8 million, net of $26.0 million of letters of credit backed by the facility.
During third quarter 2011, Aimco issued 0.1 million shares under its At-the-Market (ATM) offering program at a weighted average price of $26.33 each, generating $3.0 million in gross proceeds. The company utilized the proceeds from the equity offering to fund its investment activities.
Aimco expects recurring FFO for full year fiscal 2011 in the range of $1.46 – $1.50 per, while recurring FFO for fourth quarter 2011 is expected in the range of $0.39 to $0.43 39 cents to 43 cents. Total same-store NOI during fiscal 2011 is expected to be 5.5% for fiscal 2011 compared to the previous year.
We have a Neutral recommendation on Apartment Investment and Management Co, which presently has a Zacks #3 Rank that translates into a short-term Hold rating. One of its competitors, Equity Residential (EQR) also holds a Zacks #3 Rank.
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