Apartment Investment and Management Company (AIV) or popularly known as Aimco in real estate investment trust (REIT) has repaid 19 non-recourse property loans, scheduled to mature between 2012 and 2016, with proceeds from new loans. The new loans are all long-term, fixed-rate, non-recourse property loans totalling $674 million. The new loans were closed in three parts within a six-month period, with $219 million in December 2010, $121 million in March 2011 and $334 million in May 2011.
Each loan carries a 10 year term and provides for monthly amortization with full repayment over 30 years. The company sold the new loans to Freddie Mac, which intends to secure the new loans through a new multi-family private label securitization in the next 30 days. In a bid to effectively reduce its debt obligation, Aimco has agreed to purchase the first loss and mezzanine position from Freddie Mac by purchasing notes with a face value of $101 million for approximately $51 million. The discount of $50 million will be accreted into Aimco's income over the ten-year term of the notes.
The net effective cost of this refinancing transaction and securitization is estimated to be 5.58%, taking into account the interest on the new loans, the prepayment penalties for the previous loans and estimated interest income from the securitization trust notes.
Aimco continues its focus on reducing the risks associated with debt leverage by strengthening its balance sheet. The company revised its second quarter 2011 FFO (fund from operations) guidance from 33 cents–37 cents per share to 18 cents–22 cents per share and also its fiscal 2011 guidance from $1.49–$1.59 per share to $1.34–$1.44 per share. Fund 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. The company’s FFO guidance was impacted by prepayment charges of 14 cents and deferred financing write-off charges of 1 cent.
Headquartered in Denver, Colorado, Aimco is engaged in the acquisition, ownership, management, and redevelopment of apartment properties. Aimco currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Equity Residential (EQR) currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
APARTMENT INVT (AIV): Free Stock Analysis Report
Be the first to comment