Shareholders of Apartment Investment and Management Co. AIV, which is better known as Aimco, have reason to rejoice as the company’s corporate credit rating has been upgraded to 'BBB-' from 'BB+' by Standard & Poor's Ratings Services. The rating outlook remains stable. Moreover, the issue-level rating of this residential real estate investment trust’s (“REIT”) preferred stock has been upgraded to 'BB' from 'B+'.
The rating agency acknowledged Aimco’s large portfolio that is well diversified in terms of both geography and price points. Asset recycling and redevelopment of existing properties enhanced the quality of its portfolio.
The stable outlook underscores the rating agency’s expectations of modest increase in rent and net operating income, aided by sound multifamily fundamentals. S&P believes that decent growth in EBITDA, coupled with modest decrease in debt, would help Aimco achieve better leverage and coverage metrics.
In our opinion, the rating upgrade marks a positive for Aimco, enhancing its creditworthiness in the market, and is also likely to boost investors’ confidence in the stock. Usually, rating upgrade provides companies with an opportunity to enjoy reduced costs on its debts and a better access to capital.
Going forward, we believe that Aimco’s well diversified footprint, portfolio enhancement activity and favorable multifamily fundamentals would drive its growth. But an anticipated rise in interest rates in the medium term remains a looming concern.
Aimco currently carries a Zacks Rank #3 (Hold). Investors interested in the residential REIT may consider stocks like Silver Bay Realty Trust Corp. SBY, Equity Residential EQR and Post Properties Inc. PPS. While Silver Bay Realty sports a Zacks Rank #1 (Strong Buy), both Equity Residential and Post Properties hold a Zacks Rank #2 (Buy).
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