Apartment Investment and Management Company (AIV), or Aimco as the real estate investment trust (REIT) is popularly known, reported fiscal 2011 second quarter funds from operations (FFO) of $32.3 million or 27 cents per share compared to $46.9 million or 40 cents per share in the year-ago period. 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 reported FFO for second quarter 2011 missed the Zacks Consensus Estimate by 2 cents. During the reported quarter, total revenue stood at $281.0 million, compared to $276.5 million in the year-ago period. Total revenue for the reported quarter surpassed the Zacks Consensus Estimate of $274 million. The year-over-year increase in total revenue was primarily due to sustainable reduction in operating costs to the tune of 1.5%. Total same-store net operating income (NOI) during the quarter increased 5.1% compared to second quarter 2010.
In the conventional real estate portfolio, Aimco had a weighted average ownership of 94%. Average rents in the same-store conventional real estate portfolio increased 1.7% during the quarter to $1,070 per unit from $1,052 during second quarter 2010. Rental rate exhibited 5.1% growth in new lease rates during the reported quarter, while renewal rate increased 3.6%. Same-store revenues in the conventional portfolio increased 2.4% year-over-year to $187.0 million, while operating expenses dipped 1.3% to $68 million resulting in a NOI increase of 4.6%.
In the affordable real estate portfolio, Aimco had a weighted average ownership of 69% during the reported quarter. Average occupancy was 97.6% at quarter-end, an increase of 0.1% from second quarter 2010, while average rent per unit increased 4.0% from $810 to $842. Conventional property operations generated 85% of Aimco’s second quarter 2011 property NOI, while affordable real estate portfolio generated the balance 15%.
Aimco is continuing with its strategy to focus 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 second quarter 2011, Aimco sold 7 conventional properties and 7 affordable properties totaling 1,741 and 646 units, respectively, for $109.8 million in total gross proceeds, bulk of which was used to repay debt.
At quarter end, Aimco had a total debt of $4.8 billion with debt service and fixed charge coverage ratios of 1.59x and 1.35x respectively. Aimco had cash and cash equivalents of $85.3 million at quarter end. Aimco’s recourse debt at June 30, 2011, was limited to its revolving credit facility. At quarter end, Aimco had $21.5 million outstanding debt under its revolving credit facility with an available borrowing capacity of $251.5 million, net of $27.0 million of letters of credit backed by the facility.
During second quarter 2011, Aimco issued 1.7 million shares under its At-the-Market (ATM) offering program at a weighted average price of $25.62 each, generating $42.9 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 2011 in the range of $1.45 – $1.51 per, while recurring FFO for third quarter 2011 is expected in the range of 38 cents to 42 cents. Total same-store NOI during fiscal 2011 is expected to surge 5.0% to 6.0% compared to the previous year.
We maintain our long-term ‘Neutral’ recommendation on the stock, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Equity Residential (EQR), one of the competitors of Aimco.
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