Apartment Investment and Management pany(AIV) - 2024 Q2 - Quarterly Results

Earnings Release and Outlook This section details Aimco's Q2 2024 financial performance, strategic initiatives, and updated full-year guidance, highlighting operational strengths despite a net loss Financial Results and Highlights Aimco reported a net loss of $(0.43) per share for Q2 2024 due to an impairment charge, but saw positive operational performance with a 4.1% year-over-year increase in Stabilized Operating Properties NOI Q2 2024 Key Performance Indicators | Metric | Value | Note | | :--- | :--- | :--- | | Net Loss per Share (diluted) | $(0.43) | Primarily due to a non-cash impairment charge on IQHQ investment | | Stabilized Operating Properties NOI Growth (YoY) | 4.1% | Revenue increased 4.6%, expenses increased 5.7% | | Average Monthly Revenue per Apartment Home | $2,392 | An increase of 4.4% YoY | | Common Stock Repurchased (Q2) | 3.0 million shares | At an average cost of $8.02 per share | - Construction at key development projects, including Upton Place, Strathmore Square, and Oak Shore, advanced as planned, with Upton Place substantially complete and leasing exceeding initial underwriting[9] CEO Commentary CEO Wes Powell highlighted solid Q2 results driven by NOI growth, strong leasing, on-schedule development, and active asset marketing, with significant stock repurchases returning capital to shareholders - Full-year guidance for 2024 has been revised upwards, with NOI growth now expected to be between 1.50% and 2.75%, an increase of over 100 basis points at the midpoint[6] - Active development projects are progressing on schedule and budget, with over 600 new apartment homes brought online and 250 new leases executed year-to-date through July[7] - The company is advancing the sale of its two-property assemblage in Miami's Brickell neighborhood and The Hamilton redevelopment, with a preference for returning net proceeds to stockholders[8][10] - Year-to-date as of July 31, 2024, Aimco has repurchased 4.2 million shares at an average price of $7.93 per share, signaling confidence in the stock's value[10] Operating Property Results Aimco's Stabilized Operating Properties showed strong Q2 2024 performance with a 4.1% year-over-year NOI increase, driven by 4.6% revenue growth and stable occupancy, despite a 5.7% rise in expenses Stabilized Operating Properties Performance (Q2 2024 vs Q2 2023) | Metric | Q2 2024 | Q2 2023 | Variance | | :--- | :--- | :--- | :--- | | Revenue | $38.7M | $37.0M | +4.6% | | Expenses | $12.2M | $11.5M | +5.7% | | Net Operating Income (NOI) | $26.5M | $25.5M | +4.1% | | Average Daily Occupancy | 96.3% | 96.2% | +0.1% | - Leasing activity remained robust, with effective rents on all new and renewal leases increasing by an average of 3.5% over the previous lease, and a strong renewal rate of 65.8%[14] - The financial profile of new residents is strong, with a median annual household income of $126,000 and a rent-to-income ratio of 20.0%[14] Value Add and Opportunistic Investments Aimco is actively pursuing value-add and opportunistic investments, focusing on development projects with high barriers to entry and strategic dispositions, investing $29.8 million in Q2 development activities Development and Redevelopment Aimco's active development projects are progressing on schedule and budget, with significant leasing activity at newly delivered properties like Upton Place, Strathmore Square, and Oak Shore, and continued investment in a substantial future pipeline - Upton Place (Washington D.C.): Substantially complete with all 689 apartment homes delivered; as of July 31, 2024, 240 units were leased and 150 occupied, with 88% of the 105K sq ft of retail space also leased[19] - Strathmore Square (Bethesda, MD): Construction is on plan; as of July 31, 2024, 175 of 220 homes were delivered and 40 units were leased at rates ahead of projections[19] - Oak Shore (Corte Madera, CA): Construction is ongoing; as of July 31, 2024, 13 of 24 residences were delivered, with 7 occupied and 2 pre-leased[19] - In Q2 2024, Aimco invested $3.3 million in planning and entitlement for future pipeline projects in South Florida and Colorado[19] Investment & Disposition Activity Aimco is actively marketing three properties for sale in the Miami market: the two-property Brickell Assemblage and The Hamilton, engaging in discussions with interested parties without commenting on specifics until definitive agreements are in place - The company is focused on monetizing assets when accretive uses for the proceeds are identified, aligning with its capital allocation strategy[16][17] Balance Sheet and Financing Activity Aimco maintains a strong balance sheet with $259.4 million in liquidity as of June 30, 2024, well-managed debt that is 100% fixed-rate or hedged, and no significant debt maturities until May 2026 Net Leverage as of June 30, 2024 (Aimco Share) | Debt Type | Amount (in thousands) | | :--- | :--- | | Total non-recourse fixed rate debt | $774,474 | | Total non-recourse floating rate debt | $90,660 | | Total non-recourse construction loan debt | $337,539 | | Cash and restricted cash | $(108,995) | | Net Leverage | $1,093,678 | - As of June 30, 2024, Aimco had access to $259.4 million in liquidity, comprising $88.5 million in cash, $20.9 million in restricted cash, and $150.0 million in borrowing capacity[18] - Including contractual extensions, less than 1% ($9.4 million) of total debt matures before May 2026, providing significant financial flexibility[21] Public Market Equity Aimco demonstrated its commitment to enhancing shareholder value through significant common stock repurchases, buying back 3.0 million shares in Q2, while the Board reviews strategic actions to maximize value and return capital - In Q2 2024, Aimco repurchased 3.0 million shares at an average price of $8.02 per share[25] - Year-to-date as of July 31, 2024, repurchases totaled 4.2 million shares at an average cost of $7.93 per share[25] - The Board of Directors is actively considering strategic actions to maximize stockholder value, with a focus on portfolio simplification and returning capital to shareholders following contemplated asset sales[22][23] 2024 Outlook Aimco updated its full-year 2024 forecast, projecting a larger net loss per share due to a Q2 impairment charge, but raising its guidance for Net Operating Income (NOI) growth and narrowing revenue and expense growth ranges Updated 2024 Full-Year Guidance | Metric | 2024 Forecast | Prior Forecast | | :--- | :--- | :--- | | Net loss per share – diluted | $(0.80) - $(0.75) | $(0.50) - $(0.40) | | Revenue Growth | 3.25% - 3.75% | 1.75% - 3.75% | | Operating Expense Growth | 6.00% - 7.50% | 6.00% - 8.00% | | Net Operating Income Growth | 1.50% - 2.75% | -0.75% - 2.75% | - The updated guidance does not include any potential gains from transactions in 2024, such as the planned Miami asset sales[26][28] Consolidated Financial Statements This section presents Aimco's detailed financial statements, including income and balance sheet data, reflecting the company's Q2 2024 performance and financial position Consolidated Statements of Operations For Q2 2024, Aimco reported a net loss of $61.1 million, or $(0.43) per diluted share, primarily due to a $47.3 million non-cash impairment charge on its IQHQ equity investment, despite total revenues growing to $51.1 million Q2 2024 Statement of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Rental and other property revenues | $51,148 | $45,674 | | Total operating expenses | $52,244 | $43,704 | | Realized and unrealized losses on equity investments | $(47,264) | $1,094 | | Net income (loss) | $(61,103) | $144 | | Net loss attributable to Aimco | $(60,526) | $(3,602) | | Net loss per share – diluted | $(0.43) | $(0.02) | - The primary driver for the Q2 2024 net loss was a $47.3 million non-cash impairment charge on the company's passive equity investment in IQHQ[44] Consolidated Balance Sheets As of June 30, 2024, Aimco's balance sheet showed total assets of $2.06 billion and total liabilities of $1.56 billion, with total Aimco equity decreasing to $253.5 million due to net loss and share repurchases, and total indebtedness increasing to $1.21 billion Balance Sheet Summary (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Net real estate | $1,675,129 | $1,633,821 | | Total assets | $2,057,114 | $2,089,475 | | Total indebtedness | $1,211,315 | $1,147,741 | | Total liabilities | $1,564,360 | $1,497,865 | | Total Aimco equity | $253,536 | $349,652 | Supplemental Information This section provides detailed supplemental financial and operational schedules, including non-GAAP reconciliations, debt profiles, portfolio overviews, and development project specifics Schedule 1 – EBITDAre and Adjusted EBITDAre This schedule reconciles Net Income (Loss) to non-GAAP measures, showing Aimco's Q2 2024 Net Loss of $61.1 million translated to an EBITDAre of $(24.1) million, and an Adjusted EBITDAre of $19.1 million after further adjustments EBITDAre and Adjusted EBITDAre Reconciliation (Q2 2024, in thousands) | Metric | Amount | | :--- | :--- | | Net Income (loss) | $(61,103) | | Adjustments (Interest, Tax, D&A, etc.) | $36,959 | | EBITDAre | $(24,144) | | Further Adjustments (NCI, IQHQ losses, etc.) | $43,244 | | Adjusted EBITDAre | $19,100 | Schedule 2 – Aimco Leverage and Maturities This schedule details Aimco's debt profile, showing a total non-recourse debt (Aimco share) of $1.2 billion with a weighted average maturity of 4.8 years, a well-staggered maturity schedule, and net leverage of $1.09 billion - Total Aimco Share of non-recourse debt is $1.20 billion with a weighted average maturity of 4.8 years (5.4 years including extensions)[48][50] - The debt maturity profile is favorable, with no significant maturities until 2025, and including extension options, only 0.8% of debt matures before May 2026[49][50] Schedule 3 – Aimco Portfolio As of Q2 2024, Aimco's total portfolio comprises 39 properties, including 6,951 apartment homes, over 436,000 square feet of commercial space, and 106 hotel keys, diversified across stabilized properties, development projects, and land Total Portfolio Overview | Category | Count | | :--- | :--- | | Number of Properties | 39 | | Apartment Homes | 6,951 | | Office and Retail Sq Ft | 436,200 | | Hotel Keys | 106 | | Development Land (Acres) | 24.7 | Schedule 4 – Aimco Capital Additions Aimco's capital additions totaled $36.8 million in Q2 2024 and $82.7 million for the first six months of the year, with the majority, $29.8 million for the quarter, directed towards development and redevelopment projects Capital Additions (in thousands) | Category | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Capital Replacements and Casualty | $4,319 | $7,046 | | Development and Redevelopment | $29,809 | $72,568 | | Total Capital Additions | $36,785 | $82,655 | Schedule 5 – Aimco Development and Redevelopment Projects This schedule outlines Aimco's active and pipeline development projects, including 933 units across three active projects with estimated direct costs of $648.2 million, and a substantial future pipeline of nearly 6,000 multifamily units Active Development Project Summaries Aimco has three active development projects in lease-up or under construction: Upton Place (689 units), Strathmore Square (220 units), and Oak Shore (24 units), with a total planned direct capital investment of $456.1 million and projected NOI stabilization between 2025 and 2026 Active Projects Leasing Status (as of July 31, 2024) | Project Name | Location | Units | % Leased or Pre-Leased | | :--- | :--- | :--- | :--- | | Upton Place | Washington, D.C. | 689 | 28% | | Strathmore Square | Bethesda, MD | 220 | 11% | | Oak Shore | Corte Madera, CA | 24 | 38% | - The total estimated direct costs for the development portfolio (including active projects and those in occupancy stabilization) is $648.2 million, with an estimated stabilized NOI of $44.1 million[58] Development and Redevelopment Pipeline Projects Aimco controls a significant future development pipeline totaling 13.3 million gross square feet, planned to deliver 5,972 multifamily units and nearly 1.7 million square feet of commercial space, primarily in Southeast Florida, D.C. Metro, and Colorado Total Future Pipeline Summary | Metric | Total | | :--- | :--- | | Gross Sq Ft | 13,260,000 | | Multifamily Units | 5,972 | | Leasable Commercial Sq Ft | 1,693,500 | - The earliest potential construction starts for pipeline projects are in late 2024, with the majority planned for 2025 and beyond[63] Schedule 6 – Stabilized Operating Properties This schedule details operating results for Aimco's 21 stabilized properties (5,600 homes), showing Q2 2024 total NOI grew 4.1% year-over-year to $26.5 million, driven by strong revenue growth in Boston and Southeast Florida, despite a sequential decrease from Q1 2024 Stabilized Properties NOI Growth by Market (Q2 2024 vs Q2 2023) | Market | NOI Growth (YoY) | | :--- | :--- | | Boston | 4.0% | | Chicago | 4.2% | | New York City | 11.6% | | SE Florida | 6.2% | | Other Markets | -4.4% | | Total | 4.1% | - Year-to-date, total NOI for the stabilized portfolio was up 5.3% compared to the first half of 2023[66] Schedule 7 – Acquisitions, Dispositions, and Leased Communities Transaction activity was minimal in early 2024, with Aimco selling a majority of its partnership interest in St. George Villas, a 40-unit income-restricted property, in February, and the remaining 1% interest under contract for disposition in Q1 2025 - In February 2024, Aimco sold most of its interest in St. George Villas, a 40-unit property in South Carolina[68] Schedule 8 – Net Asset Value Components This schedule presents the pre-tax components of Aimco's Net Asset Value (NAV), including $106.2 million in annualized NOI from stabilized properties, $44.1 million in projected NOI from development projects, and $154.0 million in land investments, offset by over $1.2 billion in property and construction debt Key NAV Components (in millions) | Category | Value | | :--- | :--- | | Assets | | | Annualized NOI for Stabilized Properties | $106.2 | | Projected Annual NOI for Development Projects | $44.1 | | Land, Planning and Entitlement Investment | $154.0 | | Cash and cash equivalents | $88.5 | | Liabilities | | | Non-recourse property debt, net | $851.4 | | Non-recourse construction loans, net | $371.6 | | Preferred equity interests | $174.8 | - Aimco notes that the value of its Brickell Assemblage is estimated to be $125 - $175 million higher than the value implied by a capitalization of its current NOI, based on comparable sales[71] Glossary and Reconciliations of Non-GAAP Financial and Operating Measures This section defines non-GAAP financial measures and other terms, such as EBITDAre and Property NOI, and provides detailed reconciliations of segment NOI to consolidated GAAP financial statements, ensuring clarity on key metric calculations - Key non-GAAP measures defined include EBITDAre (Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate) and Property NOI (Net Operating Income)[80][89] - The section provides detailed reconciliations of segment NOI to GAAP revenues and expenses, clarifying adjustments for items like utility reimbursements[90][91][92]