Apartment Investment and Management pany(AIV) - 2023 Q2 - Quarterly Report

Explanatory Note This section clarifies the corporate structure of Aimco and its operating partnership, explaining their consolidated reporting for a comprehensive view - Apartment Investment and Management Company ("Aimco") is a self-administered real estate investment trust (REIT)[6] - Aimco is the general partner of Aimco OP L.P. ("Aimco Operating Partnership"), holding a 92.5% legal interest and a 94.9% economic interest as of June 30, 2023[7] - This report combines the quarterly filings for both Aimco and Aimco Operating Partnership because they operate as a single enterprise, which eliminates duplicative disclosure and provides a more readable presentation[9][12] PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements for Aimco and Aimco OP L.P. for Q2 2023 Apartment Investment and Management Company Financial Statements Presents Aimco's condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows Aimco Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $2,216,352 | $2,181,223 | | Net Real Estate | $1,558,076 | $1,432,761 | | Cash and Cash Equivalents | $164,990 | $206,460 | | Total Liabilities | $1,448,945 | $1,389,039 | | Total Indebtedness | $1,065,662 | $1,048,199 | | Total Aimco Equity | $522,182 | $547,852 | Aimco Condensed Consolidated Statement of Operations Highlights (in thousands) | Account | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Rental and other property revenues | $89,942 | $100,691 | | Total operating expenses | $85,882 | $115,343 | | Gain on dispositions of real estate | $1,878 | $94,465 | | Lease modification income | $0 | $205,387 | | Net income (loss) | ($5,609) | $263,323 | | Net income (loss) attributable to Aimco | ($12,419) | $247,346 | | Net income (loss) per share – diluted | ($0.09) | $1.62 | Aimco Condensed Consolidated Cash Flow Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,685 | $25,378 | | Net cash used in investing activities | ($126,635) | ($125,389) | | Net cash provided by (used in) financing activities | $71,549 | ($50,262) | | Net Decrease in Cash | ($37,401) | ($150,273) | Aimco OP L.P. Financial Statements Presents Aimco OP L.P.'s condensed consolidated financial statements, nearly identical to Aimco's, with equity classification differences Aimco OP L.P. Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $2,216,352 | $2,181,223 | | Total Liabilities | $1,448,945 | $1,389,039 | | Total Partners' Capital | $598,759 | $625,358 | Aimco OP L.P. Condensed Consolidated Statement of Operations Highlights (in thousands) | Account | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Rental and other property revenues | $89,942 | $100,691 | | Net income (loss) | ($5,609) | $263,323 | | Net income (loss) attributable to Aimco Operating Partnership | ($13,071) | $260,440 | | Net income (loss) per common unit – diluted | ($0.09) | $1.62 | Notes to Condensed Consolidated Financial Statements Provides detailed disclosures supporting consolidated financial statements, covering portfolio, accounting policies, commitments, and segments - As of June 30, 2023, the company's portfolio includes 26 operating apartment communities (5,640 homes), one commercial office building, one hotel, three residential communities under development (1,185 homes), and land parcels held for development[44] - In June 2023, the company sold a 20% non-controlling participation in its Parkmerced Mezzanine Investment for $33.5 million. The purchaser has an option to acquire the remaining 80% for an additional $134 million plus accruing interest[59] - As of June 30, 2023, the company had construction-related contract commitments of $165.5 million, with $229.0 million undrawn on its construction loans[71] Business Segment Net Real Estate (in thousands) | Segment | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Development and Redevelopment | $818,583 | $675,506 | | Operating | $492,720 | $502,646 | | Other | $246,773 | $254,609 | | Total | $1,558,076 | $1,432,761 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on financial condition and results, covering strategy, highlights, segment performance, and liquidity Executive Overview Management outlines its mission to create value through multifamily real estate investments, focusing on capital appreciation - The company's primary goal is to achieve outsized risk-adjusted returns and accelerate growth for shareholders, focusing on capital appreciation over regular dividends[123] - Investment strategy targets 'Value Add' and 'Opportunistic' multifamily real estate in Southeast Florida, the Washington D.C. Metro Area, and Colorado's Front Range[125] - The company plans to significantly reduce its allocation to alternative investments over time, which currently include the Parkmerced Mezzanine Investment and a passive equity investment in IQHQ[126][132] Financial Results and Recent Highlights Highlights key performance metrics and significant events for Q2 2023, including net loss and partial sale of mezzanine loan Stabilized Operating Properties Performance (YTD as of June 30, 2023 vs 2022) | Metric | Change YoY | | :--- | :--- | | Revenue | +10.4% | | Net Operating Income | +11.4% | - Net loss attributable to Aimco common stockholders was ($0.09) per share for the six months ended June 30, 2023, compared to net income of $1.62 per share for the same period in 2022[136] - The company closed on a partial sale of the Parkmerced mezzanine loan, monetizing $91.5 million of its investment with the potential for an additional $156 million in proceeds[136] Value Add, Opportunistic & Alternative Investments Details progress on development projects and alternative investments, including significant capital deployment and project updates - Invested $81.1 million and $145.9 million in development and redevelopment activities during the three and six months ended June 30, 2023, respectively[138] - The Hamilton property in Miami is 95% leased or pre-leased at rates over 20% ahead of underwriting[140] - Construction is on schedule at Upton Place in Washington, D.C., with 80% of retail space leased, and at Strathmore Square in Bethesda, MD, with initial delivery expected in H2 2024[140] Results of Operations Analysis Compares operating results for Q2 2023 vs 2022, highlighting changes in net income, NOI, depreciation, and interest expense Proportionate Property Net Operating Income (Q2 2023 vs Q2 2022, in thousands) | Segment | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Development and Redevelopment | $956 | ($330) | (100.0%) | | Operating | $25,515 | $23,246 | 9.8% | | Other | $1,912 | $2,507 | (23.7%) | | Total | $28,383 | $25,423 | 11.6% | - Depreciation and amortization decreased by $24.7 million (42.6%) for the six months ended June 30, 2023, compared to the prior year, due to property dispositions and lease terminations in 2022[159] - Interest expense decreased by $36.8 million (65.5%) for the six months ended June 30, 2023, compared to the prior year, mainly due to the prepayment of notes payable to AIR and other property debt[162] - Lease modification income was $0 in 2023, compared to $205.4 million in Q2 2022 related to an agreement with AIR[168] Liquidity and Capital Resources Discusses Aimco's liquidity position, capital resources, and debt structure, emphasizing fixed-rate debt and cash availability - Total available liquidity as of June 30, 2023, was $342.4 million[181] - As of June 30, 2023, 88% of outstanding non-recourse property debt had a fixed interest rate, with a weighted-average contractual rate of 4.9%[185] - For the six months ended June 30, 2023, net cash from financing activities was $71.5 million, a $121.8 million increase from the same period in 2022, driven by proceeds from construction loans and the partial sale of the Mezzanine Investment[190] Item 3. Quantitative and Qualitative Disclosures About Market Risk Discusses the company's exposure to market risks, primarily debt-related refunding and repricing risks, and mitigation strategies - The company's chief market risks are refunding risk and repricing risk related to its debt[192] - As of June 30, 2023, the company held interest rate caps with a notional value of $473.2 million to mitigate risk on its variable-rate debt[195] - A 100 basis point change in variable interest rate indices is estimated to have no impact on annual interest expense due to the use of interest rate caps[194] Item 4. Controls and Procedures Management's conclusions on the effectiveness of disclosure controls and procedures, with no material changes identified - Management, including the CEO and CFO, evaluated and concluded that Aimco's disclosure controls and procedures were effective as of June 30, 2023[196] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[197][199] PART II. OTHER INFORMATION Item 1A. Risk Factors States no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for 2022 - There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[202] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details Aimco's equity activities for the quarter, including common stock repurchases and OP Unit redemptions Aimco Share Repurchases (Q2 2023) | Fiscal Period | Total Number of Shares Repurchased | Weighted Average Price Paid per Share | | :--- | :--- | :--- | | April 1 - 30, 2023 | 444,690 | $7.74 | | May 1 - 31, 2023 | 315,213 | $8.11 | | June 1 - 30, 2023 | 224,896 | $8.24 | | Total | 984,799 | $7.97 | - During the three months ended June 30, 2023, Aimco Operating Partnership redeemed 47,436 common OP Units for cash at a weighted average price of $7.72 per unit[208][209] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q report, including corporate governance documents and certifications - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act for both Aimco and Aimco Operating Partnership[212] - Financial statements are provided in iXBRL format as required[212]