Apartment Investment and Management pany(AIV) - 2023 Q4 - Annual Results

Stockholder Letter The company highlights strong 2023 operating performance, strategic capital allocation through dispositions and share repurchases, and plans for portfolio simplification in 2024 - In 2023, Aimco's Stabilized Operating Properties generated $106 million in Net Operating Income (NOI), a 9.3% increase over 2022, with NOI margins expanding by 80 basis points[4] - The company invested $234 million in active development projects in 2023, delivering over 350 new units, with projects expected to achieve an average yield on cost of approximately 7% upon stabilization[5] - Strategic dispositions in 2023 included selling a 20% stake in the Parkmerced mezzanine loan for $91.5 million and a Fort Lauderdale land parcel for $31 million, though the company later recognized a non-cash impairment to fully write off the remaining Parkmerced investment[6] - Aimco repurchased 6.2 million shares for $45 million in 2023 at an average price of $7.33 per share, viewing its stock as an attractive investment[7] - Since late 2020, Aimco has reduced total debt and leasehold liabilities by over $525 million and proactively managed interest rate increases[8] - For 2024, Aimco plans to market for sale its "Brickell Assemblage" and other assets to simplify the portfolio and return capital to stockholders, while substantially reducing capital allocated to new development[13][15] Earnings Release The company details its Q4 and full-year 2023 financial results, operating property performance, investment activities, and balance sheet management Financial Results and Highlights The company reported a net loss driven by a non-cash impairment, alongside strong operating NOI growth and strategic capital recycling activities Financial Performance | Metric | Q4 2023 | Full Year 2023 | | :--- | :--- | :--- | | Net loss per share (diluted) | $(1.07) | $(1.16) | | Stabilized Properties NOI Growth (YoY) | 7.2% | 9.3% | - In 2023, Aimco delivered 350 apartment homes and opened the 106-key Benson Hotel, with signed leases at rates averaging 17% above initial underwriting[20] - The company monetized $122.7 million of assets in 2023, including a portion of its Parkmerced mezzanine investment and a development land parcel in Fort Lauderdale[20] - During 2023, Aimco acquired 6.2 million shares of its common stock at an average price of $7.33 per share[20] Operating Property Results Stabilized operating properties delivered robust NOI growth for Q4 and the full year, driven by increased revenue per unit and high occupancy Stabilized Operating Properties Performance | Stabilized Operating Properties | Q4 2023 | Q4 2022 | Variance | Full Year 2023 | Full Year 2022 | Variance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue, before utility reimbursements | $38.4M | $35.9M | 6.8% | $149.8M | $138.1M | 8.4% | | Expenses, net of utility reimbursements | $10.6M | $10.1M | 5.6% | $44.1M | $41.4M | 6.4% | | Net operating income (NOI) | $27.7M | $25.9M | 7.2% | $105.7M | $96.7M | 9.3% | | Average Daily Occupancy | 97.5% | 97.4% | 0.1% | 96.7% | 97.4% | (0.7)% | - In Q4 2023, average monthly revenue per apartment home increased by 6.7% year-over-year to $2,343[24] - The median annual household income of new residents in Q4 2023 was $115,000, with a rent-to-income ratio of 20.8%[24] Value Add, Opportunistic & Alternative Investments The company advanced its active development projects but fully wrote off its remaining Parkmerced mezzanine investment due to an expired purchase option - Aimco has four active development and redevelopment projects in progress, which remain on track with construction budgets and lease-up metrics[26] - Construction at Upton Place in Washington D.C. is nearing completion, with 450 apartment homes delivered and 80% of its retail space leased as of February 20, 2024[28] - Regarding the Parkmerced mezzanine investment, a buyer's option to purchase the remaining 80% expired, leading Aimco to record a $158.0 million non-cash impairment to fully write off the investment[29][32] Investment & Disposition Activity A joint venture sold a land parcel in Fort Lauderdale, generating a significant return for the company - In Q4 2023, a joint venture sold a 1.1-acre land parcel in Fort Lauderdale for $31.2 million ($15.9 million Aimco share), resulting in a levered IRR of more than 30%[30] Balance Sheet and Financing Activity Aimco maintained a strong liquidity position with fully hedged debt and minimal near-term maturities - As of December 31, 2023, Aimco had $289.3 million in liquidity, including $122.6 million in cash and $150.0 million available on its revolving credit facility[31] - In 2023, Aimco retired $71.7 million of property loans with a high weighted average cost of 11.2%[33] Net Leverage (Aimco Share) | Aimco Share, as of Dec 31, 2023 | Amount (in thousands) | | :--- | :--- | | Total non-recourse fixed rate debt | $776,503 | | Total non-recourse floating rate debt | $89,843 | | Total non-recourse construction loan debt | $283,694 | | Cash and restricted cash | $(137,755) | | Net Leverage | $1,012,285 | Public Market Equity The company continued its share repurchase program, buying back 6.2 million shares throughout 2023 Share Repurchases | Period | Shares Repurchased | Weighted Average Price | | :--- | :--- | :--- | | Q4 2023 | 1.4 million | $6.75 | | Full Year 2023 | 6.2 million | $7.33 | - As of December 31, 2023, Aimco had 21 million shares remaining under its repurchase authorization[37] 2024 Outlook The company's 2024 strategy involves reducing development spending, monetizing assets, and prioritizing the return of capital to stockholders 2024 Guidance Table The company forecasts a net loss per share for 2024, with modest NOI growth and a significant reduction in development spending Full-Year 2024 Forecast | Metric | 2023 Results | 2024 Forecast | | :--- | :--- | :--- | | Net income (loss) per share – diluted | $(1.16) | $(0.50) - $(0.40) | | Stabilized NOI Growth | 9.3% | -0.75% - 2.75% | | Direct Project Costs (Development) | $197M | $70M - $100M | | AIV Equity Funding (Development) | $51M | $0M - $5M | | General and Administrative | $33M | $33M - $35M | Operating Properties Outlook Aimco anticipates modest NOI growth in 2024, with revenue gains partially offset by higher expected operating expenses - Over 80% of Aimco's Stabilized Operating NOI is from markets expected to have below-average new supply pressure in 2024[42] 2024 Stabilized Operating Properties Forecast | 2024 Stabilized Operating Properties Forecast | Growth Rate | | :--- | :--- | | Revenue Growth | 1.75% - 3.75% | | Operating Expense Growth | 6.00% - 8.00% | | Net Operating Income Growth | -0.75% - 2.75% | Active Developments and Pipeline Projects Outlook The company plans a significant reduction in development capital for 2024, focusing on completing current projects with minimal new equity - Planned incremental direct capital investment in development for 2024 is $70-$100 million, with Aimco's equity portion being only $0-$5 million, a sharp decrease from $51 million in 2023[45] - In 2024, Aimco plans to complete construction at Oak Shore and Upton Place and commence lease-up of Strathmore Square[47] - The company expects to invest $12-$17 million in 2024 to advance planning and entitlement for its future pipeline, which offers approximately 13 million square feet of development opportunity[45][46] Real Estate Transactions and Leverage Outlook Aimco plans to market key assets for sale in 2024, using proceeds to return capital and reduce leverage while maintaining stable debt levels - Aimco plans to fully market its Brickell Assemblage for sale in Q1 2024 and expects to complete the transaction by year-end, pending favorable terms[47] - The company does not anticipate needing to draw on its $150 million revolving credit facility in 2024[51] - Interest expense, net of capitalization, is expected to increase in 2024 due to a $19.5 million reduction in capitalized interest as development projects are completed[51] Commitment to Enhance Stockholder Value Management is focused on maximizing stockholder value through portfolio simplification, asset monetization, and returning capital to stockholders - The Board and management are engaged in a continuous review of strategic actions to maximize stockholder value, working with advisors including Morgan Stanley & Co. LLC[52] - Plans to reduce development activity and sell assets represent a commitment to simplify the portfolio and unlock embedded value[53] - Aimco will prioritize the return of capital to stockholders as a key component of its capital allocation philosophy, particularly in conjunction with contemplated asset sales[53] Consolidated Financial Statements Presents the company's official statements of operations and balance sheets for the fiscal year ending December 31, 2023 Consolidated Statements of Operations The company reported a significant net loss in 2023, primarily driven by a mezzanine investment loss, contrasting with net income in 2022 Annual Statement of Operations | (in thousands, except per share data) | Twelve Months Ended Dec 31, 2023 | Twelve Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Total Revenues | $186,995 | $190,344 | | Total Operating Expenses | $175,411 | $270,432 | | Mezzanine investment loss, net | $(155,814) | $(179,239) | | Net income (loss) attributable to Aimco | $(166,196) | $75,726 | | Net income (loss) per share – diluted | $(1.16) | $0.49 | Consolidated Balance Sheets The company's total assets decreased while liabilities increased, resulting in a lower total equity position at year-end 2023 compared to 2022 Year-End Balance Sheet | (in thousands) | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total assets | $2,089,475 | $2,181,223 | | Total indebtedness | $1,147,741 | $1,048,199 | | Total liabilities | $1,497,865 | $1,389,039 | | Total Aimco equity | $349,652 | $547,852 | Supplemental Schedules Provides detailed schedules breaking down EBITDAre, leverage, portfolio composition, capital spending, and development project status Schedule 1 – EBITDAre and Adjusted EBITDAre This schedule reconciles the company's net loss to an Adjusted EBITDAre of $65.8 million for the full year 2023 EBITDAre Reconciliation | (in thousands) | Twelve Months Ended Dec 31, 2023 | | :--- | :--- | | Net Income (loss) | $(157,319) | | EBITDAre | $(70,697) | | Mezzanine investment (income) loss, net | $155,814 | | Adjusted EBITDAre | $65,811 | Schedule 2 – Aimco Leverage and Maturities The company's debt profile shows total non-recourse debt of $1.15 billion with limited near-term maturities Debt Summary (Aimco Share) | Debt (Aimco Share) | Amount (thousands) | W.A. Maturity (Yrs.) | W.A. Capped Interest Rate | | :--- | :--- | :--- | :--- | | Fixed rate loans | $776,503 | 7.2 | 4.25% | | Floating rate loans | $89,843 | 1.8 | 8.00% | | Construction loan debt | $283,694 | 1.8 | 7.78% | | Total non-recourse debt | $1,150,039 | 5.4 | 5.45% | - Including contractual extension options, Aimco has only $8.5 million of loans maturing prior to May 2026[75] Schedule 3 – Aimco Portfolio The company's portfolio consists of over 6,600 apartment homes, with the majority being stabilized operating properties Portfolio Summary (Aimco Share) | Portfolio Component | Number of Properties | Apartment Homes (Aimco Share) | | :--- | :--- | :--- | | Stabilized Operating Properties | 21 | 5,600 | | Development and Redevelopment | 11 | 989 | | Other Real Estate | 2 | 40 | | Unconsolidated | 6 | 73 | | Total Portfolio (Aimco Share) | 40 | 6,604 | Schedule 4 – Aimco Capital Additions Capital expenditures in 2023 totaled $288.5 million, with the vast majority allocated to development and redevelopment projects Capital Additions Summary | (consolidated amounts in thousands) | Twelve Months Ended Dec 31, 2023 | | :--- | :--- | | Capital Replacements and Casualty | $11,267 | | Property Upgrades | $1,568 | | Tenant Improvements | $856 | | Development and Redevelopment | $274,853 | | Total Capital Additions | $288,543 | Schedule 5 – Aimco Development and Redevelopment Project Summaries The company details its four active development projects and a future pipeline with potential for nearly 6,000 multifamily units - Aimco has four active development projects with a total planned direct capital investment of $518.2 million and remaining investment of $80.7 million[83] - The future development pipeline totals 13.3 million gross square feet, with the potential for 5,972 multifamily units and 1.7 million commercial square feet[89] Schedule 6 – Stabilized Operating Properties The stabilized portfolio achieved 9.3% NOI growth in 2023, with strong performance in the Boston, Chicago, and New York City markets Stabilized Portfolio Performance by Market | Full Year 2023 vs. 2022 (YTD) | Revenue Growth | Expense Growth | NOI Growth | | :--- | :--- | :--- | :--- | | Boston | 8.7% | 6.5% | 9.6% | | Chicago | 6.8% | (3.4%) | 11.4% | | New York City | 10.3% | 9.0% | 11.5% | | SE Florida | 13.0% | 23.8% | 9.1% | | Total | 8.4% | 6.4% | 9.3% | Schedule 7 – Acquisitions, Dispositions, and Leased Communities The company generated $64.7 million in proceeds from the sale of a land parcel and a partial sale of its Parkmerced investment in 2023 2023 Dispositions | 2023 Dispositions | Location | Sales Price / Value Sold | | :--- | :--- | :--- | | 200 Broward (Land) | Fort Lauderdale, FL | $31.2M | | Parkmerced Mezzanine Investment (Partial) | San Francisco, CA | $33.5M | | TOTAL Dispositions | | $64.7M | Schedule 8 – Net Asset Value Components Management provides a breakdown of Net Asset Value components, highlighting NOI from operating and development properties - The annualized NOI for Stabilized Operating Properties is listed at $110.9 million[99] - Active development projects are projected to contribute $44.1 million in annual NOI upon stabilization[99] - Management estimates the value of the 4.25-acre Brickell Assemblage to be $125 - $175 million higher than its value based on a capitalization of current NOI[101] Glossary and Reconciliations of Non-GAAP Financial and Operating Measures Defines key non-GAAP financial measures and reconciles them to their nearest GAAP equivalents to clarify performance metrics - This section defines non-GAAP measures used in the report, such as EBITDAre, Adjusted EBITDAre, and Property Net Operating Income (NOI), to provide clarity on how management evaluates performance[104] - Property Net Operating Income (NOI) is defined as total property rental and other revenues less direct property operating expenses, excluding items like depreciation and interest expense[115][116] - The report provides a detailed reconciliation of GAAP rental revenues and property operating expenses to the non-GAAP measures used in the Stabilized Operating Properties analysis[117][118] - The document defines its real estate classifications, including 'Stabilized Operating Properties', 'Development and Redevelopment', and 'Other Real Estate', which are used throughout the supplemental schedules[121][123]