Aimco reports fourth quarter and full year 2013 results
Denver--(business wire)--apartment investment and management company (“aimco”) (nyse: aiv) announced today its fourth quarter and full year 2013 results. chairman and chief executive officer terry considine comments: "aimco enjoyed a solid 2013. profitability was up, with affo increasing 14% year-over-year. portfolio quality was up, with average revenue per apartment home increasing 8%. redevelopment and development investment doubled to $194 million. our balance sheet is stronger, with leverage to ebitda down 0.5x. looking forward, we expect another good year in 2014. rent growth is expected to remain strong, although slowing somewhat. with lower interest expense and lower overhead costs, we expect profitability to be up again, with affo increasing by 10%. future results will also be strongly influenced by our portfolio management. over the past two years, we have sold approximately 18,000 apartment homes, eliminating the related property management costs and capital replacement spending. we have reinvested sales proceeds in fewer apartment homes with higher rents, higher margins and greater expected growth. as a result, free cash flow and affo are growing faster than net operating income and ffo. these results and prospects support the board’s decision to increase the dividend by 8% for 2014." chief financial officer ernie freedman adds: "fourth quarter affo exceeded the midpoint of guidance by $0.02 per share, and pro forma ffo beat the midpoint of guidance by $0.01 per share. our balance sheet was strong at year-end with total leverage, as a ratio to fourth quarter ebitda, annualized, at 7.2x, down from 7.7x one year ago. our year-end unencumbered pool was $380 million, an important milestone on our path to an investment grade rating. looking forward, we project 2014 conventional same store revenues to increase 3% to 4% compared to 2013. revenues from the strong california markets are expected to account for approximately 25% of total 2014 revenues, and approximately 30% for 2015. 2014 redevelopment and development investment will be funded by committed loans and property sales. interest expense will be down. offsite costs will be lower. taking all together and at the midpoint of guidance, we expect affo to be up by 10%." financial results: full year 2013 affo up 14%, pro forma ffo up 11% pro forma ffo - year-over-year, fourth quarter pro forma ffo increased 10% as a result of improved property operating results and lower offsite costs. these positive results were somewhat offset by higher interest expense and lower income from discontinued operations. adjusted funds from operations - fourth quarter affo increased 13% when compared to fourth quarter 2012, as a result of pro forma ffo growth. an increase in 2013 capital replacement spending related to multi-phase capital projects was offset by a reduction in standard capital replacements due to the sale of approximately 18,000 apartment homes during 2012 and 2013. as aimco concentrates its investment capital in higher quality, higher price-point properties, capital replacements decline as a percentage of net operating income. as a result, affo, up 14% when compared to full year 2012, is increasing at a faster rate than is pro forma ffo, up 11% when compared to full year 2012. operating results: full year conventional same store noi up 5.1% conventional same store results rental rates - aimco measures changes in rental rates by comparing, on a lease-by-lease basis, the rate on a newly executed lease to the rate on the expiring lease for that same apartment. newly executed leases are classified either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal. fullyear jan2014 portfolio management: revenue per apartment home up 7.9% to $1,469 aimco's portfolio strategy seeks predictable rent growth from a portfolio of "a", "b" and "c" quality market-rate properties, averaging "b/b+" in quality, and diversified among the largest coastal and job growth markets in the u.s., as measured by total apartment value. aimco's target markets are primarily coastal markets, and also include several sun belt cities and chicago, illinois. aimco measures asset quality based on rents compared to local market average rents as reported by reis, a third-party provider of commercial real estate performance information and analysis. aimco defines asset quality as follows: "a" quality assets are those with rents greater than 125% of local market average; "b" quality assets are those with rents 90% to 125% of local market average; and "c" quality assets are those with rents lower than 90% of local market average. for third quarter 2013, the most recent period for which reis information is available, aimco's conventional property rents averaged 105% of local market average rents. aimco expects to sell each year the lowest-rated 5% to 10% of its portfolio and to invest the proceeds from such sales in redevelopment and acquisition of higher-quality properties. through this disciplined approach to capital recycling, from 2010 through 2013, aimco increased its year-end conventional portfolio average revenue per apartment home at a compound annual growth rate of 8.4%. this rate of growth reflects the impact of market rent growth, but more significantly, the impact of portfolio management through dispositions, redevelopment and acquisitions. fourth quarter 2013 conventional portfolio average revenue per apartment home was $1,469, a 7.9% increase compared to fourth quarter 2012, as a result of year-over-year revenue per apartment home growth of 3.5% and the sale of conventional properties during 2012 and 2013 with average revenues per apartment home substantially lower than those of the retained portfolio and reinvestment of the proceeds in higher-rent properties through redevelopment and acquisitions. dispositions - in fourth quarter 2013, aimco sold eleven conventional properties and five affordable properties with 3,619 and 824 apartment homes, respectively, for $333.8 million in gross proceeds. aimco's share of net sales proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $142.8 million. the wind down of aimco’s affordable portfolio continued with the reduction from 228 properties three years ago to 74 properties at the end of fourth quarter 2013. redevelopment and development: full year investment totals $194 million during the fourth quarter, aimco completed the redevelopment of its elm creek property, located in elmhurst, illinois, and continued the redevelopment of four other properties that began during 2012. in addition, aimco substantially completed the capital replacement and capital improvement phase of its multi-phase capital projects at 2900 on first, located in seattle, and park towne place and the sterling, both located in center city philadelphia. during the fourth quarter, aimco began the redevelopment phase of the project at the sterling, which includes renovation of common areas and commercial space, as well as the upgrade of 69 apartment homes. additional apartment homes may be upgraded in the future. redevelopment of 2900 on first and park towne place is expected to begin during 2014. during the fourth quarter, aimco broke ground on its one canal street development in boston. over the next two and one-half years, aimco expects to invest approximately $190 million to construct 310 luxury apartment homes, approximately 22,000 square feet of commercial space and 147 parking spaces. balance sheet and liquidity: leverage on target components of aimco leverage weighted avg.maturity (yrs.) weightedavg rate 96% 1% 3% 100% leverage ratios aimco's leverage targets are: debt and preferred equity to ebitda less than 7.0x; and ebitda coverage of interest and preferred dividends greater than 2.5x. aimco also focuses on debt to ebitda and ebitda coverage of interest ratios. see the glossary for definitions of these metrics. trailing-twelve-month annualized4th qtr trailing-twelve-month annualized4th qtr future leverage reduction is expected both from earnings growth and from regularly scheduled property debt amortization funded from retained earnings. liquidity aimco's recourse debt at december 31, 2013, was limited to its revolving credit facility, which aimco uses for working capital and other short-term purposes, and to secure letters of credit. at the end of the fourth quarter, aimco had outstanding borrowings on its revolving credit facility of $50.4 million and available capacity was $505.0 million, net of $44.6 million of letters of credit backed by the facility. at the end of the fourth quarter, aimco's share of cash and restricted cash on hand was $167.5 million. in addition, aimco holds seven properties in its unencumbered asset pool with a total estimated fair value of approximately $380 million. equity activity dividend - as previously announced, aimco's board of directors declared a quarterly cash dividend of $0.26 per share of class a common stock for the quarter ended december 31, 2013, an increase of 8% compared to dividends paid during 2013. the fourth quarter 2013 dividend is payable on february 28, 2014, to stockholders of record on february 14, 2014. 2014 outlook 2014 2013 first quarter 2014 outlook quarter please refer to notes on page 7. 2014 pro forma ffo reconciliation 2014 affo reconciliation please refer to notes on the following page. notes to 2014 outlook, 2014 pro forma ffo and affo reconciliations earnings conference call information live webcast and replay: http://www.aimco.com/investors/events-presentations/webcasts supplemental information the full text of this earnings release and the supplemental information referenced in this release are available on aimco's website at http://www.aimco.com/investors/financial-reports/quarterly-earning-reports. glossary & reconciliations of non-gaap financial and operating measures financial and operating measures found in this earnings release and the supplemental information include certain financial measures used by aimco management that are not calculated in accordance with accounting principles generally accepted in the united states, or gaap. these measures are defined in the glossary in the supplemental information and, where appropriate, reconciled to the most comparable gaap measures. about aimco aimco is a real estate investment trust that is focused on the ownership and management of quality apartment communities located in the largest markets in the united states. aimco is one of the country's largest owners and operators of apartments, with 236 communities in 23 states, the district of columbia and puerto rico. aimco common shares are traded on the new york stock exchange under the ticker symbol aiv, and are included in the s&p 500. for more information about aimco, please visit our website at www.aimco.com. forward-looking statements this earnings release and supplemental information contain forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of: first quarter and full year 2014 results, including but not limited to pro forma ffo and selected components thereof; affo; and aimco's development and redevelopment project investments, timelines and stabilized rents. these forward-looking statements are based on management's judgment as of this date and include certain risks and uncertainties. risks and uncertainties include, but are not limited to: aimco's ability to maintain current or meet projected occupancy, rental rates and property operating results; the effect of acquisitions, dispositions, developments and redevelopments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our development and redevelopment projects; and our ability to comply with debt covenants, including financial coverage ratios. actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the control of aimco, including, without limitation: financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that our earnings may not be sufficient to maintain compliance with debt covenants; real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect aimco and interpretations of those regulations; the competitive environment in which aimco operates; the timing of acquisitions, dispositions, developments and redevelopments; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by aimco. in addition, aimco's current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the internal revenue code and depends on its ability to meet the various requirements imposed by the internal revenue code, through actual operating results, distribution levels and diversity of stock ownership. readers should carefully review aimco's financial statements and the notes thereto, as well as the section entitled “risk factors” in item 1a of aimco's annual report on form 10-k for the year ended december 31, 2012, and the other documents aimco files from time to time with the securities and exchange commission. these forward-looking statements reflect management's judgment as of this date, and aimco assumes no obligation to revise or update them to reflect future events or circumstances. this press release does not constitute an offer of securities for sale.
