Apartment investment and management company announces fourth quarter
2010 results
Denver--(business wire)--apartment investment and management company (nyse: aiv) announced today its fourth quarter 2010 results. chairman, chief executive officer and president terry considine comments: “aimco had a solid 2010. full year same store, conventional same store and total portfolio net operating income were all up from the prior year. total portfolio revenue was up 1.0% and conventional same store revenue was essentially flat, notwithstanding the fragile economy. aimco upgraded its portfolio with the sale of 51 properties and ended the year with a strong balance sheet and no recourse debt. looking forward, the aimco business plan is straightforward and unchanged: own and operate b/b+ quality apartments in the 20 largest u.s. markets to provide predictable returns for shareholders.” chief financial officer ernie freedman adds: “fourth quarter pro forma ffo of $0.39 per share exceeded the upper end of our guidance range by $0.01 per share, primarily as a result of better than expected operating results. we expect 2011 ffo to be in a range from $1.46 to $1.56 per share with first quarter 2011 ffo projected to be $0.33 to $0.37 per share. with a solid 2010 behind us, aimco is looking ahead to 2011 with a quality portfolio, a strong balance sheet and a focus on future growth opportunities.” financial results diluted per share results fourth quarter full year net income (loss) – net loss attributable to aimco common stockholders for the quarter was $38.4 million, compared to net loss of $6.7 million for fourth quarter 2009. fourth quarter 2010 net loss increased as compared to fourth quarter 2009 primarily due to a decrease of $60.7 million in income from discontinued operations as a result of 2009 and 2010 property sales, partially offset by lower provision for losses on notes receivable of $20.4 million, lower restructuring costs of $8.7 million and an increase of $9.9 million in net operating income of our properties included in continuing operations. funds from operations – ffo is a non-gaap financial measure defined in the glossary in aimco’s supplemental information (the glossary). ffo calculated in accordance with the definition prescribed by the national association of real estate investment trusts (nareit) was $35.7 million, or $0.31 per share, compared to $16.1 million, or $0.14 per share, in fourth quarter 2009. pro forma ffo, which represents ffo as prescribed by nareit but excludes operating real estate impairment losses and preferred equity redemption related amounts, was $45.3 million, or $0.39 per share, compared to $30.2 million, or $0.26 per share, in fourth quarter 2009. fourth quarter 2010 pro forma ffo of $0.39 per share was $0.03 per share above the midpoint of aimco’s guidance range primarily as a result of higher than expected conventional same store average daily occupancy and a reduction in previously estimated real estate tax obligations due to successful appeals completed during the fourth quarter. property operations property operating results discussed below represent aimco’s proportionate share of reported amounts, which reflects property operating results adjusted for aimco’s ownership in each property. this non-gaap measure is defined in the glossary. diversified operating portfolio – aimco’s property operations consist primarily of conventional, with some affordable, real estate operations. conventional real estate operations relate to aimco’s diversified portfolio of market rate apartment communities and include same store properties, redevelopment properties, and other properties. conventional property operations generated 88% of aimco’s fourth quarter 2010 property net operating income (noi). see supplemental schedules 7a and 7b for detailed information on aimco’s conventional real estate portfolio, including selected operating results. affordable real estate operations consist of aimco’s portfolio of properties with rents that are generally paid, in whole or in part, by a government agency. affordable properties tend to have more stable rents and higher occupancy than conventional properties due to government rent payments and thus are less affected by market fluctuations. affordable property operations generated 12% of aimco’s fourth quarter 2010 noi. fourth quarter portfolio operating measures* % aimconoi year-over-year varianceexpenses year-to-date portfolio operating measures* % aimconoi year-over-year varianceexpenses * the information in these tables relates to properties that aimco owns and manages, and are classified within continuing operations. results exclude properties that aimco owns but does not manage and properties classified within discontinued operations. to ensure comparability between periods, the year-over-year change in revenue, expenses and noi in these tables is based on aimco’s current period ownership. see the glossary for additional information about the property categories included in these tables and schedules 1 and 2 in the supplemental information for financial and statistical information for these portfolios. conventional same store results – in fourth quarter 2010, the conventional same store portfolio included 180 communities with 61,397 units, in which aimco had a weighted average ownership of 92%. conventional same store operating measures fourth quarteryear-over-year fourth quartersequential full yearyear-over-year 3rd qtr comparing conventional same store results in fourth quarter 2010 with fourth quarter 2009, total revenue increased $3.0 million, or 1.6%. the increase in revenue was primarily the result of higher average daily occupancy of 96.7% for fourth quarter 2010 compared to 95.3% for fourth quarter 2009. higher average daily occupancy was offset by lower average rent per unit, down 0.8% or $8 per unit, from $1,053 per unit to $1,045 per unit. new and renewal lease rates have steadily improved throughout the year. rental rates on new leases during the fourth quarter were higher than expiring lease rates each month during the quarter and, on average, fourth quarter new lease rates were 0.9% higher than expiring lease rates. by comparison, new lease rates were 7.0% below expiring lease rates in the first quarter, 2.3% below expiring lease rates in the second quarter, and 1.4% below expiring lease rates in the third quarter. for the full year, new lease rates were on average 2.3% below expiring lease rates. fourth quarter renewal rates were 1.6% higher than expiring lease rates. this compares to renewal rates that were 0.1% higher than expiring lease rates in the first quarter, 1.9% higher than expiring lease rates in the second quarter, and 1.5% higher than expiring lease rates in the third quarter. for the full year, renewal rates were on average 1.5% higher than expiring lease rates. during fourth quarter 2010, conventional same store expenses decreased $2.7 million or 3.7%, primarily as a result of lower real estate taxes, reductions in personnel costs, turnover expenses and marketing costs, partially offset by higher employee-related insurance costs. refer to supplemental schedules 6a through 6c for additional details on conventional same store operating results. affordable same store results – in fourth quarter 2010, the affordable same store portfolio included 153 communities with 18,359 units, in which aimco had a weighted average ownership of 65%. for the fourth quarter 2010, average month-end occupancy for the affordable portfolio was 97.6%, an increase of 0.7% from fourth quarter 2009, while average rent per unit increased 3.8% from $780 to $810 per unit. during the fourth quarter 2010, affordable same store expenses decreased 6.0% primarily as a result of lower contract services and administrative expenses. portfolio aimco’s portfolio strategy focuses on b/b+ quality conventional apartment communities located in the 20 largest u.s. markets as measured by total apartment value, with a target capital allocation of 10% to affordable apartment communities. aimco measures conventional property asset quality based on average 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 a-quality assets as those with rents greater than 125% of local market average, b-quality assets as those with rents 90% to 125% of local market average and c-quality assets as those with rents less than 90% of local market average. for the third quarter 2010, the most recent period for which reis information is available, aimco’s conventional property rents averaged 100% of local market average rents. for the fourth quarter 2010, average rents for the conventional portfolio were $1,052 per unit, a 1.0% increase compared to fourth quarter 2009, primarily as a result of the sale of conventional properties during 2010 with rents averaging 25% lower than the retained portfolio. aimco’s geographic allocation strategy focuses on the 20 largest u.s. markets. aimco believes these markets to be deep, relatively liquid and possessing desirable long-term growth characteristics. these target markets are primarily coastal markets, and also include a number of sun belt cities and chicago, illinois. in executing this strategy, aimco expects to reduce its investment in markets outside the 20 largest markets and to increase its investment in the 20 largest markets through redevelopment and acquisitions. during fourth quarter 2010, net operating income generated by conventional properties located in the 20 largest markets accounted for 84.5% of total conventional property net operating income, an increase of 1.9% compared to fourth quarter 2009. in fourth quarter 2010, aimco sold eight conventional properties and 12 affordable properties with 1,877 and 1,264 units, respectively, for $117.9 million in gross proceeds. aimco’s share of net proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $35.8 million. see supplemental schedules 7a and 7b for additional details regarding aimco’s portfolio quality and capital allocation, and supplemental schedule 8 for additional details on disposition activity. partnership transaction activity – during fourth quarter 2010, aimco purchased the noncontrolling limited partners’ interests in two properties for a total of $19.9 million. aimco purchased the noncontrolling limited partners’ 25% interest in a property located in alexandria, virginia, for $19.5 million. the property has 1,222 units and is a candidate for redevelopment in the near term. balance sheet and liquidity amount % of totalleverage weightedavg maturity (yrs) weighted avgrate see supplemental schedules 4a and 4b for additional details about aimco’s non-recourse property debt and supplemental schedule 5 for information related to aimco’s preferred securities. aimco’s recourse debt at december 31, 2010, was limited to its revolving credit facility, which aimco uses for working capital purposes and to secure letters of credit. at the end of fourth quarter, aimco had no outstanding borrowings on its revolving credit facility and available capacity was $260.3 million, net of $39.7 million of letters of credit backed by the facility. aimco’s fourth quarter ebitda coverage of interest and ebitda coverage of interest and preferred dividends ratios were 2.07:1 and 1.68:1, compared to third quarter 2010 ratios of 2.05:1 and 1.67:1, respectively. separately, in connection with its revolving credit facility, aimco is subject to debt service and fixed charge coverage covenants, as defined in the glossary. for fourth quarter 2010, aimco’s debt service and fixed charge coverage ratios were 1.57:1 and 1.33:1, compared to covenants in place during the quarter of 1.40:1 and 1.20:1, respectively, and third quarter 2010 ratios of 1.58:1 and 1.34:1. aimco expects to remain in compliance with these covenants. during fourth quarter 2010, aimco issued 600,000 shares under its at-the-market (atm) offering program at a weighted average price of $24.50 per share, generating $14.4 million in proceeds. the proceeds from the atm offering were used primarily to fund the cash portion of the acquisition of the noncontrolling limited partners’ 25% interest in the alexandria, virginia property described above. dividend – aimco’s board of directors declared a cash dividend of $0.12 per share on its class a common stock for the quarter ended december 31, 2010. the dividend is payable february 28, 2011 to shareholders of record on february 18, 2011. 2011 outlook first quarter full year * as of december 31, 2010, approximately $276.9 million of fixed-rate debt was subject to floating rate total rate of return swaps that mature in 2012. during 2010, aimco refinanced certain of the loans subject to the swaps, replacing such loans with long-dated, fixed-rate property debt, and expects to do the same in 2011 with certain other loans subject to the swaps. the average interest rate associated with the total rate of return swaps was 1.58% at december 31, 2010. these activities are expected to increase interest expense in 2011 by $0.06 per share when compared to 2010. pro forma funds from operations reconciliation the following table represents a reconciliation of full year 2010 pro forma ffo to the midpoint of aimco’s guidance for full year 2011 pro forma ffo provided in the preceding table. $ per share(at the midpoint) conventional same store revenue detail the following table represents the assumptions used by aimco in its 2011 guidance for conventional same store revenue growth of 2.0% to 3.0%. conventional same storerevenue growth(at the midpoint) * in establishing guidance, aimco has taken into consideration 2011 revenue growth in its markets as projected by third party data providers, which estimates currently range from 3.1% to 6.2%. aimco projects that 2011 revenue growth at the low end of this range would produce 2011 conventional same store revenue growth of approximately 2.3%, or 20 basis points less than the midpoint of aimco’s guidance of 2.5%. revenue growth at the high end of the third party estimate range would produce 2011 conventional same store revenue growth of approximately 3.7%, or 120 basis points greater than the midpoint of guidance of 2.5%. 2011 property tour schedule management will be hosting property tours in the following cities on the dates indicated. additional details will be communicated in the coming months. about aimco aimco is a real estate investment trust that is focused on the ownership and management of quality apartment communities located in the 20 largest markets in the united states. aimco is one of the country’s largest owners and operators of both conventional and affordable apartments, with 768 communities serving approximately 500,000 residents in 43 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. supplemental information the full text of this earnings release and the supplemental information referenced in this release are available on aimco’s website at the link http://www.aimco.com/corporateinformation/about/financial/qearnrelease.aspx. glossary and 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. earnings conference call aimco’s fourth quarter 2010 earnings conference call will be held friday, february 4, 2011, at 1:00 p.m. eastern time. live conference call conference call replay the conference call replay will be available until 5:00 p.m. eastern time on february 11, 2011. live and replay webcast: http://www.aimco.com/corporateinformation/about/financial/news.aspx 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 2011 results. 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. 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; 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 and dispositions; 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, our 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 our 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, 2009, 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. consolidated statements of operations consolidated real estate partnerships aimco operating partnership aimco operating partnership stockholders stockholders
