Apartment Investment and Management Company Announces First Quarter 2011 Results

DENVER--(BUSINESS WIRE)--Apartment Investment and Management Company (NYSE: AIV) announced today its first quarter 2011 results.

Chairman and Chief Executive Officer Terry Considine comments: “Aimco executed its plan successfully during the quarter. Total Same Store property net operating income increased 8.5%, with a 2.1% increase in revenue and a 6.8% decrease in expenses. Offsite costs decreased 5% compared to first quarter 2010, and we remain committed to further reductions by deploying labor saving technology and by simplifying our business. We are off to a good start in 2011.”

Chief Financial Officer Ernie Freedman adds: “First quarter Pro forma FFO of $0.39 per share exceeded the upper end of our guidance range by $0.02 per share, primarily as a result of better than expected property operating results. During the quarter, we further strengthened our balance sheet by reducing our 2011 property debt maturity exposure by $90 million and our 2012 exposure by $105 million. We are establishing second quarter Pro forma FFO guidance of $0.33 to $0.37 per share and increasing full year Pro forma FFO guidance from a range of $1.46 to $1.56 per share to a range of $1.49 to $1.59 per share.”

Financial Results

Diluted Per Share Results

Net loss – Net loss attributable to Aimco common stockholders for the quarter was $31.8 million, compared to net loss of $40.4 million for first quarter 2010. First quarter 2011 net loss decreased as compared to first quarter 2010 primarily due to an increase of $9.9 million in net operating income of our properties included in continuing operations, an increase of $4.7 million in net investment management income and a decrease of $4.1 million in depreciation and amortization. These increases in income were partially offset by a decrease in income from discontinued operations attributable to Aimco as a result of 2010 and 2011 property sales.

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 $44.4 million, or $0.38 per share, compared to $29.3 million, or $0.25 per share, in first quarter 2010. Pro forma FFO, which represents FFO as prescribed by NAREIT but excludes operating real estate impairment losses and preferred equity redemption related amounts, was $45.8 million, or $0.39 per share, compared to $36.9 million, or $0.32 per share, in first quarter 2010. First quarter 2011 Pro forma FFO of $0.39 per share was $0.02 per share above the upper end of Aimco’s guidance range primarily as a result of better than expected property operating results.

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 87% of Aimco’s first quarter 2011 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 13% of Aimco’s first quarter 2011 NOI.

First Quarter Portfolio Operating Measures^*

Conventional Same Store Results – In first quarter 2011, the Conventional Same Store portfolio included 178 communities with 60,173 units, in which Aimco had a weighted average ownership of 94%.

Conventional Same Store Operating Measures

Comparing Conventional Same Store results in first quarter 2011 with first quarter 2010, total revenue increased $3.0 million, or 1.6%. The increase in revenue was primarily the result of higher average daily occupancy of 96.4% for first quarter 2011 compared to 96.0% for first quarter 2010, and higher average rent per unit, up $6 per unit or 0.6%, from $1,043 per unit to $1,049 per unit.

During first quarter 2011, Conventional Same Store expenses decreased $5.0 million, or 6.6%, primarily as a result of decreases in employee related costs, real estate taxes, utilities, apartment unit turnover expenses, repairs and maintenance expenses and marketing costs. These decreases were partially offset by higher insurance costs. Refer to Supplemental Schedules 6a and 6b for additional details on Conventional Same Store operating results.

Conventional Same Store Rental Rate Trends – 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 as either a new lease, where a vacant apartment is leased to a new customer, or a renewal of an existing lease.

On average, first quarter 2011 new lease rates were 1.9% higher than expiring lease rates, compared to rates 0.9% higher than expiring lease rates in fourth quarter 2010. During first quarter 2011, renewal rates were 3.0% higher than expiring lease rates, compared to rates that were 1.6% higher than expiring lease rates in the fourth quarter 2010.

Affordable Same Store Results – In first quarter 2011, the Affordable Same Store portfolio included 145 communities with 17,469 units, in which Aimco had a weighted average ownership of 66%. For the first quarter 2011, average month-end occupancy for the affordable portfolio was 97.5%, an increase of 0.4% from first quarter 2010, while average rent per unit increased 4.4% from $797 to $832 per unit. During the first quarter 2011, Affordable Same Store expenses decreased 7.7% 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 fourth quarter 2010, the most recent period for which REIS information is available, Aimco’s Conventional Property rents averaged 99% of local market average rents.

For the first quarter 2011, average rents for the Conventional portfolio were $1,060 per unit, a 2.5% increase compared to first quarter 2010, as a result of the sale of Conventional properties during 2010 with rents averaging 25% lower than the retained portfolio and positive rent growth in 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, acquisitions and increasing ownership in properties Aimco already owns. During first quarter 2011, net operating income generated by Conventional properties located in the 20 largest markets accounted for 85% of total Conventional Property net operating income, an increase of 2% compared to first quarter 2010.

In first quarter 2011, Aimco sold two Conventional properties and five Affordable properties with 478 and 647 units, respectively, for $28.9 million in gross proceeds. Aimco’s share of net proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $9.2 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 2011, Aimco acquired the remaining noncontrolling limited partnership interests in six consolidated real estate partnerships that own nine properties and in which Aimco affiliates serve as general partner for a total cost of $6.1 million.

Termination of Fee Contracts – As of December 31, 2010, Aimco property managed or asset managed for a fee 321 properties associated with two distinct multifamily portfolios. During first quarter 2011, Aimco and the owners of one of these portfolios agreed to the termination of the asset and property management contracts associated with the portfolio. In connection with the termination of these management contracts, Aimco recognized $1.3 million of previously deferred asset management fee income during first quarter 2011.

Through this and other transactions during first quarter 2011, Aimco reduced its fee managed portfolio by 108 properties with 11,722 units, furthering the company’s goal of simplifying its business and reducing costs. Refer to Supplemental Schedule 2 for details of Aimco’s portfolio as of March 31, 2011.

Balance Sheet and Liquidity

See Supplemental Schedule 4 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 March 31, 2011, was limited to its revolving credit facility, which Aimco uses for working capital purposes and to secure letters of credit. At the end of first quarter, Aimco had no outstanding borrowings on its revolving credit facility and available capacity was $263.4 million, net of $36.6 million of letters of credit backed by the facility.

Aimco’s first quarter EBITDA Coverage of Interest and EBITDA Coverage of Interest and Preferred Dividends ratios were 2.11:1 and 1.72:1, compared to fourth quarter 2010 ratios of 2.07:1 and 1.68:1, 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 first quarter 2011, Aimco’s Debt Service and Fixed Charge Coverage ratios were 1.58:1 and 1.34:1, compared to covenants in place during the quarter of 1.40:1 and 1.20:1, respectively, and fourth quarter 2010 ratios of 1.57:1 and 1.33:1. Aimco expects to remain in compliance with these covenants.

From January 1, 2011 through the date of this release, Aimco has issued 1.5 million shares under its At-the-Market (ATM) offering program at a weighted average price of $24.69 per share, generating gross proceeds of $37.0 million. The proceeds from the ATM offering were used primarily to fund deleveraging activities and the partnership transactions described in this release.

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 March 31, 2011. The dividend is payable May 31, 2011 to shareholders of record on May 20, 2011.

2011 Outlook

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.

* Please note that the dates of the Philadelphia/Washington DC property tours have been accelerated by one day relative to Aimco’s original announcement of this event.

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 648 communities serving approximately 500,000 residents in 42 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 first quarter 2011 earnings conference call will be held Friday, April 29, 2011, at 1:00 p.m. Eastern time.

Live Conference Call
Domestic Dial-In Number: 1-866-843-0890
International Dial-In Number: 1-412-317-9250
Passcode: 0093689
Webcast: http://www.aimco.com/CorporateInformation/Overview.aspx

Conference Call Replay
Domestic Dial-In Number: 1-877-344-7529
International Dial-In Number: 1-412-317-0088
Passcode: 449948

The conference call replay will be available until 5:00 p.m. Eastern time on May 9, 2011.

Webcast Replay: 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 second 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, 2010, 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.