Back to top

Analyst Blog

On Sep 6, 2013, we reiterated our long-term Neutral recommendation on Apartment Investment & Management Co. (AIV - Analyst Report), commonly known as Aimco. The decision was based on the company’s diversified portfolio, portfolio enhancement activity and rising apartment industry fundamentals. However, rising interest rates, capital market volatility and stiff competition from other housing alternatives remain matters of concern.

Why Neutral?

Driven by improved property operating results and lower preferred share dividends, Aimco reported second-quarter 2013 pro forma funds from operations (FFO) of 49 cents per share, beating the Zacks Consensus Estimate by a penny and the year-ago quarter figure by 3 cents. Moreover, going forward, we believe that the rise in apartment demand generated by ‘echo boomers’ – children of the baby boomer generation – will offer Aimco ample growth opportunities.

Aimco is also focused on spinning off its Affordable portfolio and reinvesting the proceeds to boost its Conventional portfolio. Consequently, the company, through this disciplined capital recycling, has upped its year-end Conventional portfolio average revenue per apartment home at a compound annual growth rate (from 2007–2012) of 6.1%.

However, rising interest rates and the capital market volatility will likely limit Aimco’s ability to refinance existing debt and undertake portfolio-restructuring initiatives, thereby denting the company’s growth prospects.

Moreover, the steady recovery of the housing market and increase in supply in the Sunbelt regions are anticipated to partly impede the overall rent growth in Aimco’s operating regions. Despite attempts to reposition its portfolio in higher growth markets, much of Aimco’s portfolio still remains in areas where housing is relatively cheap. Its significant exposure to the weak Florida market can also affect its top-line growth in the near term.

Over the last 30 days, the Zacks Consensus Estimate for both 2013 and 2014 FFO per share remained stable at $2.04 and $2.19 per share, respectively. Thus, this apartment real estate investment trust (REIT) now carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better-performing REITs that are worth a look include Campus Crest Communities, Inc. (CCG - Snapshot Report), Sun Communities Inc. (SUI - Snapshot Report) and Douglas Emmett Inc. (DEI - Snapshot Report). All of these carry a Zacks Rank #2 (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
UNITED THER… UTHR 117.83 +28.51%
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
BANCO DO BR… BDORY 15.53 +3.95%