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Apartment Investment and Management Company (AIV - Free Report) – better known as Aimco – reported third-quarter 2016 pro forma funds from operations (“FFO”) of 55 cents per share, missing the Zacks Consensus Estimate of 56 cents and down 4% from the year-ago tally of 57 cents.
Loss of income from apartment sales in 2015 and early 2016 adversely affected the bottom line. However, the negative was partly mitigated with net operating income (NOI) growth in the conventional same store property portfolio as well as enhanced contribution from redevelopment and acquisition communities.
For the reported quarter, total revenue came in at $248.9 million, beating the Zacks Consensus Estimate of $239 million, and exceeding the prior-year figure by 1%.
Quarter in Detail
In the Conventional real estate portfolio, same-store revenues increased 5.0% year over year to $165.0 million, while expenses rose 2.4% year over year to $51.6 million. Consequently, same-store net operating income (NOI) climbed 6.3% to $113.4 million on a year-over-year basis.
Same-store average daily occupancy remained unchanged year over year at 95.7%. Rental rates on new and renewals leases were up 3.0% and 5.3%, respectively, from the expiring lease rates.
As of Sep 30, 2016, Aimco held cash and restricted cash on hand of $157.4 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities stood at $1.6 billion.
Further, at the end of the quarter, Aimco’s outstanding borrowings on its revolving credit facility were $294.8 million and available capacity was $278.2 million, after considering $27.0 million of letters of credit backed by the facility.
Portfolio Activity
During the quarter, Aimco invested $44 million in redevelopment. Of this, $14 million was associated with the redevelopment of Park Towne Place and The Sterling, mixed-use communities in Center City Philadelphia.
As intended, Aimco continues to sell 5–10% of its lowest rated portfolio each year and uses the proceeds for acquisition and redevelopment of higher-quality apartments. Through these measures, the company increased its conventional percentage NOI in target markets to 89% in third-quarter 2016 from 87% a year earlier. Moreover, revenue per apartment home improved 8% year over year to $1,950 from $1,810 a year ago.
2016 Guidance
For 2016, Aimco raised pro forma FFO per share guidance range to $2.29–$2.33 from the previous range of $2.26–$2.34. This reflects an increase of $0.01 at the mid-point and the move reflects the company’s third-quarter performance. The Zacks Consensus Estimate of $2.31 lies within the guided range.
For fourth-quarter 2016, Aimco provided pro forma FFO per share guidance in a band of 58–62 cents per share. The Zacks Consensus Estimate of 59 cents lies within this range.
Dividend
On Oct 26, 2016, Aimco declared a quarterly cash dividend of 33 cents per share of Class A Common Stock for third-quarter 2016. The dividend will be paid on Nov 30, 2016 to stockholders of record on Nov 18.
In Conclusion
Aimco’s persistent property sales and reinvestment of proceeds in select apartment homes with higher rents and superior margins continue to strengthen its position in high-growth potential markets. Yet, even if the divestitures pay off in the long run, its near-term adverse effects on earnings cannot be ignored. Also, stiff competition poses challenge for Aimco.
Nevertheless, the company has a solid portfolio diversified both in terms of geography and price point. This raises hope for relatively stable revenues despite new supply in various markets.
We now look forward to the earnings releases of General Growth Properties, Inc , Vornado Realty Trust (VNO - Free Report) and Taubman Centers, Inc. , scheduled next week.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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Aimco's (AIV) Q3 FFO Misses Estimates, Guidance Raised
Apartment Investment and Management Company (AIV - Free Report) – better known as Aimco – reported third-quarter 2016 pro forma funds from operations (“FFO”) of 55 cents per share, missing the Zacks Consensus Estimate of 56 cents and down 4% from the year-ago tally of 57 cents.
Loss of income from apartment sales in 2015 and early 2016 adversely affected the bottom line. However, the negative was partly mitigated with net operating income (NOI) growth in the conventional same store property portfolio as well as enhanced contribution from redevelopment and acquisition communities.
For the reported quarter, total revenue came in at $248.9 million, beating the Zacks Consensus Estimate of $239 million, and exceeding the prior-year figure by 1%.
Quarter in Detail
In the Conventional real estate portfolio, same-store revenues increased 5.0% year over year to $165.0 million, while expenses rose 2.4% year over year to $51.6 million. Consequently, same-store net operating income (NOI) climbed 6.3% to $113.4 million on a year-over-year basis.
Same-store average daily occupancy remained unchanged year over year at 95.7%. Rental rates on new and renewals leases were up 3.0% and 5.3%, respectively, from the expiring lease rates.
As of Sep 30, 2016, Aimco held cash and restricted cash on hand of $157.4 million. Moreover, the estimated fair market value of the company’s unencumbered apartment communities stood at $1.6 billion.
Further, at the end of the quarter, Aimco’s outstanding borrowings on its revolving credit facility were $294.8 million and available capacity was $278.2 million, after considering $27.0 million of letters of credit backed by the facility.
Portfolio Activity
During the quarter, Aimco invested $44 million in redevelopment. Of this, $14 million was associated with the redevelopment of Park Towne Place and The Sterling, mixed-use communities in Center City Philadelphia.
As intended, Aimco continues to sell 5–10% of its lowest rated portfolio each year and uses the proceeds for acquisition and redevelopment of higher-quality apartments. Through these measures, the company increased its conventional percentage NOI in target markets to 89% in third-quarter 2016 from 87% a year earlier. Moreover, revenue per apartment home improved 8% year over year to $1,950 from $1,810 a year ago.
2016 Guidance
For 2016, Aimco raised pro forma FFO per share guidance range to $2.29–$2.33 from the previous range of $2.26–$2.34. This reflects an increase of $0.01 at the mid-point and the move reflects the company’s third-quarter performance. The Zacks Consensus Estimate of $2.31 lies within the guided range.
For fourth-quarter 2016, Aimco provided pro forma FFO per share guidance in a band of 58–62 cents per share. The Zacks Consensus Estimate of 59 cents lies within this range.
Dividend
On Oct 26, 2016, Aimco declared a quarterly cash dividend of 33 cents per share of Class A Common Stock for third-quarter 2016. The dividend will be paid on Nov 30, 2016 to stockholders of record on Nov 18.
In Conclusion
Aimco’s persistent property sales and reinvestment of proceeds in select apartment homes with higher rents and superior margins continue to strengthen its position in high-growth potential markets. Yet, even if the divestitures pay off in the long run, its near-term adverse effects on earnings cannot be ignored. Also, stiff competition poses challenge for Aimco.
Nevertheless, the company has a solid portfolio diversified both in terms of geography and price point. This raises hope for relatively stable revenues despite new supply in various markets.
Aimco currently has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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We now look forward to the earnings releases of General Growth Properties, Inc , Vornado Realty Trust (VNO - Free Report) and Taubman Centers, Inc. , scheduled next week.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>