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Aimco (AIV) Q3 FFO Beats, Revenues Decline on Low Occupancy
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Apartment Investment and Management Company (AIV - Free Report) , commonly known as Aimco, reported third-quarter 2020 pro-forma FFO of 61 cents per share, surpassing the Zacks Consensus Estimate of 59 cents. However, the figure declined 5% from the year-ago quarter’s 64 cents.
Notably, rental and other property revenues of $215.4 million in the reported quarter narrowly missed the Zacks Consensus Estimate. Further, the revenue figure was 6.2% lower than the prior-year quarter’s $229.8 million.
Despite a marginal increase in residential rent, declining occupancy, and higher bad debt expenses and waived late fees affected top-line growth.
As of Oct 23, the company collected 96.7% and 97.7% of its total third- and second-quarter residential rents in cash, respectively. Moreover, residential rent collection for October has been in line with September collections of 96.4%.
Quarter in Detail
Same-store revenues (before utility reimbursements) slid 4.9% year over year to $161.4 million, while expenses (net of utility reimbursements) decreased 1.3% to $46.8 million. Consequently, same-store NOI declined 6.3% year over year to $114.6 million.
Same-store average daily occupancy declined 280 basis points (bps) year over year to 93.9%. Rental rates on new leases decreased 9.9%, whereas renewal rental rates dropped 2.2% year over year.
Portfolio Activity
Aimco invested $57 million in five redevelopment and development activities during the September-end quarter. These five apartment communities under development or redevelopment have an estimated remaining cost of completion of around $110 million. Aimco also leased 144 redeveloped or newly-developed apartment homes.
In addition, it is revamping its portfolio through property sales, and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-anticipated growth.
However, Aimco witnessed a 2% year-over-year decline in average revenues per apartment home to $2,212. Moreover, NOI margin declined to 70% from the year-ago quarter’s 71%. The company’s percentage of A, B and C+ home was 53%, 29% and 18%, respectively, in third-quarter 2020.
During the third quarter, Aimco sold a 39% stake in a $2.4-billion portfolio of properties located in California. This enabled the company to reduce financial leverage by $1 billion.
Moreover, it acquired a 271-apartment home community and an adjacent development site for $90 million.
Liquidity
As of Sep 30, 2020, Aimco’s total liquidity of more than $1 billion consisted of cash and restricted cash of $249 million as well as a borrowing capacity of $793 million under its revolving credit facility.
Special Dividend
Aimco’s 2020 property sales, including stake sale in its California properties, resulted in taxable gains in excess of its regular quarterly dividend. This enabled the company’s board of directors to announce an $8.20 special dividend in the form of cash and stock on Oct 21, 2020.
This special dividend includes the upcoming two quarterly cash dividends, aggregating 82 cents per share and $7.38 per share in stock.
This dividend will be paid out on Nov 30 to shareholders of record as of Nov 4, 2020.
In efforts to offset the dilutive impact of the stock issued in the special dividend, the company’s board also authorized a reverse stock split, effective Nov 30, 2020. This will result in the total shares outstanding remaining unchanged.
Conclusion
In September, Aimco announced plans to bifurcate its business into two separate publicly traded companies focused on ownership with active management and development, respectively. The spin-off will facilitate Aimco to simplify its business, and focus on a pipeline of redevelopment and development opportunities as well as additional scope to pursue real estate opportunities in partnership with Apartment Income REIT.
However, the coronavirus pandemic, which has been wreaking havoc and resulting in macroeconomic uncertainties and job-market adversities, is expected to continue affecting the demand for residential units and the rent-paying capability of tenants. As such, Aimco’s top line is likely to bear the brunt in the near term, with adverse impacts on rental rates and occupancy.
Apartment Investment and Management Company Price, Consensus and EPS Surprise
We now look forward to the earnings releases of other REITs like Lexington Realty Trust (LXP - Free Report) , National Storage Affiliates Trust (NSA - Free Report) and Ventas, Inc. (VTR - Free Report) . While Lexington Realty and National Storage Affiliates are slated to report third-quarter earnings on Nov 5, Ventas will release earnings on Nov 6.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Have You Seen Zacks’ 2020 Election Stock Report?
The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.
The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.
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Aimco (AIV) Q3 FFO Beats, Revenues Decline on Low Occupancy
Apartment Investment and Management Company (AIV - Free Report) , commonly known as Aimco, reported third-quarter 2020 pro-forma FFO of 61 cents per share, surpassing the Zacks Consensus Estimate of 59 cents. However, the figure declined 5% from the year-ago quarter’s 64 cents.
Notably, rental and other property revenues of $215.4 million in the reported quarter narrowly missed the Zacks Consensus Estimate. Further, the revenue figure was 6.2% lower than the prior-year quarter’s $229.8 million.
Despite a marginal increase in residential rent, declining occupancy, and higher bad debt expenses and waived late fees affected top-line growth.
As of Oct 23, the company collected 96.7% and 97.7% of its total third- and second-quarter residential rents in cash, respectively. Moreover, residential rent collection for October has been in line with September collections of 96.4%.
Quarter in Detail
Same-store revenues (before utility reimbursements) slid 4.9% year over year to $161.4 million, while expenses (net of utility reimbursements) decreased 1.3% to $46.8 million. Consequently, same-store NOI declined 6.3% year over year to $114.6 million.
Same-store average daily occupancy declined 280 basis points (bps) year over year to 93.9%. Rental rates on new leases decreased 9.9%, whereas renewal rental rates dropped 2.2% year over year.
Portfolio Activity
Aimco invested $57 million in five redevelopment and development activities during the September-end quarter. These five apartment communities under development or redevelopment have an estimated remaining cost of completion of around $110 million. Aimco also leased 144 redeveloped or newly-developed apartment homes.
In addition, it is revamping its portfolio through property sales, and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-anticipated growth.
However, Aimco witnessed a 2% year-over-year decline in average revenues per apartment home to $2,212. Moreover, NOI margin declined to 70% from the year-ago quarter’s 71%. The company’s percentage of A, B and C+ home was 53%, 29% and 18%, respectively, in third-quarter 2020.
During the third quarter, Aimco sold a 39% stake in a $2.4-billion portfolio of properties located in California. This enabled the company to reduce financial leverage by $1 billion.
Moreover, it acquired a 271-apartment home community and an adjacent development site for $90 million.
Liquidity
As of Sep 30, 2020, Aimco’s total liquidity of more than $1 billion consisted of cash and restricted cash of $249 million as well as a borrowing capacity of $793 million under its revolving credit facility.
Special Dividend
Aimco’s 2020 property sales, including stake sale in its California properties, resulted in taxable gains in excess of its regular quarterly dividend. This enabled the company’s board of directors to announce an $8.20 special dividend in the form of cash and stock on Oct 21, 2020.
This special dividend includes the upcoming two quarterly cash dividends, aggregating 82 cents per share and $7.38 per share in stock.
This dividend will be paid out on Nov 30 to shareholders of record as of Nov 4, 2020.
In efforts to offset the dilutive impact of the stock issued in the special dividend, the company’s board also authorized a reverse stock split, effective Nov 30, 2020. This will result in the total shares outstanding remaining unchanged.
Conclusion
In September, Aimco announced plans to bifurcate its business into two separate publicly traded companies focused on ownership with active management and development, respectively. The spin-off will facilitate Aimco to simplify its business, and focus on a pipeline of redevelopment and development opportunities as well as additional scope to pursue real estate opportunities in partnership with Apartment Income REIT.
However, the coronavirus pandemic, which has been wreaking havoc and resulting in macroeconomic uncertainties and job-market adversities, is expected to continue affecting the demand for residential units and the rent-paying capability of tenants. As such, Aimco’s top line is likely to bear the brunt in the near term, with adverse impacts on rental rates and occupancy.
Apartment Investment and Management Company Price, Consensus and EPS Surprise
Apartment Investment and Management Company price-consensus-eps-surprise-chart | Apartment Investment and Management Company Quote
The company currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
We now look forward to the earnings releases of other REITs like Lexington Realty Trust (LXP - Free Report) , National Storage Affiliates Trust (NSA - Free Report) and Ventas, Inc. (VTR - Free Report) . While Lexington Realty and National Storage Affiliates are slated to report third-quarter earnings on Nov 5, Ventas will release earnings on Nov 6.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Have You Seen Zacks’ 2020 Election Stock Report?
The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.
The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.
Check out Zacks’ 2020 Election Stock Report >>