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Aimco's (AIV) Q3 FFO Surpasses Estimates, Revenues Down

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Apartment Investment and Management Company (AIV - Free Report) , better known as Aimco, reported third-quarter 2018 pro forma funds from operations (FFO) of 63 cents per share, surpassing the Zacks Consensus Estimate of 61 cents. Also, the figure remained unchanged as compared with the year-ago tally.

The company witnessed decent growth in same-store property net operating income (NOI). Further, it exited the quarter with higher same-store average daily occupancy. However, these positives were offset by lower rental and other property revenues of partnerships served by its Asset Management business. 

Notably, total revenues of $242.5 million also outpaced the Zacks Consensus Estimate of $241.2 million. However, the reported figure came in lower than the prior-year quarter’s tally of $254.6 million.

Quarter in Detail

Same-store revenues (before utility reimbursements) increased 3.1% year over year to $148.9 million, while expenses (net of utility reimbursements) flared up 4.5% from the prior-year quarter to $39 million. Consequently, same-store NOI climbed 2.6% to $109.9 million on a year-over-year basis.

Same-store average daily occupancy expanded 30 basis point (bps) year over year to 96.3%. Rental rates on new leases were up 2.2%, whereas rental rates on renewal leases were up 4.2% from the expiring lease rates.

As of Sep 30, 2018, Aimco had cash and restricted cash on hand of $5.7 billion. Moreover, the estimated fair market value of the company’s unencumbered apartment communities was around $2.3 billion.

Furthermore, at the end of the quarter under review, Aimco had borrowing capacity of $593 million under its revolving credit facility, after consideration of $7 million of letters of credit backed by the facility.

Portfolio Activity

During the reported quarter, Aimco invested $37 million in redevelopment and development activities. In addition, the company is revamping its portfolio through property sales, and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth.

Through these efforts, the company increased its average revenues per apartment home by 6% to $2,131. Additionally, NOI margin remained unchanged year over year at 72%. The company’s percentage of A, B and C+ home was 51%, 33% and 16%, respectively, in third-quarter 2018.

Guidance

For full-year 2018, the company updated its pro forma FFO per share guidance to $2.45-$2.49 from $2.41-$2.49 provided earlier. The Zacks Consensus Estimate for the same is $2.44.

The company’s full-year projections are backed by assumptions of same-store revenue growth of 3% and NOI improvement of 2.90-3.10%.

For third-quarter 2018, Aimco provided pro forma FFO per share guidance of 61-65 cents. The Zacks Consensus Estimate for the same is pinned at 61 cents.

Dividend

On Oct 31, Aimco announced a quarterly cash dividend of 38 cents per share of Class A Common Stock for the Sep-end quarter. The dividend will be paid on Nov 30, to stockholders of record as of Nov 16, 2018.

Bottom Line

While Aimco continues to revamp its portfolio through recycling capital from non-core properties to select apartment homes that offer higher internal rates of return as compared to the sold assets, the dilutive impact on earnings from such asset dispositions cannot be bypassed in the near term.

Furthermore, new supply in various markets is anticipated to dampen the company’s rent growth and new-lease pricing ability, moving ahead. Hike in interest rate adds to its woes.

Apartment Investment and Management Company Price, Consensus and EPS Surprise
 


Apartment Investment and Management Company Price, Consensus and EPS Surprise
| Apartment Investment and Management Company Quote

Aimco currently carries a Zacks Rank #4 (Sell).

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 Lamar Advertising Company (LAMR - Free Report) , Jones Lang LaSalle Incorporated (JLL - Free Report) and Outfront Media Inc. (OUT - Free Report) , all of which are scheduled to report their quarterly numbers next week.

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.

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