Sign in
AI

APARTMENT INVESTMENT & MANAGEMENT CO (AIV)·Q1 2020 Earnings Summary

Executive Summary

  • Q1 2020 delivered resilient operations despite COVID-19: Same Store NOI up 5.0% YoY, occupancy at 97.6%, and blended lease rates up 3.6%; AFFO per share was $0.60 (midpoint of guidance) and FFO per share $0.67 (+10% YoY) .
  • Liquidity strengthened materially: ~$1.0B currently, rising to ~$1.2B with in‑process loans; 2020 capital spending reduced by ~$150M (≈45%) and $688M of new property debt placed at 2.9% WAM rate to lower borrowing costs .
  • Balance sheet de‑risking and cash discipline: wrote off $2.9M straight‑line rent receivables and $2.2M deferred broker commissions for vulnerable commercial tenants; shifted those leases to cash accounting .
  • Preliminary Q2 indicators: April turnover reached a record low (41.1%), occupancy 96.6% and pricing held with blended lease rate increases of 4.2% YoY; bad debt methodology tightened to recognize ~1% of revenues in April based on credit metrics .
  • Strategic narrative catalysts: proactive COVID response, robust same‑store performance, targeted capex cuts, abundant liquidity, and clarifications around Parkmerced mezzanine loan cash collection and risk protections .

What Went Well and What Went Wrong

What Went Well

  • Same Store operating momentum: revenue +3.5%, expenses −0.4%, NOI +5.0%; margin strong at 74% and occupancy at 97.6% .
  • Pricing power held: weighted‑average rent increases of 3.6% in Q1; April blended rent up 4.2% YoY despite pandemic disruption .
  • Liquidity and liability management: ~$1.0B+ liquidity (rising to ~$1.2B), $688M of new property debt placed (8.3‑year WAM, 2.9% rate), lowering overall borrowing costs; no 2020 maturities and reduced 2021‑2024 maturities .
  • Quote: “Aimco’s first quarter was solid… AFFO of $0.60 per share… up 9% year‑over‑year… FFO of $0.67 per share… up 10% year‑over‑year.” — CFO Paul Beldin .

What Went Wrong

  • GAAP revenue declined YoY on commercial tenant stress and write‑offs: Rental and other property revenues fell to $224.6M from $230.2M; net income per share dropped to $0.04 vs $1.88 prior year largely due to lower gains on dispositions .
  • Increased bad debt and commercial collections pressure: April residential collections were 96%; office collected ~90% but other commercial only ~30%—necessitating write‑offs and cash accounting for certain leases .
  • COVID‑related costs (~$0.4M) and $5.1M straight‑line rent/deferred commissions charges offset operating outperformance .
  • Analyst concerns over Parkmerced cash yield surfaced; management emphasized collectibility protections and subordinated equity cushion .

Financial Results

MetricQ3 2019Q4 2019Q1 2020
Rental & Other Property Revenues ($USD Millions)$229.8 $230.0 $224.6
Net Income Attributable to AIV ($USD Millions)$1.98 $133.5 $6.68
Diluted EPS ($)$0.01 $0.90 $0.04
Nareit FFO per Share – Diluted ($)$0.61 $0.59 $0.67
AFFO per Share – Diluted ($)$0.56 $0.58 $0.60
Same Store Revenue ($USD Millions, before utility reimbursements)$179.1 $174.8 $188.0
Same Store Expenses ($USD Millions, net of utility reimbursements)$48.2 $44.0 $48.8
Same Store NOI ($USD Millions)$130.9 $130.8 $139.2
Same Store NOI Margin (%)73.1% 74.8% 74.0%
Average Daily Occupancy (%)96.8% 97.4% 97.6%

Segment breakdown (Same Store totals):

Segment MetricQ3 2019Q4 2019Q1 2020
Revenue ($USD Millions)$179.1 $174.8 $188.0
Expenses ($USD Millions)$48.2 $44.0 $48.8
NOI ($USD Millions)$130.9 $130.8 $139.2

KPIs:

KPIQ3 2019Q4 2019Q1 2020
Renewal Rent Increase (%)4.6% 5.0% 5.8%
New Lease Rent Increase (%)2.5% 0.7% 1.7%
Blended Rent Increase (%)3.6% 2.4% 3.6%
Average Daily Occupancy (%)96.8% 97.4% 97.6%
Trailing‑12M Turnover (%)44.8% 43.2% 42.0%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
AFFO per ShareQ1 2020$0.58–$0.62 Delivered $0.60 Met midpoint
Pro forma FFO per ShareQ1 2020$0.64–$0.68 Delivered $0.67 Near high end
Redevelopment/Development SpendFY 2020$250–$300M Reduced by ~$150M (~45%) Lowered
Property DispositionsFY 2020$900–$1,000M Management now targets “~$750M” given capex reduction and lease‑up contribution Lowered
Dividend per ShareQ1 2020N/A$0.41 declared (+5% vs 2019 regular ) Increased vs 2019 regular

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2019, Q4 2019)Current Period (Q1 2020)Trend
COVID‑19 operational responseN/A in prior quarters; focus on strong same‑store performance and redevelopment progress Extensive health/safety measures, team retention, virtual leasing, targeted resident support New major focus; institutionalized practices
Leasing and occupancyQ3/Q4 occupancy 96.8–97.4%; blended rent increases 2.4–3.6% Q1 occupancy 97.6%; April occupancy 96.6% with blended rent +4.2% YoY; leasing pace recovering via >3,300 live virtual tours Resilient pricing, minor occupancy easing
Liquidity and debt ladderingExtended duration; financed $668M in Q3 at 3.34%; rate‑locked $100M at 3.21% ~$1.0B liquidity rising to ~$1.2B; $688M new property debt, WAM 8.3yrs, 2.9% rate; no 2020 maturities Strengthening; cost of debt down
Commercial tenant riskLimited mention; portfolio focus on residential Office collected ~90% in April; other commercial ~30%—prompting $2.9M straight‑line rent and $2.2M deferred commission write‑offs, cash accounting going forward Elevated risk managed via write‑offs
Parkmerced mezzanine loanAnnounced in Q4: 10% note with option to acquire 30% interest; accretive return expected Q1 cash interest received $0.6M; accrual per 10% rate; management emphasized subordinated equity (~$300M) and UCC foreclosure rights if needed Scrutiny high; management confident
Regulatory/legal (rent collection)Not highlighted previouslyConcerns about rent setting/collection enforcement in certain jurisdictions; tighter bad‑debt methodology using FICO/surety Heightened policy risk flagged

Management Commentary

  • “The Aimco business began the year with record effectiveness and record profitability… [but] the last few weeks of March were a time when it seemed that ‘decades’ were happening!” — Terry Considine, CEO .
  • “Aimco’s first quarter was solid… AFFO of $0.60 per share… up 9% year‑over‑year… FFO of $0.67 per share… up 10% year‑over‑year.” — Paul Beldin, CFO .
  • “Today, Aimco enjoys $1 billion of liquidity… increasing by an additional $200 million… placing $688 million of new property debt… weighted‑average interest rate of 2.9%.” — Paul Beldin .
  • “April turnover reached a new low at 41.1%… average daily occupancy was 96.6%… pricing remained solid… blended lease rates up 4.2%.” — Keith Kimmel, EVP Operations .
  • “When stabilized, these 5 communities are expected to contribute plus or minus $30 million of additional NOI.” — Wes Powell, EVP Redevelopment .

Q&A Highlights

  • Occupancy outlook: Management expects demand to be recovering with week‑over‑week leasing improvements since early April; cautious on precise bottoming but hopeful Q1/April represent trough .
  • Dispositions target recalibration: From ~$950M plan to “something under $800M… say $750M” given capex cuts and lease‑up EBITDA contribution; no urgency for sales given liquidity and LTV .
  • Parkmerced cash yield debate: Collected ~$0.6M in Q1 cash interest; accrual at 10% continues; management underscored collectibility and $300M junior equity cushioning AIV’s position, plus UCC foreclosure remedies .
  • Collections and bad debt: April residential collections 96%; April bad debt ~1% of revenue under tightened FICO‑based methodology; worst pressure in Southern California; prior crisis peak bad debt just over 100bps .
  • Pricing strategy: No blanket zero‑increase policy; pricing tailored by property/job cohort; Northern California tech exposure supports rent increases vs hospitality‑impacted assets .

Estimates Context

  • S&P Global consensus estimates for Q1 2020 (EPS, revenue, EBITDA) were unavailable at time of analysis due to data access limits; accordingly, we cannot definitively classify Street beats/misses. We anchored performance vs company guidance and prior periods .

Key Takeaways for Investors

  • Same Store fundamentals proved durable with 5% NOI growth and solid pricing; short‑term occupancy modestly eased but demand indicators are improving, aided by virtual leasing and targeted resident engagement .
  • Liquidity/laddering leave AIV well‑positioned: ~$1.0B–$1.2B liquidity, no 2020 maturities, reduced 2021–2024 maturities, and lower borrowing costs provide flexibility to navigate macro uncertainty .
  • Tactical capex cut (~$150M) preserves cash while continuing five long‑cycle projects expected to add ~$30M NOI at stabilization; near‑term deliveries in 2020 could face choppy lease‑ups but long‑term demand remains intact .
  • Commercial exposure is small (~3.5% of monthly revenue) but under stress; AIV proactively wrote off vulnerable receivables and shifted to cash recognition, limiting future GAAP volatility from this segment .
  • Parkmerced scrutiny is a headline risk; focus on cash collection trajectory and developer progress—but AIV’s structural protections (junior equity cushion, remedies) mitigate downside while preserving optionality .
  • Near‑term trading: Favorable operational prints and strong liquidity could support sentiment; watch monthly collections, occupancy, and leasing velocity updates as catalysts.
  • Medium‑term thesis: Portfolio quality, disciplined capital recycling, and redevelopment ROI should drive incremental NOI and deleveraging as macro normalizes .