Apartment Investment and Management Company (AIV), or Aimco as the real estate investment trust (REIT) is popularly known, reported fiscal 2011 first quarter funds from operations (FFO) of $44.4 million or 38 cents per share compared to $29.3 million or 25 cents in the year-ago period. Fund from operations, 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.
Excluding the non-recurring one-time items, FFO during the reported quarter was $45.8 million or 39 cents per share compared to $36.9 million or 32 cents in the year-earlier quarter. The recurring FFO for first quarter 2011 was 2 cents above the higher end of its previous guidance and was well ahead of the Zacks Consensus Estimate of 36 cents. During the quarter, total revenues stood at $286.6 million, compared to $276.8 million in the year-ago period. Total revenues for the reported quarter surpassed the Zacks Consensus Estimate of $278 million.
In the conventional real estate portfolio, Aimco had a weighted average ownership of 94%. Average rents in the same-store conventional real estate portfolio increased 0.6% during the quarter to $1,049 per unit from $1,043 during first quarter 2010. Rental rates on new leases in the conventional real estate portfolio were 1.9% higher than the expiring lease rates. First quarter 2011 renewal rates were 3.0% higher than the expiring lease rates.
Same-store revenues in the conventional portfolio increased 1.6% year-over-year to $189.2 million primarily due to higher average daily occupancy of 96.4% for first quarter 2011 compared to 96.0% for first quarter 2010.
In the affordable real estate portfolio, Aimco had a weighted average ownership of 66% during the quarter. Average occupancy was 97.5% at quarter-end, an increase of 0.7% from first quarter 2010, while average rent per unit increased 4.4% from $797 to $832. Conventional property operations generated 87% of Aimco’s first quarter 2011 property net operating income (NOI), while affordable real estate portfolio generated the balance 13%.
Aimco is continuing with its strategy to focus on the 20 largest markets in the U.S. that are concentrated mostly in the coastal areas and also includes a number of Sun Belt cities, Chicago and Illinois. During first quarter 2011, Aimco sold 2 conventional properties and 5 affordable properties for $28.9 million of total gross proceeds, bulk of which was used to repay debt.
At quarter-end, Aimco had a total debt of $4.9 billion with debt service and fixed charge coverage ratios of 1.58x and 1.34x respectively. Aimco had cash and cash equivalents of $111.3 million at quarter-end compared to $81.4 million in the previous year. Aimco’s recourse debt at March 31, 2011, was limited to its revolving credit facility. At quarter-end, Aimco had no outstanding borrowings on its revolving credit facility and available capacity was $263.4 million, net of $36.6 million of letters of credit backed by the facility.
During first quarter 2011, Aimco issued 1.5 million shares under its At-the-Market (ATM) offering program at a weighted average price of $24.69 each, generating $37.0 million in proceeds. The company utilized the proceeds from the equity offering to repay debt.
With strong quarterly and fiscal results, Aimco increased recurring FFO guidance for full year 2011 from the range of $1.46 – $1.56 per share to $1.49 – $1.59, while recurring FFO for second quarter 2011 is expected in the range of 33 cents to 37 cents. Same-store conventional NOI during fiscal 2011 is expected to decline 2.5% to 4.5% compared to the previous year.
We maintain our long-term ‘Neutral’ recommendation on the stock, which presently has a Zacks #3 Rank translating into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Equity Residential (EQR), one of the competitors of Aimco.
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