Apartment Investment & Management Co 10-Q for FY2024 Q1
Apartment Investment & Management Co (AIV)
About this 10-Q
Apartment Investment & Management Co filed this 10-Q on May 8, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $50.2M
- up 13.4% from $44.27M a year earlier
- Net loss
- $10.19M
- compared with a net loss of $8.82M a year earlier
- Diluted EPS
- -$0.07
- compared with -$0.06 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Trading Symbol(s) |
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Name of Each Exchange on Which Registered |
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Securities registered pursuant to Section 12(g) of the Act:
None (Apartment Investment and Management Company)
Partnership Common Units (Aimco OP L.P.)
(title of each class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Apartment Investment and Management Company: |
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Aimco OP L.P.: |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Apartment Investment and Management Company: |
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Aimco OP L.P.: |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Apartment Investment and Management Company:
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
Aimco OP L.P.:
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Apartment Investment and Management Company: |
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Aimco OP L.P.: |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Apartment Investment and Management Company: Yes ☐ No |
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Aimco OP L.P.: Yes ☐ No |
The number of shares of Apartment Investment and Management Company Class A common stock ("Common Stock") outstanding as of May 7, 2024:
EXPLANATORY NOTE
Apartment Investment and Management Company (“Aimco” or “the Company”), a Maryland corporation, is a self-administered and self-managed real estate investment trust, or REIT. On December 15, 2020, Aimco completed the separation of its businesses (the “Separation”), creating two, separate and distinct, publicly traded companies, Aimco and Apartment Income REIT Corp. (“AIR”) (Aimco and AIR together, as they existed prior to the Separation, “Aimco Predecessor”). Events noted in this filing as occurring before December 15, 2020, were those entered into by Aimco Predecessor.
Aimco, through a wholly-owned subsidiary, is the general partner and is, directly, the special limited partner of Aimco OP L.P. ("Aimco Operating Partnership"). As of March 31, 2024, Aimco owned 92.4% of the legal interest in the common partnership units of Aimco Operating Partnership and 94.8% of the economic interest in Aimco Operating Partnership. The remaining 7.6% legal interest is owned by limited partners. The common partnership units of Aimco Operating Partnership are referred to as "OP Units". As the sole general partner of Aimco Operating Partnership, Aimco has exclusive control of Aimco Operating Partnership’s day-to-day management.
Aimco Operating Partnership holds all of Aimco’s assets and manages the daily operations of Aimco’s business. Pursuant to the Aimco Operating Partnership agreement, Aimco is required to contribute to Aimco Operating Partnership all proceeds from the offerings of its securities. In exchange for the contribution of such proceeds, Aimco receives additional interests in Aimco Operating Partnership with similar terms (e.g., if Aimco contributes proceeds of a stock offering, Aimco receives partnership units with terms substantially similar to the stock issued by Aimco).
This filing combines the quarterly reports on Form 10-Q for the quarterly period ended March 31, 2024, of Aimco and Aimco Operating Partnership. Where it is important to distinguish between the two entities, we refer to them specifically. Otherwise, references to “we,” “us,” or “our” mean, collectively, Aimco, Aimco Operating Partnership, and their consolidated entities.
We believe combining the periodic reports of Aimco and Aimco Operating Partnership into this single report provides the following benefits:
We operate Aimco and Aimco Operating Partnership as one enterprise; the management of Aimco directs the management and operations of Aimco Operating Partnership; and Aimco OP GP, LLC, Aimco Operating Partnership’s general partner, is managed by Aimco.
We believe it is important to understand the few differences between Aimco and Aimco Operating Partnership in the context of how Aimco and Aimco Operating Partnership operate as a consolidated company. Aimco has no assets or liabilities other than its investment in Aimco Operating Partnership. Also, Aimco is a corporation that issues publicly traded equity from time to time, whereas Aimco Operating Partnership is a partnership that has no publicly traded equity. Except for the net proceeds from stock offerings by Aimco, which are contributed to Aimco Operating Partnership in exchange for additional limited partnership interests (of a similar type and in an amount equal to the shares of stock sold in the offering), Aimco Operating Partnership generates all remaining capital required by its business. These sources include Aimco Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility, the issuance of debt and equity securities, including additional partnership units, and proceeds received from the sale of real estate.
Equity, partners’ capital, and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of Aimco and those of Aimco Operating Partnership. Interests in Aimco Operating Partnership held by entities other than Aimco are classified within partners’ capital in Aimco Operating Partnership’s condensed consolidated financial statements and as noncontrolling interests in Aimco’s condensed consolidated financial statements.
To help investors understand the differences between Aimco and Aimco Operating Partnership, this report provides: separate condensed consolidated financial statements for Aimco and Aimco Operating Partnership; a single set of condensed consolidated notes to such financial statements that includes separate discussions of each entity’s stockholders’ equity or partners’ capital, and earnings per share or earnings per unit, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity, where appropriate.
This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for Aimco and Aimco Operating Partnership in order to establish that the requisite certifications have been made and that Aimco and Aimco Operating Partnership are both compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.
2
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO OP L.P.
TABLE OF CONTENTS
FORM 10-Q
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ITEM 1. |
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4 |
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5 |
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6 |
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9 |
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Condensed Consolidated Statements of Partners’ Capital (Unaudited) |
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11 |
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12 |
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ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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ITEM 3. |
33 |
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ITEM 4. |
34 |
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ITEM 1A. |
35 |
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ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES |
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ITEM 6. |
37 |
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38 |
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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March 31, 2024 |
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December 31, 2023 |
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ASSETS |
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Buildings and improvements |
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$ |
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$ |
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Land |
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Total real estate |
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Accumulated depreciation |
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Net real estate |
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Cash and cash equivalents |
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Restricted cash |
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Interest rate options |
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Unconsolidated real estate partnerships |
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Right-of-use lease assets - finance leases |
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Other assets, net |
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Total assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Non-recourse property debt, net |
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$ |
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$ |
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Non-recourse construction loans, net |
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Total indebtedness |
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Deferred tax liabilities |
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Lease liabilities - finance leases |
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Accrued liabilities and other |
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Total liabilities |
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Redeemable noncontrolling interests in consolidated real estate partnerships |
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Equity ( |
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Common Stock, $ |
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Additional paid-in capital |
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Retained earnings (deficit) |
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Total Aimco equity |
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Noncontrolling interests in consolidated real estate partnerships |
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Common noncontrolling interests in Aimco Operating Partnership |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
4
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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Three Months Ended March 31, |
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2024 |
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2023 |
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REVENUES |
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Rental and other property revenues |
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$ |
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$ |
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OPERATING EXPENSES |
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Property operating expenses |
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Depreciation and amortization |
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General and administrative expenses |
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Total operating expenses |
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Interest income |
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Interest expense |
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Realized and unrealized gains (losses) on interest rate options |
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Realized and unrealized gains (losses) on equity investments |
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Income from unconsolidated real estate partnerships |
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Other income (expense), net |
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Income (loss) before income tax |
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Income tax benefit (expense) |
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Net income (loss) |
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Net (income) loss attributable to redeemable noncontrolling |
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Net (income) loss attributable to noncontrolling interests |
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Net (income) loss attributable to common noncontrolling |
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Net income (loss) attributable to Aimco |
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$ |
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$ |
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Net income (loss) attributable to Aimco per common |
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$ |
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$ |
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Net income (loss) attributable to Aimco per common |
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$ |
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$ |
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Weighted-average common shares outstanding – basic |
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Weighted-average common shares outstanding – diluted |
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See notes to condensed consolidated financial statements.
5
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2024 and 2023
(In thousands, except per share data)
(Unaudited)
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Common Stock |
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Noncontrolling |
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Common |
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Shares |
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Amount |
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Additional |
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Retained Earnings (Accumulated Deficit) |
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Total Aimco |
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Consolidated |
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Aimco |
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Total |
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Balances at December 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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( |
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( |
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( |
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( |
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Redemption of OP Units held by third parties |
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— |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Contributions from noncontrolling interests in consolidated real estate partnerships |
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— |
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— |
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— |
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— |
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— |
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— |
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Distributions to noncontrolling interests in consolidated real estate partnerships |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Common stock repurchased |
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( |
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( |
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( |
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— |
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( |
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— |
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— |
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( |
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Other common stock issuances |
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— |
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— |
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Other, net |
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— |
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— |
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— |
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— |
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Balances at March 31, 2023 |
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Balances at December 31, 2023 |
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Net income (loss) |
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— |
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— |
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— |
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( |
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Redemption of OP Units held by third parties |
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— |
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— |
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— |
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( |
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— |
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( |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Contributions from noncontrolling interests in consolidated real estate partnerships |
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— |
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— |
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— |
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— |
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— |
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Distributions to noncontrolling interests in consolidated real estate partnerships |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Common stock repurchased |
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( |
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( |
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( |
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— |
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— |
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— |
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Other common stock issuances, net of withholding taxes |
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— |
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Balances at March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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See notes to condensed consolidated financial statements.
6
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Three Months Ended March 31, |
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2024 |
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2023 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
$ |
( |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash provided by |
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Depreciation and amortization |
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Realized and unrealized (gains) losses on interest rate options |
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Realized and unrealized (gains) losses on equity investments |
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Income tax expense (benefit) |
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Share-based compensation |
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Income from unconsolidated real estate partnerships |
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Amortization of debt issuance costs and other |
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Changes in operating assets and operating liabilities: |
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Operating assets, net |
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Operating liabilities, net |
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Total adjustments |
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Net cash provided by operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Capital expenditures(1) |
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Other investing activities |
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Net cash used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from non-recourse construction loans |
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Principal repayments on non-recourse property debt |
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Proceeds from interest rate options |
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Payments on finance leases |
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Common stock repurchased |
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Payments related to withholding taxes for share-based compensation |
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Distributions to redeemable noncontrolling interests |
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Contributions from noncontrolling interests |
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Distributions to noncontrolling interests |
|
( |
) |
|
|
( |
) |
Contributions from redeemable noncontrolling interests |
|
— |
|
|
|
|
|
Redemption of OP Units held by third parties |
|
( |
) |
|
|
( |
) |
Other financing activities |
|
— |
|
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
||
NET DECREASE IN CASH, CASH EQUIVALENTS, |
|
|
|
|
( |
) |
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT |
|
|
|
|
|
||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT |
$ |
|
|
$ |
|
||
(1)
See notes to condensed consolidated financial statements.
7
AIMCO OP L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
ASSETS |
|
|
|
|
|
|
||
Buildings and improvements |
|
$ |
|
|
$ |
|
||
Land |
|
|
|
|
|
|
||
Total real estate |
|
|
|
|
|
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Net real estate |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Interest rate options |
|
|
|
|
|
|
||
Unconsolidated real estate partnerships |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Right-of-use lease assets - finance leases |
|
|
|
|
|
|
||
Other assets, net |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
||
Non-recourse property debt, net |
|
$ |
|
|
$ |
|
||
Non-recourse construction loans, net |
|
|
|
|
|
|
||
Total indebtedness |
|
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
|
||
Lease liabilities - finance leases |
|
|
|
|
|
|
||
Accrued liabilities and other |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Redeemable noncontrolling interests in consolidated real estate partnerships |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
||
Partners’ capital: |
|
|
|
|
|
|
||
General Partner and Special Limited Partner |
|
|
|
|
|
|
||
Limited Partners |
|
|
|
|
|
|
||
Partners’ capital attributable to Aimco Operating Partnership |
|
|
|
|
|
|
||
Noncontrolling interests in consolidated real estate partnerships |
|
|
|
|
|
|
||
Total partners’ capital |
|
|
|
|
|
|
||
Total liabilities and partners’ capital |
|
$ |
|
|
$ |
|
||
See notes to condensed consolidated financial statements.
8
AIMCO OP L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
REVENUES |
|
|
|
|
|
|
||
Rental and other property revenues |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
OPERATING EXPENSES |
|
|
|
|
|
|
||
Property operating expenses |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
General and administrative expenses |
|
|
|
|
|
|
||
Total operating expenses |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Interest income |
|
|
|
|
|
|
||
Interest expense |
|
|
( |
) |
|
|
( |
) |
Realized and unrealized gains (losses) on interest rate options |
|
|
|
|
|
( |
) |
|
Realized and unrealized gains (losses) on equity investments |
|
|
( |
) |
|
|
|
|
Income from unconsolidated real estate partnerships |
|
|
|
|
|
|
||
Other income (expense), net |
|
|
( |
) |
|
|
( |
) |
Income (loss) before income tax |
|
|
( |
) |
|
|
( |
) |
Income tax benefit (expense) |
|
|
|
|
|
|
||
Net income (loss) |
|
|
( |
) |
|
|
( |
) |
Net (income) loss attributable to redeemable noncontrolling |
|
|
( |
) |
|
|
( |
) |
Net (income) loss attributable to noncontrolling interests |
|
|
|
|
|
( |
) |
|
Net income (loss) attributable to Aimco Operating |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Net income (loss) attributable to Aimco Operating |
|
$ |
( |
) |
|
$ |
( |
) |
Net income (loss) attributable to Aimco Operating |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Weighted-average common units outstanding – basic |
|
|
|
|
|
|
||
Weighted-average common units outstanding – diluted |
|
|
|
|
|
|
||
See notes to condensed consolidated financial statements.
9
AIMCO OP L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the Three Months Ended March 31, 2024 and 2023
(In thousands)
(Unaudited)
|
|
General Partner |
|
|
Limited |
|
|
Partners’ Capital |
|
|
Noncontrolling |
|
|
Total |
|
|||||
Balances at December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Net income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Redemption of OP Units held by third parties |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Contributions from noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Distributions to noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Redemption of OP Units held by Aimco |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other OP Unit issuances |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Other, net |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balances at March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balances at December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Redemption of OP Units held by third parties |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Contributions from noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Distributions to noncontrolling interests in consolidated real estate partnerships |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Redemption of OP Units held by Aimco |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other OP Unit issuances, net of withholding taxes |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balances at March 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
See notes to condensed consolidated financial statements.
10
AIMCO OP L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
Three Months Ended March 31, |
|
|||||
|
2024 |
|
|
2023 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
||
Net income (loss) |
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net income (loss) to net cash provided by |
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
||
Realized and unrealized (gains) losses on interest rate options |
|
( |
) |
|
|
|
|
Realized and unrealized (gains) losses on equity investments |
|
|
|
|
( |
) |
|
Income tax expense (benefit) |
|
( |
) |
|
|
( |
) |
Share-based compensation |
|
|
|
|
|
||
Income from unconsolidated real estate partnerships |
|
( |
) |
|
|
( |
) |
Amortization of debt issuance costs and other |
|
|
|
|
|
||
Changes in operating assets and operating liabilities: |
|
|
|
|
|
||
Operating assets, net |
|
( |
) |
|
|
|
|
Operating liabilities, net |
|
|
|
|
( |
) |
|
Total adjustments |
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
||
Capital expenditures(1) |
|
( |
) |
|
|
( |
) |
Other investing activities |
|
( |
) |
|
|
|
|
Net cash used in investing activities |
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
||
Proceeds from non-recourse construction loans |
|
|
|
|
|
||
Principal repayments on non-recourse property debt |
|
( |
) |
|
|
( |
) |
Proceeds from interest rate options |
|
|
|
|
|
||
Payments on finance leases |
|
( |
) |
|
|
( |
) |
Common stock repurchased |
|
( |
) |
|
|
( |
) |
Payments related to withholding taxes for share-based compensation |
|
( |
) |
|
|
— |
|
Distributions to redeemable noncontrolling interests |
|
( |
) |
|
|
( |
) |
Contributions from noncontrolling interests |
|
|
|
|
|
||
Distributions to noncontrolling interests |
|
( |
) |
|
|
( |
) |
Contributions from redeemable noncontrolling interests |
|
— |
|
|
|
|
|
Redemption of OP Units held by third parties |
|
( |
) |
|
|
( |
) |
Other financing activities |
|
— |
|
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
||
NET DECREASE IN CASH, CASH EQUIVALENTS, |
|
|
|
|
( |
) |
|
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT |
|
|
|
|
|
||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT |
$ |
|
|
$ |
|
||
(1)
See notes to condensed consolidated financial statements.
11
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO OP L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2024
(Unaudited)
Note 1 — Organization
Apartment Investment and Management Company (“Aimco” or "the Company"), a Maryland corporation, is a self-administered and self-managed real estate investment trust (“REIT”). On December 15, 2020, Aimco completed the separation of its businesses (the “Separation”), creating two, separate and distinct, publicly traded companies, Aimco and Apartment Income REIT Corp. (“AIR”) (Aimco and AIR together, as they existed prior to the Separation, “Aimco Predecessor”). Events noted in this filing as occurring before December 15, 2020, were those entered into by Aimco Predecessor.
Aimco, through a wholly owned subsidiary, is the general partner and is, directly, the special limited partner of Aimco OP L.P. (“Aimco Operating Partnership”). As of March 31, 2024, Aimco owned
This filing combines the quarterly reports on Form 10-Q for the quarterly period ended March 31, 2024, of Aimco and Aimco Operating Partnership. Where it is important to distinguish between the two entities, we refer to them specifically. Otherwise, references to “we,” “us,” or “our” mean, collectively, Aimco, Aimco Operating Partnership, and their consolidated entities.
We own or lease a portfolio of real estate investments focused primarily on the U.S. multifamily sector. At March 31, 2024, our entire portfolio of operating residential apartment communities includes
Note 2 — Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
The accompanying condensed consolidated financial statements include the accounts of Aimco, Aimco Operating Partnership, and their consolidated subsidiaries. Aimco Operating Partnership’s condensed consolidated financial statements include the accounts of Aimco Operating Partnership and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
As used herein, and except where the context otherwise requires, “partnership” refers to a limited partnership or a limited liability company and “partner” refers to a partner in a limited partnership or a member of a limited liability company.
Certain reclassifications have been made to prior period amounts to conform to the current period condensed consolidated financial statement presentation with no effect on the Company’s previously reported results of operations, financial position, or cash flows.
12
The Condensed Consolidated Balance Sheets of Aimco and Aimco Operating Partnership as of December 31, 2023 have been derived from their respective audited financial statements at that date, but do not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in Aimco’s and Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2023. Except where indicated, the footnotes refer to both Aimco and Aimco Operating Partnership.
Principles of Consolidation
We consolidate a variable interest entity (“VIE”) in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. Refer to Note 6 for further information.
Common Noncontrolling Interests in Aimco Operating Partnership
Common noncontrolling interests in Aimco Operating Partnership consist of OP Units held by third parties, and are reflected in Aimco’s accompanying Condensed Consolidated Balance Sheets as Common Noncontrolling Interests in Aimco Operating Partnership. Aimco Operating Partnership’s income or loss is allocated to the holders of OP Units, other than Aimco, based on the weighted-average number of OP Units (including OP Units held by Aimco) outstanding during the period. For the periods ended March 31, 2024 and 2023, the holders of OP Units had a weighted-average economic ownership interest in Aimco Operating Partnership of approximately
Redeemable Noncontrolling Interests in Consolidated Real Estate Partnerships
Redeemable noncontrolling interests consist of equity interests held by a limited partner in a consolidated real estate partnership that has a finite life. If a consolidated real estate partnership includes redemption rights that are not within our control, the noncontrolling interest is included as temporary equity.
Redeemable noncontrolling interests in consolidated real estate partnerships as of March 31, 2024, consists of the following: (i) a preferred equity interest in an entity that owns a portfolio of operating apartment communities and (ii) equity interests in two separate consolidated joint ventures that expect to complete the development of residential apartment communities in 2024. Capital contributions, distributions, and net income attributable to redeemable noncontrolling interests in consolidated real estate partnerships are determined in accordance with the relevant partnership agreements. These interests are presented as Redeemable noncontrolling interests in consolidated real estate partnerships in our Condensed Consolidated Balance Sheets as of March 31, 2024.
The assets of our consolidated real estate partnerships must first be used to settle the liabilities of the consolidated real estate partnerships. The consolidated real estate partnership’s creditors do not have recourse to the general credit of Aimco Operating Partnership.
The following table shows changes in our redeemable noncontrolling interests in consolidated real estate partnerships from December 31, 2023 to March 31, 2024 (in thousands):
|
|
2024 |
|
|
Balance at Beginning of Period |
|
$ |
|
|
Distributions |
|
|
( |
) |
Net income |
|
|
|
|
Balance at March 31, 2024 |
|
$ |
|
|
13
Mezzanine Investment
In November 2019, Aimco Predecessor made a
The Separation Agreement with AIR provides for AIR to transfer ownership of the subsidiaries that originated and hold the Mezzanine Investment, and a related equity option to acquire a
In June 2023, we closed on the sale of a
Because we receive first priority and a higher return than the purchaser, the partial sale and transfer of the financial interest does not qualify for sale accounting in accordance with GAAP. Therefore, we recorded the cash received from the purchaser as a liability, which is included in Accrued liabilities and other in our Condensed Consolidated Balance Sheets in accordance with GAAP. Although the cash received is accounted for as a liability in accordance with GAAP, no amount is due to the purchaser until after we receive $
Income Tax Benefit (Expense)
Certain aspects of our operations, including our development and redevelopment activities, are conducted through taxable REIT subsidiaries, or TRS entities. Additionally, our TRS entities hold investments in one of our apartment communities and 1001 Brickell Bay Drive.
Our income tax benefit (expense) calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities. Income taxes, as well as changes in valuation allowance and incremental deferred tax items in conjunction with intercompany asset transfers and internal restructurings (if applicable), are included in Income tax benefit (expense) in our Condensed Consolidated Statements of Operations.
Consolidated GAAP income or loss subject to tax consists of pretax income or loss of our taxable entities and income and gains retained by the REIT. For the three months ended March 31, 2024, we had consolidated net losses subject to tax of $
For the three months ended March 31, 2024, we recognized an income tax benefit of $
Use of Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes thereto. Actual results could differ from those estimates.
Cash Equivalents
We classify highly liquid investments with an original maturity of three months or less as cash equivalents. We maintain cash equivalents in financial institutions in excess of insured limits. We have not experienced any losses in these accounts in the past and believe that we are not exposed to significant credit risk because our accounts are deposited with major financial institutions.
14
Restricted Cash
Restricted cash consists of tenant security deposits, capital replacement reserves, insurance reserves, and cash restricted as required by our debt agreements.
Other Assets, net
Other assets were comprised of the following amounts as of March 31, 2024 and December 31, 2023 (in thousands):
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Other investments |
$ |
|
|
$ |
|
||
Deferred costs, deposits, and other |
|
|
|
|
|
||
Prepaid expenses and real estate taxes |
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
||
Corporate fixed assets |
|
|
|
|
|
||
Accounts receivable, net of allowances of $ |
|
|
|
|
|
||
Deferred tax assets |
|
|
|
|
|
||
Due from affiliates |
|
|
|
|
|
||
Total other assets, net |
$ |
|
|
$ |
|
||
In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures", which requires disclosure of incremental segment information, including segment expense categories, on an annual and interim basis. The new guidance is effective for the annual period ended December 31, 2024 and interim periods beginning in 2025. The amendments in the ASU apply retrospectively to all periods presented in the financial statements. The segment expense categories and amounts disclosed in prior periods are based on the significant expense categories identified and disclosed in the period of adoption. We are currently evaluating the potential impact of adopting this new guidance on our condensed consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which is intended to enhance the transparency and decision usefulness of income tax disclosures. This amendment modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold, (2) the amount of income taxes paid (net of refunds received) (disaggregated by federal, state, and foreign taxes) as well as individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid net of refunds. (3) the income or loss from continuing operations before income tax expense or benefit (disaggregated between domestic and foreign) and (4) income tax expense or benefit from continuing operations (disaggregated by federal, state and foreign). The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, while retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our condensed consolidated financial statements and related disclosures.
Note 3 — Commitments and Contingencies
Commitments
In connection with our development, redevelopment, and other capital additions activities, we have entered into various construction-related contracts, and have made commitments to complete development and redevelopment of certain real estate, pursuant to financing or other arrangements. As of March 31, 2024, we had remaining commitments for construction-related contracts of $
As of March 31, 2024, we have remaining commitments of $
We also enter into certain commitments for future purchases of goods and services in connection with the operations of our apartment communities. Those commitments generally have terms of
15
Legal Matters
From time to time, we may be a party to certain legal proceedings, incidental to the normal course of business. While the outcome of the legal proceedings cannot be predicted with certainty, we believe there are no legal proceedings pending that would have a material effect upon our financial condition or results of operations.
Note 4 — Earnings per Share and per Unit
Aimco and Aimco Operating Partnership calculate basic earnings per share and basic earnings per unit based on the weighted-average number of shares of Common Stock and OP Units outstanding. We calculate diluted earnings per share and diluted earnings per unit taking into consideration dilutive shares of Common Stock and OP Unit equivalents and dilutive convertible securities outstanding during the period.
Aimco's Common Stock and OP Unit equivalents include options to purchase shares of Common Stock, which, if exercised, would result in Aimco's issuance of additional shares of Common Stock and Aimco Operating Partnership’s issuance to Aimco of additional OP Units equal to the number of shares of Common Stock purchased under the options. These equivalents also include unvested market-based restricted stock awards that do not meet the definition of participating securities, which would result in an increase in the number of shares of Common Stock and OP Units outstanding equal to the number of the shares that vest. OP Unit equivalents also include unvested long-term incentive partnership units. The Common Stock and OP Unit equivalents were not included in the computation of diluted earnings per share and unit for the three months ended March 31, 2024 and 2023, because the effect of their inclusion would have been antidilutive. As of March 31, 2024, the Common Stock and OP Unit equivalents that could potentially dilute basic earnings per share or unit in future periods totaled
Aimco's time-based restricted stock awards receive non-forfeitable dividends similar to shares of Common Stock and OP Units prior to vesting, and our market-based long-term incentive partnership units ("LTIP Units") receive non-forfeitable distributions based on specified percentages of the distributions paid to OP Units prior to vesting and conversion. The unvested restricted shares and units related to these awards are participating securities. When applicable, we include the effect of participating securities in basic and diluted earnings per share and unit computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method. Participating securities were not included in the computation of diluted earnings per share and unit for the three months ended March 31, 2024 and 2023, because the effect of their inclusion would have been antidilutive. As of March 31, 2024, participating securities that could potentially dilute basic earnings per share or unit in future periods totaled
16
Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings per share and per unit for the three months ended March 31, 2024 and 2023, are as follows (in thousands, except per share and per unit data):
|
Three Months Ended |
|
|||||
|
2024 |
|
|
2023 |
|
||
Earnings per share |
|
|
|
|
|
||
Numerator: |
|
|
|
|
|
||
Net income (loss) attributable to Aimco |
$ |
( |
) |
|
$ |
( |
) |
Net income (loss) allocated to Aimco participating securities |
|
|
|
|
|
||
Net income (loss) attributable to Aimco common stockholders |
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
||
Denominator - shares: |
|
|
|
|
|
||
Basic weighted-average common stock outstanding |
|
|
|
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|
||
Diluted share equivalents outstanding |
|
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|
||
Diluted weighted-average common stock outstanding |
|
|
|
|
|
||
|
|
|
|
|
|
||
Earnings (loss) per share - basic |
$ |
( |
) |
|
$ |
( |
) |
Earnings (loss) per share - diluted |
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
||
Earnings per unit |
|
|
|
|
|
||
Numerator: |
|
|
|
|
|
||
Net income (loss) attributable to Aimco Operating Partnership |
$ |
( |
) |
|
$ |
( |
) |
Net income (loss) allocated to Aimco Operating Partnership participating securities |
|
|
|
|
|
||
Net income (loss) attributable to Aimco Operating Partnership's common unit holders |
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
||
Denominator - units |
|
|
|
|
|
||
Basic weighted-average OP Units outstanding |
|
|
|
|
|
||
Diluted OP Unit equivalents outstanding |
|
|
|
|
|
||
Diluted weighted-average OP Units outstanding |
|
|
|
|
|
||
|
|
|
|
|
|
||
Earnings (loss) per unit - basic |
$ |
( |
) |
|
$ |
( |
) |
Earnings (loss) per unit - diluted |
$ |
( |
) |
|
$ |
( |
) |
Note 5 — Fair Value Measurements and Disclosures
Recurring Fair Value Measurements
From time to time we purchase interest rate swaps, caps, and other instruments to provide protection against increases in interest rates on our variable rate debt. These instruments are presented as Interest rate options in our Condensed Consolidated Balance Sheets. As of March 31, 2024, we held interest rate caps with a $
On a recurring basis, we measure at fair value our interest rate options. Our interest rate options are classified within Level 2 of the GAAP fair value hierarchy, and we estimate their fair value using pricing models that rely on observable market information, including contractual terms, market prices, and interest rate yield curves. The fair value adjustment is included in earnings in Realized and unrealized gains (losses) on interest rate options in our Condensed Consolidated Statements of Operations. Changes in fair value are reflected as a non-cash transaction in adjustments to arrive at cash flows from operations, any upfront premium is reflected in Purchase of interest rate options, and any proceeds are reflected in Proceeds from interest rate options in our Condensed Consolidated Statements of Cash Flows.
As of March 31, 2024 and December 31, 2023, we had investments in stock of $
17
The following table summarizes the fair value for our interest rate options, investments in stock, and our investments in real estate technology funds as of March 31, 2024 and December 31, 2023 (in thousands):
|
|
As of March 31, 2024 |
|
|
As of December 31, 2023 |
|
||||||||||||||||||||||||||
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||||
Interest rate options |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Investments in stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investments in real estate technology funds (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(1)
Fair Value Disclosures
We believe that the carrying value of the consolidated amounts of cash and cash equivalents, restricted cash, accounts receivable and payables approximated their fair value as of March 31, 2024, and December 31, 2023, due to their relatively short-term nature and high probability of realization. We estimate the fair value of our debt using an income and market approach, including comparison of the contractual terms to observable and unobservable inputs such as market interest rate risk spreads, contractual interest rates, remaining periods to maturity, debt service coverage ratios, and loan to value ratios. We classify the fair value of our non-recourse property debt and non-recourse construction loans within Level 2 of the GAAP valuation hierarchy based on the significance of certain of the unobservable inputs used to estimate their fair value.
The following table summarizes the carrying value and fair value of our non-recourse property debt and non-recourse construction loans as of March 31, 2024 and December 31, 2023 (in thousands):
|
|
As of March 31, 2024 |
|
|
As of December 31, 2023 |
|
||||||||||
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
Non-recourse property debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Non-recourse construction loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 6 — Variable Interest Entities
We evaluate our investments in limited partnerships and similar entities in accordance with applicable consolidation guidance to determine whether each such entity is a VIE. The accounting standards for the consolidation of VIEs require qualitative assessments to determine whether we are the primary beneficiary. The primary beneficiary analysis is based on power and economics. We conclude that we are the primary beneficiary and consolidate the VIE if we have both: (i) the power to direct the activities of the VIE that most significantly influence the VIE's economic performance, and (ii) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Significant judgments and assumptions related to these determinations include, but are not limited to, estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.
We consolidate Aimco Operating Partnership, a VIE of which we are the primary beneficiary. Through Aimco Operating Partnership, we consolidate all VIEs for which we are the primary beneficiary. Substantially all of our assets and liabilities are those of Aimco Operating Partnership.
Aimco Operating Partnership is the primary beneficiary of, and therefore consolidates,
In addition, we have
18
The details of our consolidated and unconsolidated VIEs, excluding those of Aimco Operating Partnership, are summarized in the table below as of March 31, 2024 and December 31, 2023 (in thousands, except for VIE count):
|
|
As of March 31, 2024 |
|
|
As of December 31, 2023 |
|
||||||||||
|
|
Consolidated |
|
|
Unconsolidated |
|
|
Consolidated |
|
|
Unconsolidated |
|
||||
Count of VIEs |
|
|
|
|
|
|
|
|
||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net real estate |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Cash and cash equivalents |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Interest rate options |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Unconsolidated real estate partnerships |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Notes receivable |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Right-of-use lease assets - finance leases |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Other assets, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-recourse construction loans, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Lease liabilities - finance leases |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Accrued liabilities and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 7 — Lease Arrangements
Aimco as Lessor
The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents and commercial tenants primarily for utility reimbursements and other services.
For the three months ended March 31, 2024 and 2023, our total lease income was comprised of the following amounts for all residential and commercial property leases (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Fixed lease income |
|
$ |
|
|
$ |
|
||
Variable lease income |
|
|
|
|
|
|
||
|
$ |
|
|
$ |
|
|||
Aimco as Lessee
Finance Lease Arrangements
We are lessee to finance leases for the land underlying the development sites at Upton Place, Strathmore Square, and Oak Shore.
As of March 31, 2024 and December 31, 2023, our finance leases had weighted-average remaining terms of
For the three months ended March 31, 2024, amortization related to finance leases was $
Operating Lease Arrangements
We have operating leases primarily for corporate office space. Substantially all of the payments under our office leases are fixed. As of March 31, 2024 and December 31, 2023, our operating leases had weighted-average remaining terms of
19
We record operating lease expense on a straight-line basis over the lease term. For each of the three month periods ended March 31, 2024 and 2023, we recognized total operating lease expense of $
For finance and operating leases, when the rate implicit in the lease cannot be determined, we estimate the value of our lease liabilities using discount rates equivalent to the rates we would pay on a secured borrowing with terms similar to the leases. We determine if an arrangement is or contains a lease at inception. We have lease agreements with lease and non-lease components, and have elected to not separate these components for all classes of underlying assets. Leases with an initial term of 12 months or less are not recorded in our Condensed Consolidated Balance Sheets. Leases with initial terms greater than 12 months are recorded as operating or finance leases in our Condensed Consolidated Balance Sheets.
Office Space Sublease
We have a sublease arrangement to provide space within our corporate office for fixed rents, which commenced on
Annual Future Minimum Lease Payments
Combined minimum annual lease payments under operating and finance leases, and sublease income that offsets our operating lease rent, are as follows as of March 31, 2024 (in thousands):
|
Sublease Income |
|
|
Future Minimum Rent |
|
|
Future Minimum Payments |
|
|||
Remainder of 2024 |
$ |
|
|
$ |
|
|
$ |
|
|||
2025 |
|
|
|
|
|
|
|
|
|||
2026 |
|
|
|
|
|
|
|
|
|||
2027 |
|
|
|
|
|
|
|
|
|||
2028 |
|
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
|
|
|
|||
Total |
$ |
|
|
|
|
|
|
|
|||
Less: Discount |
|
|
|
|
( |
) |
|
|
( |
) |
|
Total lease liabilities |
|
|
|
$ |
|
|
$ |
|
|||
Note 8 — Business Segments
We have
Our Development and Redevelopment segment consists of rental communities that are under construction or have not achieved stabilization, as well as land held for development. As of March 31, 2024, our Development and Redevelopment segment consists of
Our Operating segment includes
During the three months ended March 31, 2024, we revised the information regularly reviewed by our chief operating decision maker ("CODM") to assess our operating performance. As a result, we reclassified The Benson Hotel from the Development and Redevelopment segment to the Other segment. In addition, during the first quarter of 2024, we disposed of St. George Villas, which was previously reported within our Other segment. Prior period segment information has been recast based upon our current segment population, and is consistent with how our CODM evaluates the business.
Our Other segment consists of properties currently owned that are not included in our Development and Redevelopment or Operating segments. Our Other segment includes 1001 Brickell Bay Drive, our only office building, and The Benson Hotel, our only hotel.
20
Our CODM uses cash flow, construction timeline to completion, and actual versus budgeted results to evaluate our properties in our Development and Redevelopment segment. Our CODM uses proportionate property net operating income to assess the operating performance of our Operating segment. Proportionate property net operating income is defined as our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, for the consolidated communities; but
The following tables present the results of operations of consolidated properties with our segments reported on a proportionate basis for the three months ended March 31, 2024 and 2023 (in thousands):
|
Development and Redevelopment |
|
|
Operating |
|
|
Other |
|
|
Proportionate |
|
|
Corporate and Amounts Not Allocated to Segments (2) |
|
|
Consolidated |
|
||||||
Three Months Ended March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Rental and other property revenues |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Property operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other operating expenses not allocated |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Proportionate property net operating |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
Other items included in income before |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Income (loss) before income tax |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|||
|
Development and Redevelopment |
|
|
Operating |
|
|
Other |
|
|
Proportionate |
|
|
Corporate and Amounts Not Allocated to Segments (2) |
|
|
Consolidated |
|
||||||
Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Rental and other property revenues |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Property operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other operating expenses not allocated |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Proportionate property net operating |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||||
Other items included in income before |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Income (loss) before income tax |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|||
21
Net real estate and non-recourse property debt, net, of our segments as of March 31, 2024 and December 31, 2023, were as follows (in thousands):
|
Development and Redevelopment |
|
|
Operating |
|
|
Other |
|
|
Corporate and Amounts Not Allocated to Segments (1) |
|
|
Total |
|
|||||
As of March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Buildings and improvements |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Land |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total real estate |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Accumulated depreciation |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net real estate |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-recourse property debt and construction loans, net |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
|
Development and Redevelopment |
|
|
Operating |
|
|
Other |
|
|
Corporate and Amounts Not Allocated to Segments (1) |
|
|
Total |
|
|||||
As of December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Buildings and improvements |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accumulated depreciation |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net real estate |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-recourse property debt and construction loans, net |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
In addition to the amounts disclosed in the tables above, as of March 31, 2024 the Development and Redevelopment segment right-of-use lease assets and lease liabilities aggregated to $
22
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report on Form 10-Q contains or may contain information that is forward-looking within the meaning of the federal securities laws. Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief, or expectations. Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements regarding: our future plans and goals, including our pipeline investments and projects, our plans to eliminate certain near term debt maturities, our estimated value creation and potential, our timing, scheduling and budgeting, projections regarding lease growth, our plans to form joint ventures, our plans for new acquisitions or dispositions, our strategic partnerships and value added therefrom, the potential for adverse economic and geopolitical conditions, which negatively impact our operations, including on our ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, developments, and redevelopments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our development and redevelopment investments; expectations regarding sales of our apartment communities and the use of proceeds thereof; the availability and cost of corporate debt; and our ability to comply with debt covenants, including financial coverage ratios.
These forward-looking statements are based on management’s judgment as of this date, which is subject to risks and uncertainties that could cause actual results to differ materially from our expectations, including, but not limited to: geopolitical events which may adversely affect the markets in which our securities trade, and other macro-economic conditions, including, among other things, rising interest rates and inflation, which heightens the impact of the other risks and factors described herein; real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing and effects of acquisitions, dispositions, developments and redevelopments; expectations regarding sales of apartment communities and the use of proceeds thereof; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; supply chain disruptions, particularly with respect to raw materials such as lumber, steel, and concrete; financing risks, including the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently owned by us.
In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”) and depends on our ability to meet the various requirements imposed by the Code through actual operating results, distribution levels and diversity of stock ownership.
Readers should carefully review our financial statements and the notes thereto, as well as Item 1A. Risk Factors in Part II of this report. These risk factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Readers should also carefully review the section entitled “Risk Factors” described in Item 1A of Apartment Investment and Management Company’s and Aimco OP L.P.’s combined Annual Report on Form 10-K for the year ended December 31, 2023, and subsequent documents we file from time to time with the SEC.
As used herein and except as the context otherwise requires, “we,” “our,” and “us” refer to Apartment Investment and Management Company (which we refer to as Aimco), Aimco OP L.P. (which we refer to as Aimco Operating Partnership) and their consolidated subsidiaries, collectively.
Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States (“GAAP”). These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading.
23
Executive Overview
Our mission is to make real estate investments, primarily focused on the multifamily sector within targeted U.S. markets, where outcomes are enhanced through our human capital and substantial value is created for investors, teammates, and the communities in which we operate.
Our value proposition includes our:
Our primary goal is outsized risk adjusted returns and accelerating growth for our stockholders. We are focused on providing superior total-return performance to stockholders, primarily through capital appreciation driven by accretive investment and active portfolio management over multi-year periods. We do not presently intend to pay a regular quarterly cash dividend, but may periodically pay dividends for REIT tax purposes or to return a portion of profits to stockholders.
Our financial objectives are to create value and produce superior, asset level, risk-adjusted returns on equity as measured by the investment period Internal Rate of Return (“IRR”) and the project-level Multiple on Invested Capital (“MOIC”). We measure broader performance based on Net Asset Value (“NAV”) growth over time.
Our capital allocation strategy is designed to leverage our investment platform and optimize risk-adjusted returns for our stockholders.
We target a balanced allocation, which includes investments in “Value Add” and “Opportunistic” multifamily real estate, primarily located in Southeast Florida, the Washington, D.C. Metro Area and Colorado's Front Range, plus investment in a geographically diversified portfolio of "Core" and "Core-Plus" apartment communities.
In addition, we currently hold select alternative assets, consisting primarily of indirect, real estate related debt and equity investments. We have reduced our allocation to these investments and plan to continue to significantly reduce our allocation over time.
We have policies in place that support our stated strategy, guide our investment allocations, and manage risk, including to hold at all times a sizable portion of our net equity in stabilized cash-flowing assets and to require cash or committed credit necessary for completion of development and redevelopment projects prior to their commencement.
24
Given our stated strategy, it is expected that at any point in time the value-creation process will be ongoing at numerous of our investments. Over time, we expect our enterprise to produce superior returns on equity on a risk-adjusted basis and it is our plan to do so by:
We have corporate headquarters in Denver, Colorado and Washington, D.C. Our investment platform is managed by experienced professionals based in three regions, where we will focus our new investment activity: Southeast Florida, the Washington, D.C. Metro Area and Colorado's Front Range. By regionalizing this platform, we are able to leverage the in-depth local market knowledge of each regional leader, creating a comparative advantage when sourcing, evaluating, and executing investment opportunities.
Our dedicated team will source and execute development and redevelopment projects, and various other direct investment strategies. Our development and redevelopment portfolio currently includes projects in construction and lease-up. In addition, our team has secured significant, high-quality, future development opportunities, including total potential of more than 13 million square feet, located in high-growth markets. Generally, we seek direct investment opportunities in locations where barriers to entry are high, target customers can be clearly defined and where we have a comparative advantage over others in the market. From time to time, we may choose to monetize certain pipeline assets prior to vertical construction in an effort to maximize value and risk adjusted returns. In any time period, the amount of our capital that is allocated to development activities may vary based on market conditions and other factors.
Our entire portfolio of operating properties includes 25 apartment communities (21 consolidated properties and four unconsolidated properties) with average rents in line with local market averages (generally defined as B class). We also own one commercial office building that is part of an assemblage with an adjacent apartment building. The target composition of our stabilized portfolio will continue to include primarily B multifamily assets, spread across a geographically diversified portfolio, with a bias toward long established residential neighborhoods that rank highly in regard to schools, employment fundamentals and state and regional governance. Core-Plus opportunities offer the opportunity for incremental capital investment while maintaining stabilized cashflow to accelerate income growth and improve asset values.
We currently hold select alternative investments, the majority of which originated with Aimco Predecessor and, over time, plan to significantly reduce capital allocated to these investments. Our current allocation to alternative investments includes: our mezzanine loan to the Parkmerced partnership, which owns 3,165 apartment homes and future development rights in San Francisco, California, and our passive equity investments in IQHQ, Inc. ("IQHQ"), a privately-held life sciences real estate development company, and in property technology funds consisting of entities that develop technology related to the real estate industry.
We will guard our liquidity at all times by maintaining sufficient cash and committed credit.
From time to time, we will allocate capital to financial assets designed to mitigate risks. Existing examples include our use of interest rate caps to provide protection against increases in interest rates on in-place loans.
We expect to capitalize our activities through a combination of non-recourse property debt, non-recourse construction loans, third-party equity, and the recycling of our equity, including retained earnings. We plan to limit the use of recourse leverage, with a strong preference towards non-recourse property-level debt to limit risk to our enterprise. When warranted, we plan to seek equity capital from joint venture partners to improve our cost of capital, further leverage our equity, reduce exposure to a single investment and, in certain cases, for strategic benefits.
25
The results from the execution of our business plan during the three months ended March 31, 2024 are further described below.
Financial Results and Recent Highlights
Operating Property Results
We own a diversified portfolio of stabilized apartment communities located in eight major U.S. markets with average rents in line with local market averages (generally defined as B class). We also own a commercial office building that is part of an assemblage with an adjacent apartment building.
Highlights for the three months ended March 31, 2024 include:
Value Add, Opportunistic & Alternative Investments
Development and Redevelopment
We generally seek development and redevelopment opportunities where barriers to entry are high, target customers can be clearly defined, and where we have a comparative advantage over others in the market. Our Value Add and Opportunistic investments may also target portfolio acquisitions, operational turnarounds, and re-entitlements.
We currently have three active development and redevelopment multifamily projects, located in two U.S. markets, in varying phases of construction and lease-up. These projects remain on track, as measured by construction budget and lease-up metrics. Additionally, we have a pipeline of future value-add opportunities totaling approximately 13 million gross square feet of development in our target markets of Southeast Florida, the Washington, D.C. Metro Area, and Colorado's Front Range.
During the three months ended March 31, 2024, we invested $42.8 million in development and redevelopment activities, inclusive of construction debt and third-party equity, compared to $64.8 million during the three months ended March 31, 2023.
Highlights for the three months ended March 31, 2024 include:
26
Investment and Disposition Activity
We are focused on prudently allocating capital and delivering strong investment returns. Consistent with our capital allocation philosophy, we monetize the value within our assets when accretive uses of the proceeds are identified and invest when the risk adjusted returns are superior to other uses of capital. In the three months ended March 31, 2024, no new investment or significant disposition activity occurred.
Balance Sheet and Financing Activities
We are highly focused on maintaining a strong balance sheet, including having at all times ample liquidity. As of March 31, 2024, we had access to $290.4 million in liquidity, including $121.8 million of cash on hand, $18.6 million of restricted cash, and the capacity to borrow up to $150.0 million on our revolving credit facility. Refer to the Liquidity and Capital Resources section for additional information regarding our leverage.
Financial Results of Operations
We have three segments: (i) Development and Redevelopment, (ii) Operating, and (iii) Other.
Our Development and Redevelopment segment consists of rental communities that are under construction or have not achieved and maintained stabilization throughout the current year and comparable period, as well as land assemblages that are being held for future development. Our Operating segment includes 21 residential apartment communities that have achieved stabilized levels of operations as of January 1, 2023, and maintained it throughout the current year and comparable period. Our Other segment consists of properties that are not included in our Development and Redevelopment or Operating segments.
The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying condensed consolidated financial statements included in Item 1.
Results of Operations for the three months ended March 31, 2024, Compared to the same period in 2023
Net income attributable to Aimco common stockholders decreased by $1.4 million for the three months ended March 31, 2024, compared to the same period in 2023, as described more fully below.
Property Results
As of March 31, 2024, our Development and Redevelopment segment included 10 rental communities, three of which were under construction. Our Operating segment included 21 residential apartment communities with approximately 5,600 apartment homes, and our Other segment included 1001 Brickell Bay Drive, our only office building, and The Benson Hotel.
During the three months ended March 31, 2024, we revised the information regularly reviewed by our chief operating decision maker ("CODM") to assess our operating performance. As a result, we reclassified The Benson Hotel from the Development and Redevelopment segment to the Other segment. Prior period segment information has been recast based upon our current segment population, and is consistent with how our CODM evaluates the business. The recast conforms with our reportable segment classification as of March 31, 2024.
We use proportionate property net operating income to assess the operating performance of our segments. Proportionate property net operating income is defined as our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, for the consolidated communities; but
Please refer to Note 8 to the condensed consolidated financial statements in Item 1 for further discussion regarding our segments, including a reconciliation of these proportionate amounts to consolidated rental and other property revenues and property operating expenses.
27
Proportionate Property Net Operating Income
The results of our segments for the three months ended March 31, 2024 and 2023, as presented below, are based on segment classifications as of March 31, 2024 (dollars in thousands).
|
Three Months Ended March 31, |
|
|
|
|
||||||||||
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Rental and other property revenues, before utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
||||
Development and Redevelopment |
$ |
4,672 |
|
|
$ |
2,201 |
|
|
$ |
2,471 |
|
|
|
100.0 |
% |
Operating |
|
38,639 |
|
|
|
36,672 |
|
|
|
1,967 |
|
|
|
5.4 |
% |
Other |
|
4,764 |
|
|
|
3,671 |
|
|
|
1,093 |
|
|
|
29.8 |
% |
Total |
|
48,075 |
|
|
|
42,544 |
|
|
|
5,531 |
|
|
|
13.0 |
% |
Property operating expenses, net of utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
||||
Development and Redevelopment |
|
2,597 |
|
|
|
1,676 |
|
|
|
921 |
|
|
|
55.0 |
% |
Operating |
|
11,503 |
|
|
|
11,186 |
|
|
|
317 |
|
|
|
2.8 |
% |
Other |
|
2,983 |
|
|
|
1,529 |
|
|
|
1,454 |
|
|
|
95.1 |
% |
Total |
|
17,083 |
|
|
|
14,391 |
|
|
|
2,692 |
|
|
|
18.7 |
% |
Proportionate property net operating income: |
|
|
|
|
|
|
|
|
|
|
|
||||
Development and Redevelopment |
|
2,075 |
|
|
|
525 |
|
|
|
1,550 |
|
|
|
100.0 |
% |
Operating |
|
27,136 |
|
|
|
25,486 |
|
|
|
1,650 |
|
|
|
6.5 |
% |
Other |
|
1,781 |
|
|
|
2,142 |
|
|
|
(361 |
) |
|
|
(16.9 |
%) |
Total |
$ |
30,992 |
|
|
$ |
28,153 |
|
|
$ |
2,839 |
|
|
|
10.1 |
% |
For the three months ended March 31, 2024, compared to the same period in 2023:
Non-Segment Real Estate Operations
Operating income amounts not attributed to our segments include property management costs, casualty losses, and, if applicable, the results of apartment communities sold or held for sale, reported in consolidated amounts, which we do not allocate to our segments for purposes of evaluating segment performance.
Depreciation and Amortization
For the three months ended March 31, 2024, compared to the same period in 2023, Depreciation and amortization expense increased by $3.2 million, or 19.6%, due primarily to increases at Upton Place and The Benson Hotel resulting from deliveries of apartment homes and completion of construction subsequent to the first quarter of 2023.
General and Administrative Expenses
For the three months ended March 31, 2024, compared to the same period in 2023, General and administrative expenses increased by $0.1 million, or 1.7%.
Interest Income
For the three months ended March 31, 2024, compared to the same period in 2023, Interest income increased by $0.6 million, or 28.7%, due primarily to interest earned on seller financing provided in connection with the sale of a land parcel in December 2023.
Interest Expense
For the three months ended March 31, 2024, compared to the same period in 2023, Interest expense increased by $3.6 million, or 37.5%, due primarily to increased non-recourse construction loan interest for our development and redevelopment properties.
28
Realized and Unrealized Gains (Losses) on Interest Rate Options
We are required to adjust our interest rate options to fair value on a quarterly basis. As a result of the mark-to-market adjustments, we recorded unrealized losses of $0.2 million for the three months ended March 31, 2024, compared to unrealized losses of $1.9 million for the same period in 2023. In addition, we realized gains of $1.9 million for the three months ended March 31, 2024, compared to realized gains of $0.8 million for the same period in 2023.
Realized and Unrealized Gains (Losses) on Equity Investments
We measure our investments in stock based on its market price at period end and our investments in property technology funds at NAV as a practical expedient. As a result of changes in the values of these investments, we recorded unrealized losses of $0.3 million for the three months ended March 31, 2024, compared to unrealized gains of $0.1 million for the same period in 2023.
Other Income (Expense), Net
Other income (expense), net, includes costs associated with our risk management activities, partnership administration expenses, fee income, and certain non-recurring items, as well as activity related to our Mezzanine Investment. For the three months ended March 31, 2024, compared to the same period in 2023, Other income (expense), net decreased by $1.7 million, or 47.5%, due primarily to the incremental expense associated with pre-existing long-term incentive partnership units recorded upon the resignation of one of our board members in the prior period, partially offset by the current period amortization of deferred transaction costs resulting from the partial sale of the Mezzanine Investment in June 2023.
Income Tax Benefit (Expense)
Certain aspects of our operations, including our development and redevelopment activities, are conducted through taxable REIT subsidiaries, or TRS entities. Additionally, our TRS entities hold investments in one of our apartment communities and 1001 Brickell Bay Drive.
Our income tax benefit (expense) calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities. Income taxes, as well as changes in valuation allowance and incremental deferred tax items in conjunction with intercompany asset transfers and internal restructurings (if applicable), are included in Income tax benefit (expense) in our Condensed Consolidated Statements of Operations.
Consolidated GAAP income or loss subject to tax consists of pretax income or loss of our taxable entities and income and gains retained by the REIT. For the three months ended March 31, 2024, we had consolidated net losses subject to tax of $6.6 million, compared to consolidated net losses subject to tax of $4.9 million for the same period in 2023.
For the three months ended March 31, 2024, we recognized an income tax benefit of $2.7 million, compared to an income tax benefit of $4.2 million for the same period in 2023. The decrease is due primarily to a reduction to the effective state tax rate expected to apply to the reversal of our existing deferred items recognized during the three months ended March 31, 2023.
29
Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions. Our critical accounting estimates that involve our more significant judgments and estimates used in the preparation of our consolidated financial statements are detailed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of Aimco’s and Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes in our critical accounting estimates from those reported in our Form 10-K and we believe that the related judgments and assessments have been consistently applied and produce financial information that fairly depicts the financial condition, results of operations, and cash flows for all periods presented.
Non-GAAP Measures
We use EBITDAre and Adjusted EBITDAre in managing our business and in evaluating our financial condition and operating performance. These key financial indicators are non-GAAP measures and are defined and described below. We provide reconciliations of the non-GAAP financial measures to the most comparable financial measure computed in accordance with GAAP.
Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization for Real Estate ("EBITDAre")
EBITDAre and Adjusted EBITDAre are non-GAAP measures, which we believe are useful to investors, creditors, and rating agencies as a supplemental measure of our ability to incur and service debt because they are recognized measures of performance by the real estate industry and allow for comparison of our credit strength to different companies. EBITDAre and Adjusted EBITDAre should not be considered alternatives to net income (loss) as determined in accordance with GAAP as indicators of liquidity. There can be no assurance that our method of calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real estate investment trusts. Nareit defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, depreciation, and amortization expense, further adjusted for:
EBITDAre is defined by Nareit and provides for an additional performance measure independent of capital structure for greater comparability between real estate investment trusts. We define Adjusted EBITDAre as EBITDAre adjusted to exclude the effect of the following items:
30
The reconciliation of net income (loss) to EBITDAre and Adjusted EBITDAre for the three months ended March 31, 2024 and 2023, is as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net income (loss) |
|
$ |
(7,196 |
) |
|
$ |
(5,753 |
) |
Adjustments: |
|
|
|
|
|
|
||
Interest expense |
|
|
13,370 |
|
|
|
9,725 |
|
Income tax (benefit) expense |
|
|
(2,730 |
) |
|
|
(4,196 |
) |
Depreciation and amortization |
|
|
19,468 |
|
|
|
16,271 |
|
Adjustment related to EBITDAre of unconsolidated partnerships |
|
|
215 |
|
|
|
223 |
|
EBITDAre |
|
$ |
23,127 |
|
|
$ |
16,270 |
|
Net (income) loss attributable to redeemable noncontrolling |
|
|
(3,560 |
) |
|
|
(3,274 |
) |
Net (income) loss attributable to noncontrolling interests |
|
|
16 |
|
|
|
(264 |
) |
EBITDAre adjustments attributable to noncontrolling interests |
|
|
(575 |
) |
|
|
(16 |
) |
Mezzanine investment (income) loss, net |
|
|
628 |
|
|
|
128 |
|
Realized and unrealized (gains) losses on interest rate options |
|
|
(1,672 |
) |
|
|
1,057 |
|
Adjusted EBITDAre |
|
$ |
17,964 |
|
|
$ |
13,901 |
|
Liquidity and Capital Resources
Liquidity
Liquidity is the ability to meet present and future financial obligations. Our primary sources of liquidity are cash flows from operations and borrowing capacity under our loan agreements.
As of March 31, 2024, our available liquidity was $290.4 million, which consisted of:
As of March 31, 2024, we had sufficient capacity on our non-recourse construction loans to cover our remaining commitments on development and redevelopment projects of approximately $42.4 million. The initial allocations to our joint ventures have remaining unfunded commitments of $3.0 million. We also have unfunded commitments in the amount of $1.9 million related to four investments in entities that develop technology related to the real estate industry. Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital expenditures, and future investments. Additionally, our third-party property managers may enter into commitments on our behalf to purchase goods and services in connection with the operation of our apartment communities and our office building. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to historical levels.
We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for the next twelve months.
In the event that our cash and cash equivalents, revolving secured credit facility, and cash provided by operating activities are not sufficient to cover our liquidity needs, we have the means to generate additional liquidity, such as from additional property financing activity and proceeds from apartment community sales. We expect to meet our long-term liquidity requirements, including debt maturities, development and redevelopment spending, and future investment activity, primarily through property financing activity, cash generated from operations, and the recycling of our equity. Our revolving secured credit facility matures in December 2024, prior to consideration of its one-year extension option.
Leverage and Capital Resources
The availability and cost of credit and its related effect on the overall economy may affect our liquidity and future financing activities, both through changes in interest rates and access to financing. Any adverse changes in the lending environment could negatively affect our liquidity. We have taken steps to mitigate a portion of our short-term refunding risk. However, if property or development financing options become unavailable, we may consider alternative sources of liquidity, such as reductions in capital spending or apartment community dispositions.
31
As of March 31, 2024, approximately 90% of our outstanding non-recourse property debt had a fixed interest rate and approximately 10% had a variable interest rate, all of which was hedged. In addition, the weighted-average contractual rate on our non-recourse debt was 4.8% and 4.6% inclusive of interest rate caps, and the average remaining term to maturity was 6.4 years. Our use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates.
While our primary sources of leverage are property-level debt and non-recourse construction loans, we also have a secured $150.0 million credit facility with a syndicate of financial institutions. As of March 31, 2024, we had no outstanding borrowings under our revolving secured credit facility, which requires that we maintain a fixed charge coverage ratio of 1.25X, minimum tangible net worth of $625.0 million, and maximum leverage of 60.0% as defined in the credit agreement. We are currently in compliance and expect to remain in compliance with these covenants during the next twelve months.
Changes in Cash, Cash Equivalents, and Restricted Cash
The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash due to operating, investing and financing activities, which are presented in our Condensed Consolidated Statements of Cash Flows in Item 1 of this report.
Operating Activities
For the three months ended March 31, 2024, net cash provided by operating activities was $21.7 million. Our operating cash flow is primarily affected by rental rates, occupancy levels, operating expenses related to our portfolio of apartment communities and general and administrative costs. Cash provided by operating activities for the three months ended March 31, 2024, increased by $16.1 million compared to the same period in 2023, due primarily to increased net operating income driven by higher rents and the timing of balance sheet position changes.
Investing Activities
For the three months ended March 31, 2024, net cash used in investing activities of $41.1 million consisted primarily of capital expenditures. Net cash used in investing activities for the three months ended March 31, 2024, decreased by $22.1 million compared to the same period in 2023, due primarily to decreased capital expenditures.
Financing Activities
For the three months ended March 31, 2024, net cash provided by financing activities of $20.5 million consisted primarily of proceeds from non-recourse construction loans, offset by common stock repurchases and distributions to redeemable noncontrolling interests. Net cash provided by financing activities for the three months ended March 31, 2024, increased by $4.0 million compared to the same period in 2023, due primarily to decrease in common stock repurchases, partially offset by a decrease in proceeds from non-recourse construction loans.
Future Capital Needs
We expect to fund any future acquisitions, development and redevelopment, and other capital spending principally with operating cash flows, short-term borrowings, and debt and equity financing. Our near-term business plan does not contemplate the issuance of equity. We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for the next twelve months.
32
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our chief market risks are refunding risk, that is the availability of property debt or other cash sources to refund maturing property debt, and repricing risk, that is the possibility of increases in base interest rates and credit risk spreads. We primarily use long-dated, fixed-rate, non-recourse property debt on stabilized properties in order to avoid the refunding and repricing risks of short-term borrowings.
We use working capital primarily to fund short-term uses. We use derivative financial instruments as a risk management tool and do not use them for trading or other speculative purposes.
As of March 31, 2024, on a consolidated basis, we had approximately $81.3 million of variable-rate property-level debt outstanding and $300.2 million of variable-rate construction loans. The impact of rising interest rates is mitigated by our use of interest rate caps, which as of March 31, 2024, provided protection for our variable interest rate debt. Our use of interest rate caps may vary from quarter to quarter depending on lender requirements, recycling of interest rate caps between projects, and our view on forecasted interest rates. As of March 31, 2024, we estimate an increase or decrease in our variable rate indices of 100 basis points with constant credit risk spreads, would have no impact on interest expense.
As of March 31, 2024, we held interest rate caps with $627.4 million notional value. These instruments were acquired for $5.8 million and at March 31, 2024, were valued at $5.1 million.
As of March 31, 2024, we had $140.4 million in cash and cash equivalents and restricted cash, a portion of which earns interest at variable rates.
33
ITEM 4. CONTROLS AND PROCEDURES
Aimco
Disclosure Controls and Procedures
Aimco’s management, with the participation of Aimco’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Aimco’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, Aimco’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, Aimco’s disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in Aimco’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2024, that has materially affected, or is reasonably likely to materially affect, Aimco’s internal control over financial reporting.
Aimco Operating Partnership
Disclosure Controls and Procedures
Aimco Operating Partnership’s management, with the participation of the Chief Executive Officer and Chief Financial Officer of both Aimco and Aimco OP GP, LLC, Aimco Operating Partnership’s general partner, has evaluated the effectiveness of Aimco Operating Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer of Aimco OP GP, LLC have concluded that, as of the end of such period, Aimco Operating Partnership’s disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There were no changes in Aimco Operating Partnership's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2024, that has materially affected, or is reasonably likely to materially affect, Aimco Operating Partnership's internal control over financial reporting.
34
PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
As of the date of this report, there have been no material changes from the risk factors in Aimco’s and Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2023. We may disclose changes to such factors or disclose additional factors from time to time in our filings with the SEC.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES
Aimco
Unregistered Sales of Equity Securities
From time to time, Aimco may issue shares of its Common Stock in exchange for OP Units, defined under the Aimco Operating Partnership heading below. Such shares are issued based on an exchange ratio of one share for each OP Unit. Aimco may also issue shares of its Common Stock in exchange for limited partnership interests in consolidated real estate partnerships.
During the three months ended March 31, 2024, no shares of Common Stock were issued in exchange for OP Units in such transactions. Had any such shares been issued, the issuances would have been effected in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.
In addition to any issuances pursuant to transactions of the types discussed above, there were no unregistered sales of equity securities made by Aimco during the quarter ended March 31, 2024.
Repurchases of Equity Securities
The following table summarizes Aimco's share repurchases, for the three months ended March 31, 2024, all of which were part of publicly announced programs:
Fiscal Period |
|
Total Number of Shares Repurchased |
|
|
Weighted Average Price Paid per Share |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
|
Maximum Number of Shares That May Yet Be Purchased Under Plans or Programs (1) |
|
||||
January 1 - 31, 2024 |
|
|
61,143 |
|
|
$ |
7.47 |
|
|
|
61,143 |
|
|
|
21,056,413 |
|
February 1 - 29, 2024 |
|
|
345,202 |
|
|
|
7.36 |
|
|
|
345,202 |
|
|
|
20,711,211 |
|
March 1 - 31, 2024 |
|
|
466,414 |
|
|
|
7.59 |
|
|
|
466,414 |
|
|
|
20,244,797 |
|
Total |
|
|
872,759 |
|
|
$ |
7.49 |
|
|
|
872,759 |
|
|
|
|
|
(1) Aimco's Board of Directors (the "Board") has, from time to time, authorized Aimco to repurchase shares of its outstanding Common Stock. These repurchases may be made from time to time in the open market or in privately negotiated transactions. These share repurchase authorizations have no expiration date.
Aimco Operating Partnership
There is no public market for OP Units, and Aimco Operating Partnership has no intention of listing OP Units on any securities exchange. In addition, Aimco Operating Partnership’s Partnership Agreement restricts the transferability of OP Units.
On May 7, 2024, there were 156,730,743 OP Units and equivalents outstanding (of which 144,827,125 were held by Aimco), that were held by 1,966 unitholders of record.
Unregistered Sales of Equity Securities
Aimco Operating Partnership did not issue any unregistered OP Units during the three months ended March 31, 2024.
Repurchases of Equity Securities
Aimco Operating Partnership’s Partnership Agreement generally provides that after holding OP Units for one year, limited partners other than Aimco have the right to redeem their OP Units for cash or, at its election, shares of Aimco Common Stock on a one-for-one basis (subject to customary antidilution adjustments). During the three months ended March 31, 2024, no OP Units were redeemed in exchange for shares of Common Stock and 36,907 OP Units were redeemed in exchange for cash at an aggregate weighted average price per unit of $7.74.
The following table summarizes repurchases, or redemptions in exchange for cash, of the Aimco Operating Partnership’s equity securities for the three months ended March 31, 2024:
35
Fiscal Period |
|
Total Number of Units Repurchased |
|
|
Weighted Average Price Paid per Unit |
|
|
Total Number of Units Purchased as Part of Publicly Announced Plans or Programs |
|
Maximum Number of Units That May Yet Be Purchased Under Plans or Programs (1) |
||
January 1 - 31, 2024 |
|
|
— |
|
|
$ |
— |
|
|
N/A |
|
N/A |
February 1 - 29, 2024 |
|
|
— |
|
|
|
— |
|
|
N/A |
|
N/A |
March 1 - 31, 2024 |
|
|
36,907 |
|
|
|
7.74 |
|
|
N/A |
|
N/A |
Total |
|
|
36,907 |
|
|
$ |
7.74 |
|
|
|
|
|
(1) The terms of the Aimco Operating Partnership’s Partnership Agreement do not provide for a maximum number of units that may be repurchased, and other than the express terms of its Partnership Agreement, the Aimco Operating Partnership has no publicly announced plans or programs of repurchase. However, for Aimco to repurchase shares of its Common Stock, the Aimco Operating Partnership must make a concurrent repurchase of its OP Units held by Aimco at a price per unit that is equal to the price per share Aimco pays for its Common Stock.
Dividend and Distribution Payments
As a REIT, Aimco is required to distribute annually to holders of its Common Stock at least 90.0% of its “real estate investment trust taxable income,” which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary income. Our Board determines and declares Aimco's dividends. In making a dividend determination, our Board considers a variety of factors, including REIT distribution requirements; current market conditions; liquidity needs; and other uses of cash, such as deleveraging and accretive investment activities.
36
ITEM 6. EXHIBITS
The following exhibits are filed with this report:
EXHIBIT NO. |
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DESCRIPTION |
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|
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||
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|
||
|
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|
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||
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||
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||
|
|
|
|
EXHIBIT NO. |
|
DESCRIPTION |
|
|
|
101 |
|
The following materials from Aimco’s and Aimco Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of equity and partners’ capital; (iv) condensed consolidated statements of cash flows; and (v) notes to condensed consolidated financial statements. |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
APARTMENT INVESTMENT AND MANAGEMENT COMPANY |
|
|
|
|
|
By: |
/s/ H. Lynn C. Stanfield |
|
|
H. Lynn C. Stanfield |
|
|
Executive Vice President and Chief Financial Officer |
|
|
|
|
|
|
|
By: |
/s/ Kellie E. Dreyer |
|
|
Kellie E. Dreyer |
|
|
Senior Vice President and Chief Accounting Officer |
|
|
|
|
|
|
|
|
|
|
AIMCO OP L.P. |
|
|
|
|
|
By: |
Aimco OP GP, LLC, its General Partner |
|
|
|
|
By: |
/s/ H. Lynn C. Stanfield |
|
|
H. Lynn C. Stanfield |
|
|
Executive Vice President and Chief Financial Officer |
|
|
|
|
|
|
|
By: |
/s/ Kellie E. Dreyer |
|
|
Kellie E. Dreyer |
|
|
Senior Vice President and Chief Accounting Officer |
|
|
|
|
|
|
|
|
|
Date: May 8, 2024
38
Exhibit 31.1
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Wes Powell, certify that:
Date: May 8, 2024
|
/s/ Wes Powell |
|
Wes Powell |
|
Director, President and Chief Executive Officer |
Exhibit 31.2
CHIEF FINANCIAL OFFICER CERTIFICATION
I, H. Lynn C. Stanfield, certify that:
Date: May 8, 2024
|
/s/ H. Lynn C. Stanfield |
|
H. Lynn C. Stanfield |
|
Executive Vice President and Chief Financial Officer |
|
|
Exhibit 31.3
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Wes Powell, certify that:
Date: May 8, 2024
|
/s/ Wes Powell |
|
Wes Powell |
|
Director, President and Chief Executive Officer |
Exhibit 31.4
CHIEF FINANCIAL OFFICER CERTIFICATION
I, H. Lynn C. Stanfield, certify that:
Date: May 8, 2024
|
/s/ H. Lynn C. Stanfield |
|
H. Lynn C. Stanfield |
|
Executive Vice President and Chief Financial Officer |
Exhibit 32.1
Certification of CEO and CFO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Apartment Investment and Management Company (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Wes Powell |
|
Wes Powell |
|
Director, President and Chief Executive Officer |
|
May 8, 2024 |
|
/s/ H. Lynn C. Stanfield |
|
H. Lynn C. Stanfield |
|
Executive Vice President and Chief Financial Officer |
|
May 8, 2024 |
|
Exhibit 32.2
Certification of CEO and CFO Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Aimco OP L.P. (the “Partnership”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
/s/ Wes Powell |
|
Wes Powell |
|
Director, President and Chief Executive Officer |
|
May 8, 2024 |
|
/s/ H. Lynn C. Stanfield |
|
H. Lynn C. Stanfield |
|
Executive Vice President and Chief Financial Officer |
|
May 8, 2024 |
|