UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20192020
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 NumberNumber: 1-13232 (Apartment Investment and Management Company)
Commission File NumberNumber: 0-24497 (AIMCO Properties, L.P.)
Apartment Investment and Management Company
AIMCO Properties, L.P.
(Exact name of registrant as specified in its charter)
Maryland (Apartment Investment and Management Company) |
| 84-1259577 |
Delaware (AIMCO Properties, L.P.) |
| 84-1275621 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
|
|
|
4582 South Ulster Street, Suite 1700 |
|
|
Denver, Colorado |
| 80237 |
(Address of principal executive offices) |
| (Zip Code) |
(303) 757-8101
(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 |
| Trading Symbol(s) |
| Name of |
|
| AIV |
| New York Stock Exchange |
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: Yes ☒ No ☐ |
| AIMCO Properties, L.P.: Yes ☒ No ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files).
Apartment Investment and Management Company: Yes ☒ No ☐ |
| AIMCO Properties, L.P.: Yes ☒ No ☐ |
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. (Check one):
Apartment Investment and Management Company:
Large accelerated filer | ☒ |
|
| Accelerated filer | ☐ |
Non-accelerated filer | ☐ |
|
| Smaller reporting company | ☐ |
|
|
|
| Emerging growth company | ☐ |
AIMCO Properties, L.P.:
Large accelerated filer | ☐ |
|
| Accelerated filer | ☒ |
Non-accelerated filer | ☐ |
|
| Smaller reporting company | ☐ |
|
|
|
| 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: | ☐ |
| AIMCO Properties, 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 ☒ |
| AIMCO Properties, L.P.: Yes ☐ No ☒ |
The number of shares of Apartment Investment and Management Company Class A Common Stock outstanding as of November 1, 2019: 148,884,686
The number of AIMCO Properties, L.P. Partnership Common Units outstanding as of November 1, 2019: 158,433,601
July 31, 2020: 148,865,047
EXPLANATORY NOTE
This filing combines the reports on Form 10-Q for the quarterly period ended SeptemberJune 30, 2019,2020, of Apartment Investment and Management Company, or Aimco, and AIMCO Properties, L.P., or the Aimco Operating Partnership. Where it is important to distinguish between the two entities, we refer to them specifically. Otherwise, references to “we,” “us”“us,” or “our” mean, collectively, Aimco, the Aimco Operating Partnership, and their consolidated entities.
Aimco, a Maryland corporation, is a self-administered and self-managed real estate investment trust, or REIT. Aimco, through wholly-owned subsidiaries, is the general and special limited partner of and asthe Aimco Operating Partnership. As of SeptemberJune 30, 2019,2020, Aimco owned a 94.0% ownershipapproximately 93.5% of the legal interest in the common partnership units of the Aimco Operating Partnership and 94.9% of the economic interest in the Aimco Operating Partnership. The remaining 6.0%6.5% legal interest and 5.1% economic interest is owned by limited partners. As the sole general partner of the Aimco Operating Partnership, Aimco has exclusive control of the Aimco Operating Partnership’s day-to-day management.
The 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 the Aimco Operating Partnership all proceeds from the offerings of its securities. In exchange for the contribution of such proceeds, Aimco receives additional interests in the 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).
We believe combining the periodic reports of Aimco and the Aimco Operating Partnership into this single report provides the following benefits:
| • | We present our business as a whole, in the same manner our management views and operates the business; |
| • | We eliminate duplicative disclosure and provide a more streamlined and readable presentation because a substantial portion of the disclosures apply to both Aimco and the Aimco Operating Partnership; and |
| • | We save time and cost through the preparation of a single combined report rather than two separate reports. |
We operate Aimco and the Aimco Operating Partnership as one enterprise, the management of Aimco directs the management and operations of the Aimco Operating Partnership, and the members of the Board of Directors of Aimco are identical to those of the Aimco Operating Partnership.Partnership’s general partner.
We believe it is important to understand the few differences between Aimco and the Aimco Operating Partnership in the context of how Aimco and the Aimco Operating Partnership operate as a consolidated company. Aimco has no assets or liabilities other than its investment in the Aimco Operating Partnership. Also, Aimco is a corporation that issues publicly traded equity from time to time, whereas the 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 the 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), the Aimco Operating Partnership generates all remaining capital required by its business. These sources include the 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 apartment communities.
Equity, partners’ capital, and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of Aimco and those of the Aimco Operating Partnership. Interests in the Aimco Operating Partnership held by entities other than Aimco, which we refer to as OP Units, are classified within partners’ capital in the Aimco Operating Partnership’s financial statements and as noncontrolling interests in Aimco’s financial statements.
To help investors understand the differences between Aimco and the Aimco Operating Partnership, this report provides: separate condensed consolidated financial statements for Aimco and the Aimco Operating Partnership; a single set of condensed consolidated notes to such financial statements that includes separate discussions of each entity’s earnings per share andor 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 the Aimco Operating Partnership in order to establish that the requisite certifications have been made and that Aimco and the 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.
1
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
TABLE OF CONTENTS
FORM 10-Q
|
| Page |
|
| |
ITEM 1. |
| |
|
| |
| 3 | |
| 4 | |
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) | 5 |
| 6 | |
| 8 | |
|
| |
| 9 | |
| 10 | |
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) | 11 |
| Condensed Consolidated Statements of Partners’ Capital (Unaudited) | 12 |
| 14 | |
| 15 | |
ITEM 2. |
| |
ITEM 3. |
| |
ITEM 4. |
| |
|
| |
ITEM 1A. |
| |
ITEM 2. |
| |
ITEM 6. |
| |
|
|
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS |
|
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| June 30, 2020 |
|
| December 31, 2019 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings and improvements |
| $ | 6,848,162 |
|
| $ | 6,552,065 |
|
| $ | 6,928,584 |
|
| $ | 6,868,543 |
|
Land |
|
| 1,887,424 |
|
|
| 1,756,525 |
|
|
| 1,866,009 |
|
|
| 1,869,048 |
|
Total real estate |
|
| 8,735,586 |
|
|
| 8,308,590 |
|
|
| 8,794,593 |
|
|
| 8,737,591 |
|
Accumulated depreciation |
|
| (2,684,694 | ) |
|
| (2,585,115 | ) |
|
| (2,786,104 | ) |
|
| (2,718,284 | ) |
Net real estate |
|
| 6,050,892 |
|
|
| 5,723,475 |
|
|
| 6,008,489 |
|
|
| 6,019,307 |
|
Cash and cash equivalents |
|
| 58,724 |
|
|
| 36,858 |
|
|
| 398,408 |
|
|
| 142,902 |
|
Restricted cash |
|
| 34,501 |
|
|
| 35,737 |
|
|
| 44,100 |
|
|
| 34,800 |
|
Mezzanine investment |
|
| 293,427 |
|
|
| 280,258 |
| ||||||||
Other assets |
|
| 395,061 |
|
|
| 351,541 |
|
|
| 376,723 |
|
|
| 351,472 |
|
Assets held for sale |
|
| — |
|
|
| 42,393 |
| ||||||||
Total assets |
| $ | 6,539,178 |
|
| $ | 6,190,004 |
|
| $ | 7,121,147 |
|
| $ | 6,828,739 |
|
|
|
|
|
|
|
|
|
| ||||||||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse property debt, net |
| $ | 4,254,710 |
|
| $ | 3,915,305 |
|
| $ | 4,543,743 |
|
| $ | 4,230,590 |
|
Term loan, net |
|
| 348,440 |
|
|
| — |
| ||||||||
Revolving credit facility borrowings |
|
| — |
|
|
| 160,360 |
|
|
| — |
|
|
| 275,000 |
|
Total indebtedness |
|
| 4,254,710 |
|
|
| 4,075,665 |
|
|
| 4,892,183 |
|
|
| 4,505,590 |
|
Accrued liabilities and other |
|
| 397,216 |
|
|
| 226,230 |
|
|
| 353,787 |
|
|
| 360,574 |
|
Liabilities related to assets held for sale |
|
| — |
|
|
| 23,177 |
| ||||||||
Total liabilities |
|
| 4,651,926 |
|
|
| 4,325,072 |
|
|
| 5,245,970 |
|
|
| 4,866,164 |
|
Preferred noncontrolling interests in Aimco Operating Partnership |
|
| 101,178 |
|
|
| 101,291 |
| ||||||||
Commitments and contingencies (Note 5) |
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
| ||||||||
Redeemable preferred OP Units |
|
| 96,449 |
|
|
| 97,064 |
| ||||||||
Redeemable noncontrolling interests in consolidated real estate partnership |
|
| 4,492 |
|
|
| 4,716 |
| ||||||||
Commitments and contingencies (Note 4) |
|
|
|
|
|
|
|
| ||||||||
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perpetual Preferred Stock |
|
| — |
|
|
| 125,000 |
| ||||||||
Common Stock, $0.01 par value, 500,787,260 shares authorized, 148,884,686 and 144,623,034 shares issued/outstanding at September 30, 2019 and December 31, 2018, respectively |
|
| 1,489 |
|
|
| 1,446 |
| ||||||||
Common Stock, $0.01 par value, 510,587,500 shares authorized, 148,865,047 and 148,885,197 shares issued/outstanding at June 30, 2020 and December 31, 2019, respectively |
|
| 1,489 |
|
|
| 1,489 |
| ||||||||
Additional paid-in capital |
|
| 3,497,333 |
|
|
| 3,515,686 |
|
|
| 3,491,277 |
|
|
| 3,497,367 |
|
Accumulated other comprehensive income |
|
| 4,488 |
|
|
| 4,794 |
|
|
| 3,807 |
|
|
| 4,195 |
|
Distributions in excess of earnings |
|
| (1,797,851 | ) |
|
| (1,947,507 | ) |
|
| (1,798,561 | ) |
|
| (1,722,402 | ) |
Total Aimco equity |
|
| 1,705,459 |
|
|
| 1,699,419 |
|
|
| 1,698,012 |
|
|
| 1,780,649 |
|
Noncontrolling interests in consolidated real estate partnerships |
|
| 1,500 |
|
|
| (2,967 | ) |
|
| (3,190 | ) |
|
| (3,296 | ) |
Common noncontrolling interests in Aimco Operating Partnership |
|
| 79,115 |
|
|
| 67,189 |
|
|
| 79,414 |
|
|
| 83,442 |
|
Total equity |
|
| 1,786,074 |
|
|
| 1,763,641 |
|
|
| 1,774,236 |
|
|
| 1,860,795 |
|
Total liabilities and equity |
| $ | 6,539,178 |
|
| $ | 6,190,004 |
|
| $ | 7,121,147 |
|
| $ | 6,828,739 |
|
See notes to condensed consolidated financial statements.
3
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues attributable to real estate |
| $ | 229,827 |
|
| $ | 234,048 |
|
| $ | 684,262 |
|
| $ | 690,571 |
| ||||||||||||||||
Asset Management business rental and tax credit revenues |
|
| — |
|
|
| 8,433 |
|
|
| — |
|
|
| 49,817 |
| ||||||||||||||||
Total revenues |
|
| 229,827 |
|
|
| 242,481 |
|
|
| 684,262 |
|
|
| 740,388 |
| ||||||||||||||||
Rental and other property revenues |
| $ | 218,808 |
|
| $ | 224,200 |
|
| $ | 443,360 |
|
| $ | 454,435 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses attributable to real estate |
|
| 77,430 |
|
|
| 78,254 |
|
|
| 232,453 |
|
|
| 232,572 |
| ||||||||||||||||
Property operating expenses of partnerships served by Asset Management business |
|
| — |
|
|
| 2,608 |
|
|
| — |
|
|
| 20,865 |
| ||||||||||||||||
Property operating expenses |
|
| 74,123 |
|
|
| 75,647 |
|
|
| 149,603 |
|
|
| 154,606 |
| ||||||||||||||||
Depreciation and amortization |
|
| 97,538 |
|
|
| 96,406 |
|
|
| 283,027 |
|
|
| 286,439 |
|
|
| 97,689 |
|
|
| 91,924 |
|
|
| 198,165 |
|
|
| 185,489 |
|
General and administrative expenses |
|
| 11,821 |
|
|
| 12,479 |
|
|
| 34,314 |
|
|
| 37,196 |
|
|
| 9,696 |
|
|
| 11,498 |
|
|
| 19,804 |
|
|
| 21,327 |
|
Investment management expenses |
|
| 1,121 |
|
|
| 1,406 |
|
|
| 2,305 |
|
|
| 2,738 |
| ||||||||||||||||
Other expenses, net |
|
| 4,411 |
|
|
| 5,780 |
|
|
| 14,323 |
|
|
| 13,624 |
|
|
| 4,239 |
|
|
| 3,621 |
|
|
| 5,881 |
|
|
| 8,757 |
|
Total operating expenses |
|
| 191,200 |
|
|
| 195,527 |
|
|
| 564,117 |
|
|
| 590,696 |
|
|
| 186,868 |
|
|
| 184,096 |
|
|
| 375,758 |
|
|
| 372,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 2,824 |
|
|
| 2,712 |
|
|
| 8,615 |
|
|
| 7,768 |
|
|
| 2,843 |
|
|
| 3,065 |
|
|
| 7,366 |
|
|
| 5,791 |
|
Interest expense |
|
| (42,011 | ) |
|
| (45,492 | ) |
|
| (122,961 | ) |
|
| (143,193 | ) |
|
| (48,802 | ) |
|
| (39,541 | ) |
|
| (90,138 | ) |
|
| (80,950 | ) |
Gain on dispositions of real estate and the Asset Management business |
|
| 1,146 |
|
|
| 626,232 |
|
|
| 356,929 |
|
|
| 679,738 |
| ||||||||||||||||
Other, net |
|
| 288 |
|
|
| (283 | ) |
|
| 591 |
|
|
| 141 |
| ||||||||||||||||
Gain on dispositions of real estate |
|
| 47,238 |
|
|
| 64,310 |
|
|
| 47,204 |
|
|
| 355,783 |
| ||||||||||||||||
Mezzanine investment income, net |
|
| 6,936 |
|
|
| — |
|
|
| 13,683 |
|
|
| — |
| ||||||||||||||||
Income from unconsolidated real estate partnerships |
|
| 170 |
|
|
| 231 |
|
|
| 352 |
|
|
| 303 |
| ||||||||||||||||
Income before income tax benefit (expense) |
|
| 874 |
|
|
| 630,123 |
|
|
| 363,319 |
|
|
| 694,146 |
|
|
| 40,325 |
|
|
| 68,169 |
|
|
| 46,069 |
|
|
| 362,445 |
|
Income tax benefit (expense) |
|
| 3,096 |
|
|
| (26,206 | ) |
|
| 1,942 |
|
|
| 12,617 |
|
|
| 2,879 |
|
|
| 1,827 |
|
|
| 6,112 |
|
|
| (1,154 | ) |
Net income |
|
| 3,970 |
|
|
| 603,917 |
|
|
| 365,261 |
|
|
| 706,763 |
|
|
| 43,204 |
|
|
| 69,996 |
|
|
| 52,181 |
|
|
| 361,291 |
|
Noncontrolling interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 58 |
|
|
| (1,794 | ) |
|
| (103 | ) |
|
| (8,045 | ) |
|
| 17 |
|
|
| (70 | ) |
|
| (1 | ) |
|
| (161 | ) |
Net income attributable to preferred noncontrolling interests in Aimco Operating Partnership |
|
| (1,933 | ) |
|
| (1,934 | ) |
|
| (5,800 | ) |
|
| (5,805 | ) |
|
| (1,859 | ) |
|
| (1,933 | ) |
|
| (3,728 | ) |
|
| (3,867 | ) |
Net income attributable to common noncontrolling interests in Aimco Operating Partnership |
|
| (116 | ) |
|
| (30,198 | ) |
|
| (18,787 | ) |
|
| (34,093 | ) |
|
| (2,107 | ) |
|
| (3,534 | ) |
|
| (2,475 | ) |
|
| (18,671 | ) |
Net income attributable to noncontrolling interests |
|
| (1,991 | ) |
|
| (33,926 | ) |
|
| (24,690 | ) |
|
| (47,943 | ) |
|
| (3,949 | ) |
|
| (5,537 | ) |
|
| (6,204 | ) |
|
| (22,699 | ) |
Net income attributable to Aimco |
|
| 1,979 |
|
|
| 569,991 |
|
|
| 340,571 |
|
|
| 658,820 |
|
|
| 39,255 |
|
|
| 64,459 |
|
|
| 45,977 |
|
|
| 338,592 |
|
Net income attributable to Aimco preferred stockholders |
|
| — |
|
|
| (2,148 | ) |
|
| (7,335 | ) |
|
| (6,445 | ) |
|
| — |
|
|
| (5,187 | ) |
|
| — |
|
|
| (7,335 | ) |
Net loss (income) attributable to participating securities |
|
| 24 |
|
|
| (814 | ) |
|
| (431 | ) |
|
| (1,004 | ) | ||||||||||||||||
Net income attributable to participating securities |
|
| (43 | ) |
|
| (38 | ) |
|
| (86 | ) |
|
| (455 | ) | ||||||||||||||||
Net income attributable to Aimco common stockholders |
| $ | 2,003 |
|
| $ | 567,029 |
|
| $ | 332,805 |
|
| $ | 651,371 |
|
| $ | 39,212 |
|
| $ | 59,234 |
|
| $ | 45,891 |
|
| $ | 330,802 |
|
Net income attributable to Aimco per common share – basic |
| $ | 0.01 |
|
| $ | 3.73 |
|
| $ | 2.26 |
|
| $ | 4.29 |
| ||||||||||||||||
Net income attributable to Aimco per common share – diluted |
| $ | 0.01 |
|
| $ | 3.73 |
|
| $ | 2.26 |
|
| $ | 4.28 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Net income attributable to Aimco per common share – basic and diluted |
| $ | 0.26 |
|
| $ | 0.40 |
|
| $ | 0.31 |
|
| $ | 2.25 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Weighted average common shares outstanding – basic |
|
| 148,434 |
|
|
| 151,971 |
|
|
| 147,474 |
|
|
| 151,928 |
|
|
| 148,535 |
|
|
| 148,367 |
|
|
| 148,527 |
|
|
| 146,994 |
|
Weighted average common shares outstanding – diluted |
|
| 148,636 |
|
|
| 152,193 |
|
|
| 147,692 |
|
|
| 152,086 |
|
|
| 148,553 |
|
|
| 148,599 |
|
|
| 148,670 |
|
|
| 147,220 |
|
See notes to condensed consolidated financial statements.
4
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Net income |
| $ | 3,970 |
|
| $ | 603,917 |
|
| $ | 365,261 |
|
| $ | 706,763 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) gains on available for sale debt securities |
|
| (402 | ) |
|
| 979 |
|
|
| (325 | ) |
|
| (72 | ) |
Losses on interest rate swaps reclassified into earnings from accumulated other comprehensive loss |
|
| — |
|
|
| 757 |
|
|
| — |
|
|
| 1,391 |
|
Other comprehensive (loss) income |
|
| (402 | ) |
|
| 1,736 |
|
|
| (325 | ) |
|
| 1,319 |
|
Comprehensive income |
|
| 3,568 |
|
|
| 605,653 |
|
|
| 364,936 |
|
|
| 708,082 |
|
Comprehensive income attributable to noncontrolling interests |
|
| (1,967 | ) |
|
| (34,020 | ) |
|
| (24,671 | ) |
|
| (48,015 | ) |
Comprehensive income attributable to Aimco common stockholders |
| $ | 1,601 |
|
| $ | 571,633 |
|
| $ | 340,265 |
|
| $ | 660,067 |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net income |
| $ | 43,204 |
|
| $ | 69,996 |
|
| $ | 52,181 |
|
| $ | 361,291 |
|
Unrealized (losses) gains on available for sale debt securities |
|
| (355 | ) |
|
| 16 |
|
|
| (415 | ) |
|
| 77 |
|
Comprehensive income |
|
| 42,849 |
|
|
| 70,012 |
|
|
| 51,766 |
|
|
| 361,368 |
|
Comprehensive income attributable to noncontrolling interests |
|
| (3,926 | ) |
|
| (5,538 | ) |
|
| (6,177 | ) |
|
| (22,704 | ) |
Comprehensive income attributable to Aimco |
| $ | 38,923 |
|
| $ | 64,474 |
|
| $ | 45,589 |
|
| $ | 338,664 |
|
See notes to condensed consolidated financial statements.
5
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended SeptemberJune 30, 20192020 and 20182019
(In thousands)
(Unaudited)
| Preferred Stock |
|
| Common Stock |
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| Noncontrolling Interests in |
|
| Common Noncontrolling Interests in |
|
|
|
|
| |||||||||||||
| Shares Issued |
|
| Amount |
|
| Shares Issued |
|
| Amount |
|
| Additional Paid-in Capital |
|
| Other Comprehensive Income (Loss) |
|
| Distributions in Excess of Earnings |
|
| Total Aimco Equity |
|
| Consolidated Real Estate Partnerships |
|
| Aimco Operating Partnerships |
|
| Total Equity |
| |||||||||||
Balances at June 30, 2018 |
| 5,000 |
|
| $ | 125,000 |
|
|
| 152,592 |
|
| $ | 1,526 |
|
| $ | 3,887,308 |
|
| $ | 3,208 |
|
| $ | (2,402,101 | ) |
| $ | 1,614,941 |
|
| $ | (2,984 | ) |
| $ | 42,828 |
|
| $ | 1,654,785 |
|
Redemption of Aimco Operating Partnership units |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (847 | ) |
|
| (847 | ) |
Amortization of share-based compensation cost |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,804 |
|
|
| — |
|
|
| — |
|
|
| 1,804 |
|
|
| — |
|
|
| 456 |
|
|
| 2,260 |
|
Effect of changes in ownership of consolidated entities |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (753 | ) |
|
| — |
|
|
| — |
|
|
| (753 | ) |
|
| — |
|
|
| 753 |
|
|
| — |
|
Other, net |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| (3 | ) |
|
| (2 | ) |
|
| — |
|
|
| — |
|
|
| (2 | ) |
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 569,991 |
|
|
| 569,991 |
|
|
| 1,794 |
|
|
| 30,198 |
|
|
| 601,983 |
|
Change in accumulated other comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,642 |
|
|
| — |
|
|
| 1,642 |
|
|
| — |
|
|
| 94 |
|
|
| 1,736 |
|
Cash dividends paid to Common Stockholders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (59,793 | ) |
|
| (59,793 | ) |
|
| — |
|
|
| — |
|
|
| (59,793 | ) |
Cash dividends paid to Preferred Stockholders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,148 | ) |
|
| (2,148 | ) |
|
| — |
|
|
| — |
|
|
| (2,148 | ) |
Distributions to noncontrolling interests |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (415 | ) |
|
| (3,429 | ) |
|
| (3,844 | ) |
Balances at September 30, 2018 |
| 5,000 |
|
| $ | 125,000 |
|
|
| 152,592 |
|
| $ | 1,526 |
|
| $ | 3,888,360 |
|
| $ | 4,850 |
|
| $ | (1,894,054 | ) |
| $ | 2,125,682 |
|
| $ | (1,605 | ) |
| $ | 70,053 |
|
| $ | 2,194,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2019 |
| — |
|
| $ | — |
|
|
| 148,827 |
|
| $ | 1,488 |
|
| $ | 3,498,629 |
|
| $ | 4,866 |
|
| $ | (1,741,765 | ) |
| $ | 1,763,218 |
|
| $ | (2,718 | ) |
| $ | 82,366 |
|
| $ | 1,842,866 |
|
Redemption of Aimco Operating Partnership Units |
| — |
|
|
| — |
|
|
| 57 |
|
|
| 1 |
|
|
| 2,820 |
|
|
| — |
|
|
| — |
|
|
| 2,821 |
|
|
| — |
|
|
| (3,647 | ) |
|
| (826 | ) |
Amortization of share-based compensation cost |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,163 |
|
|
| — |
|
|
| — |
|
|
| 1,163 |
|
|
| — |
|
|
| 795 |
|
|
| 1,958 |
|
Effect of changes in ownership of consolidated entities |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,104 | ) |
|
| — |
|
|
| — |
|
|
| (5,104 | ) |
|
| 2,315 |
|
|
| 2,789 |
|
|
| — |
|
Contribution from noncontrolling interest in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,911 |
|
|
| — |
|
|
| 4,911 |
|
Purchase of noncontrolling interest in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,863 | ) |
|
| — |
|
|
| (2,863 | ) |
Other, net |
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| (175 | ) |
|
| — |
|
|
| — |
|
|
| (175 | ) |
|
| — |
|
|
| — |
|
|
| (175 | ) |
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,979 |
|
|
| 1,979 |
|
|
| (58 | ) |
|
| 116 |
|
|
| 2,037 |
|
Change in accumulated other comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (378 | ) |
|
| — |
|
|
| (378 | ) |
|
| — |
|
|
| (24 | ) |
|
| (402 | ) |
Cash dividends paid to Common Stockholders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (58,065 | ) |
|
| (58,065 | ) |
|
| — |
|
|
| — |
|
|
| (58,065 | ) |
Distributions to noncontrolling interests |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (87 | ) |
|
| (3,280 | ) |
|
| (3,367 | ) |
Balances at September 30, 2019 |
| — |
|
| $ | — |
|
|
| 148,885 |
|
| $ | 1,489 |
|
| $ | 3,497,333 |
|
| $ | 4,488 |
|
| $ | (1,797,851 | ) |
| $ | 1,705,459 |
|
| $ | 1,500 |
|
| $ | 79,115 |
|
| $ | 1,786,074 |
|
|
| Preferred Stock |
|
| Common Stock |
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| Noncontrolling Interests in |
|
| Common Noncontrolling Interests in |
|
|
|
|
| |||||||||||||
|
| Shares Issued |
|
| Amount |
|
| Shares Issued |
|
| Amount |
|
| Additional Paid- in Capital |
|
| Other Comprehensive Income (Loss) |
|
| Distributions in Excess of Earnings |
|
| Total Aimco Equity |
|
| Consolidated Real Estate Partnerships |
|
| Aimco Operating Partnership |
|
| Total Equity |
| |||||||||||
Balances at March 31, 2019 |
|
| 5,000 |
|
| $ | 125,000 |
|
|
| 148,758 |
|
| $ | 1,488 |
|
| $ | 3,495,295 |
|
| $ | 4,851 |
|
| $ | (1,742,998 | ) |
| $ | 1,883,636 |
|
| $ | (2,857 | ) |
| $ | 79,493 |
|
| $ | 1,960,272 |
|
Redemption of Preferred Stock |
|
| (5,000 | ) |
|
| (125,000 | ) |
|
| — |
|
|
| — |
|
|
| 4,089 |
|
|
| — |
|
|
| (4,089 | ) |
|
| (125,000 | ) |
|
| — |
|
|
| — |
|
|
| (125,000 | ) |
Issuance of Aimco Operating Partnership units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,034 |
|
|
| 3,034 |
|
Redemption of Aimco Operating Partnership units |
|
| — |
|
|
| — |
|
|
| 70 |
|
|
| 1 |
|
|
| 3,422 |
|
|
| — |
|
|
| — |
|
|
| 3,423 |
|
|
| — |
|
|
| (4,998 | ) |
|
| (1,575 | ) |
Amortization of share-based compensation cost |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,190 |
|
|
| — |
|
|
| — |
|
|
| 1,190 |
|
|
| — |
|
|
| 796 |
|
|
| 1,986 |
|
Effect of changes in ownership for consolidated entities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,851 | ) |
|
| — |
|
|
| — |
|
|
| (4,851 | ) |
|
| 1,042 |
|
|
| 3,809 |
|
|
| — |
|
Purchase of noncontrolling interest in consolidated real estate partnerships |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (917 | ) |
|
| — |
|
|
| (917 | ) |
Change in accumulated other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15 |
|
|
| — |
|
|
| 15 |
|
|
| — |
|
|
| 1 |
|
|
| 16 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 64,459 |
|
|
| 64,459 |
|
|
| 70 |
|
|
| 3,534 |
|
|
| 68,063 |
|
Common Stock dividends |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (58,039 | ) |
|
| (58,039 | ) |
|
| — |
|
|
|
|
|
|
| (58,039 | ) |
Common Stock issued to Common Stockholders in special dividend |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (516 | ) |
|
| — |
|
|
| — |
|
|
| (516 | ) |
|
| — |
|
|
| — |
|
|
| (516 | ) |
Preferred Stock dividends |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,098 | ) |
|
| (1,098 | ) |
|
| — |
|
|
| — |
|
|
| (1,098 | ) |
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (56 | ) |
|
| (3,303 | ) |
|
| (3,359 | ) |
Other, net |
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| (1 | ) |
Balances at June 30, 2019 |
|
| — |
|
| $ | — |
|
|
| 148,827 |
|
| $ | 1,488 |
|
| $ | 3,498,629 |
|
| $ | 4,866 |
|
| $ | (1,741,765 | ) |
| $ | 1,763,218 |
|
| $ | (2,718 | ) |
| $ | 82,366 |
|
| $ | 1,842,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2020 |
|
| — |
|
| $ | — |
|
|
| 148,700 |
|
| $ | 1,487 |
|
| $ | 3,488,611 |
|
| $ | 4,139 |
|
| $ | (1,776,782 | ) |
| $ | 1,717,455 |
|
| $ | (3,409 | ) |
| $ | 81,502 |
|
| $ | 1,795,548 |
|
Redemption of Aimco Operating Partnership units |
|
| — |
|
|
| — |
|
|
| 159 |
|
|
| 2 |
|
|
| 5,135 |
|
|
| — |
|
|
| — |
|
|
| 5,137 |
|
|
| — |
|
|
| (5,423 | ) |
|
| (286 | ) |
Amortization of share-based compensation cost |
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| 1,080 |
|
|
| — |
|
|
| — |
|
|
| 1,080 |
|
|
| — |
|
|
| 1,051 |
|
|
| 2,131 |
|
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,579 | ) |
|
| — |
|
|
| — |
|
|
| (3,579 | ) |
|
| 36 |
|
|
| 3,543 |
|
|
| — |
|
Change in accumulated other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (332 | ) |
|
| — |
|
|
| (332 | ) |
|
| — |
|
|
| (23 | ) |
|
| (355 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 39,255 |
|
|
| 39,255 |
|
|
| 107 |
|
|
| 2,107 |
|
|
| 41,469 |
|
Common Stock dividends |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (61,034 | ) |
|
| (61,034 | ) |
|
| — |
|
|
| — |
|
|
| (61,034 | ) |
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (35 | ) |
|
| (3,343 | ) |
|
| (3,378 | ) |
Other, net |
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| — |
|
|
| 30 |
|
|
| — |
|
|
| — |
|
|
| 30 |
|
|
| 111 |
|
|
| — |
|
|
| 141 |
|
Balances at June 30, 2020 |
|
| — |
|
| $ | — |
|
|
| 148,865 |
|
| $ | 1,489 |
|
| $ | 3,491,277 |
|
| $ | 3,807 |
|
| $ | (1,798,561 | ) |
| $ | 1,698,012 |
|
| $ | (3,190 | ) |
| $ | 79,414 |
|
| $ | 1,774,236 |
|
See notes to condensed consolidated financial statements.
6
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the NineSix Months Ended SeptemberJune 30, 20192020 and 20182019
(In thousands)
(Unaudited)
| Preferred Stock |
|
| Common Stock |
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| Noncontrolling Interests in |
|
| Common Noncontrolling Interests in |
|
|
|
|
| |||||||||||||
| Shares Issued |
|
| Amount |
|
| Shares Issued |
|
| Amount |
|
| Additional Paid-in Capital |
|
| Other Comprehensive Income (Loss) |
|
| Distributions in Excess of Earnings |
|
| Total Aimco Equity |
|
| Consolidated Real Estate Partnerships |
|
| Aimco Operating Partnerships |
|
| Total Equity |
| |||||||||||
Balances at December 31, 2017 |
| 5,000 |
|
| $ | 125,000 |
|
|
| 152,435 |
|
| $ | 1,524 |
|
| $ | 3,900,090 |
|
| $ | 3,603 |
|
| $ | (2,367,073 | ) |
| $ | 1,663,144 |
|
| $ | (1,716 | ) |
| $ | (5,675 | ) |
| $ | 1,655,753 |
|
Issuance of Aimco Operating Partnership units |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 50,151 |
|
|
| 50,151 |
|
Redemption of Aimco Operating Partnership units |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,458 | ) |
|
| (8,458 | ) |
Amortization of share-based compensation cost |
| — |
|
|
| — |
|
|
| 21 |
|
|
| — |
|
|
| 6,285 |
|
|
| — |
|
|
| — |
|
|
| 6,285 |
|
|
| — |
|
|
| 1,236 |
|
|
| 7,521 |
|
Effect of changes in ownership of consolidated entities |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18,137 | ) |
|
| — |
|
|
| — |
|
|
| (18,137 | ) |
|
| — |
|
|
| 8,036 |
|
|
| (10,101 | ) |
Other, net |
| — |
|
|
| — |
|
|
| 136 |
|
|
| 2 |
|
|
| 122 |
|
|
| — |
|
|
| (5 | ) |
|
| 119 |
|
|
| — |
|
|
| — |
|
|
| 119 |
|
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 658,820 |
|
|
| 658,820 |
|
|
| 8,045 |
|
|
| 34,093 |
|
|
| 700,958 |
|
Change in accumulated other comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,247 |
|
|
| — |
|
|
| 1,247 |
|
|
| — |
|
|
| 72 |
|
|
| 1,319 |
|
Cash dividends paid to Common Stockholders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (179,351 | ) |
|
| (179,351 | ) |
|
| — |
|
|
| — |
|
|
| (179,351 | ) |
Cash dividends paid to Preferred Stockholders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,445 | ) |
|
| (6,445 | ) |
|
| — |
|
|
| — |
|
|
| (6,445 | ) |
Distributions to noncontrolling interests |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,934 | ) |
|
| (9,402 | ) |
|
| (17,336 | ) |
Balances at September 30, 2018 |
| 5,000 |
|
| $ | 125,000 |
|
|
| 152,592 |
|
| $ | 1,526 |
|
| $ | 3,888,360 |
|
| $ | 4,850 |
|
| $ | (1,894,054 | ) |
| $ | 2,125,682 |
|
| $ | (1,605 | ) |
| $ | 70,053 |
|
| $ | 2,194,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2018 |
| 5,000 |
|
| $ | 125,000 |
|
|
| 144,623 |
|
| $ | 1,446 |
|
| $ | 3,515,686 |
|
| $ | 4,794 |
|
| $ | (1,947,507 | ) |
| $ | 1,699,419 |
|
| $ | (2,967 | ) |
| $ | 67,189 |
|
| $ | 1,763,641 |
|
Repurchases of Common Stock |
| — |
|
|
| — |
|
|
| (461 | ) |
|
| (5 | ) |
|
| (20,677 | ) |
|
| — |
|
|
| — |
|
|
| (20,682 | ) |
|
| — |
|
|
| — |
|
|
| (20,682 | ) |
Redemption of Preferred Stock |
| (5,000 | ) |
|
| (125,000 | ) |
|
| — |
|
|
| — |
|
|
| 4,089 |
|
|
| — |
|
|
| (4,089 | ) |
|
| (125,000 | ) |
|
| — |
|
|
| — |
|
|
| (125,000 | ) |
Issuance of Aimco Operating Partnership units |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,034 |
|
|
| 3,034 |
|
Redemption of Aimco Operating Partnership Units |
| — |
|
|
| — |
|
|
| 127 |
|
|
| 2 |
|
|
| 6,242 |
|
|
| — |
|
|
| — |
|
|
| 6,244 |
|
|
| — |
|
|
| (11,202 | ) |
|
| (4,958 | ) |
Amortization of share-based compensation cost |
| — |
|
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| 4,795 |
|
|
| — |
|
|
| — |
|
|
| 4,795 |
|
|
| — |
|
|
| 2,387 |
|
|
| 7,182 |
|
Effect of changes in ownership of consolidated entities |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12,123 | ) |
|
| — |
|
|
| — |
|
|
| (12,123 | ) |
|
| 3,357 |
|
|
| 8,766 |
|
|
| — |
|
Contribution from noncontrolling interest in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,911 |
|
|
| — |
|
|
| 4,911 |
|
Purchase of noncontrolling interest in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,780 | ) |
|
| — |
|
|
| (3,780 | ) |
Other, net |
| — |
|
|
| — |
|
|
| 82 |
|
|
| 1 |
|
|
| (118 | ) |
|
| — |
|
|
| — |
|
|
| (117 | ) |
|
| 19 |
|
|
| — |
|
|
| (98 | ) |
Net income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| 340,571 |
|
|
| 340,571 |
|
|
| 103 |
|
|
| 18,787 |
|
|
| 359,461 |
|
Change in accumulated other comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (306 | ) |
|
| — |
|
|
| (306 | ) |
|
| — |
|
|
| (19 | ) |
|
| (325 | ) |
Cash dividends paid to Common Stockholders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (183,579 | ) |
|
| (183,579 | ) |
|
| — |
|
|
| — |
|
|
| (183,579 | ) |
Common Stock issued to Common Stockholders in special dividend |
| — |
|
|
| — |
|
|
| 4,492 |
|
|
| 45 |
|
|
| (561 | ) |
|
| — |
|
|
| — |
|
|
| (516 | ) |
|
| — |
|
|
| — |
|
|
| (516 | ) |
Cash dividends paid to Preferred Stockholders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,247 | ) |
|
| (3,247 | ) |
|
| — |
|
|
| — |
|
|
| (3,247 | ) |
Distributions to noncontrolling interests |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (143 | ) |
|
| (9,827 | ) |
|
| (9,970 | ) |
Balances at September 30, 2019 |
| — |
|
| $ | — |
|
|
| 148,885 |
|
| $ | 1,489 |
|
| $ | 3,497,333 |
|
| $ | 4,488 |
|
| $ | (1,797,851 | ) |
| $ | 1,705,459 |
|
| $ | 1,500 |
|
| $ | 79,115 |
|
| $ | 1,786,074 |
|
|
| Preferred Stock |
|
| Common Stock |
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| Noncontrolling Interests in |
|
| Common Noncontrolling Interests in |
|
|
|
|
| |||||||||||||
|
| Shares Issued |
|
| Amount |
|
| Shares Issued |
|
| Amount |
|
| Additional Paid- in Capital |
|
| Other Comprehensive Income (Loss) |
|
| Distributions in Excess of Earnings |
|
| Total Aimco Equity |
|
| Consolidated Real Estate Partnerships |
|
| Aimco Operating Partnership |
|
| Total Equity |
| |||||||||||
Balances at December 31, 2018 |
|
| 5,000 |
|
| $ | 125,000 |
|
|
| 144,623 |
|
| $ | 1,446 |
|
| $ | 3,515,686 |
|
| $ | 4,794 |
|
| $ | (1,947,507 | ) |
| $ | 1,699,419 |
|
| $ | (2,967 | ) |
| $ | 67,189 |
|
| $ | 1,763,641 |
|
Repurchases of Common Stock |
|
| — |
|
|
| — |
|
|
| (461 | ) |
|
| (5 | ) |
|
| (20,677 | ) |
|
| — |
|
|
| — |
|
|
| (20,682 | ) |
|
| — |
|
|
| — |
|
|
| (20,682 | ) |
Redemption of Preferred Stock |
|
| (5,000 | ) |
|
| (125,000 | ) |
|
| — |
|
|
| — |
|
|
| 4,089 |
|
|
| — |
|
|
| (4,089 | ) |
|
| (125,000 | ) |
|
| — |
|
|
| — |
|
|
| (125,000 | ) |
Issuance of Aimco Operating Partnership units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,034 |
|
|
| 3,034 |
|
Redemption of Aimco Operating Partnership units |
|
| — |
|
|
| — |
|
|
| 70 |
|
|
| 1 |
|
|
| 3,422 |
|
|
| — |
|
|
| — |
|
|
| 3,423 |
|
|
| — |
|
|
| (7,555 | ) |
|
| (4,132 | ) |
Amortization of share-based compensation cost |
|
| — |
|
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| 3,632 |
|
|
| — |
|
|
| — |
|
|
| 3,632 |
|
|
| — |
|
|
| 1,592 |
|
|
| 5,224 |
|
Effect of changes in ownership for consolidated entities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,019 | ) |
|
| — |
|
|
| — |
|
|
| (7,019 | ) |
|
| 1,042 |
|
|
| 5,977 |
|
|
| — |
|
Purchase of noncontrolling interest in consolidated real estate partnerships |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (917 | ) |
|
| — |
|
|
| (917 | ) |
Change in accumulated other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 72 |
|
|
| — |
|
|
| 72 |
|
|
| — |
|
|
| 5 |
|
|
| 77 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 338,592 |
|
|
| 338,592 |
|
|
| 161 |
|
|
| 18,671 |
|
|
| 357,424 |
|
Common Stock dividends |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (125,514 | ) |
|
| (125,514 | ) |
|
| — |
|
|
| — |
|
|
| (125,514 | ) |
Common Stock issued to Common Stockholders in special dividend |
|
| — |
|
|
| — |
|
|
| 4,492 |
|
|
| 45 |
|
|
| (561 | ) |
|
| — |
|
|
| — |
|
|
| (516 | ) |
|
| — |
|
|
| — |
|
|
| (516 | ) |
Preferred Stock dividends |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,247 | ) |
|
| (3,247 | ) |
|
| — |
|
|
| — |
|
|
| (3,247 | ) |
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (56 | ) |
|
| (6,547 | ) |
|
| (6,603 | ) |
Other, net |
|
| — |
|
|
| — |
|
|
| 81 |
|
|
| 1 |
|
|
| 57 |
|
|
| — |
|
|
| — |
|
|
| 58 |
|
|
| 19 |
|
|
| — |
|
|
| 77 |
|
Balances at June 30, 2019 |
|
| — |
|
| $ | — |
|
|
| 148,827 |
|
| $ | 1,488 |
|
| $ | 3,498,629 |
|
| $ | 4,866 |
|
| $ | (1,741,765 | ) |
| $ | 1,763,218 |
|
| $ | (2,718 | ) |
| $ | 82,366 |
|
| $ | 1,842,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2019 |
|
| — |
|
| $ | — |
|
|
| 148,885 |
|
| $ | 1,489 |
|
| $ | 3,497,367 |
|
| $ | 4,195 |
|
| $ | (1,722,402 | ) |
| $ | 1,780,649 |
|
| $ | (3,296 | ) |
| $ | 83,442 |
|
| $ | 1,860,795 |
|
Repurchases of Common Stock |
|
| — |
|
|
| — |
|
|
| (234 | ) |
|
| (2 | ) |
|
| (10,002 | ) |
|
| — |
|
|
| — |
|
|
| (10,004 | ) |
|
| — |
|
|
| — |
|
|
| (10,004 | ) |
Redemption of Aimco Operating Partnership units |
|
| — |
|
|
| — |
|
|
| 159 |
|
|
| 2 |
|
|
| 5,135 |
|
|
| — |
|
|
| — |
|
|
| 5,137 |
|
|
| — |
|
|
| (6,392 | ) |
|
| (1,255 | ) |
Amortization of share-based compensation cost |
|
| — |
|
|
| — |
|
|
| 25 |
|
|
| — |
|
|
| 3,009 |
|
|
| — |
|
|
| — |
|
|
| 3,009 |
|
|
| — |
|
|
| 2,102 |
|
|
| 5,111 |
|
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,348 | ) |
|
| — |
|
|
| — |
|
|
| (4,348 | ) |
|
| 36 |
|
|
| 4,312 |
|
|
| — |
|
Cumulative effect of a change in accounting principle |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (277 | ) |
|
| (277 | ) |
|
| — |
|
|
| — |
|
|
| (277 | ) |
Change in accumulated other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (388 | ) |
|
| — |
|
|
| (388 | ) |
|
| — |
|
|
| (27 | ) |
|
| (415 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 45,977 |
|
|
| 45,977 |
|
|
| 225 |
|
|
| 2,475 |
|
|
| 48,677 |
|
Common Stock dividends |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (121,859 | ) |
|
| (121,859 | ) |
|
| — |
|
|
| — |
|
|
| (121,859 | ) |
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (108 | ) |
|
| (6,498 | ) |
|
| (6,606 | ) |
Other, net |
|
| — |
|
|
| — |
|
|
| 30 |
|
|
| — |
|
|
| 116 |
|
|
| — |
|
|
| — |
|
|
| 116 |
|
|
| (47 | ) |
|
| — |
|
|
| 69 |
|
Balances at June 30, 2020 |
|
| — |
|
| $ | — |
|
|
| 148,865 |
|
| $ | 1,489 |
|
| $ | 3,491,277 |
|
| $ | 3,807 |
|
| $ | (1,798,561 | ) |
| $ | 1,698,012 |
|
| $ | (3,190 | ) |
| $ | 79,414 |
|
| $ | 1,774,236 |
|
See notes to condensed consolidated financial statements.
7
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended |
| |||||||||||
| September 30, |
| Six Months Ended June 30, |
| |||||||||
| 2019 |
| 2018 |
| 2020 |
|
| 2019 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| |
Net income | $ | 365,261 |
| $ | 706,763 |
| $ | 52,181 |
|
| $ | 361,291 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| |
Depreciation and amortization |
| 283,027 |
| 286,439 |
|
| 198,165 |
|
|
| 185,489 |
| |
Gain on dispositions of real estate and the Asset Management business |
| (356,929 | ) |
| (679,738 | ) | |||||||
Income tax benefit |
| (1,942 | ) |
| (12,617 | ) | |||||||
Gain on dispositions of real estate |
| (47,204 | ) |
|
| (355,783 | ) | ||||||
Income tax (benefit) expense |
| (6,112 | ) |
|
| 1,154 |
| ||||||
Other adjustments |
| 10,429 |
| 11,762 |
|
| 7,411 |
|
|
| 6,443 |
| |
Net changes in operating assets and operating liabilities |
| (21,098 | ) |
| (9,683 | ) |
| (20,084 | ) |
|
| (28,555 | ) |
Net cash provided by operating activities |
| 278,748 |
| 302,926 |
|
| 184,357 |
|
|
| 170,039 |
| |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| |
Purchases of real estate and deposits related to purchases of real estate |
| (131,613 | ) |
| (212,358 | ) |
| (7,794 | ) |
|
| (43,743 | ) |
Capital expenditures |
| (292,749 | ) |
| (253,149 | ) |
| (182,348 | ) |
|
| (176,488 | ) |
Proceeds from dispositions of real estate |
| 422,463 |
| 708,464 |
|
| 36,869 |
|
|
| 422,456 |
| |
Purchases of corporate assets |
| (14,825 | ) |
| (5,530 | ) |
| (8,743 | ) |
|
| (7,186 | ) |
Proceeds from repayments on notes receivable |
| 111 |
| 3,242 |
| ||||||||
Other investing activities |
| 608 |
| (1,547 | ) |
| 1,946 |
|
|
| 2,486 |
| |
Net cash (used in) provided by investing activities |
| (16,005 | ) |
| 239,122 |
|
| (160,070 | ) |
|
| 197,525 |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from issuance of non-recourse property debt |
| 667,965 |
| 360,613 |
| ||||||||
Principal repayments of non-recourse property debt |
| (390,346 | ) |
| (403,141 | ) | |||||||
Repayment of term loan |
| — |
| (250,000 | ) | ||||||||
Net repayments on revolving credit facility |
| (160,360 | ) |
| (67,160 | ) | |||||||
Proceeds from non-recourse property debt |
| 608,756 |
|
|
| — |
| ||||||
Principal repayments on non-recourse property debt |
| (274,347 | ) |
|
| (207,790 | ) | ||||||
Proceeds from term loan |
| 350,000 |
|
|
| — |
| ||||||
Net (repayments of) borrowings on revolving credit facility |
| (275,000 | ) |
|
| 134,600 |
| ||||||
Repurchases of Common Stock |
| (20,682 | ) |
| — |
|
| (10,004 | ) |
|
| (20,682 | ) |
Redemption of Preferred Stock |
| (125,000 | ) |
| — |
| |||||||
Payment of dividends to Common Stockholders |
| (183,319 | ) |
| (178,937 | ) | |||||||
Payment of dividends to Preferred Stockholders |
| (3,247 | ) |
| (6,445 | ) | |||||||
Repurchases of Preferred Stock |
| — |
|
|
| (125,000 | ) | ||||||
Payment of dividends to holders of Common Stock |
| (122,058 | ) |
|
| (125,350 | ) | ||||||
Payment of dividends to holders of Preferred Stock |
| — |
|
|
| (3,247 | ) | ||||||
Payment of distributions to noncontrolling interests |
| (16,320 | ) |
| (22,549 | ) |
| (10,639 | ) |
|
| (10,937 | ) |
Redemption of noncontrolling interests in the Aimco Operating Partnership |
| (5,071 | ) |
| (8,675 | ) | |||||||
Contribution from noncontrolling interests in consolidated real estate partnerships |
| 4,911 |
| — |
| ||||||||
Redemptions of noncontrolling interests in the Aimco Operating Partnership |
| (1,870 | ) |
|
| (4,244 | ) | ||||||
Purchases of noncontrolling interests in consolidated real estate partnerships |
| (3,780 | ) |
| (3,581 | ) |
| — |
|
|
| (917 | ) |
Other financing activities |
| (6,864 | ) |
| (415 | ) |
| (24,319 | ) |
|
| (10,685 | ) |
Net cash used in financing activities |
| (242,113 | ) |
| (580,290 | ) | |||||||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
| 20,630 |
| (38,242 | ) | ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD |
| 72,595 |
| 142,541 |
| ||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 93,225 |
| $ | 104,299 |
| |||||||
Net cash provided by (used in) financing activities |
| 240,519 |
|
|
| (374,252 | ) | ||||||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
| 264,806 |
|
|
| (6,688 | ) | ||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |
| 177,702 |
|
|
| 72,595 |
| ||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 442,508 |
|
| $ | 65,907 |
|
See notes to condensed consolidated financial statements.
8
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| June 30, 2020 |
|
| December 31, 2019 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings and improvements |
| $ | 6,848,162 |
|
| $ | 6,552,065 |
|
| $ | 6,928,584 |
|
| $ | 6,868,543 |
|
Land |
|
| 1,887,424 |
|
|
| 1,756,525 |
|
|
| 1,866,009 |
|
|
| 1,869,048 |
|
Total real estate |
|
| 8,735,586 |
|
|
| 8,308,590 |
|
|
| 8,794,593 |
|
|
| 8,737,591 |
|
Accumulated depreciation |
|
| (2,684,694 | ) |
|
| (2,585,115 | ) |
|
| (2,786,104 | ) |
|
| (2,718,284 | ) |
Net real estate |
|
| 6,050,892 |
|
|
| 5,723,475 |
|
|
| 6,008,489 |
|
|
| 6,019,307 |
|
Cash and cash equivalents |
|
| 58,724 |
|
|
| 36,858 |
|
|
| 398,408 |
|
|
| 142,902 |
|
Restricted cash |
|
| 34,501 |
|
|
| 35,737 |
|
|
| 44,100 |
|
|
| 34,800 |
|
Mezzanine investment |
|
| 293,427 |
|
|
| 280,258 |
| ||||||||
Other assets |
|
| 395,061 |
|
|
| 351,541 |
|
|
| 376,723 |
|
|
| 351,472 |
|
Assets held for sale |
|
| — |
|
|
| 42,393 |
| ||||||||
Total assets |
| $ | 6,539,178 |
|
| $ | 6,190,004 |
|
| $ | 7,121,147 |
|
| $ | 6,828,739 |
|
|
|
|
|
|
|
|
|
| ||||||||
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse property debt, net |
| $ | 4,254,710 |
|
| $ | 3,915,305 |
|
| $ | 4,543,743 |
|
| $ | 4,230,590 |
|
Term loan, net |
|
| 348,440 |
|
|
| — |
| ||||||||
Revolving credit facility borrowings |
|
| — |
|
|
| 160,360 |
|
|
| — |
|
|
| 275,000 |
|
Total indebtedness |
|
| 4,254,710 |
|
|
| 4,075,665 |
|
|
| 4,892,183 |
|
|
| 4,505,590 |
|
Accrued liabilities and other |
|
| 397,216 |
|
|
| 226,230 |
|
|
| 353,787 |
|
|
| 360,574 |
|
Liabilities related to assets held for sale |
|
| — |
|
|
| 23,177 |
| ||||||||
Total liabilities |
|
| 4,651,926 |
|
|
| 4,325,072 |
|
|
| 5,245,970 |
|
|
| 4,866,164 |
|
Redeemable preferred units |
|
| 101,178 |
|
|
| 101,291 |
| ||||||||
Commitments and contingencies (Note 5) |
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
| ||||||||
Redeemable preferred OP Units |
|
| 96,449 |
|
|
| 97,064 |
| ||||||||
Redeemable noncontrolling interests in consolidated real estate partnership |
|
| 4,492 |
|
|
| 4,716 |
| ||||||||
Commitments and contingencies (Note 4) |
|
|
|
|
|
|
|
| ||||||||
Partners’ capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred units |
|
| — |
|
|
| 125,000 |
| ||||||||
General Partner and Special Limited Partner |
|
| 1,705,459 |
|
|
| 1,574,419 |
|
|
| 1,698,012 |
|
|
| 1,780,649 |
|
Limited Partners |
|
| 79,115 |
|
|
| 67,189 |
|
|
| 79,414 |
|
|
| 83,442 |
|
Partners’ capital attributable to the Aimco Operating Partnership |
|
| 1,784,574 |
|
|
| 1,766,608 |
|
|
| 1,777,426 |
|
|
| 1,864,091 |
|
Noncontrolling interests in consolidated real estate partnerships |
|
| 1,500 |
|
|
| (2,967 | ) |
|
| (3,190 | ) |
|
| (3,296 | ) |
Total partners’ capital |
|
| 1,786,074 |
|
|
| 1,763,641 |
|
|
| 1,774,236 |
|
|
| 1,860,795 |
|
Total liabilities and partners’ capital |
| $ | 6,539,178 |
|
| $ | 6,190,004 |
|
| $ | 7,121,147 |
|
| $ | 6,828,739 |
|
See notes to condensed consolidated financial statements.
9
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues attributable to real estate |
| $ | 229,827 |
|
| $ | 234,048 |
|
| $ | 684,262 |
|
| $ | 690,571 |
|
Asset Management business rental and tax credit revenues |
|
| — |
|
|
| 8,433 |
|
|
| — |
|
|
| 49,817 |
|
Total revenues |
|
| 229,827 |
|
|
| 242,481 |
|
|
| 684,262 |
|
|
| 740,388 |
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses attributable to real estate |
|
| 77,430 |
|
|
| 78,254 |
|
|
| 232,453 |
|
|
| 232,572 |
|
Property operating expenses of partnerships served by Asset Management business |
|
| — |
|
|
| 2,608 |
|
|
| — |
|
|
| 20,865 |
|
Depreciation and amortization |
|
| 97,538 |
|
|
| 96,406 |
|
|
| 283,027 |
|
|
| 286,439 |
|
General and administrative expenses |
|
| 11,821 |
|
|
| 12,479 |
|
|
| 34,314 |
|
|
| 37,196 |
|
Other expenses, net |
|
| 4,411 |
|
|
| 5,780 |
|
|
| 14,323 |
|
|
| 13,624 |
|
Total operating expenses |
|
| 191,200 |
|
|
| 195,527 |
|
|
| 564,117 |
|
|
| 590,696 |
|
a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 2,824 |
|
|
| 2,712 |
|
|
| 8,615 |
|
|
| 7,768 |
|
Interest expense |
|
| (42,011 | ) |
|
| (45,492 | ) |
|
| (122,961 | ) |
|
| (143,193 | ) |
Gain on dispositions of real estate and the Asset Management business |
|
| 1,146 |
|
|
| 626,232 |
|
|
| 356,929 |
|
|
| 679,738 |
|
Other, net |
|
| 288 |
|
|
| (283 | ) |
|
| 591 |
|
|
| 141 |
|
Income before income tax benefit (expense) |
|
| 874 |
|
|
| 630,123 |
|
|
| 363,319 |
|
|
| 694,146 |
|
Income tax benefit (expense) |
|
| 3,096 |
|
|
| (26,206 | ) |
|
| 1,942 |
|
|
| 12,617 |
|
Net income |
|
| 3,970 |
|
|
| 603,917 |
|
|
| 365,261 |
|
|
| 706,763 |
|
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 58 |
|
|
| (1,794 | ) |
|
| (103 | ) |
|
| (8,045 | ) |
Net income attributable to the Aimco Operating Partnership |
|
| 4,028 |
|
|
| 602,123 |
|
|
| 365,158 |
|
|
| 698,718 |
|
Net income attributable to the Aimco Operating Partnership’s preferred unitholders |
|
| (1,933 | ) |
|
| (4,082 | ) |
|
| (13,135 | ) |
|
| (12,250 | ) |
Net loss (income) attributable to participating securities |
|
| 43 |
|
|
| (941 | ) |
|
| (429 | ) |
|
| (1,145 | ) |
Net income attributable to the Aimco Operating Partnership’s common unitholders |
| $ | 2,138 |
|
| $ | 597,100 |
|
| $ | 351,594 |
|
| $ | 685,323 |
|
Net income attributable to the Aimco Operating Partnership per common unit – basic |
| $ | 0.01 |
|
| $ | 3.73 |
|
| $ | 2.26 |
|
| $ | 4.29 |
|
Net income attributable to the Aimco Operating Partnership per common unit – diluted |
| $ | 0.01 |
|
| $ | 3.72 |
|
| $ | 2.26 |
|
| $ | 4.29 |
|
Weighted average common units outstanding – basic |
|
| 156,618 |
|
|
| 160,088 |
|
|
| 155,644 |
|
|
| 159,622 |
|
Weighted average common units outstanding – diluted |
|
| 156,879 |
|
|
| 160,328 |
|
|
| 155,971 |
|
|
| 159,787 |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues |
| $ | 218,808 |
|
| $ | 224,200 |
|
| $ | 443,360 |
|
| $ | 454,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
| 74,123 |
|
|
| 75,647 |
|
|
| 149,603 |
|
|
| 154,606 |
|
Depreciation and amortization |
|
| 97,689 |
|
|
| 91,924 |
|
|
| 198,165 |
|
|
| 185,489 |
|
General and administrative expenses |
|
| 9,696 |
|
|
| 11,498 |
|
|
| 19,804 |
|
|
| 21,327 |
|
Investment management expenses |
|
| 1,121 |
|
|
| 1,406 |
|
|
| 2,305 |
|
|
| 2,738 |
|
Other expenses, net |
|
| 4,239 |
|
|
| 3,621 |
|
|
| 5,881 |
|
|
| 8,757 |
|
Total operating expenses |
|
| 186,868 |
|
|
| 184,096 |
|
|
| 375,758 |
|
|
| 372,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
| 2,843 |
|
|
| 3,065 |
|
|
| 7,366 |
|
|
| 5,791 |
|
Interest expense |
|
| (48,802 | ) |
|
| (39,541 | ) |
|
| (90,138 | ) |
|
| (80,950 | ) |
Gain on dispositions of real estate |
|
| 47,238 |
|
|
| 64,310 |
|
|
| 47,204 |
|
|
| 355,783 |
|
Mezzanine investment income, net |
|
| 6,936 |
|
|
| — |
|
|
| 13,683 |
|
|
| — |
|
Income from unconsolidated real estate partnerships |
|
| 170 |
|
|
| 231 |
|
|
| 352 |
|
|
| 303 |
|
Income before income tax benefit (expense) |
|
| 40,325 |
|
|
| 68,169 |
|
|
| 46,069 |
|
|
| 362,445 |
|
Income tax benefit (expense) |
|
| 2,879 |
|
|
| 1,827 |
|
|
| 6,112 |
|
|
| (1,154 | ) |
Net income |
|
| 43,204 |
|
|
| 69,996 |
|
|
| 52,181 |
|
|
| 361,291 |
|
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 17 |
|
|
| (70 | ) |
|
| (1 | ) |
|
| (161 | ) |
Net income attributable to the Aimco Operating Partnership |
|
| 43,221 |
|
|
| 69,926 |
|
|
| 52,180 |
|
|
| 361,130 |
|
Net income attributable to the Aimco Operating Partnership’s preferred unitholders |
|
| (1,859 | ) |
|
| (7,120 | ) |
|
| (3,728 | ) |
|
| (11,202 | ) |
Net income attributable to participating securities |
|
| (43 | ) |
|
| 11 |
|
|
| (86 | ) |
|
| (472 | ) |
Net income attributable to the Aimco Operating Partnership’s common unitholders |
| $ | 41,319 |
|
| $ | 62,817 |
|
| $ | 48,366 |
|
| $ | 349,456 |
|
Net income attributable to the Aimco Operating Partnership per common unit – basic and diluted |
| $ | 0.26 |
|
| $ | 0.40 |
|
| $ | 0.31 |
|
| $ | 2.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common units outstanding – basic |
|
| 156,509 |
|
|
| 156,637 |
|
|
| 156,584 |
|
|
| 155,158 |
|
Weighted-average common units outstanding – diluted |
|
| 156,527 |
|
|
| 157,018 |
|
|
| 156,802 |
|
|
| 155,517 |
|
See notes to condensed consolidated financial statements.
10
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Net income |
| $ | 3,970 |
|
| $ | 603,917 |
|
| $ | 365,261 |
|
| $ | 706,763 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) gains on available for sale debt securities |
|
| (402 | ) |
|
| 979 |
|
|
| (325 | ) |
|
| (72 | ) |
Losses on interest rate swaps reclassified into earnings from accumulated other comprehensive loss |
|
| — |
|
|
| 757 |
|
|
| — |
|
|
| 1,391 |
|
Other comprehensive (loss) income |
|
| (402 | ) |
|
| 1,736 |
|
|
| (325 | ) |
|
| 1,319 |
|
Comprehensive income |
|
| 3,568 |
|
|
| 605,653 |
|
|
| 364,936 |
|
|
| 708,082 |
|
Comprehensive loss (income) attributable to noncontrolling interests |
|
| 58 |
|
|
| (1,794 | ) |
|
| (103 | ) |
|
| (8,045 | ) |
Comprehensive income attributable to the Aimco Operating Partnership common unitholders |
| $ | 3,626 |
|
| $ | 603,859 |
|
| $ | 364,833 |
|
| $ | 700,037 |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net income |
| $ | 43,204 |
|
| $ | 69,996 |
|
| $ | 52,181 |
|
| $ | 361,291 |
|
Unrealized (losses) gains on available for sale debt securities |
|
| (355 | ) |
|
| 16 |
|
|
| (415 | ) |
|
| 77 |
|
Comprehensive income |
|
| 42,849 |
|
|
| 70,012 |
|
|
| 51,766 |
|
|
| 361,368 |
|
Comprehensive loss (income) attributable to noncontrolling interests |
|
| 17 |
|
|
| (70 | ) |
|
| (1 | ) |
|
| (161 | ) |
Comprehensive income attributable to the Aimco Operating Partnership |
| $ | 42,866 |
|
| $ | 69,942 |
|
| $ | 51,765 |
|
| $ | 361,207 |
|
See notes to condensed consolidated financial statements.
11
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the Three Months Ended SeptemberJune 30, 20192020 and 20182019
(In thousands)
(Unaudited)
| Preferred Units |
|
| General Partner and Special Limited Partner |
|
| Limited Partners |
|
| Partners’ Capital Attributable to the Aimco Operating Partnership |
|
| Noncontrolling Interests in Consolidated Real Estate Partnerships |
|
| Total Partners’ capital |
| ||||||
Balances at June 30, 2018 | $ | 125,000 |
|
| $ | 1,489,941 |
|
| $ | 42,828 |
|
| $ | 1,657,769 |
|
| $ | (2,984 | ) |
| $ | 1,654,785 |
|
Redemption of partnership units held by non-Aimco partners |
| — |
|
|
| — |
|
|
| (847 | ) |
|
| (847 | ) |
|
| — |
|
|
| (847 | ) |
Amortization of share-based compensation |
| — |
|
|
| 1,804 |
|
|
| 456 |
|
|
| 2,260 |
|
|
| — |
|
|
| 2,260 |
|
Effect of changes in ownership of partnership units |
| — |
|
|
| (753 | ) |
|
| 753 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other, net |
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Net income |
| — |
|
|
| 569,991 |
|
|
| 30,198 |
|
|
| 600,189 |
|
|
| 1,794 |
|
|
| 601,983 |
|
Change in accumulated other comprehensive income |
| — |
|
|
| 1,642 |
|
|
| 94 |
|
|
| 1,736 |
|
|
| — |
|
|
| 1,736 |
|
Distributions paid to common unitholders |
| — |
|
|
| (59,793 | ) |
|
| (3,429 | ) |
|
| (63,222 | ) |
|
| — |
|
|
| (63,222 | ) |
Distributions paid to preferred unitholders |
| — |
|
|
| (2,148 | ) |
|
| — |
|
|
| (2,148 | ) |
|
| — |
|
|
| (2,148 | ) |
Distributions paid to noncontrolling interests in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (415 | ) |
|
| (415 | ) |
Balances at September 30, 2018 | $ | 125,000 |
|
| $ | 2,000,682 |
|
| $ | 70,053 |
|
| $ | 2,195,735 |
|
| $ | (1,605 | ) |
| $ | 2,194,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2019 | $ | — |
|
| $ | 1,763,218 |
|
| $ | 82,366 |
|
| $ | 1,845,584 |
|
| $ | (2,718 | ) |
| $ | 1,842,866 |
|
Redemption of partnership units held by non-Aimco partners |
| — |
|
|
| 2,821 |
|
|
| (3,647 | ) |
|
| (826 | ) |
|
| — |
|
|
| (826 | ) |
Amortization of share-based compensation |
| — |
|
|
| 1,163 |
|
|
| 795 |
|
|
| 1,958 |
|
|
| — |
|
|
| 1,958 |
|
Effect of changes in ownership of partnership units and consolidated entities |
| — |
|
|
| (5,104 | ) |
|
| 2,789 |
|
|
| (2,315 | ) |
|
| 2,315 |
|
|
| — |
|
Contribution from noncontrolling interest in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,911 |
|
|
| 4,911 |
|
Purchase of noncontrolling interest in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,863 | ) |
|
| (2,863 | ) |
Other, net |
| — |
|
|
| (175 | ) |
|
| — |
|
|
| (175 | ) |
|
| — |
|
|
| (175 | ) |
Net income |
| — |
|
|
| 1,979 |
|
|
| 116 |
|
|
| 2,095 |
|
|
| (58 | ) |
|
| 2,037 |
|
Change in accumulated other comprehensive income |
| — |
|
|
| (378 | ) |
|
| (24 | ) |
|
| (402 | ) |
|
| — |
|
|
| (402 | ) |
Distributions paid to common unitholders |
| — |
|
|
| (58,065 | ) |
|
| (3,280 | ) |
|
| (61,345 | ) |
|
| — |
|
|
| (61,345 | ) |
Distributions paid to noncontrolling interests in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (87 | ) |
|
| (87 | ) |
Balances at September 30, 2019 | $ | — |
|
| $ | 1,705,459 |
|
| $ | 79,115 |
|
| $ | 1,784,574 |
|
| $ | 1,500 |
|
| $ | 1,786,074 |
|
|
| Preferred Units |
|
| General Partner and Special Limited Partner |
|
| Limited Partners |
|
| Partners’ Capital Attributable to the Aimco Operating Partnership |
|
| Noncontrolling Interests in Consolidated Real Estate Partnerships |
|
| Total Partners’ Capital |
| ||||||
Balances at March 31, 2019 |
| $ | 125,000 |
|
| $ | 1,758,636 |
|
| $ | 79,493 |
|
| $ | 1,963,129 |
|
| $ | (2,857 | ) |
| $ | 1,960,272 |
|
Redemption of preferred units |
|
| (125,000 | ) |
|
| — |
|
|
| — |
|
|
| (125,000 | ) |
|
| — |
|
|
| (125,000 | ) |
Issuance of Aimco Operating Partnership units |
|
| — |
|
|
| — |
|
|
| 3,034 |
|
|
| 3,034 |
|
|
| — |
|
|
| 3,034 |
|
Redemption of Aimco Operating Partnership units |
|
| — |
|
|
| 3,423 |
|
|
| (4,998 | ) |
|
| (1,575 | ) |
|
| — |
|
|
| (1,575 | ) |
Amortization of share-based compensation cost |
|
| — |
|
|
| 1,190 |
|
|
| 796 |
|
|
| 1,986 |
|
|
| — |
|
|
| 1,986 |
|
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| (4,851 | ) |
|
| 3,809 |
|
|
| (1,042 | ) |
|
| 1,042 |
|
|
| — |
|
Purchase of noncontrolling interest in consolidated real estate partnerships |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (917 | ) |
|
| (917 | ) |
Change in accumulated other comprehensive income |
|
| — |
|
|
| 15 |
|
|
| 1 |
|
|
| 16 |
|
|
| — |
|
|
| 16 |
|
Net income |
|
| — |
|
|
| 64,459 |
|
|
| 3,534 |
|
|
| 67,993 |
|
|
| 70 |
|
|
| 68,063 |
|
Distributions to common unitholders |
|
| — |
|
|
| (58,039 | ) |
|
| (3,303 | ) |
|
| (61,342 | ) |
|
| — |
|
|
| (61,342 | ) |
Common partnership units issued to common unitholders in special distribution |
|
| — |
|
|
| (516 | ) |
|
| — |
|
|
| (516 | ) |
|
| — |
|
|
| (516 | ) |
Distributions to preferred unitholders |
|
| — |
|
|
| (1,098 | ) |
|
| — |
|
|
| (1,098 | ) |
|
| — |
|
|
| (1,098 | ) |
Distributions paid to noncontrolling interests in consolidated real estate partnerships |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (56 | ) |
|
| (56 | ) |
Other, net |
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
|
| — |
|
|
| (1 | ) |
Balances at June 30, 2019 |
| $ | — |
|
| $ | 1,763,218 |
|
| $ | 82,366 |
|
| $ | 1,845,584 |
|
| $ | (2,718 | ) |
| $ | 1,842,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2020 |
| $ | — |
|
| $ | 1,717,455 |
|
| $ | 81,502 |
|
| $ | 1,798,957 |
|
| $ | (3,409 | ) |
| $ | 1,795,548 |
|
Redemption of Aimco Operating Partnership units |
|
| — |
|
|
| 5,137 |
|
|
| (5,423 | ) |
|
| (286 | ) |
|
| — |
|
|
| (286 | ) |
Amortization of share-based compensation cost |
|
| — |
|
|
| 1,080 |
|
|
| 1,051 |
|
|
| 2,131 |
|
|
| — |
|
|
| 2,131 |
|
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| (3,579 | ) |
|
| 3,543 |
|
|
| (36 | ) |
|
| 36 |
|
|
| — |
|
Change in accumulated other comprehensive income |
|
| — |
|
|
| (332 | ) |
|
| (23 | ) |
|
| (355 | ) |
|
| — |
|
|
| (355 | ) |
Net income |
|
| — |
|
|
| 39,255 |
|
|
| 2,107 |
|
|
| 41,362 |
|
|
| 107 |
|
|
| 41,469 |
|
Distributions to common unitholders |
|
| — |
|
|
| (61,034 | ) |
|
| (3,343 | ) |
|
| (64,377 | ) |
|
| — |
|
|
| (64,377 | ) |
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (35 | ) |
|
| (35 | ) |
Other, net |
|
| — |
|
|
| 30 |
|
|
| — |
|
|
| 30 |
|
|
| 111 |
|
|
| 141 |
|
Balances at June 30, 2020 |
| $ | — |
|
| $ | 1,698,012 |
|
| $ | 79,414 |
|
| $ | 1,777,426 |
|
| $ | (3,190 | ) |
| $ | 1,774,236 |
|
See notes to condensed consolidated financial statements.
12
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
For the NineSix Months Ended SeptemberJune 30, 20192020 and 20182019
(In thousands)
(Unaudited)
| Preferred Units |
|
| General Partner and Special Limited Partner |
|
| Limited Partners |
|
| Partners’ Capital Attributable to the Aimco Operating Partnership |
|
| Noncontrolling Interests in Consolidated Real Estate Partnerships |
|
| Total Partners’ Capital |
| ||||||
Balances at December 31, 2017 | $ | 125,000 |
|
| $ | 1,538,144 |
|
| $ | (5,675 | ) |
| $ | 1,657,469 |
|
| $ | (1,716 | ) |
| $ | 1,655,753 |
|
Issuance of common partnership units |
| — |
|
|
| — |
|
|
| 50,151 |
|
|
| 50,151 |
|
|
| — |
|
|
| 50,151 |
|
Redemption of partnership units held by non-Aimco partners |
| — |
|
|
| — |
|
|
| (8,458 | ) |
|
| (8,458 | ) |
|
| — |
|
|
| (8,458 | ) |
Amortization of share-based compensation |
| — |
|
|
| 6,285 |
|
|
| 1,236 |
|
|
| 7,521 |
|
|
| — |
|
|
| 7,521 |
|
Effect of changes in ownership of partnership units |
| — |
|
|
| (18,137 | ) |
|
| 8,036 |
|
|
| (10,101 | ) |
|
| — |
|
|
| (10,101 | ) |
Other, net |
| — |
|
|
| 119 |
|
|
| — |
|
|
| 119 |
|
|
| — |
|
|
| 119 |
|
Net income |
| — |
|
|
| 658,820 |
|
|
| 34,093 |
|
|
| 692,913 |
|
|
| 8,045 |
|
|
| 700,958 |
|
Change in accumulated other comprehensive income |
| — |
|
|
| 1,247 |
|
|
| 72 |
|
|
| 1,319 |
|
|
| — |
|
|
| 1,319 |
|
Distributions paid to common unitholders |
| — |
|
|
| (179,351 | ) |
|
| (9,402 | ) |
|
| (188,753 | ) |
|
| — |
|
|
| (188,753 | ) |
Distributions paid to preferred unitholders |
| — |
|
|
| (6,445 | ) |
|
| — |
|
|
| (6,445 | ) |
|
| — |
|
|
| (6,445 | ) |
Distributions paid to noncontrolling interests in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,934 | ) |
|
| (7,934 | ) |
Balances at September 30, 2018 | $ | 125,000 |
|
| $ | 2,000,682 |
|
| $ | 70,053 |
|
| $ | 2,195,735 |
|
| $ | (1,605 | ) |
| $ | 2,194,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2018 | $ | 125,000 |
|
| $ | 1,574,419 |
|
| $ | 67,189 |
|
| $ | 1,766,608 |
|
| $ | (2,967 | ) |
| $ | 1,763,641 |
|
Repurchases of common partnership units held by Aimco |
| — |
|
|
| (20,682 | ) |
|
| — |
|
|
| (20,682 | ) |
|
| — |
|
|
| (20,682 | ) |
Redemption of preferred units held by Aimco |
| (125,000 | ) |
|
| — |
|
|
| — |
|
|
| (125,000 | ) |
|
| — |
|
|
| (125,000 | ) |
Issuance of common partnership units |
| — |
|
|
| — |
|
|
| 3,034 |
|
|
| 3,034 |
|
|
| — |
|
|
| 3,034 |
|
Redemption of partnership units held by non-Aimco partners |
| — |
|
|
| 6,244 |
|
|
| (11,202 | ) |
|
| (4,958 | ) |
|
| — |
|
|
| (4,958 | ) |
Amortization of share-based compensation |
| — |
|
|
| 4,795 |
|
|
| 2,387 |
|
|
| 7,182 |
|
|
| — |
|
|
| 7,182 |
|
Effect of changes in ownership of partnership units and consolidated entities |
| — |
|
|
| (12,123 | ) |
|
| 8,766 |
|
|
| (3,357 | ) |
|
| 3,357 |
|
|
| — |
|
Contribution from noncontrolling interest in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,911 |
|
|
| 4,911 |
|
Purchase of noncontrolling interest in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,780 | ) |
|
| (3,780 | ) |
Other, net |
| — |
|
|
| (117 | ) |
|
| — |
|
|
| (117 | ) |
|
| 19 |
|
|
| (98 | ) |
Net income |
| — |
|
|
| 340,571 |
|
|
| 18,787 |
|
|
| 359,358 |
|
|
| 103 |
|
|
| 359,461 |
|
Change in accumulated other comprehensive income |
| — |
|
|
| (306 | ) |
|
| (19 | ) |
|
| (325 | ) |
|
| — |
|
|
| (325 | ) |
Distributions paid to common unitholders |
| — |
|
|
| (183,579 | ) |
|
| (9,827 | ) |
|
| (193,406 | ) |
|
| — |
|
|
| (193,406 | ) |
Common partnership units issued to common unitholders in special distribution |
|
|
|
|
| (516 | ) |
|
| — |
|
|
| (516 | ) |
|
| — |
|
|
| (516 | ) |
Distributions paid to preferred unitholders |
| — |
|
|
| (3,247 | ) |
|
| — |
|
|
| (3,247 | ) |
|
| — |
|
|
| (3,247 | ) |
Distributions paid to noncontrolling interests in consolidated real estate partnerships |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (143 | ) |
|
| (143 | ) |
Balances at September 30, 2019 | $ | — |
|
| $ | 1,705,459 |
|
| $ | 79,115 |
|
| $ | 1,784,574 |
|
| $ | 1,500 |
|
| $ | 1,786,074 |
|
|
| Preferred Units |
|
| General Partner and Special Limited Partner |
|
| Limited Partners |
|
| Partners’ Capital Attributable to the Aimco Operating Partnership |
|
| Noncontrolling Interests in Consolidated Real Estate Partnerships |
|
| Total Partners’ Capital |
| ||||||
Balances at December 31, 2018 |
| $ | 125,000 |
|
| $ | 1,574,419 |
|
| $ | 67,189 |
|
| $ | 1,766,608 |
|
| $ | (2,967 | ) |
| $ | 1,763,641 |
|
Repurchases of common partnership units |
|
| — |
|
|
| (20,682 | ) |
|
| — |
|
|
| (20,682 | ) |
|
| — |
|
|
| (20,682 | ) |
Redemption of preferred units |
|
| (125,000 | ) |
|
| — |
|
|
| — |
|
|
| (125,000 | ) |
|
| — |
|
|
| (125,000 | ) |
Issuance of Aimco Operating Partnership units |
|
| — |
|
|
| — |
|
|
| 3,034 |
|
|
| 3,034 |
|
|
| — |
|
|
| 3,034 |
|
Redemption of Aimco Operating Partnership units |
|
| — |
|
|
| 3,423 |
|
|
| (7,555 | ) |
|
| (4,132 | ) |
|
| — |
|
|
| (4,132 | ) |
Amortization of share-based compensation cost |
|
| — |
|
|
| 3,632 |
|
|
| 1,592 |
|
|
| 5,224 |
|
|
| — |
|
|
| 5,224 |
|
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| (7,019 | ) |
|
| 5,977 |
|
|
| (1,042 | ) |
|
| 1,042 |
|
|
| — |
|
Purchase of noncontrolling interest in consolidated real estate partnerships |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (917 | ) |
|
| (917 | ) |
Change in accumulated other comprehensive income |
|
| — |
|
|
| 72 |
|
|
| 5 |
|
|
| 77 |
|
|
| — |
|
|
| 77 |
|
Net income |
|
| — |
|
|
| 338,592 |
|
|
| 18,671 |
|
|
| 357,263 |
|
|
| 161 |
|
|
| 357,424 |
|
Distributions to common unitholders |
|
| — |
|
|
| (125,514 | ) |
|
| — |
|
|
| (125,514 | ) |
|
| — |
|
|
| (125,514 | ) |
Common partnership units issued to common unitholders in special distribution |
|
| — |
|
|
| (516 | ) |
|
| — |
|
|
| (516 | ) |
|
| — |
|
|
| (516 | ) |
Distributions to preferred unitholders |
|
| — |
|
|
| (3,247 | ) |
|
| — |
|
|
| (3,247 | ) |
|
| — |
|
|
| (3,247 | ) |
Distributions paid to noncontrolling interests in consolidated real estate partnerships |
|
| — |
|
|
| — |
|
|
| (6,547 | ) |
|
| (6,547 | ) |
|
| (56 | ) |
|
| (6,603 | ) |
Other, net |
|
| — |
|
|
| 58 |
|
|
| — |
|
|
| 58 |
|
|
| 19 |
|
|
| 77 |
|
Balances at June 30, 2019 |
| $ | — |
|
| $ | 1,763,218 |
|
| $ | 82,366 |
|
| $ | 1,845,584 |
|
| $ | (2,718 | ) |
| $ | 1,842,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2019 |
| $ | — |
|
| $ | 1,780,649 |
|
| $ | 83,442 |
|
| $ | 1,864,091 |
|
| $ | (3,296 | ) |
| $ | 1,860,795 |
|
Repurchases of common partnership units |
|
| — |
|
|
| (10,004 | ) |
|
| — |
|
|
| (10,004 | ) |
|
| — |
|
|
| (10,004 | ) |
Redemption of Aimco Operating Partnership units |
|
| — |
|
|
| 5,137 |
|
|
| (6,392 | ) |
|
| (1,255 | ) |
|
| — |
|
|
| (1,255 | ) |
Amortization of share-based compensation cost |
|
| — |
|
|
| 3,009 |
|
|
| 2,102 |
|
|
| 5,111 |
|
|
| — |
|
|
| 5,111 |
|
Effect of changes in ownership of consolidated entities |
|
| — |
|
|
| (4,348 | ) |
|
| 4,312 |
|
|
| (36 | ) |
|
| 36 |
|
|
| — |
|
Cumulative effect of a change in accounting principle |
|
| — |
|
|
| (277 | ) |
|
| — |
|
|
| (277 | ) |
|
| — |
|
|
| (277 | ) |
Change in accumulated other comprehensive income |
|
| — |
|
|
| (388 | ) |
|
| (27 | ) |
|
| (415 | ) |
|
| — |
|
|
| (415 | ) |
Net income |
|
| — |
|
|
| 45,977 |
|
|
| 2,475 |
|
|
| 48,452 |
|
|
| 225 |
|
|
| 48,677 |
|
Distributions to common unitholders |
|
| — |
|
|
| (121,859 | ) |
|
| (6,498 | ) |
|
| (128,357 | ) |
|
| — |
|
|
| (128,357 | ) |
Distributions to noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (108 | ) |
|
| (108 | ) |
Other, net |
|
| — |
|
|
| 116 |
|
|
| — |
|
|
| 116 |
|
|
| (47 | ) |
|
| 69 |
|
Balances at June 30, 2020 |
| $ | — |
|
| $ | 1,698,012 |
|
| $ | 79,414 |
|
| $ | 1,777,426 |
|
| $ | (3,190 | ) |
| $ | 1,774,236 |
|
See notes to condensed consolidated financial statements.
13
AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Nine Months Ended |
| |||||||||||
| September 30, |
| Six Months Ended June 30, |
| |||||||||
| 2019 |
| 2018 |
| 2020 |
|
| 2019 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income | $ | 365,261 |
| $ | 706,763 |
| $ | 52,181 |
|
| $ | 361,291 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| |
Depreciation and amortization |
| 283,027 |
| 286,439 |
|
| 198,165 |
|
|
| 185,489 |
| |
Gain on dispositions of real estate and the Asset Management business |
| (356,929 | ) |
| (679,738 | ) | |||||||
Income tax benefit |
| (1,942 | ) |
| (12,617 | ) | |||||||
Gain on dispositions of real estate |
| (47,204 | ) |
|
| (355,783 | ) | ||||||
Income tax (benefit) expense |
| (6,112 | ) |
|
| 1,154 |
| ||||||
Other adjustments |
| 10,429 |
| 11,762 |
|
| 7,411 |
|
|
| 6,443 |
| |
Net changes in operating assets and operating liabilities |
| (21,098 | ) |
| (9,683 | ) |
| (20,084 | ) |
|
| (28,555 | ) |
Net cash provided by operating activities |
| 278,748 |
|
| 302,926 |
|
| 184,357 |
|
|
| 170,039 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of real estate and deposits related to purchases of real estate |
| (131,613 | ) |
| (212,358 | ) |
| (7,794 | ) |
|
| (43,743 | ) |
Capital expenditures |
| (292,749 | ) |
| (253,149 | ) |
| (182,348 | ) |
|
| (176,488 | ) |
Proceeds from dispositions of real estate |
| 422,463 |
| 708,464 |
|
| 36,869 |
|
|
| 422,456 |
| |
Purchases of corporate assets |
| (14,825 | ) |
| (5,530 | ) |
| (8,743 | ) |
|
| (7,186 | ) |
Proceeds from repayments on notes receivable |
| 111 |
| 3,242 |
| ||||||||
Other investing activities |
| 608 |
|
| (1,547 | ) |
| 1,946 |
|
|
| 2,486 |
|
Net cash (used in) provided by investing activities |
| (16,005 | ) |
| 239,122 |
|
| (160,070 | ) |
|
| 197,525 |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of non-recourse property debt |
| 667,965 |
| 360,613 |
| ||||||||
Principal repayments of non-recourse property debt |
| (390,346 | ) |
| (403,141 | ) | |||||||
Repayment of term loan |
| — |
| (250,000 | ) | ||||||||
Net repayments on revolving credit facility |
| (160,360 | ) |
| (67,160 | ) | |||||||
Repurchases of common partnership units held by Aimco |
| (20,682 | ) |
| — |
| |||||||
Redemption of preferred units held by Aimco |
| (125,000 | ) |
| — |
| |||||||
Payment of distributions to Aimco |
| (183,319 | ) |
| (178,937 | ) | |||||||
Proceeds from non-recourse property debt |
| 608,756 |
|
|
| — |
| ||||||
Principal repayments on non-recourse property debt |
| (274,347 | ) |
|
| (207,790 | ) | ||||||
Proceeds from term loan |
| 350,000 |
|
|
| — |
| ||||||
Net (repayments of) borrowings on revolving credit facility |
| (275,000 | ) |
|
| 134,600 |
| ||||||
Repurchases of common partnership units held by General Partner and Special Limited Partner |
| (10,004 | ) |
|
| (20,682 | ) | ||||||
Redemption of preferred units from Aimco |
| — |
|
|
| (125,000 | ) | ||||||
Payment of distributions to General Partner and Special Limited Partner |
| (122,058 | ) |
|
| (125,350 | ) | ||||||
Payment of distributions to Limited Partners |
| (10,211 | ) |
| (8,810 | ) |
| (6,793 | ) |
|
| (7,014 | ) |
Payment of distributions to preferred unitholders |
| (9,047 | ) |
| (12,250 | ) | |||||||
Payment of distributions to noncontrolling interests in consolidated real estate partnerships |
| (309 | ) |
| (7,934 | ) | |||||||
Redemptions of partnership units held by non-Aimco partners |
| (5,071 | ) |
| (8,675 | ) | |||||||
Contributions from noncontrolling interests in consolidated real estate partnerships |
| 4,911 |
| — |
| ||||||||
Payment of distributions to preferred OP Units |
| (3,728 | ) |
|
| (7,114 | ) | ||||||
Payment of distributions to noncontrolling interests |
| (118 | ) |
|
| (56 | ) | ||||||
Redemption of common and preferred OP Units |
| (1,870 | ) |
|
| (4,244 | ) | ||||||
Purchases of noncontrolling interests in consolidated real estate partnerships |
| (3,780 | ) |
| (3,581 | ) |
| — |
|
|
| (917 | ) |
Other financing activities |
| (6,864 | ) |
| (415 | ) |
| (24,319 | ) |
|
| (10,685 | ) |
Net cash used in financing activities |
| (242,113 | ) |
| (580,290 | ) | |||||||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
| 20,630 |
|
| (38,242 | ) | |||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD |
| 72,595 |
|
| 142,541 |
| |||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 93,225 |
| $ | 104,299 |
| |||||||
Net cash provided by (used in) financing activities |
| 240,519 |
|
|
| (374,252 | ) | ||||||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
| 264,806 |
|
|
| (6,688 | ) | ||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD |
| 177,702 |
|
|
| 72,595 |
| ||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 442,508 |
|
| $ | 65,907 |
|
See notes to condensed consolidated financial statements.
14
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SeptemberJune 30, 20192020
(Unaudited)
Note 1 — Organization
Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-administered and self-managed real estate investment trust, or REIT. AIMCO Properties, L.P., or the Aimco Operating Partnership, is a Delaware limited partnership formed on May 16, 1994, to conduct our business, which is focused on the ownership, management, redevelopment, and some development of quality apartment communities located in several of the largest markets in the United States.
Aimco, through its wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, ownsholds a majority of the ownership interests in the Aimco Operating Partnership. Aimco conducts all of its business and owns all of its assets through the Aimco Operating Partnership. Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are referred to as OP Units. OP Units include common partnership units, which we refer to as common OP Units, as well as preferred partnership preferred units, which we refer to as preferred OP Units. As of SeptemberJune 30, 2019,2020, after elimination of units held by consolidated subsidiaries, the Aimco Operating Partnership had 158,447,276159,195,031 common partnership unitsOP Units outstanding. As of SeptemberJune 30, 2019,2020, Aimco owned 148,884,686148,865,047 of the common partnership units, or 94.0%,OP Units of the Aimco Operating Partnership and Aimco had an equal number of shares of its Class A Common Stock outstanding, which we refer to as Common Stock. Aimco’s ownership of the total common OP units outstanding represents a 93.5% legal interest in the Aimco Operating Partnership and a 94.9% economic interest.
Except as the context otherwise requires, “we,” “our”“our,” and “us” refer to Aimco, the Aimco Operating Partnership, and their consolidated subsidiaries, collectively.
We own and operate a portfolio of apartment communities, diversified by both geography and price point, in 17 states and the District of Columbia. As of SeptemberJune 30, 2019, we owned an equity interest in 1282020, our portfolio included 125 apartment communities with 33,82432,938 apartment homes in our portfolio. Our portfolio is diversified by both price point and geography and consists primarily of market rate apartment communities in which we own a substantial interest.held an average ownership of approximately 99%. We consolidated 124121 of these apartment communities with 33,68232,796 apartment homes.
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 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, (consistingconsisting of normal recurring items)items, considered necessary for a fair presentation have been included. Operating results for the three and ninesix months ended SeptemberJune 30, 20192020, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.2020.
The condensed consolidated balance sheets of Aimco and the Aimco Operating Partnership atas of December 31, 2018,2019, 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 the Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2018.2019. Except where indicated, the footnotes refer to both Aimco and the Aimco Operating Partnership.
Principles of Consolidation
Aimco’s accompanying condensed consolidated financial statements include the accounts of Aimco, the Aimco Operating Partnership, and their consolidated subsidiaries. The Aimco Operating Partnership’s condensed consolidated financial statements include the accounts of the Aimco Operating Partnership and its consolidated subsidiaries. Please refer to Note 9. All significant intercompany balances and transactions have been eliminated in consolidation.
15
We consolidate a variable interest entity, or 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. As of June 30, 2020, and December 31, 2019, Aimco consolidated 5 and 6 VIEs, respectively, in addition to the Aimco Operating Partnership.
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. Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are reflected in Aimco’s accompanying condensed consolidated balance sheets as noncontrolling interests in the Aimco Operating Partnership. Interests in partnerships consolidated by the Aimco Operating Partnership that are held by third parties are reflected in our accompanying condensed consolidated balance sheets as noncontrolling interests in consolidated real estate partnerships.
Temporary EquityWe have an interest in a partnership that owns Parkmerced Apartments, which meets the definition of a VIE. However, we are not the primary beneficiary and Partners’ Capitaldo not consolidate this partnership. We loaned $275.0 million to the partnership, which accrues interest at 10% per annum with a five-year term and the right to extend for a second five-year term. Our investment balance of $293.4 million, reflected in mezzanine investment in our condensed consolidated balance sheets, consists primarily of notes receivable and represents our maximum exposure to loss in this VIE.
The following table presents a reconciliation of the Aimco Operating Partnership’s preferredRedeemable Preferred OP Units from December 31, 2018 to September 30, 2019.
As described in Note 6,5, the preferred OP Units may be redeemed at the holder’s option and are therefore presented within temporary equity in Aimco’s condensed consolidated balance sheets and within temporary capital in the Aimco Operating Partnership’s condensed consolidated balance sheetssheets. The following table presents a reconciliation of the Aimco Operating Partnership’s preferred OP Units from December 31, 2019, to June 30, 2020 (in thousands):
Balance, December 31, 2018 |
| $ | 101,291 |
|
Distributions to holders of preferred OP Units |
|
| (5,800 | ) |
Redemption of preferred OP Units and other |
|
| (113 | ) |
Net income attributable to preferred OP Units |
|
| 5,800 |
|
Balance, September 30, 2019 |
| $ | 101,178 |
|
Balance at December 31, 2019 |
| $ | 97,064 |
|
Preferred distributions |
|
| (3,728 | ) |
Redemption of preferred units |
|
| (615 | ) |
Net income |
|
| 3,728 |
|
Balance at June 30, 2020 |
| $ | 96,449 |
|
The Aimco Operating Partnership has outstanding various classes of redeemable preferred OP Units. As of June 30, 2020, the Aimco Operating Partnership had 3,618,802 redeemable preferred OP Units issued and outstanding with a total redemption value of $96.4 million. Distributions per annum range from $0.48 to $8.00 per unit.
Revenue from Leases
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. For the three and six months ended June 30, 2020 and 2019, our total lease income was comprised of the following amounts for all operating leases (in thousands):
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Fixed lease income |
| $ | 205,736 |
|
| $ | 209,890 |
|
| $ | 419,152 |
|
| $ | 425,471 |
|
Variable lease income |
|
| 12,649 |
|
|
| 13,608 |
|
|
| 26,264 |
|
|
| 27,752 |
|
Straight-line rent write-off (1) |
|
| (19 | ) |
|
| — |
|
|
| (2,927 | ) |
|
| — |
|
Total lease income |
| $ | 218,366 |
|
| $ | 223,498 |
|
| $ | 442,489 |
|
| $ | 453,223 |
|
(1) | We monitor the collectability of all unpaid rent amounts. The onset of COVID-19 and the anticipated economic slowdown resulted in a $2.9 million write-off of accrued straight-line rent during the three months ended March 31, 2020. Additionally, we wrote-off the related deferred leasing costs of $2.2 million during the three months ended March 31, 2020. The write-offs of deferred leasing costs are recorded in depreciation and amortization in our condensed consolidated statements of operations. |
In response to the economic effects of the COVID-19 pandemic, some jurisdictions where our communities are located, such as Los Angeles, Philadelphia, and New York City, have enacted protections for residents and commercial tenants, including government mandated rent deferrals, rent freezes, repayment extensions, fee abatement measures or concessions, and prohibitions on lease terminations or evictions for tenants. Some states and municipalities are also implementing rental assistance programs and encouraging landlord-tenant negotiations.
On April 10, 2020, the Financial Accounting Standards Board, or FASB, issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions, including deferrals or reductions of future lease payments.
16
Consequently, in accordance with the Staff Q&A issued by the FASB, we may elect to record rent relief when granted rather than over the remaining term of the lease. Our commercial tenants represent 3.1% of revenue for the three months ended June 30, 2020. For the three and six months ended June 30, 2020, we granted to commercial tenants $0.4 million in rent relief and elected to record this as a reduction of variable lease income in the table above.
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.
Reclassifications and Revisions
Certain items inFor the 20182020 presentation of our condensed consolidated financial statements of operations, we have beenadded a caption for investment management expenses. We have reclassified certain items from property operating expenses, general and administrative expenses, and other expenses, net, in our 2019 presentation to conform to the current presentation. We have also reclassified gain on dispositions of real estate and related income taxes, which were previously reported net on our condensed consolidated statements of operations, to now present gain on dispositions of real estate and the Asset Management business as a component of income before income tax benefit (expense) in our condensed consolidated statements of operations, as follows (in thousands):
|
| Three Months Ended September 30, 2018 |
|
| Nine Months Ended September 30, 2018 |
| |||||||||||||||||||||||||||||||||||
|
| As Previously Reported |
|
| Adjustments |
|
| As Revised |
|
| As Previously Reported |
|
| Adjustments |
|
| As Revised |
| |||||||||||||||||||||||
Income tax benefit (expense) |
| $ | 27,941 |
|
| $ | (54,147 | ) |
| $ | (26,206 | ) |
| $ | 69,724 |
|
| $ | (57,107 | ) |
| $ | 12,617 |
| |||||||||||||||||
Gain on dispositions of real estate and the Asset Management business |
|
| 572,085 |
|
|
| 54,147 |
|
|
| 626,232 |
|
|
| 622,631 |
|
|
| 57,107 |
|
|
| 679,738 |
|
During the nine months ended September 30, 2019, Aimco and the Aimco Operating Partnership effected a reverse split of Common Stock and common partnership units, respectively, at a ratio of one share or unit for every 1.03119 shares or units outstanding on the date of effectiveness. The accounting guidance for recapitalization events requires that we revise Aimco’s equity and the Aimco Operating Partnership’s partners’ capital as if the reverse split had occurred at the beginning of the earliest period presented. As such, we have revised the outstanding share and unit counts, presentation of share and unit activity, and earnings per share and unit, as if the reverse split had occurred on December 31, 2017.
Accounting Pronouncements Adopted in the Current Year
EffectiveOn January 1, 2019,2020, we adopted the lease accounting standardASC 326, Financial Instruments – Credit Losses, issued by the Financial Accounting Standards Board, or FASB. We elected to adopt the new standard using practical expedients that: do not require a look back to expired or existing contracts for embedded leases; allow us to retain the classification of existing leases; and allow us to retain the previous accounting for the initial direct costs of existing leases. Under the new standard, a contract is or contains a lease when it provides the right to control the use of an asset for a period of time in exchange for consideration.
Lessor accounting remains largely unchanged. In our position as a lessor, we have elected the practical expedient that allows us to combine revenue attributable to nonlease components with associated lease components where the timing and pattern of transfer of the components are the same. As a result, we will combine rent payments with payments for other services we provide to our residents, including residents’ reimbursement of utility expenses. We have adopted the standard using the optional transition method that allows for prior reporting periods to remain as originally presented. Please refer to Note 4.
16
In 2018, the Securities Exchange Commission, or SEC, amended its rules to eliminate, modify, or integrate into other SEC requirements certain disclosure rules. The amendments are intended to simplify compliance without significantly changing the total mix of information provided to investors. The amendments created a requirement to report changes in equity and dividends per share in interim periods on a comparative basis for both quarter-to-date and year-to-date periods presented. We have presented comparative interim statements of stockholders’ and partners’ equity in our condensed consolidated financial statements for the three and nine months ended September 30, 2019 and 2018.
Recent Accounting Pronouncements
In 2016, the FASB issued a new standard for accounting for financial instruments and credit losses thereon, which changes the method and timing of the recognition of credit losses on financial assets. The standard will requirerequires us to estimate and record credit losses over the life of a financial instrument, including receivables, at its inception. We have limited loansOur notes receivable and we investinvestments in available for sale, or AFS, debt securities which are subject to the new standard. Financial instruments, including receivables, related to operating leases are excluded fromFor AFS debt securities, the new standard as they are subjectrequires us to estimate a credit loss if the lease accounting standard. Thisfair value of the instruments is less than the carrying value of the instruments.
We adopted the credit loss standard is required to be applied using athe modified-retrospective approach and requiresapproach. We recorded a cumulative-effect adjustment to retainedfor the estimated credit loss associated with our notes receivable of $0.3 million in distributions in excess of earnings be recordedand partners’ capital in our condensed consolidated balance sheets as of January 1, 2020. As of the date of adoption. The new standard is effectiveadoption, the fair value of our AFS debt securities exceeded their carrying value and 0 estimate of credit loss was required for us on January 1, 2020. We are currently in the process of completing our analysis of the impact of the standard and do not expect it to have a material effect on our financial position or results of operations.
these instruments.
Note 3 — Significant Transactions
Acquisition of 1001 Brickell Bay DriveFinancing Activity
DuringOn April 20, 2020, we secured a $350.0 million term loan. The loan matures on April 20, 2021, includes a one-year extension option, and currently bears interest at a 30-day LIBOR plus 1.85%, with a 50-basis point LIBOR floor. Proceeds from the three months ended September 30, 2019, we acquired a 95% interest in 1001 Brickell Bay Drive, a 1.8-acre waterfront parcel in Miami, Florida, currently improved with an office building. Summarized information regarding this acquisition is set forth in the table below (dollars in thousands):loan were used primarily to repay borrowings on our revolving credit facility.
Purchase price |
| $ | 156,750 |
|
Capitalized transaction costs |
|
| 2,339 |
|
Noncontrolling interests in consolidated real estate partnerships |
|
| 8,250 |
|
Total consideration (1) |
| $ | 167,339 |
|
|
|
|
|
|
Acquisition costs allocated to land |
| $ | 145,648 |
|
Acquisition costs allocated to building and improvements |
|
| 153,241 |
|
Acquisition costs allocated to intangible assets |
|
| 16,500 |
|
Acquisition costs allocated to intangible liabilities |
|
| (6,519 | ) |
Deferred tax liability assumed (2) |
|
| (141,531 | ) |
Total consideration |
| $ | 167,339 |
|
|
|
|
|
Acquisitions of Apartment Communities
During the nine months ended September 30, 2019, we acquired an apartment community located in Ardmore, Pennsylvania, a suburb of Philadelphia. Summarized information regarding this acquisition is set forth in the table below (dollars in thousands):
Number of apartment homes |
|
| 110 |
|
|
|
|
|
|
Purchase price (1) |
| $ | 65,833 |
|
Capitalized transaction costs |
|
| 892 |
|
Total consideration |
| $ | 66,725 |
|
|
|
|
|
|
Acquisition costs allocated to land |
| $ | 4,929 |
|
Acquisition costs allocated to building (2) |
|
| 61,271 |
|
Acquisition costs allocated to furniture and fixtures (2) |
|
| 525 |
|
Total consideration |
| $ | 66,725 |
|
|
|
17
|
|
Dispositions of Apartment Communities
During the ninethree and six months ended SeptemberJune 30, 2019,2020, we sold 1 apartment communities as summarized below (dollars in thousands):
Apartment communities sold |
|
| 8 |
|
Apartment homes sold |
|
| 2,605 |
|
Gain on dispositions of real estate |
| $ | 356,929 |
|
community with 219 apartment homes for a gain on disposition of $47.2 million. The apartment communitiescommunity sold were predominantly located outside of our primary markets or in 2020 was in a lower-rated locationslocation within our primary markets and had average revenues per apartment home significantly below those of our retained portfolio.
In addition toDuring the three months ended June 30, 2019, we sold 1 apartment community with 399 apartment homes for a gain on disposition of $64.3 million. During the six months ended June 30, 2019, we sold 8 apartment communities we sold during the current period, fromwith 2,605 apartment homes for a gain on dispositions of $355.8 million.
From time to time we may be marketing for sale certain apartment communities that are inconsistent with our long-term investment strategy. At the end of each reporting period we evaluate whether such communities meet the criteria to be classified as held for sale. As of SeptemberJune 30, 2019,2020, 0 apartment communities were classified as held for sale. Subsequent to June 30, 2020, we received a $5.0 million non-refundable deposit on a community to be sold for approximately $126 million later in 2020.
Note 4 — Leases
The majority of payments that we receive for our residential and commercial leases are fixed. We receive variable payments from our residents and commercial tenants primarily for utility and other expense reimbursements. For the three and nine months ended September 30, 2019, our total lease income was comprised of the following amounts for all operating leases (in thousands):
|
| Three Months Ended September 30, 2019 |
|
| Nine Months Ended September 30, 2019 |
| ||
Fixed lease income |
| $ | 213,945 |
|
| $ | 639,359 |
|
Variable lease income |
|
| 15,005 |
|
|
| 42,814 |
|
Total lease income |
| $ | 228,950 |
|
| $ | 682,173 |
|
In general, our commercial leases have options to extend for a certain period of time at the tenant’s option. Future minimum annual rental payments we will receive under commercial operating leases, excluding such extension options, are as follows (in thousands):
October 1, 2019 to December 31, 2019 |
| $ | 7,200 |
|
2020 |
|
| 26,861 |
|
2021 |
|
| 23,391 |
|
2022 |
|
| 19,910 |
|
2023 |
|
| 16,081 |
|
Thereafter |
|
| 65,583 |
|
Total |
| $ | 159,026 |
|
Generally, our residential leases do not provide extension options and, as of September 30, 2019, have an average remaining term of 10.3 months. Future minimum rental payments pursuant to residential leases are excluded from the table above due to their shorter term.
For leases in which we are the lessee, beginning in 2019, we recognize right of use assets and related lease liabilities on our consolidated balance sheets. Upon adoption of the accounting guidance for leases, we recognized right of use assets of $87.5 million, which are included in other assets on our condensed consolidated balance sheets. We also recognized the related lease liabilities of $79.7 million, which are included in accrued liabilities and other on our condensed consolidated balance sheets. We estimated the value of the lease liabilities using a discount rate equivalent to the rate we would pay on a secured borrowing with similar terms to the lease.
Substantially all of the payments under our ground and office leases are fixed. Rents for extension periods, when provided for in the lease, are generally adjusted to market value at the time the option is exercised; therefore, these extension periods were not included in our determination of the right of use asset and lease liability. For the three and nine months ended September 30, 2019, our total lease cost for ground leases was $1.3 million and $5.8 million, respectively, and for office leases was $1.1 million and $2.4 million, respectively.
18
As of September 30, 2019, the ground and office leases have weighted average remaining terms of 79.3 years and 8.5 years, respectively, and weighted average discount rates of 4.12% and 3.22%, respectively. Minimum annual rental payments under operating leases, reconciled to the lease liabilities included in accrued liabilities and other on our condensed consolidated balance sheets are as follows (in thousands):
|
| Office Lease Future Minimum Rent |
|
| Ground Lease Future Minimum Rent |
|
| Total Operating Lease Future Minimum Rent |
| |||
October 1, 2019 to December 31, 2019 |
| $ | 852 |
|
| $ | 529 |
|
| $ | 1,381 |
|
2020 |
|
| 2,806 |
|
|
| 2,350 |
|
|
| 5,156 |
|
2021 |
|
| 2,704 |
|
|
| 2,439 |
|
|
| 5,143 |
|
2022 |
|
| 2,561 |
|
|
| 2,492 |
|
|
| 5,053 |
|
2023 |
|
| 1,871 |
|
|
| 2,492 |
|
|
| 4,363 |
|
Thereafter |
|
| 10,644 |
|
|
| 422,169 |
|
|
| 432,813 |
|
Total |
|
| 21,438 |
|
|
| 432,471 |
|
|
| 453,909 |
|
Less: Discount |
|
| (3,091 | ) |
|
| (354,941 | ) |
|
| (358,032 | ) |
Total lease liability |
| $ | 18,347 |
|
| $ | 77,530 |
|
| $ | 95,877 |
|
Note 5 — Commitments and Contingencies
Commitments
In connection with our redevelopment, development, and other capital additions activities, we have entered into various construction-related contracts and we have made commitments to complete redevelopment and development of certain apartment communities, pursuant to financing or other arrangements. As of SeptemberJune 30, 2019,2020, our commitments related to these capital activities totaled approximately $308.9$179 million, most of which we expect to incur during the next 12 months.
17
We 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 one year or less and reflect expenditure levels comparable to our historical expenditures.
Income Taxes
In 2014, the Internal Revenue Service initiated an audit of the Aimco Operating Partnership’s 2011 and 2012 tax years. This audit was concluded during the three months ended September 30, 2019, with no material effect on our tax benefits, financial condition or results of operations.
Legal Matters
In addition to the matters described below, we are a party to various legal actions and administrative proceedings arising in the ordinary course of business, some of which are covered by our general liability insurance program, and none of which we expect to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.
Environmental
Various federal, state, and local laws subject apartment community owners or operators to liability for management, and the costs of removal or remediation, of certain potentially hazardous materials that may be present in the land or buildings of an apartment community. Such laws often impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with investigation and remediation actions. Moreover, private plaintiffs may potentially make claims for investigation and remediation costs they incur or for personal injury, disease, disability, or other infirmities related to the alleged presence of hazardous materials. In addition to potential environmental liabilities or costs associated with our current apartment communities, we may also be responsible for such liabilities or costs associated with communities we acquire or manage in the future, or apartment communities we no longer own or operate.
We are engaged in discussions with the Environmental Protection Agency, or EPA, regarding contaminated groundwater near an Indiana apartment community that has not been owned by us since 2008. The contamination allegedly derives from a dry cleaner that operated on our former property, prior to our ownership. We undertook a voluntary remediation of the dry cleaner contamination under IDEM’sstate oversight. In 2016, EPA listed our former community and a number of residential communities in the vicinity on the National Priorities List, or NPL (i.e., as a Superfund site). In May 2018, we prevailed on our federal judicial appeal vacating the Superfund listing. We continue to work with EPA to identify options for clean-upformulate a scope of work and agreed order to finish clean up of the site.
19
site outside the Superfund program. Although the outcome of these processes arethis process is uncertain, we do not expect theirthe resolution to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.
We also have a contingent environmental liability stemming fromrelated to a property in Lake Tahoe, California, regarding environmental contamination from the historic operation of a dry cleaner.California. An entity owned by us was the former general partner of a now-dissolved partnership that previously owned a site that was used for dry cleaning.where a laundromat, with a self-service dry-cleaning machine, operated. That entity and the current property owner have been remediating the dry cleaner site since 2009, under the oversight of the Lahontan Regional Water Quality Control Board, or Lahontan. In May 2017, Lahontan issued a final cleanup and abatement order that names 4 potentially-responsible parties, acknowledges that there may be additional responsible parties, and requires the named parties to perform additional groundwater investigation and corrective actions with respect to onsite and offsite contamination. We are appealingappealed the final order, while simultaneously complying with it.and on June 1, 2020, the court vacated the Order against us. However, there are still civil suits pending related to this contingent liability. Although the outcome of this process is uncertain, we do not expect itsthe resolution to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.
We have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement obligations, as defined inby GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or apartment community casualty, we believe that the fair value of our asset retirement obligations cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. Asset retirement obligations that are reasonably estimable as of SeptemberJune 30, 2019,2020, are immaterial to our consolidated financial condition, results of operations, and cash flows.
Note 65 — Earnings and Dividends per Share and Unit
Aimco and the Aimco Operating Partnership calculate basic earnings per common share and basic earnings per common unit based on the weighted averageweighted-average number of shares of Common Stock and common partnership units outstanding and excludes participating securities. Dilutedoutstanding. We calculate diluted earnings per share and diluted earnings per unit are calculated taking into consideration dilutive common stock and common partnership unit equivalents and dilutive convertible securities outstanding during the period.
Our common stock and common partnership unit equivalents include options to purchase shares of Common Stock, which, if exercised, would result in Aimco’s issuance of additional shares and the Aimco Operating Partnership’s issuance to Aimco of additional common partnership units equal to the number of shares purchased under the options. These equivalents also include
18
unvested total stockholdershareholder return, or TSR, 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 common partnership units outstanding equal to the number of shares that vest. Common partnership unit equivalents also include unvested long-term incentive partnership units. SecuritiesWe include in the denominator securities with dilutive effect are included in the denominator for calculating diluted earnings per share and per unit during these periods.
Our time-based restricted stock awards that are subject to time-based vesting receive non-forfeitable dividends similar to shares of Common Stock and common partnership units prior to vesting. These dividendsvesting, and our TSR long-term incentive partnership units receive non-forfeitable distributions are not forfeited ifbased on specified percentages of the awards faildistributions paid to vest. Therefore, thecommon partnership units prior to vesting and conversion. The unvested restricted shares and units related to these awards are participating securities. TheWe include the effect of our time-based restricted stock awards is includedparticipating 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.
The effectReconciliations of dilutive securities includedthe numerator and denominator in the calculationcalculations of basic and diluted earnings per share and securities not dilutive and excluded from the calculation of earnings per share,unit for the three and ninesix months ended SeptemberJune 30, 2020 and 2019, and 2018, wereare as follows (in thousands)thousands, except per share and per unit data):
| Three Months Ended |
| Nine Months Ended | Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||
| September 30, 2019 |
| September 30, 2018 |
| September 30, 2019 |
| September 30, 2018 | 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic and dilutive net income attributable to Aimco common stockholders | $ | 39,212 |
|
| $ | 59,234 |
|
| $ | 45,891 |
|
| $ | 330,802 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Denominator – shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic weighted-average Common Stock outstanding |
| 148,535 |
|
|
| 148,367 |
|
|
| 148,527 |
|
|
| 146,994 |
| |||||||
Dilutive share equivalents outstanding | 202 |
| 222 |
| 218 |
| 158 |
| 18 |
|
|
| 232 |
|
|
| 143 |
|
|
| 226 |
|
Dilutive weighted-average Common Stock outstanding |
| 148,553 |
|
|
| 148,599 |
|
|
| 148,670 |
|
|
| 147,220 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Earnings per share – basic and diluted | $ | 0.26 |
|
| $ | 0.40 |
|
| $ | 0.31 |
|
| $ | 2.25 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Non-dilutive share equivalents outstanding |
| 8,929 |
|
|
| — |
|
|
| 8,260 |
|
|
| — |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Earnings per unit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic and dilutive net income attributable to the Aimco Operating Partnership's common unitholders | $ | 41,319 |
|
| $ | 62,817 |
|
| $ | 48,366 |
|
| $ | 349,456 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Denominator – units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic weighted-average common partnership units outstanding |
| 156,509 |
|
|
| 156,637 |
|
|
| 156,584 |
|
|
| 155,158 |
| |||||||
Dilutive partnership unit equivalents outstanding | 261 |
| 240 |
| 327 |
| 165 |
| 18 |
|
|
| 381 |
|
|
| 218 |
|
|
| 359 |
|
Non-dilutive share equivalents outstanding | — |
| 184 |
| — |
| 184 | |||||||||||||||
Dilutive weighted-average common partnership units outstanding |
| 156,527 |
|
|
| 157,018 |
|
|
| 156,802 |
|
|
| 155,517 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Earnings per unit – basic and diluted | $ | 0.26 |
|
| $ | 0.40 |
|
| $ | 0.31 |
|
| $ | 2.25 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Non-dilutive partnership unit equivalents outstanding | — |
| 421 |
| — |
| 421 |
| 2,081 |
|
|
| — |
|
|
| 1,214 |
|
|
| — |
|
Unvested restricted participating shares and partnership units | 189 |
| 250 |
| 189 |
| 250 |
The Aimco Operating Partnership has various classes of preferred OP Units, which may be redeemed at the holder’sholders’ option. The Aimco Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of SeptemberJune 30, 2019,2020, these preferred OP Units were potentially redeemable for approximately 1.92.6 million shares of Common Stock (based on the period end market price), or cash. The Aimco Operating Partnership has a redemption policy that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. Accordingly, we have excluded these securities from earnings per share and unit computations for the periods presented above, and we expect to exclude them in future periods.
20
During the three and ninesix months ended SeptemberJune 30, 2020, we paid $0.41 and $0.82, respectively, in dividends and distributions per share and per unit. During the three and six months ended June 30, 2019, we paid $0.39 and $2.80,$2.41, respectively, in dividends and distributions per share and per unit. Of the $2.80$2.41 paid in dividends and distributions in 2019, $2.02 was paid in March and represents the per share and per unit value of the special dividend and special distribution.distribution authorized by the Board of Directors in the first quarter of 2019. The special dividend consisted of $67.1 million in cash, 4.5 million shares of Common Stock, and $0.4 million of cash paid in lieu of issuing fractional shares. The special distribution consisted of $72.7 million in cash, 4.8 million common partnership units, and $0.4 million of cash paid in lieu of issuing fractional units. During
19
In connection with the special dividend and distribution, the Board of Directors authorized a reverse stock split during the three and nine months ended September 30, 2018, we paid $0.38March 31, 2019. The reverse split combined every 1.03119 common shares and $1.14, respectively,common partnership units into one common share or common partnership unit and was intended to neutralize the dilutive impact of the shares and units issued in dividendsthe special dividend and distributions per sharedistribution. As a result, the number of shares and per unit.
units outstanding after the dividend/distribution and reverse split was unchanged from the number outstanding immediately prior to the two actions.
Note 76 — Fair Value Measurements
Recurring Fair Value Measurements
We hold several positionsmeasure at fair value on a recurring basis our investments in the securitization trust that holds certain of our property debt, andwhich we classify as AFS debt securities. These investments are presented within other assets in the condensed consolidated balance sheets. We hold several positions in the securitization trust that pay interest currently. Wecurrently and we also hold the first loss position in the securitization trust, which accrues interest over the term of the investment. These investments were acquired at a discount to face value and we are accreting the discount to the $100.9 million face value of the investments through interest income using the effective interest method over the remaining expected term of the investments, which as of SeptemberJune 30, 2019,2020, was approximately 1.71.1 years. We measure at fair value, on a recurring basis, our investments in the securitization trust, which we classify as available for sale, or AFS, debt securities.
Our investments in AFS debt securities are included in other assets in the accompanying condensed consolidated balance sheets. Our amortized cost basis for AFS debt securities,these investments, which represents the original cost adjusted for interest accretion less interest payments received, was $88.3$93.5 million and $83.6$90.0 million as of SeptemberJune 30, 20192020, and December 31, 2018, respectively. We estimated the fair value of these investments to be $92.9 million and $88.5 million as of September 30, 2019, and December 31, 2018, respectively.
Our investments in AFS debt securities are classified within Level 2 of the GAAP fair value hierarchy. We estimate the fair value of these investments using an income and market approach with primarily observable inputs, including yields and other information regarding similar types of investments, and adjusted for certain unobservable inputs specific to these investments. The fair value of the positions that pay interest currently typically moves in an inverse relationship with movements in interest rates. The fair value of the first loss position is primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities.
During the three months ended June 30, 2020, we paid an upfront premium of $12.1 million for the option to enter into an interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against our refinancing interest rate risk and is intended to mitigate interest rate increases between now and 2024. We receive a cash settlement in the future if the prevailing interest rate is higher than the 1.68% strike price. The amount of future cash settlement is limited if the prevailing interest rate exceeds 2.78%. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement.
We measure at fair value on a recurring basis our interest rate option, which is presented in other assets in our condensed consolidated balance sheets. Our interest rate option is classified within Level 2 of the GAAP fair value hierarchy, and we estimate its 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 other expense, net, 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, and the upfront premium is reflected in other financing in our condensed consolidated statements of cash flows.
The following table summarizes fair value for our AFS debt securities and our interest rate option (in thousands):
|
| As of June 30, 2020 |
|
| As of December 31, 2019 |
| ||||||||||||||||||||||||||
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
AFS debt securities |
| $ | 97,311 |
|
| $ | — |
|
| $ | 97,311 |
|
| $ | — |
|
| $ | 94,251 |
|
| $ | — |
|
| $ | 94,251 |
|
| $ | — |
|
Interest rate option |
| $ | 11,008 |
|
| $ | — |
|
| $ | 11,008 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Fair Value Disclosures
We believe that the carrying value of the consolidated amounts of cash and cash equivalents, receivablesrestricted cash, accounts receivable, and payablesaccounts payable approximated their fair value as of SeptemberJune 30, 20192020, and December 31, 2018,2019, due to their relatively short-term nature and high probability of realization. The carrying amounts of longernotes receivable, the term seller financing notes receivableloan, and the revolving credit facility also approximated their estimated fair value as of SeptemberJune 30, 20192020, and December 31, 2018. The carrying amount of our total indebtedness approximated its estimated fair value as of September 30, 2019 and December 31, 2018.2019. We estimate the fair value of our seller financing notes and our consolidatednon-recourse property 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, collateral quality, and loan to value ratios on similarly encumbered apartment communities within our portfolio. We classify the fair value of our non-recourse property debt and seller financing notes within Level 32 of the GAAP valuationfair value hierarchy based on the significance of certain of the unobservable inputs used to estimate its fair value.
20
The following table summarizes carrying value and fair value for our non-recourse property debt (in thousands):
| As of June 30, 2020 |
|
| As of December 31, 2019 |
| ||||||||||
| Carrying Value |
|
| Fair Value |
|
| Carrying Value |
|
| Fair Value |
| ||||
Non-recourse property debt | $ | 4,565,673 |
|
| $ | 4,656,612 |
|
| $ | 4,251,339 |
|
| $ | 4,298,630 |
|
Note 87 — Business Segments
In 2019, as a result of the 2018 sale of the Asset Management business, we revised the information regularly reviewed by our chief executive officer, who is our chief operating decision maker, to assess our operating performance. We have determined we have 43 segments: (i) Same Store, (ii) Redevelopment and Development, and (iii) Acquisition and Other Real Estate.
Our Same Store segment includes communities that have reached a stabilized level of operations as of the beginning of a two-year comparable period and maintained it throughout the current and comparable prior year and are not expected to be sold within 12 months. Our Redevelopment and Development segment includes apartment communities that are currently under construction, that have not achieved a stabilized level of operations, and those that have been completed in recent years that have not achieved and maintained stabilized operations for both the current and comparable prior year. Our Acquisition and Other Real Estate segment includes apartmentincludes: (i) communities that we have acquired since the beginning of a two-year comparable period. Our Other Real Estate segment primarily includes apartmentperiod; (ii) communities that are subject to limitations on rent increases,increases; (iii) communities that we expect to sell within 12 months but do not yet meet the criteria to be classified as held for sale,sale; (iv) communities that we expect to redevelop; and (v) certain retail spaces and 1001 Brickell Bay Drive.commercial spaces.
21
Our chief operating decision maker uses proportionate property net operating income to assess the operating performance of our apartment communities. Proportionate property net operating income is defined asreflects our share of rental and other property revenuerevenues, excluding utility reimbursements, less our share ofdirect property operating expenses, net of utility reimbursements, for consolidated apartment communities. We exclude from rental and other property revenues the amount of utility costs reimbursed by residents and reflect such amount as a reduction of the related utility expense within property operating expenses in our evaluation of segment results. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues, in accordance with GAAP.
As of SeptemberJune 30, 2019,2020, our Same Store segment included 9594 consolidated apartment communities with 27,64027,876 apartment homes; our Redevelopment and Development segment included 78 consolidated apartment communities with 3,137 apartment2,521 homes; and our Acquisition segment included 7 consolidated apartment communities with 1,590 apartment homes; and our Other Real Estate segment included 15 apartment19 communities with 1,315 apartment2,399 homes and 1 office building.
The following tables present the rental and other property revenues, property operating expenses, proportionate property net operating income, and income before income tax benefit (expense) of our segments on a proportionate basis, excluding amounts related to sold communities and excluding our proportionate share of 4 apartment communities with 142 apartment homes whichthat we do notneither manage nor consolidate, and amounts related to apartment communities sold as of September 30, 2019 for the three and ninesix months ended SeptemberJune 30, 20192020 and 20182019 (in thousands):
| Same Store |
|
| Redevelopment and Development |
|
| Acquisition |
|
| Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| Same Store |
|
| Redevelopment and Development |
|
| Acquisition and Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| |||||||||||||
Three months ended September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Total revenues | $ | 179,056 |
|
| $ | 17,891 |
|
| $ | 10,656 |
|
| $ | 13,389 |
|
| $ | 8,832 |
|
| $ | 3 |
|
| $ | 229,827 |
| |||||||||||||||||||||||
Property operating expenses attributable to real estate |
| 48,220 |
|
|
| 7,469 |
|
|
| 3,317 |
|
|
| 5,149 |
|
|
| 8,234 |
|
|
| 5,041 |
|
|
| 77,430 |
| |||||||||||||||||||||||
Three months ended June 30, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Rental and other property revenues | $ | 180,779 |
|
| $ | 11,589 |
|
| $ | 17,415 |
|
| $ | 8,519 |
|
| $ | 506 |
|
| $ | 218,808 |
| |||||||||||||||||||||||||||
Property operating expenses |
| 48,720 |
|
|
| 4,912 |
|
|
| 6,485 |
|
|
| 7,931 |
|
|
| 6,075 |
|
|
| 74,123 |
| |||||||||||||||||||||||||||
Other operating expenses not allocated to segments (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 113,770 |
|
|
| 113,770 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 112,745 |
|
|
| 112,745 |
|
Total operating expenses |
| 48,220 |
|
|
| 7,469 |
|
|
| 3,317 |
|
|
| 5,149 |
|
|
| 8,234 |
|
|
| 118,811 |
|
|
| 191,200 |
|
| 48,720 |
|
|
| 4,912 |
|
|
| 6,485 |
|
|
| 7,931 |
|
|
| 118,820 |
|
|
| 186,868 |
|
Proportionate property net operating income |
| 130,836 |
|
|
| 10,422 |
|
|
| 7,339 |
|
|
| 8,240 |
|
|
| 598 |
|
|
| (118,808 | ) |
|
| 38,627 |
| |||||||||||||||||||||||
Proportionate property net operating income (loss) |
| 132,059 |
|
|
| 6,677 |
|
|
| 10,930 |
|
|
| 588 |
|
|
| (118,314 | ) |
|
| 31,940 |
| |||||||||||||||||||||||||||
Other items included in income before income tax benefit (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (37,753 | ) |
|
| (37,753 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,385 |
|
|
| 8,385 |
|
Income before income tax benefit | $ | 130,836 |
|
| $ | 10,422 |
|
| $ | 7,339 |
|
| $ | 8,240 |
|
| $ | 598 |
|
| $ | (156,561 | ) |
| $ | 874 |
| $ | 132,059 |
|
| $ | 6,677 |
|
| $ | 10,930 |
|
| $ | 588 |
|
| $ | (109,929 | ) |
| $ | 40,325 |
|
| Same Store |
|
| Redevelopment and Development |
|
| Acquisition |
|
| Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| |||||||
Three months ended September 30, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues | $ | 172,426 |
|
| $ | 19,876 |
|
| $ | 10,630 |
|
| $ | 9,475 |
|
| $ | 8,335 |
|
| $ | 21,739 |
|
| $ | 242,481 |
|
Property operating expenses attributable to real estate |
| 46,751 |
|
|
| 7,242 |
|
|
| 2,826 |
|
|
| 3,652 |
|
|
| 7,826 |
|
|
| 9,957 |
|
|
| 78,254 |
|
Other operating expenses not allocated to segments (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 117,273 |
|
|
| 117,273 |
|
Total operating expenses |
| 46,751 |
|
|
| 7,242 |
|
|
| 2,826 |
|
|
| 3,652 |
|
|
| 7,826 |
|
|
| 127,230 |
|
|
| 195,527 |
|
Proportionate property net operating income |
| 125,675 |
|
|
| 12,634 |
|
|
| 7,804 |
|
|
| 5,823 |
|
|
| 509 |
|
|
| (105,491 | ) |
|
| 46,954 |
|
Other items included in income before income tax benefit (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 583,169 |
|
|
| 583,169 |
|
Income before income tax expense | $ | 125,675 |
|
| $ | 12,634 |
|
| $ | 7,804 |
|
| $ | 5,823 |
|
| $ | 509 |
|
| $ | 477,678 |
|
| $ | 630,123 |
|
| Same Store |
|
| Redevelopment and Development |
|
| Acquisition and Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| ||||||
Three months ended June 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues | $ | 182,816 |
|
| $ | 12,695 |
|
| $ | 14,097 |
|
| $ | 7,905 |
|
| $ | 6,687 |
|
| $ | 224,200 |
|
Property operating expenses |
| 48,893 |
|
|
| 4,990 |
|
|
| 5,431 |
|
|
| 7,378 |
|
|
| 8,955 |
|
|
| 75,647 |
|
Other operating expenses not allocated to segments (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 108,449 |
|
|
| 108,449 |
|
Total operating expenses |
| 48,893 |
|
|
| 4,990 |
|
|
| 5,431 |
|
|
| 7,378 |
|
|
| 117,404 |
|
|
| 184,096 |
|
Proportionate property net operating income (loss) |
| 133,923 |
|
|
| 7,705 |
|
|
| 8,666 |
|
|
| 527 |
|
|
| (110,717 | ) |
|
| 40,104 |
|
Other items included in income before income tax benefit (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,065 |
|
|
| 28,065 |
|
Income before income tax benefit | $ | 133,923 |
|
| $ | 7,705 |
|
| $ | 8,666 |
|
| $ | 527 |
|
| $ | (82,652 | ) |
| $ | 68,169 |
|
2221
| Same Store |
|
| Redevelopment and Development |
|
| Acquisition |
|
| Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| |||||||
Nine months ended September 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues | $ | 529,550 |
|
| $ | 57,408 |
|
| $ | 30,886 |
|
| $ | 32,130 |
|
| $ | 25,715 |
|
| $ | 8,573 |
|
| $ | 684,262 |
|
Property operating expenses attributable to real estate |
| 142,124 |
|
|
| 21,786 |
|
|
| 9,144 |
|
|
| 12,940 |
|
|
| 24,025 |
|
|
| 22,434 |
|
|
| 232,453 |
|
Other operating expenses not allocated to segments (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 331,664 |
|
|
| 331,664 |
|
Total operating expenses |
| 142,124 |
|
|
| 21,786 |
|
|
| 9,144 |
|
|
| 12,940 |
|
|
| 24,025 |
|
|
| 354,098 |
|
|
| 564,117 |
|
Proportionate property net operating income |
| 387,426 |
|
|
| 35,622 |
|
|
| 21,742 |
|
|
| 19,190 |
|
|
| 1,690 |
|
|
| (345,525 | ) |
|
| 120,145 |
|
Other items included in income before income tax expense (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 243,174 |
|
|
| 243,174 |
|
Income before income tax benefit | $ | 387,426 |
|
| $ | 35,622 |
|
| $ | 21,742 |
|
| $ | 19,190 |
|
| $ | 1,690 |
|
| $ | (102,351 | ) |
| $ | 363,319 |
|
| Same Store |
|
| Redevelopment and Development |
|
| Acquisition and Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| ||||||
Six months ended June 30, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues | $ | 367,564 |
|
| $ | 23,502 |
|
| $ | 36,174 |
|
| $ | 17,215 |
|
| $ | (1,095 | ) |
| $ | 443,360 |
|
Property operating expenses |
| 97,154 |
|
|
| 9,599 |
|
|
| 13,061 |
|
|
| 15,989 |
|
|
| 13,800 |
|
|
| 149,603 |
|
Other operating expenses not allocated to segments (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 226,155 |
|
|
| 226,155 |
|
Total operating expenses |
| 97,154 |
|
|
| 9,599 |
|
|
| 13,061 |
|
|
| 15,989 |
|
|
| 239,955 |
|
|
| 375,758 |
|
Proportionate property net operating income (loss) |
| 270,410 |
|
|
| 13,903 |
|
|
| 23,113 |
|
|
| 1,226 |
|
|
| (241,050 | ) |
|
| 67,602 |
|
Other items included in income before income tax benefit (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21,533 | ) |
|
| (21,533 | ) |
Income before income tax benefit | $ | 270,410 |
|
| $ | 13,903 |
|
| $ | 23,113 |
|
| $ | 1,226 |
|
| $ | (262,583 | ) |
| $ | 46,069 |
|
| Same Store |
|
| Redevelopment and Development |
|
| Acquisition |
|
| Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| |||||||
Nine months ended September 30, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues | $ | 509,357 |
|
| $ | 56,436 |
|
| $ | 18,567 |
|
| $ | 28,164 |
|
| $ | 24,103 |
|
| $ | 103,761 |
|
| $ | 740,388 |
|
Property operating expenses attributable to real estate |
| 139,417 |
|
|
| 20,678 |
|
|
| 5,224 |
|
|
| 11,179 |
|
|
| 22,551 |
|
|
| 33,523 |
|
|
| 232,572 |
|
Other operating expenses not allocated to segments (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 358,124 |
|
|
| 358,124 |
|
Total operating expenses |
| 139,417 |
|
|
| 20,678 |
|
|
| 5,224 |
|
|
| 11,179 |
|
|
| 22,551 |
|
|
| 391,647 |
|
|
| 590,696 |
|
Proportionate property net operating income |
| 369,940 |
|
|
| 35,758 |
|
|
| 13,343 |
|
|
| 16,985 |
|
|
| 1,552 |
|
|
| (287,886 | ) |
|
| 149,692 |
|
Other items included in income before income tax expense (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 544,454 |
|
|
| 544,454 |
|
Income before income tax benefit | $ | 369,940 |
|
| $ | 35,758 |
|
| $ | 13,343 |
|
| $ | 16,985 |
|
| $ | 1,552 |
|
| $ | 256,568 |
|
| $ | 694,146 |
|
| Same Store |
|
| Redevelopment and Development |
|
| Acquisition and Other Real Estate |
|
| Proportionate and Other Adjustments (1) |
|
| Corporate and Amounts Not Allocated to Segments (2) |
|
| Consolidated |
| ||||||
Six months ended June 30, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues | $ | 363,187 |
|
| $ | 26,708 |
|
| $ | 28,210 |
|
| $ | 16,068 |
|
| $ | 20,262 |
|
| $ | 454,435 |
|
Property operating expenses |
| 97,519 |
|
|
| 10,245 |
|
|
| 10,547 |
|
|
| 14,983 |
|
|
| 21,312 |
|
|
| 154,606 |
|
Other operating expenses not allocated to segments (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 218,311 |
|
|
| 218,311 |
|
Total operating expenses |
| 97,519 |
|
|
| 10,245 |
|
|
| 10,547 |
|
|
| 14,983 |
|
|
| 239,623 |
|
|
| 372,917 |
|
Proportionate property net operating income (loss) |
| 265,668 |
|
|
| 16,463 |
|
|
| 17,663 |
|
|
| 1,085 |
|
|
| (219,361 | ) |
|
| 81,518 |
|
Other items included in income before income tax expense (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 280,927 |
|
|
| 280,927 |
|
Income before income tax expense | $ | 265,668 |
|
| $ | 16,463 |
|
| $ | 17,663 |
|
| $ | 1,085 |
|
| $ | 61,566 |
|
| $ | 362,445 |
|
(1) | Represents adjustments for the noncontrolling interests in consolidated real estate partnerships’ share of the results of consolidated |
(2) | Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if |
(3) |
|
(4) |
|
The assets of our segments and the consolidated assets not allocated to our segments were as follows (in thousands):
| September 30, 2019 |
|
| December 31, 2018 |
| June 30, 2020 |
|
| December 31, 2019 |
| ||||
Same Store | $ | 4,083,389 |
|
| $ | 4,131,494 |
| $ | 4,592,960 |
|
| $ | 4,669,022 |
|
Redevelopment and Development |
| 899,628 |
|
|
| 792,126 |
|
| 826,200 |
|
|
| 716,750 |
|
Acquisition |
| 633,462 |
|
|
| 507,190 |
| |||||||
Other Real Estate |
| 643,645 |
|
|
| 327,099 |
| |||||||
Acquisition and Other Real Estate |
| 795,039 |
|
|
| 803,777 |
| |||||||
Corporate and other assets (1) |
| 279,054 |
|
|
| 432,095 |
|
| 906,948 |
|
|
| 639,190 |
|
Total consolidated assets | $ | 6,539,178 |
|
| $ | 6,190,004 |
| $ | 7,121,147 |
|
| $ | 6,828,739 |
|
(1) | Includes the assets not allocated to our segments, primarily corporate assets, our mezzanine investment, and assets of sold apartment |
23
For the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, capital additions related to our segments were as follows (in thousands):
| 2019 |
|
| 2018 |
| 2020 |
|
| 2019 |
| ||||
Same Store | $ | 121,069 |
|
| $ | 126,140 |
| $ | 51,608 |
|
| $ | 85,280 |
|
Redevelopment and Development |
| 147,582 |
|
|
| 98,191 |
|
| 115,140 |
|
|
| 78,089 |
|
Acquisition |
| 22,398 |
|
|
| 9,731 |
| |||||||
Other Real Estate |
| 12,692 |
|
|
| 4,194 |
| |||||||
Acquisition and Other Real Estate |
| 12,376 |
|
|
| 14,433 |
| |||||||
Total capital additions | $ | 303,741 |
|
| $ | 238,256 |
| $ | 179,124 |
|
| $ | 177,802 |
|
Note 9 — Variable Interest Entities
Generally, a variable interest entity, or VIE, is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to our business activities and the business activities of the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.
Aimco consolidates the Aimco Operating Partnership, a VIE of which Aimco is the primary beneficiary. Aimco, through the Aimco Operating Partnership, consolidates all VIEs for which the Aimco Operating Partnership is the primary beneficiary.
All of the VIEs the Aimco Operating Partnership consolidates own interests in one or more apartment communities and are typically structured to generate a return for their partners through the operation and ultimate sale of the communities. The Aimco Operating Partnership is the primary beneficiary in the limited partnerships in which it is the sole decision maker and has a substantial economic interest. The table below summarizes information regarding VIEs consolidated by the Aimco Operating Partnership:
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
VIEs with interests in apartment communities |
|
| 6 |
|
|
| 9 |
|
Apartment communities owned by VIEs |
|
| 6 |
|
|
| 9 |
|
Apartment homes in communities owned by VIEs |
|
| 2,056 |
|
|
| 3,592 |
|
Assets of the Aimco Operating Partnership’s consolidated VIEs must first be used to settle the liabilities of such consolidated VIEs. These consolidated VIEs’ creditors do not have recourse to the general credit of the Aimco Operating Partnership. Assets and liabilities of consolidated VIEs are summarized in the table below (in thousands):
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
Assets |
|
|
|
|
|
|
|
|
Net real estate |
| $ | 203,443 |
|
| $ | 488,127 |
|
Cash and cash equivalents |
|
| 5,604 |
|
|
| 15,416 |
|
Restricted cash |
|
| 1,884 |
|
|
| 4,461 |
|
Other assets |
|
| 26,433 |
|
|
| 3,973 |
|
Liabilities |
|
|
|
|
|
|
|
|
Non-recourse property debt secured by Aimco communities, net |
|
| 176,840 |
|
|
| 322,685 |
|
Accrued liabilities and other |
|
| 32,378 |
|
|
| 13,576 |
|
2422
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 contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding: the impact of the COVID-19 pandemic, including on our ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, redevelopments, and developments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our redevelopment and development 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.
Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond our control, including, without limitation:
| • | 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 of acquisitions, dispositions, redevelopments, and developments; and changes in operating costs, including energy costs; |
• | Impact of the COVID-19 pandemic on our residents, commercial tenants, and operations, including as a result of government restrictions and the overall impact on the real estate industry and economy generally, and the ongoing, dynamic and uncertain nature and duration of the pandemic, all of which heightens the impact of the other risks and factors described below; |
| • | Financing risks, including the availability and cost of capital markets’ financing; the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; and the risk that our earnings may not be sufficient to maintain compliance with debt covenants; |
| • | Insurance risks, including the cost of insurance, natural disasters, and severe weather such as hurricanes; and |
| • | Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of governmental regulations that affect us and interpretations of those regulations; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously 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 and depends on our ability to meet the various requirements imposed by the Internal Revenue 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, the section entitled “Risk Factors” described in Item 1A of Apartment Investment and Management Company’s and AIMCO Properties, L.P.’s combined Annual Report on Form 10-K for the year ended December 31, 2018,2019, and the other documents we file from time to time with the Securities and Exchange Commission.
As used herein and except as the context otherwise requires, “we,” “our”“our,” and “us” refer to Apartment Investment and Management Company (which we refer to as Aimco), AIMCO Properties, L.P. (which we refer to as the Aimco Operating Partnership) and their consolidated entities, collectively.
Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States, or GAAP. These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading and include: Nareit Funds Fromfrom Operations, Pro forma Funds Fromfrom Operations, Adjusted Funds Fromfrom Operations, Free Cash Flow, Net Asset Value, Economic Income, and the measures used to compute our leverage ratios.
23
Executive Overview
We are focused on the ownership, management, redevelopment, and some development of quality apartment communities located in several of the largest markets in the United States.
Our principal financial objective is to provide predictable and attractive returns to our equity holders. We measure our long-term total return using Economic Income, defined as changes in the per share Net Asset Value, or NAV, growth plus dividends. NAV is used by many investors because the value of company assets can be readily estimated, even for non-earning assets such as land or properties under development. NAV has the advantage of incorporating the investment decisions of thousands of real estate investors, enhancing comparability among companies that have differences in their accounting and avoiding disparity that can result from application of GAAP to investment properties and various ownership structures. NAV also provides real estate investors a basis for the perceived quality and predictability of future cash flows as well as their expected growth. Some investors focus on multiples of Adjusted
25
Funds Fromfrom Operations, or AFFO, and Funds Fromfrom Operations as defined by the National Association of Real Estate Investment Trusts, or Nareit FFO. Our disclosure of AFFO, a measure of current return, complements our focus on Economic Income. We also use Pro forma Funds From Operations, or Pro forma FFO as a secondary measure of operational performance.
Our Economic Income is the result of performance in five key business plan to achieve our principal financial objective is to:areas:
| • |
|
| • |
|
| • |
|
• | primarily |
| • |
|
Our business is organized around five areasOver our first 25 years as a public company, our Economic Income compounded at an annual rate of strategic focus: operational excellence; redevelopment14%.
Impacts of COVID-19 and development; portfolio management; balance sheet;Government Lockdown
The impact of the COVID-19 pandemic and Government Lockdown continued into the second quarter of 2020. As discussed in our Quarterly Report on Form 10-Q for the three months ended March 31, 2020, we formed a cross-functional committee that meets weekly to adjust to the changing conditions in order to keep our team and culture. our residents safe. We continued our commitment to employees by allowing flexible work arrangements, undertook to pay all costs associated with COVID-19 testing and treatment, kept our team intact without layoffs or pay cuts, and continued clear and frequent communication. Utilizing our previous investment in technology and artificial intelligence, paired with policies providing flexibility, our team continued to lease apartments and fulfill service requests in a safe environment for both the team and our residents.
We also implemented enhanced cleaning procedures and physical distancing measures during the second quarter.
Seeing residents as individuals, each impacted differently by the pandemic and lockdown, our teammates have undertaken to speak to every resident in need, to listen, and to help each solve his or her problems.
We also seek to assist the communities where our residents and employees live and work. Since March, we have provided free temporary furnished housing for healthcare providers at 21 Fitzsimons on the Anschutz Medical Campus, Parc Mosaic near Boulder Community Health, and River Club near Newark University Hospital.
During the three months ended June 30, 2020, we estimate that we incurred $8.0 million of incremental costs related to additional interest costs resulting from our increased liquidity; incremental bad debt expense; lower commercial revenue; local restrictions on our ability to charge late fees; and enhanced cleaning and safety procedures and other COVID-19 related items.
24
Since the outbreak of the COVID-19 pandemic and government lockdown, we have sold one community and entered into a contract to sell another, both at values greater than their respective gross asset value one year ago. We continue to monitor economic and market conditions and can provide no assurance that a prolonged recession will not result in lower property values and non-cash impairment losses.
As of June 30, 2020, we had $1.2 billion of cash and available credit, providing increased liquidity and financial flexibility.
Residential Rent Collection Update
In response to the economic effects of the COVID-19 pandemic and government lockdown, some jurisdictions where our communities are located, including Los Angeles, Philadelphia, and New York City, have enacted laws seeking to suspend contractual obligations of residents, including government-mandated deferrals, rent freezes, repayment extensions, fee abatement measures or concessions, and prohibitions on lease terminations or evictions for tenants. Some states and municipalities are also implementing rental assistance programs and encouraging landlord-tenant negotiations.
We measure residential rent collection as the amount of payments received as a percentage of all residential amounts billed. The table below represents the percentage of residential billed amounts for the three months ended June 30, 2020, and the month ended July 31, 2020.
|
| Three months ended |
|
| 2020 |
| ||||||||||||||
|
| June 30, 2020 |
|
| April |
|
| May |
|
| June |
|
| July |
| |||||
Payments received during the period |
|
| 95.3 | % |
|
| 95.6 | % |
|
| 95.1 | % |
|
| 95.0 | % |
|
| 95.8 | % |
Payments received after period close |
|
| 1.9 | % |
|
| 3.1 | % |
|
| 1.7 | % |
|
| 1.1 | % |
| n/a |
| |
Total payments received as of July 31, 2020 |
|
| 97.2 | % |
|
| 98.7 | % |
|
| 96.8 | % |
|
| 96.1 | % |
|
| 95.8 | % |
During the three months ended June 30, 2020, we recognized 98.4% of all residential revenue, treating the balance of 1.6% as bad debt. Of the 98.4% of residential revenue recognized, we collected in cash all but 120 basis points. The amounts uncollected and not reserved as bad debt include balances collateralized by security deposits of approximately 70 basis points, or those considered collectable based on our review of individual customers’ credit of approximately 50 basis points, or $1.0 million.
In July, we recognized 98.4% of all residential revenue, treating the balance of 1.6% as bad debt. Of the 98.4% of residential revenue recognized, we collected 95.8% in cash, 30 basis points is collateralized by security deposits, and $1.6 million, or 2.3%, is expected to be collected in future periods, half of which is expected to be collected in August.
Results for the Three Months Ended June 30, 2020
The results from the execution of our business plan during the three months ended SeptemberJune 30, 2019,2020, are further described below.
Operational ExcellenceOperations
We own and operate a portfolio of apartment communities, diversified by both geography and price point. At SeptemberAs of June 30, 2019,2020, our portfolio included 128125 apartment communities with 33,82432,938 apartment homes in which we held an average ownership of approximately 99%.
Our property operations team, adapting to changing guidelines and regulations due to COVID-19, produced solid results for our portfolio for the three months ended SeptemberJune 30, 2019. Highlights2020. Same Store highlights include:
| • |
|
| • |
|
| • |
|
Our focus on efficient operations through productivity initiatives such as centralization of administrative tasks, optimization of economies of scale at the corporate level, and investment in more durable, longer-lived materialsincreased automation has helped us control operating expenses. These and other innovations contributed to limitinga growth rate in Same Store controllable operating expense, (definedwhich we define as property expenses less taxes, insurance, and utility expenses).expenses, compounding for the 12 years ended December 31, 2019, at an annual rate
25
of negative 0.2%. During the three months ended June 30, 2020, Same Store controllable operating expenses decreased 6.3% compared to the three months ended June 30, 2019, due primarily to the timing of repairs, which were slowed during the lockdown.
Redevelopment and Development
Our second line of business is the redevelopment and some development of apartment communities. Through theseredevelopment activities, we expect to create value by repositioning communities within our portfolio. We measure the rate and quality of financial returns by NAV creation, an important component of Economic Income, our primary measure of long-term financial performance. We undertake ground-up development when warranted by risk-adjusted investment returns, either directly or in connection with the redevelopment of an existing apartment community. When warranted, we rely on the expertise and credit of a third-party developer familiar with the local market to limit our exposure to construction risk.
26
We invest to earn leverage-neutral risk-adjusted returns in excess of those expected from the apartment communities sold in “paired trades” to fund the redevelopment or development. Of these two activities, we generally favor redevelopment because it permits adjustment toof the scope and timing of spending to align with changing market conditions and customer preferences.
During the three months ended September 30, 2019,We execute redevelopments using a range of approaches. We prefer to limit risk by executing redevelopments using a short-cycle approach, in which we invested $71.3 millionrenovate an apartment community in redevelopment and development. We continued:
|
|
|
|
|
|
At Parc Mosaic, we delivered the first building in August and, as of September 30, has leased 91% of its apartment homes. In late October, we completed construction of the second building and had leased more than half of its apartment homes. The remaining buildings are on schedule to be delivered by year end.
At 707 Leahy, we are on schedule to deliver the first building in the first quarter of 2020, and preleasing is underway.
At Flamingo Point, we began the full renovation of the North Tower and are on schedule to complete construction on the entryway, retail, and amenities by year end.
When possible, we preferstages. These short-cycle redevelopments that can be completed one unitapartment home at a time, when that unithome is vacated and available for renovation, or one floor at a time, thereby limiting the number of down unitshomes and lease-up risk. DuringAs a result, short-cycle redevelopments provide us the three months ended September 30, 2019, we completed 71 units at six smaller phase projects throughout our portfolio with another 15 units under construction as of September 30, 2019. Asflexibility to maintain current earnings while aligning the timing of the nine months ended September 30, 2019,completed apartment homes with market demand. When short-cycle redevelopments are not possible, we completed 129 units atmay engage in redevelopment activities where an entire building or community is vacated. We refer to these projects.as long-cycle redevelopments. Redevelopment work may include seeking entitlements from local governments, which enhance the value of our existing portfolio by increasing density; that is, the right to add apartment homes to a site.
During the three months ended SeptemberJune 30, 2019,2020, we invested $62.3 million in redevelopment and development. We continued five long-cycle redevelopment and development projects already under construction, including the full redevelopment of the North Tower at Flamingo Point and 707 Leahy; and ground-up construction at The Fremont on the Anschutz Medical Campus; Eldridge Townhomes; and Prism. Our estimated cost to complete these projects is $151.0 million, an amount readily funded from our liquidity.
In the first quarter, we announced plans to pause our short-cycle redevelopments in response to COVID-19 and the government lockdown, and their potential economic ramifications. In June, with the economy beginning to reopen, we resumed short-cycle redevelopments at Bay Parc and the Center Tower at Flamingo Point. Our estimated cost to complete these projects is $13.4 million.
The following table summarizes our significant redevelopment and development communities as of June 30, 2020 (dollars in millions):
| Location |
| Homes Approved for Redevelopment |
|
| Homes Completed |
|
| Homes Leased |
|
| Total Planned Investment (1) |
|
| Investment to Date |
|
| Expected Initial Occupancy (2) |
| Expected NOI Stabilization (3) | |||||
Short-cycle redevelopments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Bay Parc | Miami, FL |
|
| 90 |
|
|
| 75 |
|
|
| 67 |
|
| $ | 27.7 |
|
| $ | 26.4 |
|
| N/A |
| N/A |
Flamingo Point Center Tower | Miami Beach, FL |
|
| 58 |
|
|
| 18 |
|
|
| 13 |
|
|
| 16.0 |
|
|
| 3.9 |
|
| N/A |
| N/A |
Long-cycle redevelopments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
707 Leahy (4) | Redwood City, CA |
|
| 110 |
|
|
| 12 |
|
|
| 41 |
|
|
| 25.0 |
|
|
| 21.7 |
|
| 1Q 2020 |
| 2Q 2022 |
Eldridge Townhomes (5) | Elmhurst, IL |
|
| 58 |
|
|
| 18 |
|
|
| 29 |
|
|
| 35.1 |
|
|
| 31.0 |
|
| 2Q 2020 |
| 4Q 2022 |
Flamingo Point North Tower | Miami Beach, FL |
|
| 366 |
|
|
| — |
|
|
| — |
|
|
| 171.0 |
|
|
| 64.4 |
|
| 4Q 2021 |
| 2Q 2024 |
The Fremont (6) | Denver, CO (MSA) |
|
| 253 |
|
|
| 21 |
|
|
| 37 |
|
|
| 87.0 |
|
|
| 81.1 |
|
| 3Q 2020 |
| 1Q 2023 |
Parc Mosaic (7) | Boulder, CO |
|
| 226 |
|
|
| 226 |
|
|
| 175 |
|
|
| 124.6 |
|
|
| 123.6 |
|
| 3Q 2019 |
| 1Q 2022 |
Prism (8) | Cambridge, MA |
|
| 136 |
|
|
| — |
|
|
| 1 |
|
|
| 73.2 |
|
|
| 42.1 |
|
| 1Q 2021 |
| 3Q 2023 |
Total |
|
|
| 1,297 |
|
|
| 370 |
|
|
| 363 |
|
| $ | 559.6 |
|
| $ | 394.2 |
|
|
|
|
|
(1) | Planned investment relates to the current phase of the redevelopment or development. |
(2) | Delivery timing and stabilization is subject to change and are based on the best estimate at this time. Temporary local restrictions halting construction activity and extended ‘‘shelter-in-place” orders, related to COVID-19 or otherwise, may delay project completion and impact the timing of stabilization. Any additional delays may also result in increased costs. |
(3) | Represents the period in which we expect the communities to achieve stabilized rents and operating costs, generally five quarters after occupancy stabilization. |
(4) | In May 2020, construction resumed following a five-week county-mandated work stoppage. We have completed construction on 43 apartment homes and leased 77% of those completed. |
26
(5) | As of July 31, 2020, 23 townhomes have been delivered and 91% of those have been leased. Construction is on track to deliver the remaining 35 townhomes by year end. |
(6) | As of July 31, 2020, 86 apartment homes have been delivered and 49% have been leased. Completion is expected in the fourth quarter 2020. |
(7) | Construction is substantially complete. As of July 31, 2020, we had leased 84% of the apartment homes at rents exceeding underwriting. |
(8) | In June 2020, COVID-19 related construction bans by The City of Cambridge were lifted, allowing construction activities to resume. Completion of this community is expected in the first quarter of 2021. |
As of June 30, 2020, our total estimated net investment at redevelopment and development communities is $559.6 million, of which we have funded $394.2 million. We expect to fund the remaining estimated net investment of $165.4 million on these communities in 2020 and future years, on a leverage-neutral basis, with proceeds from sales of apartment communities with lower forecasted free cash flow, or FCF, internal rates of return.
During the three months ended June 30, 2020, we leased 11759 redeveloped or newly developed apartment homes at redevelopment communities.homes. As of SeptemberJune 30, 2019,2020, our exposure to lease-up at activelong-cycle redevelopment and development communities was approximately 894809 apartment homes; 44 homes or less than 3%where construction is complete, 289 homes expected to be delivered during the remainder of our portfolio.2020, and 476 homes expected to be delivered in 2021.
Please see below under the LiquidityPortfolio Management and Capital Resources – Redevelopment and Development heading for additional information regarding our redevelopment and development investment during the nine months ended September 30, 2019.
Portfolio ManagementAllocation
Our portfolio of apartment communities is diversified across “A,” “B,” and “C+” price points, averaging “B/B+” in quality, and is geographicallyalso diversified across several of the largest markets in the United States. We measure the quality of apartment communities in our portfolio based on average rents of our apartment homes compared to local market average rents as reported by a third-party provider of commercial real estate performance data and analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of local market average; as “B” quality apartment communities those earning rents between 90% and 125% of local market average; as “C+” quality apartment communities those earning rents greater than $1,100 per month, but lower than 90% of local market average; and as “C” quality apartment communities those earning rents less than $1,100 per month and lower than 90% of local market average. We classify as “B/B+” quality a portfolio that on average earns rents between 100% and 125% of local market average rents. Although some companies and analysts within the multifamily real estate industry use apartment community quality ratings of “A,” “B”“B,” and “C,” some of which are tied to local market rent averages, the metrics used to classify apartment community quality as well as the period for which local market rents are calculated may vary from company to company. Accordingly, our rating system for measuring apartment community quality is neither broadly nor consistently used in the multifamily real estate industry.
The following table summarizes information about our portfolio relative to the market for the three months ended June 30, 2020:
|
| Three Months Ended September 30, |
| |||||
|
| 2019 |
|
| 2018 |
| ||
Average revenue per Aimco apartment home (1) |
| $ | 2,262 |
|
| $ | 2,131 |
|
Portfolio average rents as a percentage of local market average rents |
|
| 113 | % |
|
| 113 | % |
Percentage A (3Q 2019 average revenue per Aimco apartment home $2,976) |
|
| 52 | % |
|
| 51 | % |
Percentage B (3Q 2019 average revenue per Aimco apartment home $1,979) |
|
| 30 | % |
|
| 33 | % |
Percentage C+ (3Q 2019 average revenue per Aimco apartment home $1,782) |
|
| 18 | % |
|
| 16 | % |
Average revenue per Aimco apartment home (1) |
| $ | 2,254 |
|
Portfolio average rents as a percentage of local market average rents |
|
| 112 | % |
Percentage A (average revenue per Aimco apartment home $2,942) |
|
| 53 | % |
Percentage B (average revenue per Aimco apartment home $1,987) |
|
| 29 | % |
Percentage C+ (average revenue per Aimco apartment home $1,758) |
|
| 18 | % |
(1) | Represents average monthly rental and other property revenues (excluding resident reimbursement of utility cost) divided by the number of occupied apartment homes as of the end of the period. |
27
Our average monthly revenue per apartment home was $2,262$2,254 for the three months ended SeptemberJune 30, 2019, a 6%2020, representing an increase of approximately 2% compared to 2018.the same period in 2019. This increase is due primarily to growth in Same Store revenue for the three months ended September 30, 2019 compared to 2018, as well as our acquisition activities,rent, lease-up of redevelopment communities,redeveloped apartment homes, and salesthe sale of communities with average monthly revenuesrent per apartment home lower than those of the retained portfolio.portfolio, offset partially by lower average fees and other revenue per home.
During the nine months ended September 30, 2019, we have reallocated capital from slower-growth markets such as Chicago and reinvested the proceedsWe follow a disciplined paired trade policy in higher-growth market such as Miami, Denver, and Boston.
making investments. As part of our portfolio strategy, we seek to sell up to 10% of our portfolio annually and to reinvest the proceeds from such sales in accretive uses such as capital enhancements, redevelopments, some developments, and selective acquisitions with projected Free Cash FlowFCF internal rates of return higher than expected from the communities being sold. We prefer well-located real estate where land is a significant percentage of total value and provides potential upside from development or redevelopment. Through this disciplined approach to capital recycling, we increase the quality and expected growth rate of our portfolio.
As we execute our portfolio strategy, we expect to increase average revenue per Aimco apartment home at a rate greater than market rent growth;growth, increase Free Cash Flow margins;FCF margins, and maintain sufficient geographic and price point diversification to limit volatility and concentration risk.
Acquisitions27
We evaluate potential acquisitions with an eye for unique and opportunistic investments, for example real estate transactions where the land is a significant percentage
Acquisitions
During the three months ended SeptemberJune 30, 2019,2020, we acquired for $157 million a 95% ownership in 1001 Brickell Bay Drive, the 350,000 square foot office building and land contiguous to our Yacht Club Apartments.
Combined, Yacht Club and 1001 Brickell Bay Drive give us 4.25 acres, 600 linear feet of bay frontage, and the ability to increase density by 10% over what could be developed on the individual parcels. We are evaluating options to maximize returns and minimize risk on the monetization of our investment. In the meantime, we will earn income from the office building operations in excess of the lost income for those properties being sold to fund the investment.
Year-to-date, we have acquired three properties: One Ardmore in Ardmore, Pennsylvania; 50 Rogers Street, a community under construction in Cambridge, Massachusetts; and 1001 Brickell Bay Drive in Miami, Florida. These acquisitions have an expected weighted-average Free Cash Flow internal rate of return of approximately 9%, approximately 300 basis points better than expected from the properties being sold in paired trades to fund themade no acquisitions.
Dispositions
No dispositions were made duringDuring the three months ended SeptemberJune 30, 2019.2020, we sold one apartment community located in Annandale, Virginia with 219 homes at a price of $58.9 million, 3% better than its estimated gross asset value one year prior. Net sales proceeds from this transaction were $36.9 million.
Year-to-date,In July, we haveaccepted a non-refundable deposit on a community to be sold eight properties generating net proceedslater in 2020, and agreed to sell this community at a price of $418approximately $126 million, 3% better than its estimated gross asset value as of December 31, 2019. Proceeds from this transaction are expected to be used to fund acquisitions, redevelopment and development, the repurchase of common shares in the fourth quarter of 2018, and general corporate uses.reduce leverage.
Balance Sheet
Leverage
Our leverage strategy seeks to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage, primarily non-recourse and long-dated property debt; build financial flexibility by maintaining ample unused and available credit as well ascredit; holding properties with substantial value unencumbered by property debt; maintaining an investment grade rating; and useusing partners’ capital when it enhances financial returns or reduces investment risk.
Our leverage includes our share of long-term, non-recourse property debt encumbering apartment communities, outstanding borrowings on the revolving credit facility, our term loan, and outstanding preferred equity.
We are respondingother leverage. Please refer to today’s interest rates to extend duration, reduce refinancing risk, and lower our cost of debt.
For additional information regarding our leverage, please see the discussion under the Liquidity and Capital Resources heading.
28
Leverage Ratiossection for additional information regarding our leverage. Other leverage includes mezzanine equity instruments, including preferred OP Units and redeemable noncontrolling interests in a consolidated real estate partnership.
Our target leverage ratios are Proportionate Debt and Preferred EquityNet Leverage to Adjusted EBITDAre below 7.0x and Adjusted EBITDAre to Adjusted Interest Expense and Preferred DividendsDistributions greater than 2.5x. Our leverage ratios for the three months ended September 30, 2019, are presented below:
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We calculate Adjusted EBITDAre and Adjusted Interest Expense used in our leverage ratios based on the most recent three monththree-month amounts, annualized. Our leverage to EBITDAre ratios while above target,for the three months ended June 30, 2020, are consistent with plan and expected to be 6.8x and 7.0x, respectively, by year end.presented below:
Proportionate Debt to Adjusted EBITDAre | 7.9x | |
Net Leverage to Adjusted EBITDAre | 8.1x | |
Adjusted EBITDAre to Adjusted Interest Expense | 3.5x | |
Adjusted EBITDAre to Adjusted Interest Expense and Preferred Distributions | 3.3x |
In 2019, we retitled our Adjusted EBITDA measureNet Leverage to Adjusted EBITDAre increased by 0.4x from March 31, 2020, due primarily to a $6.1 million reduction in our calculation of leverage ratios. The computation ofquarterly Adjusted EBITDAre has been modifiedprimarily as a result of COVID-19 and the government lockdown.
We expect to meet our leverage target through a combination of property net operating income growth, including the $30 million of incremental net operating income we expect to receive from our prior measurelong-cycle redevelopment communities now underway, and through approximately $350 million of property sales, including the previously mentioned under-contract community, expected to include amortizationclose in 2020. Depending upon the communities sold and the timing of debt issuance costssales, taxable gains may exceed our regular quarterly dividend. If so, our Board of Directors may declare a taxable stock dividend.
Under our revolving credit facility and term loan, we have agreed to maintain a fixed charge coverage ratio of 1.40x, as a component of interest expensewell as other covenants customary for similar revolving credit arrangements. For the trailing twelve months ended June 30, 2020, our fixed charge coverage ratio was 2.02x. We expect to remain in both the computation of Adjusted Interest Expense and EBITDAre. The impact of this change is less than 0.1x to each ratio. We also began presenting a reconciliation of net income to earnings before interest, taxes, depreciation and amortization for real estate, or EBITDAre, as defined by Nareit. compliance with these covenants.
Please refer to the Leverage Ratios subsection of the Non-GAAP Measures section below.
Refinancing Activity
Duringfor further information about the three months ended September 30, 2019, we financed $668.0 millioncalculation of new non-recourse, fixed-rate property debt. These loans have a weighted-average interest rate of 3.34%, a weighted-average term to maturity of 11.4 years, and lower our annual cost of leverage by approximately 10 basis points. We also rate-locked a $100.0 million fixed-rate, non-recourse, property loan with an eleven-year maturity and an interest rate of 3.21%, which is expected to close during the three months ending December 31, 2019.ratios.
Liquidity
We use our credit facility primarily for working capital and other short-term purposes and to secure letters of credit. Our $1.2 billion liquidity consists of cash and restricted cash balances and available capacity on our revolving line of credit.credit facility. As of SeptemberJune 30, 2019,2020, we had cash and restricted cash, excluding amounts related to tenant security deposits, of $93.2$428.4 million and had the capacity to borrow up to $792.8$793.5 million on our revolving credit facility, after consideration of $7.2$6.5 million of letters of credit backed by the facility.
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We manage our financial flexibility by maintaining an investment grade rating and holding apartment communities that are unencumbered by property debt. At SeptemberAs of June 30, 2019,2020, we held unencumbered apartment communities with an estimated fair market value of approximately $2.4$2.3 billion.
Two credit rating agencies rate our creditworthiness, using different methodologies and ratios for assessing our credit, and both have rated our credit and outlook as BBB- (stable), an investment grade rating. Although some of the ratios they use are similar to those we use to measure our leverage, there are differences in our methods of calculation and therefore our leverage ratios disclosed above are not indicative of the ratios that may be calculated by these agencies.
Financing Activity
During the three months ended June 30, 2020, we placed $608.8 million of new property debt, generating incremental proceeds of $370.6 million, and closed the refinancing of another $79.9 million in July 2020. The loans have a weighted-average term to maturity of 9.3 years and a weighted-average interest rate of 2.9%, lowering our weighted-average borrowing cost of leverage to 3.69%. We addressed all of our 2020 loan maturities and reduced 2021 to 2024 maturities by 18%, resulting in average annual maturities of $262 million remaining for the four years.
Also during the three months ended June 30, 2020, we secured a $350.0 million term loan. Proceeds from the loan were primarily used to repay borrowings on our $800.0 million revolving credit facility. Please refer to the Leverage and Capital Resources section for further information about the terms of our term loan.
Equity Capital Activities
On October 29, 2019,July 28, 2020, our Board of Directors declared a quarterly cash dividendsdividend of $0.39$0.41 per share of Class A Common Stock, for the quarter ended September 30, 2019, representing an increase of 3%5% compared to the regular quarterly dividends paid in 2018.2019. This amount is payable on November 29, 2019,August 28, 2020, to stockholders of record on November 15, 2019.August 14, 2020.
Team and Culture
Our team and culture are keys to our success. Our intentional focus on a collaborative and productive culture based on respect for others and personal responsibility is reinforced by a preference for promotion from within basedwithin. We focus on succession planning and talent development to produce a strong, stable team that is the enduring foundation of our success. We offer benefits reinforcing our value of caring for each other, including paid time for parental leave, paid time annually to volunteer in local communities, college scholarships for the children of team members, an emergency fund to help team members in crisis, financial support for our team members who are becoming United States citizens, and a bonus structure at all levels of the organization. We also pay full compensation and benefits for team members who are actively deployed by the United States military. Out of hundreds of participating companies in 2019, Aimco was2020, we were one of only sevensix recognized as a “Top Place to Work”Workplace” in Colorado for each of the past seven years. Aimco was also recognized as a Top Workplace in the Bay Area in 2019. Also in 2019, Aimco was theeight years, and were one of only two real estate companycompanies to receive a BEST award from the Association for Talent Development in recognition of our company-wide success in talent development, marking our secondthird consecutive year receiving this award.
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Key Financial Indicators
The key financial indicators that we use in managing our business and in evaluating our operating performance are Economic Income, our measure of long-term total return, and AFFO, our measure of current return. In addition to these indicators, we evaluate our operating performance and financial condition using: Pro forma FFO; Free Cash Flow; Same Store property net operating income; proportionate property net operating income; average revenue per effective apartment home; leverage ratios; and net leverage.
Results of Operations
Because our operating results depend primarily on income from our apartment communities, the supply of and demand for apartments influences our operating results. Additionally, the level of expenses required to operate and maintain our apartment communities and the pace and price at which we redevelop, acquire, and dispose of our apartment communities affect our operating results.
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.
Financial Highlights
Net income attributable to common stockholders per common share, on a dilutive basis, decreased by $0.14 during the three months ended SeptemberJune 30, 20192020, compared to 2018,2019, due primarily due to lowerfewer gains from dispositions.dispositions and more prepayment penalties incurred during second quarter refinancing activity undertaken to increase liquidity and to benefit from current interest rates.
Pro forma FFO per share was up $0.01increased $0.03 during the three months ended June 30, 2020, compared to 2019, due primarily to the contribution from communities in lease-up, the net contribution from the Parkmerced mezzanine loan, and lower general and administrative expenses; offset partially by impacts of the pandemic and government lockdown mentioned previously and by “drag”, or lower contribution, from Redevelopment communities under construction.
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We have not excluded from Pro forma FFO and AFFO $8.0 million, or $0.05 per share, for the following COVID-19 related impacts: $2.6 million of net incremental interest expense primarily on our $350.0 million term loan, which we secured to increase liquidity; $2.5 million of incremental bad debt expense; $1.5 million of lower commercial revenue; $0.6 million of lower other income, resulting from local restrictions on our contractual right to charge late fees; and $0.8 million of other amounts resulting from COVID-19. Additionally, we have not excluded from Pro forma FFO and AFFO for the six months ended June 30, 2020, the write-off of $2.9 million of our straight-line rent receivables for certain commercial tenants for which collectability of future rent is uncertain and $2.2 million of deferred broker commissions related to the same commercial tenants.
AFFO per share increased $0.04 for the three months ended SeptemberJune 30, 20192020, compared to 20182019, due primarily to the following items:
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AFFO per share was flat for the three months ended September 30, 2019 compared to 2018 due to the $0.01$0.03 increase in Pro forma FFO per share offset by aand $0.01 increase indue to lower capital replacement spending. For the year ended December 31, 2019, we expect total capital replacement expenditures, per share, to be flat year-over-year as we continue to upgrade our portfolio and invest capital in fewer, but more valuable, properties.
Detailed Results of Operations for the Three and Six Months Ended SeptemberJune 30, 20192020, Compared to SeptemberJune 30, 20182019
Net income attributable to Aimco decreased by $568.0$26.8 million and $309.1 million during the three and six months ended SeptemberJune 30, 2019 as2020, compared to 2018. Net income attributable to the Aimco Operating Partnership decreased by $598.1 million during the three months ended September 30, 2019, respectively, as compared to 2018. Details regarding the decreases in net income are described more fully below.
Property Operations
As further described below, weWe have fourthree segments: (i) Same Store, (ii) Redevelopment and Development, and (iii) Acquisition and Other Real Estate. Our Same Store segment includes Same Store communities which are those that have reached a stabilized level of operations as of the beginning of a two-year comparable period and maintained it throughout the current and comparable prior year and are not expected to be sold within 12 months. Our Redevelopment and Development segment includes communities that are currently under construction, that have not achieved a stabilized level of operations, and those that have been completed in recent years that have not achieved and maintained stabilized operations for both the current and comparable prior year. Our Acquisition and Other Real Estate segment includes thoseincludes: (i) communities that we have acquired since the beginning of a two-year comparable period. Our Other Real Estate segment primarily includes apartmentperiod; (ii) communities that are subject to limitations on rent increases,increases; (iii) communities that we expect to sell within 12 months but do not yet meet the criteria to be classified as held for sale,sale; (iv) communities that we expect to redevelop; and (v) certain retail spaces and 1001 Brickell Bay Drive.commercial spaces.
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As of SeptemberJune 30, 2019,2020, our Same Store segment included 95 Same Store94 apartment communities with 27,64027,876 apartment homes.
From December 31, 20182019, to SeptemberJune 30, 2019,2020, on a net basis, our Same Store segment increased by twothree apartment communities and 1,7351,227 apartment homes. These changes consisted of:
| • | the addition of |
| • | the addition of |
| • | the |
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| • | the reduction of one apartment community with |
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As of SeptemberJune 30, 2019:2020, our Redevelopment and Development segment included seveneight apartment communities with 3,1372,521 apartment homes;homes, and our Acquisition segment included seven apartment communities with 1,590 apartment homes; and our Other Real Estate segment included 1519 apartment communities with 1,3152,399 apartment homes and one office building.
We use proportionate property net operating income to assess the operating performance of our communities. Proportionate property net operating income reflects our share of rental and other property revenues, excluding resident utility reimbursement,reimbursements, less direct property operating expenses, net of resident utility reimbursement,reimbursements, for consolidated communities. Accordingly, the results of operations of our segments discussed below are presented on a proportionate basis and exclude the results of four apartment communities with 142 apartment homes that we do not consolidate.
We do not include offsite costs associated with property management, casualty gains or casualty-relatedlosses, or the results of apartment communities sold or held for sale, reported in consolidated amounts, in our assessment of segment performance. Accordingly, these items are not allocated to our segment results discussed below.
Please refer to Note 87 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 expense.expenses.
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Proportionate Property Net Operating Income
The results of our segments for the three months ended June 30, 2020 and 2019, as presented below, are based on segment classifications as of June 30, 2020.
| Three Months Ended June 30, |
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(in thousands) | 2020 |
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| 2019 |
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| $ Change |
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| % Change |
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Rental and other property revenues, before utility reimbursements: |
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Same Store | $ | 180,779 |
|
| $ | 182,816 |
|
| $ | (2,037 | ) |
|
| (1.1 | %) |
Redevelopment and Development |
| 11,589 |
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|
| 12,695 |
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|
| (1,106 | ) |
|
| (8.7 | %) |
Acquisition and Other Real Estate |
| 17,415 |
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|
| 14,097 |
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|
| 3,318 |
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|
| 23.5 | % |
Total |
| 209,783 |
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| 209,608 |
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| 175 |
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| 0.1 | % |
Property operating expenses, net of utility reimbursements: |
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Same Store |
| 48,720 |
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| 48,893 |
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| (173 | ) |
|
| (0.4 | %) |
Redevelopment and Development |
| 4,912 |
|
|
| 4,990 |
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|
| (78 | ) |
|
| (1.6 | %) |
Acquisition and Other Real Estate |
| 6,485 |
|
|
| 5,431 |
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|
| 1,054 |
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|
| 19.4 | % |
Total |
| 60,117 |
|
|
| 59,314 |
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|
| 803 |
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|
| 1.4 | % |
Proportionate property net operating income: |
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Same Store |
| 132,059 |
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| 133,923 |
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| (1,864 | ) |
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| (1.4 | %) |
Redevelopment and Development |
| 6,677 |
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| 7,705 |
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| (1,028 | ) |
|
| (13.3 | %) |
Acquisition and Other Real Estate |
| 10,930 |
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|
| 8,666 |
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| 2,264 |
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| 26.1 | % |
Total | $ | 149,666 |
|
| $ | 150,294 |
|
| $ | (628 | ) |
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| (0.4 | %) |
For the three months ended June 30, 2020, compared to 2019, our Same Store proportionate property net operating income decreased by $1.9 million, or 1.4%. This decrease was attributable primarily to a $2.0 million, or 1.1%, decrease in rental and other property revenues due to $2.1 million, or 120 basis point, increase in bad debt and $1.1 million, or 70 basis point, reduction in other rental income due to local restrictions on our contractual right to charge late fees, and an approximately 140-basis point decrease in average daily occupancy. This decrease was offset partially by a 250 basis point increase in average residential rents. Same Store property operating expenses decreased $0.2 million for the three months ended June 30, 2020, compared to 2019, due primarily to a $1.6, or 6.3%, decrease in controllable operating expenses, which exclude utility costs, real estate taxes, and insurance.
Redevelopment and Development proportionate property net operating income decreased by $1.0 million, or 13.3%, for the three months ended June 30, 2020, compared to 2019. This decrease was attributable primarily to de-leasing in 2019 at Flamingo Point and 707 Leahy in preparation for redevelopment, offset partially by increased occupancy driven by the lease-up at Parc Mosaic.
Acquisition and Other Real Estate proportionate property net operating income increased by $2.3 million, or 26.1%, for the three months ended June 30, 2020, compared to 2019, due to the lease-up of One Ardmore acquired in April 2019 and the acquisition of 1001 Brickell Bay Drive in July 2019, offset partially by a decrease in revenues related to commercial tenants due to the economic impacts of COVID-19 and the government lockdown.
The results of our segments for the six months ended June 30, 2020 and 2019, as presented below, are based on segment classifications as of June 30, 2020.
| Six Months Ended June 30, |
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(in thousands) | 2020 |
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| 2019 |
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| $ Change |
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| % Change |
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Rental and other property revenues, before utility reimbursements: |
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Same Store | $ | 367,564 |
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| $ | 363,187 |
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| $ | 4,377 |
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| 1.2 | % |
Redevelopment and Development |
| 23,502 |
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| 26,708 |
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| (3,206 | ) |
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| (12.0 | %) |
Acquisition and Other Real Estate |
| 36,174 |
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| 28,210 |
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| 7,964 |
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| 28.2 | % |
Total |
| 427,240 |
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| 418,105 |
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| 9,135 |
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| 2.2 | % |
Property operating expenses, net of utility reimbursements: |
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Same Store |
| 97,154 |
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| 97,519 |
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| (365 | ) |
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| (0.4 | %) |
Redevelopment and Development |
| 9,599 |
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| 10,245 |
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| (646 | ) |
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| (6.3 | %) |
Acquisition and Other Real Estate |
| 13,061 |
|
|
| 10,547 |
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| 2,514 |
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| 23.8 | % |
Total |
| 119,814 |
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| 118,311 |
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|
| 1,503 |
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| 1.3 | % |
Proportionate property net operating income: |
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Same Store |
| 270,410 |
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| 265,668 |
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| 4,742 |
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| 1.8 | % |
Redevelopment and Development |
| 13,903 |
|
|
| 16,463 |
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|
| (2,560 | ) |
|
| (15.6 | %) |
Acquisition and Other Real Estate |
| 23,113 |
|
|
| 17,663 |
|
|
| 5,450 |
|
|
| 30.9 | % |
Total | $ | 307,426 |
|
| $ | 299,794 |
|
| $ | 7,632 |
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| 2.5 | % |
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The results of our segments forFor the threesix months ended SeptemberJune 30, 2019 and 2018, as presented below, are based on the apartment community populations as of September 30, 2019.
| Three Months Ended September 30, |
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(in thousands) | 2019 |
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| 2018 |
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| $ Change |
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| % Change |
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Rental and other property revenues, before utility reimbursements: |
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Same Store | $ | 179,056 |
|
| $ | 172,426 |
|
| $ | 6,630 |
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| 3.8 | % |
Redevelopment and Development |
| 17,891 |
|
|
| 19,876 |
|
|
| (1,985 | ) |
|
| (10.0 | %) |
Acquisition |
| 10,656 |
|
|
| 10,630 |
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| 26 |
|
|
| 0.2 | % |
Other Real Estate |
| 13,389 |
|
|
| 9,475 |
|
|
| 3,914 |
|
|
| 41.3 | % |
Total |
| 220,992 |
|
|
| 212,407 |
|
|
| 8,585 |
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|
| 4.0 | % |
Property operating expenses, net of utility reimbursements: |
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|
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|
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|
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|
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Same Store |
| 48,220 |
|
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| 46,751 |
|
|
| 1,469 |
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|
| 3.1 | % |
Redevelopment and Development |
| 7,469 |
|
|
| 7,242 |
|
|
| 227 |
|
|
| 3.1 | % |
Acquisition |
| 3,317 |
|
|
| 2,826 |
|
|
| 491 |
|
|
| 17.4 | % |
Other Real Estate |
| 5,149 |
|
|
| 3,652 |
|
|
| 1,497 |
|
|
| 41.0 | % |
Total |
| 64,155 |
|
|
| 60,471 |
|
|
| 3,684 |
|
|
| 6.1 | % |
Proportionate property net operating income: |
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|
|
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|
|
|
|
|
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|
|
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Same Store |
| 130,836 |
|
|
| 125,675 |
|
|
| 5,161 |
|
|
| 4.1 | % |
Redevelopment and Development |
| 10,422 |
|
|
| 12,634 |
|
|
| (2,212 | ) |
|
| (17.5 | %) |
Acquisition |
| 7,339 |
|
|
| 7,804 |
|
|
| (465 | ) |
|
| (6.0 | %) |
Other Real Estate |
| 8,240 |
|
|
| 5,823 |
|
|
| 2,417 |
|
|
| 41.5 | % |
Total | $ | 156,837 |
|
| $ | 151,936 |
|
| $ | 4,901 |
|
|
| 3.2 | % |
For the three months ended September 30, 20192020, compared to 2018,2019, our Same Store proportionate property net operating income increased by $5.2$4.7 million, or 4.1%1.8%. This increase was attributable primarily attributable to a $6.6$4.4 million, or 3.8%1.2%, increase in rental and other property revenues due primarily to highera 270 basis point increase in average revenues of $72 per Aimco apartment home comprised of increasesresidential rents, offset partially by a 60 basis point increase in rental ratesbad debt and a 40 basis point increasereduction in average daily occupancy. Renewal rents, which is the rent paid by an existing resident who renewed a lease comparedother rental income due to the rent paid priorlocal restrictions on our contractual right to renewal, were up 4.6%, and new lease rents, which is the rent paid by a new resident compared to the rent paid by the previous resident of the same apartment home, were up 2.5%, resulting in a weighted-average increase of 3.6%. The increase incharge late fees. Same Store rental and other property revenues was partially offset by a $1.5 million, or 3.1%, increase in property operating expenses primarily duedecreased by $0.4 million, contributing to higher real estate taxes, partially offsetthe proportionate property net operating income growth, driven by a $2.4 million, or 4.9%, decrease in utilities expense, net. During the three months ended September 30, 2019 compared to 2018, controllable operating expenses, which exclude utility costs,offset primarily by an increase in real estate taxes and insurance, decreased by $0.2 million, or 0.8%.insurance.
Redevelopment and Development proportionate property net operating income decreased by $2.2$2.6 million, or 17.5%15.6%, for the threesix months ended SeptemberJune 30, 20192020, compared to 2018.2019. This decrease was attributable primarily attributable to de-leasing in 2019 at Flamingo Point and 707 Leahy in preparation for redevelopment, offset partially offset by increased occupancy and higher average revenue per apartment home driven by the lease-up at Park Towne Place.Parc Mosaic.
Acquisition and Other Real Estate proportionate property net operating income increased by $2.4$5.5 million, or 41.5%30.9%, for the threesix months ended SeptemberJune 30, 20192020, compared to 2018 primarily2019, due to the acquisitionlease-up of the 1001 Brickell Bay Drive property in July 2019.
Detailed Results of Operations for the Nine Months Ended September 30, 2019 Compared to September 30, 2018
Net income attributable to Aimco decreased by $318.2 million during the nine months ended September 30, 2019 as compared to 2018. Net income attributable to the Aimco Operating Partnership decreased by $333.6 million during the nine months ended September 30, 2019 as compared to 2018. Details regarding the decreases in net income are described more fully below.
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The results of our segments for the nine months ended September 30, 2019 and 2018 as presented below, are based on the apartment community populations as of September 30, 2019.
| Nine Months Ended September 30, |
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| |||||
(in thousands) | 2019 |
|
| 2018 |
|
| $ Change |
|
| % Change |
| ||||
Rental and other property revenues, before utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
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Same Store | $ | 529,550 |
|
| $ | 509,357 |
|
| $ | 20,193 |
|
|
| 4.0 | % |
Redevelopment and Development |
| 57,408 |
|
|
| 56,436 |
|
|
| 972 |
|
|
| 1.7 | % |
Acquisition |
| 30,886 |
|
|
| 18,567 |
|
|
| 12,319 |
|
|
| 66.3 | % |
Other Real Estate |
| 32,130 |
|
|
| 28,164 |
|
|
| 3,966 |
|
|
| 14.1 | % |
Total |
| 649,974 |
|
|
| 612,524 |
|
|
| 37,450 |
|
|
| 6.1 | % |
Property operating expenses, net of utility reimbursements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store |
| 142,124 |
|
|
| 139,417 |
|
|
| 2,707 |
|
|
| 1.9 | % |
Redevelopment and Development |
| 21,786 |
|
|
| 20,678 |
|
|
| 1,108 |
|
|
| 5.4 | % |
Acquisition |
| 9,144 |
|
|
| 5,224 |
|
|
| 3,920 |
|
|
| 75.0 | % |
Other Real Estate |
| 12,940 |
|
|
| 11,179 |
|
|
| 1,761 |
|
|
| 15.8 | % |
Total |
| 185,994 |
|
|
| 176,498 |
|
|
| 9,496 |
|
|
| 5.4 | % |
Proportionate property net operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store |
| 387,426 |
|
|
| 369,940 |
|
|
| 17,486 |
|
|
| 4.7 | % |
Redevelopment and Development |
| 35,622 |
|
|
| 35,758 |
|
|
| (136 | ) |
|
| (0.4 | %) |
Acquisition |
| 21,742 |
|
|
| 13,343 |
|
|
| 8,399 |
|
|
| 62.9 | % |
Other Real Estate |
| 19,190 |
|
|
| 16,985 |
|
|
| 2,205 |
|
|
| 13.0 | % |
Total | $ | 463,980 |
|
| $ | 436,026 |
|
| $ | 27,954 |
|
|
| 6.4 | % |
For the nine months ended September 30, 2019 compared to 2018, our Same Store proportionate property net operating income increased by $17.5 million, or 4.7%. This increase was primarily attributable to a $20.2 million, or 4.0%, increase in rental and other property revenues due to higher average revenues of $69 per Aimco apartment home comprised of increases in rental rates and an 60 basis point increase in average daily occupancy. Renewal rents, which is the rent paid by an existing resident who renewed a lease compared to the rent paid prior to renewal, were up 4.9% and new lease rents, which is the rent paid by a new resident compared to the rent paid by the previous resident of the same apartment home, were up 2.0% resulting in a weighted average increase of 3.5%. The increase in Same Store rental and other property revenues was partially offset by a $2.7 million, or 1.9%, increase in property operating expenses primarily due to higher real estate taxes and repairs and maintenance expense, partially offset by a decrease in utilities expense, net. During the nine months ended September 30, 2019 compared to 2018, controllable operating expenses, which exclude utility costs, real estate taxes and insurance, decreased by $0.3 million, or 0.4%.
Acquisition proportionate property net operating income increased by $8.4 million or 62.9%, for the nine months ended September 30, 2019 compared to 2018. This increase was primarily attributable to a full period of operating activity at communitiesOne Ardmore acquired in 2018April 2019 and 2019, compared to five months of operations for the four Philadelphia communities during the nine months ended September 30, 2018.
Other Real Estate proportionate property net operating income increased by $2.2 million, or 13.0%, for the nine months ended September 30, 2019 compared to 2018, primarily due to the acquisition of 1001 Brickell Bay Drive in July 2019, offset partially offset by increasesa decrease in repairsrevenues related to commercial tenants due to the economic impacts of COVID-19 and maintenance expense, real estate taxes, and personnel expenses.government lockdown.
Non-Segment Real Estate Operations
Operating income amounts not attributed to our segments include offsite costs associated with property management, casualty losses, write-off of straight-line rent receivables, and 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. Please see Note 8
During the six months ended June 30, 2020, we recognized a $2.9 million write-off of straight-line rent receivables due to the condensed consolidated financial statementsimpact of COVID-19 and government lockdown, and the resulting economic impact on our commercial tenants. No similar write-off was recognized in Item 1.2019.
For the three months ended September 30, 2019 and September 30, 2018, casualty losses totaled $0.5 million and $0.8 million, respectively, and included several minor claims.
For the nine months ended September 30, 2019, casualty losses totaled $4.5 million and included large claims related to fires and water and winter storm damage, and several minor claims. For the nine months ended September 30, 2018, casualty losses totaled $2.4 million and included several claims primarily related to winter storm damage, partially offset by recovery from insurance carriers for insured losses in excess of policy limits.
33
Net operating income decreased for the three and ninesix months ended SeptemberJune 30, 20192020, compared to 2018,2019, by $8.4$4.0 million and $30.1$11.7 million, respectively, due to the sale of apartment communities in 20182020 and 2019.
For the three and nine months ended September 30, 2019 compared to 2018, net operating income decreased by $5.8 million and $29.0 million, respectively, due to the 2018 sale of our Asset Management business.
Depreciation and Amortization
For the three and six months ended SeptemberJune 30, 20192020, compared to 2018,2019, depreciation and amortization expense increased by $1.1$5.8 million, or 1.2%6.3%, and $12.7 million, or 6.8%, respectively, due primarily due to depreciation and amortization related to propertiescommunities acquired in 2018 and 2019, and renovatedredeveloped apartment homes placed in service after completion of construction, and the write-off of deferred leasing costs. This increase was offset partially offset by the reduction ofdecreases in depreciation associated with apartment communities sold and assets fully depreciated in 20182020 and 2019. For the nine months ended September 30, 2019 compared to 2018, depreciation and amortization decreased by $3.4 million, or 1.2%, primarily due to the reduction of depreciation expense associated with communities owned by partnerships served by our Asset Management business, which was sold in 2018, and depreciation associated with apartment communities sold in 2018 and 2019, partially offset by depreciation and amortization related to apartment communities acquired in 2018 and 2019 and renovated apartment homes placed in service upon their completion.
General and Administrative Expenses
For the ninethree and six months ended SeptemberJune 30, 20192020, compared to 2018,2019, general and administrative expenses decreased $2.9by $1.8 million, or 7.7%15.7%, and $1.5 million, or 7.1%, respectively, due primarily due to timing ofa decrease in personnel costs, partially offset by an increase in travel expenses.costs.
Other Expenses, Net
Other expenses, net, includes costs associated with our risk management activities, partnership administration expenses, ground lease rent expense, and certain non-recurring items.
For the three months ended SeptemberJune 30, 20192020, compared to 2018,2019, other expenses, net, were relatively flat.
For the six months ended June 30, 2020, compared to 2019, other expenses, net decreased by $1.4$2.9 million, or 23.7%32.8%, due primarily to a favorable incremental cash receipt in the first quarter of 2020 related to a previous settlement and lower ground lease expense, offset partially by unrealized losses on our interest rate derivative.
32
Interest Income
Interest income for the three months ended June 30, 2020, compared to 2019, was relatively flat.
Interest income for six months ended June 30, 2020, compared to 2019, increased $1.6 million, or 27.2%, due primarily to reduced legal fees associated with 2018 Airbnb litigation.a gain recognized on the early payoff of a seller financing note.
Interest Expense
For the three and nine months ended SeptemberJune 30, 20192020, compared to 2018,2019, interest expense which includes the amortization of debt issuance costs, decreased $3.5increased by $9.3 million, or 7.7%23.4%, due primarily to refinancing activity and $20.2interest expense related to our term loan. As a result of our refinancing activity, we incurred prepayment penalties, offset partially by more favorable interest rates on refinanced fixed rate debt.
For the six months ended June 30, 2020, compared to 2019, interest expense increased by $9.2 million, or 14.1%11.4%, respectively, due primarily to lowerrefinancing activity and interest on property-level debt following refinancing and debt payoff activity, including the 2018 repayment ofexpense related to our term loan, offset partially offset by an increase in capitalized interest related to our active redevelopments and developments. As a result of our refinancing activity, we incurred prepayment penalties, andoffset partially by more favorable interest rates on property-level debt assumed in connection with our acquisition of 1001 Brickell Bay Drive and the Philadelphia portfolio.refinanced fixed rate debt.
Gain on Dispositions of Real Estate and the Asset Management Business
The table below summarizes dispositions of apartment communities from our portfolio duringDuring the three and ninesix months ended SeptemberJune 30, 2020, we sold one apartment community with 219 apartment homes for a gain on disposition of $47.2 million and net proceeds of $36.9 million.
During the three months ended June 30, 2019, we sold one apartment community with 399 apartment homes for a gain on disposition of $64.3 million and 2018 (dollarsnet proceeds of $78.1 million. During the six months ended June 30, 2019, we sold eight apartment communities with 2,605 apartment homes for a gain on dispositions of $355.8 million and net proceeds of $418.3 million.
The apartment community sold in millions):2020 was in a lower-rated location within our primary markets and had average revenues per apartment home significantly below those of our retained portfolio.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Number of apartment communities sold |
|
| — |
|
|
| 1 |
|
|
| 8 |
|
|
| 4 |
|
Gross proceeds |
| $ | — |
|
| $ | 170.4 |
|
| $ | 487.6 |
|
| $ | 242.3 |
|
Net proceeds (1) |
|
| — |
|
|
| 165.5 |
|
|
| 418.3 |
|
|
| 235.9 |
|
Gain on dispositions (2) |
|
| 1.1 |
|
|
| 122.6 |
|
|
| 356.9 |
|
|
| 175.9 |
|
Mezzanine Investment Income, Net On November 26, 2019, we loaned $275.0 million to the partnership owning Parkmerced Apartments. During the three and six months ended June 30, 2020, we recognized $6.9 million and $13.7 million, respectively, of income in connection with the mezzanine loan. For the six months ended June 30, 2020, we have received a cash payment of $0.6 million. We have accrued all interest amounts due as required by GAAP. Our loan is secured by approximately $300 million of borrower equity junior to our loan. In the event we determine that a portion of the loan or accrued interest is not collectable, we will cease income recognition and, if appropriate, recognize an impairment. |
|
|
|
Income Tax Benefit (Expense)
Certain of our operations, including property management and risk management, are conducted through taxable REIT subsidiaries, or TRS entities. Additionally, some of our apartment communities and 1001 Brickell Bay Drive are owned through TRS entities.
Our income tax benefit (expense) calculated in accordance with GAAP includes: (a) income taxes associated with the income or loss of our TRS entities including tax on gains on dispositions, for which the tax consequences have been realized or will be realized in future periods; (b) low income housing tax credits generated prior to the sale of our Asset Management
34
business and four Hunters Point apartment communities that offset REIT taxable income, primarily from retained capital gains; and (c) historic tax credits that offset income tax obligations of our TRS entities. Income taxes related to these items, as well as changes in valuation allowance and the establishment of incremental deferred tax items in conjunction with intercompany asset transfers (if applicable), are included in income tax (expense) benefit in our condensed consolidated statements of operations.
For the three months ended SeptemberJune 30, 2019,2020, we incurredrecognized income tax benefit of $3.1$2.9 million, compared to a $1.8 million benefit during the same period in 2019. The change is due primarily to income tax benefit associated with 1001 Brickell Bay Drive, offset partially by decreased benefit due to lower net operating losses at communities held by TRS entities.
For the six months ended June 30, 2020, we recognized income tax benefit of $6.1 million, compared to income tax expenseprovision of $26.2$1.2 million during the same period in 2018.2019. The change is due primarily due to income tax provision on the gain related to the 2018 saleon dispositions of the Asset Management business and lower historic tax credits generatedreal estate in 2019 partially offset by the release of a previously established valuation allowance as a result of the sale. For the nine months ended September 30, 2019 compared to 2018,and an income tax benefit associated with 1001 Brickell Bay Drive, offset partially by decreased by $10.7 million primarilybenefit due to a tax benefit recognized in connection with a 2018 intercompany transferlower net operating losses at communities held by TRS entities.
33
Noncontrolling Interests in Consolidated Real Estate Partnerships
Noncontrolling interests in consolidated real estate partnerships reflects the results of our consolidated real estate partnerships allocated to the owners who are not affiliated with Aimco. The amounts of income or loss of our consolidated real estate partnerships that we allocate to owners not affiliated with Aimco include their share of property management fees, interest on notes and other amounts that we charge to these partnerships.
The amount of net income attributed to noncontrolling interests was driven by two primary factors: the operations of the consolidated apartment communities and gains on the sale of apartment communities with noncontrolling interest holders, as further discussed below.
For the three months ended September 30, 2019, we attributed net loss of $0.1 million, and we attributed net income of $1.8 million for the same period during 2018. The amounts attributed to noncontrolling interests resulting from operations of the consolidated apartment communities were $0.1 million net loss and $0.1 million net income for the three months ended September 30, 2019 and 2018, respectively. Additionally, we attributed the gain on the sale of an apartment community to noncontrolling interests totaling $1.7 million during the three months ended September 30, 2018.
For the nine months ended September 30, 2019 and 2018, we attributed net income of $0.1 million and $8.0 million, respectively, to noncontrolling interests in consolidated real estate partnerships. The operating income attributed to noncontrolling interests resulting from operations of the consolidated apartment communities was $0.1 million and $0.2 million for the nine months ended September 30, 2019 and 2018, respectively. Additionally, we attributed the gain on the sales of apartment communities to noncontrolling interests totaling $7.8 million during the nine months ended September 30, 2018.
Noncontrolling Interests in Aimco Operating Partnership
In Aimco’s consolidated financial statements, noncontrolling interests in the Aimco Operating Partnership reflects the results attributable to the OP Unit holders. For the three months ended September 30, 2019 compared to 2018, net income attributed to noncontrolling interests in the Aimco Operating Partnership decreased by $30.1 million. For the nine months ended September 30, 2019 compared to 2018, net income attributed to noncontrolling interests in the Aimco Operating Partnership decreased by $15.3 million. Net income attributable to noncontrolling interests in the Aimco Operating Partnership fluctuates in proportion to variations in net income, as described above. The overall percentage of net income attributed to noncontrolling interests in the Aimco Operating Partnership increased due to the issuance of OP Units as partial consideration for the acquisition of apartment communities in May 2018 and April 2019 and the repurchases of Common Stock completed in 2018. These transactions increased the noncontrolling interests’ share of the Aimco Operating Partnership relative to Aimco’s ownership.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions. We believe that the critical accounting policies that involve our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements relate to the impairment of long-lived assets and capitalized costs.
Our critical accounting policies are described in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of Aimco’s and the Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2018.2019. There have been no significant changes in our critical accounting policies 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.
35
Non-GAAP Measures
VariousCertain key financial indicators we use in managing our business and in evaluating our financial condition and operating performance are non-GAAP measures. Key non-GAAP measures we use are defined and described below, and for those non-GAAP measures used or disclosed within this quarterly report, we provide reconciliations of the non-GAAP measures to the most comparable financial measure computed in accordance with GAAP are provided.GAAP.
We measure our long-term total return using Economic Income, which is a non-GAAP financial measure. Economic Income represents stockholder value creation as measured by the per share change in estimated net asset value, or NAV plus cash dividends. We believe Economic Income is important to investors as it represents a measure of the total return we have earned forby our stockholders. We report and reconcile Economic Income annually. Please refer to the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018,2019, for more information about Economic Income.
Nareit FFO, Pro forma FFO and AFFO are non-GAAP financial measures, which are defined and further described below under the Nareit Funds From Operations, Pro forma Funds From Operations and Adjusted Funds From Operations heading.
Free Cash Flow, or FCF, as calculated for our retained portfolio, represents an apartment community’s property net operating income, or NOI, less spending for Capital Replacements, which represents our estimation of the capital additions made to replace capital assets consumed during our ownership period (further discussed under the Nareit Funds From Operations, Pro forma Funds From Operations, and Adjusted Funds From Operations heading and the Liquidity and Capital Resources heading). FCF margin as calculated for apartment communities sold represents the sold apartment community’s NOInet operating income less $1,200 per apartment home of assumed annual capital replacement spending, as a percentage of the apartment community’s rental and other property revenues. Capital replacement spending represents a measure of capital asset usage during the period; therefore, we believe that FCF is useful to investors as a supplemental measure of apartment community performance because it takes into consideration costs incurred during the period to replace capital assets that have been consumed during our ownership.
Nareit Funds From Operations, Pro Formaforma Funds From Operations, and Adjusted Funds From Operations
Nareit FFO is a non-GAAP financial measure that we believe, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets such as machinery, computers, or other personal property. The National Association of Real Estate Investment Trusts, or Nareit defines FFO as net income computed in accordance with GAAP, excluding: depreciation and amortization related to real estate; gains and losses from sales and impairment of depreciable assets and land used in our primary business; and income taxes directly associated with a gain or loss on the sale of real estate, and including our share of the FFO of unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine Nareit FFO. We calculate Nareit FFO attributable to Aimco common stockholders (diluted) by subtracting dividends on preferred stock and amounts allocated from Nareit FFO to participating securities.
In addition to Nareit FFO, we compute Pro forma FFO and AFFO, which are also non-GAAP financial measures that we believe are helpful to investors in understanding our short-term performance. Pro forma FFO represents Nareit FFO attributable to Aimco common stockholders (diluted), excluding certain amounts that are unique or occur infrequently.
In computing 2020 Pro forma FFO, we made the following adjustments to Nareit FFO:
• | Prepayment penalties: as a result of debt refinancing activity, we incurred debt extinguishment costs. We excluded these costs from Pro forma FFO because we believe these costs are not representative of ongoing operating performance. |
• | Straight-line rent: in 2018, we assumed a 99-year ground lease with scheduled rent increases. Due to the terms of the lease, GAAP rent expense will exceed cash rent payments until 2076. We include the cash rent payments for this |
34
ground lease in Pro forma FFO but exclude the incremental straight-line non-cash rent expense. We include the rent expense for this lease in other expenses, net, in our condensed consolidated statements of operations. |
• | Severance costs, litigation, and other, net: during the three months ended June 30, 2020, we incurred an unrealized loss on a derivative agreement and incurred other non-recurring costs. We excluded the unrealized loss and other costs from Pro forma FFO because we believe they are not representative of current operating performance. The unrealized loss and costs are included in other expenses, net, on our condensed consolidated statements of operations. |
In computing 2019 Pro forma FFO, we made the following adjustments to Nareit FFO:
| • | Preferred equity redemption related costs: |
| • | Straight-line |
| • |
|
36
|
|
|
|
In computing 2018 Pro forma FFO, we made the following adjustments to Nareit FFO:
|
|
|
|
|
|
|
|
AFFO represents Pro forma FFO reduced by Capital Replacements, which representsrepresent our estimation of the actual capital additions made to replace capital assets consumed during our ownership period. When we make capital additions toat an apartment community, we evaluate whether the additions extend the useful life of an asset as compared to its condition at the time we purchased the apartment community. We classify as Capital Improvements those capital additions that meet this criterion, and we classify as Capital Replacements those that do not. AFFO is a key financial indicator we use to evaluate our short-term operational performance and is one of the factors that we use to determine the amounts of our dividend payments.
Nareit FFO, Pro forma FFO, and AFFO should not be considered alternatives to net income as determined in accordance with GAAP, as indications of our performance. Although we use these non-GAAP measures for comparability in assessing our performance compared to other REITs, not all REITs compute these same measures and those who do may not compute them in the same manner. Additionally, computation of AFFO is subject to our definition of Capital Replacement spending. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other REITs.
3735
For the three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, Aimco’s Nareit FFO, Pro forma FFO, and AFFO are calculated as follows (in thousands)thousands, except per share data):
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Net income attributable to Aimco common stockholders (1) |
| $ | 2,003 |
|
| $ | 567,029 |
|
| $ | 332,805 |
|
| $ | 651,371 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate depreciation and amortization, net of noncontrolling partners’ interest |
|
| 95,199 |
|
|
| 94,166 |
|
|
| 276,353 |
|
|
| 279,798 |
|
Gain on dispositions and other, net of noncontrolling partners’ interest |
|
| (1,146 | ) |
|
| (624,521 | ) |
|
| (356,929 | ) |
|
| (671,761 | ) |
Income tax adjustments related to gain on dispositions and other tax-related items (2) |
|
| 415 |
|
|
| 54,448 |
|
|
| 7,151 |
|
|
| 23,813 |
|
Common noncontrolling interests in Aimco Operating Partnership’s share of above adjustments |
|
| (4,931 | ) |
|
| 24,130 |
|
|
| 3,962 |
|
|
| 18,963 |
|
Amounts allocable to participating securities |
|
| (142 | ) |
|
| 626 |
|
|
| 101 |
|
|
| 529 |
|
Nareit FFO attributable to Aimco common stockholders – diluted |
| $ | 91,398 |
|
| $ | 115,878 |
|
| $ | 263,443 |
|
| $ | 302,713 |
|
Adjustments, all net of common noncontrolling interests in Aimco OP and participating securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred equity redemption related amounts |
|
| — |
|
|
| — |
|
|
| 3,864 |
|
|
| — |
|
Litigation |
|
| — |
|
|
| 2,727 |
|
|
| 147 |
|
|
| 4,633 |
|
Severance and restructuring costs |
|
| 1,226 |
|
|
| 67 |
|
|
| 1,699 |
|
|
| 1,282 |
|
Prepayment penalties |
|
| 1,604 |
|
|
| — |
|
|
| 1,604 |
|
|
| — |
|
Tax benefit due to valuation allowance release |
|
| — |
|
|
| (19,349 | ) |
|
| — |
|
|
| (19,349 | ) |
Change in lease accounting |
|
| — |
|
|
| (870 | ) |
|
| — |
|
|
| (2,239 | ) |
Straight-line rent and other |
|
| 874 |
|
|
| — |
|
|
| 3,815 |
|
|
| — |
|
Pro forma FFO attributable to Aimco common stockholders – diluted |
| $ | 95,102 |
|
| $ | 98,453 |
|
| $ | 274,572 |
|
| $ | 287,040 |
|
Capital Replacements, net of common noncontrolling interests in Aimco Operating Partnership and participating securities |
|
| (11,434 | ) |
|
| (9,898 | ) |
|
| (34,273 | ) |
|
| (30,006 | ) |
AFFO attributable to Aimco common stockholders – diluted |
| $ | 83,668 |
|
| $ | 88,555 |
|
| $ | 240,299 |
|
| $ | 257,034 |
|
Total shares and dilutive share equivalents used to calculate Net income and Nareit FFO per share (3) |
|
| 148,636 |
|
|
| 152,193 |
|
|
| 147,692 |
|
|
| 152,086 |
|
Adjustment to weight reverse stock split (4) |
|
| — |
|
|
| 4,745 |
|
|
| 828 |
|
|
| 4,750 |
|
Pro forma shares and dilutive share equivalents used to calculate Pro forma FFO and AFFO per share |
|
| 148,636 |
|
|
| 156,938 |
|
|
| 148,520 |
|
|
| 156,836 |
|
Net income attributable to Aimco per common share – diluted |
| $ | 0.01 |
|
| $ | 3.73 |
|
| $ | 2.26 |
|
| $ | 4.28 |
|
FFO per share – diluted |
| $ | 0.61 |
|
| $ | 0.76 |
|
| $ | 1.78 |
|
| $ | 1.99 |
|
Pro forma FFO per share – diluted |
| $ | 0.64 |
|
| $ | 0.63 |
|
| $ | 1.85 |
|
| $ | 1.83 |
|
AFFO per share – diluted |
| $ | 0.56 |
|
| $ | 0.56 |
|
| $ | 1.62 |
|
| $ | 1.64 |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net income attributable to Aimco common stockholders (1) |
| $ | 39,212 |
|
| $ | 59,234 |
|
| $ | 45,891 |
|
| $ | 330,802 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate depreciation and amortization, net of noncontrolling partners’ interest |
|
| 95,109 |
|
|
| 89,780 |
|
|
| 192,901 |
|
|
| 181,154 |
|
Gain on dispositions and other, net of noncontrolling partners’ interest |
|
| (47,238 | ) |
|
| (64,310 | ) |
|
| (47,204 | ) |
|
| (355,783 | ) |
Income tax adjustments related to gain on dispositions and other tax-related items |
|
| 152 |
|
|
| 210 |
|
|
| 378 |
|
|
| 6,736 |
|
Common noncontrolling interests in Aimco Operating Partnership’s share of above adjustments |
|
| (2,446 | ) |
|
| (1,356 | ) |
|
| (7,542 | ) |
|
| 8,893 |
|
Amounts allocable to participating securities |
|
| (15 | ) |
|
| (73 | ) |
|
| (54 | ) |
|
| 243 |
|
Nareit FFO attributable to Aimco common stockholders |
| $ | 84,774 |
|
| $ | 83,485 |
|
| $ | 184,370 |
|
| $ | 172,045 |
|
Adjustments, all net of common noncontrolling interests in Aimco Operating Partnership and participating securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment penalties |
|
| 6,203 |
|
|
| — |
|
|
| 6,203 |
|
|
| — |
|
Straight-line rent |
|
| 633 |
|
|
| 634 |
|
|
| 1,268 |
|
|
| 2,946 |
|
Preferred equity redemption related amounts |
|
| — |
|
|
| 3,864 |
|
|
| — |
|
|
| 3,864 |
|
Severance costs, litigation, and other, net |
|
| 1,731 |
|
|
| 595 |
|
|
| 1,731 |
|
|
| 620 |
|
Pro forma FFO attributable to Aimco common stockholders |
| $ | 93,341 |
|
| $ | 88,578 |
|
| $ | 193,572 |
|
| $ | 179,475 |
|
Capital Replacements, net of common noncontrolling interests in Aimco Operating Partnership and participating securities |
|
| (11,403 | ) |
|
| (13,134 | ) |
|
| (23,008 | ) |
|
| (22,845 | ) |
AFFO attributable to Aimco common stockholders |
| $ | 81,938 |
|
| $ | 75,444 |
|
| $ | 170,564 |
|
| $ | 156,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share and dilutive share equivalents used to calculate Net income and Nareit FFO per share (2) |
|
| 148,553 |
|
|
| 148,599 |
|
|
| 148,670 |
|
|
| 147,220 |
|
Adjustment to weight reverse stock split (3) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,242 |
|
Pro forma shares and dilutive share equivalents used to calculate Pro forma FFO and AFFO per share |
|
| 148,553 |
|
|
| 148,599 |
|
|
| 148,670 |
|
|
| 148,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Aimco per common share – diluted |
| $ | 0.26 |
|
| $ | 0.40 |
|
| $ | 0.31 |
|
| $ | 2.25 |
|
Nareit FFO per share – diluted |
| $ | 0.57 |
|
| $ | 0.56 |
|
| $ | 1.24 |
|
| $ | 1.17 |
|
Pro forma FFO per share – diluted |
| $ | 0.63 |
|
| $ | 0.60 |
|
| $ | 1.30 |
|
| $ | 1.21 |
|
AFFO per share – diluted |
| $ | 0.55 |
|
| $ | 0.51 |
|
| $ | 1.15 |
|
| $ | 1.06 |
|
(1) | Represents the numerator for calculating Aimco’s earnings per common share in accordance with GAAP. |
(2) |
|
| Represents the denominator for Aimco’s earnings per common share – diluted, calculated in accordance with GAAP. |
| During the three months ended March 31, 2019, we completed a reverse stock split and a special dividend paid primarily in stock. For stock splits, GAAP requires the restatement of weighted average shares as if the reverse stock split occurred at the beginning of the period presented; while shares issued in the special dividend are included in weighted average shares outstanding from the date issued. To minimize confusion and facilitate comparison of period-over-period Pro forma FFO and AFFO, we calculated pro forma weighted average shares for |
38
Please refer to the Results of Operations headingFinancial Highlights above for discussion of the factors affecting our Pro forma FFO and AFFO resultsgrowth for 20192020, as compared to their comparable periods in 2018.
Please refer to the Liquidity and Capital Resources section for further information regarding our capital investing activities, including Capital Replacements.2019.
The Aimco Operating Partnership does not separately compute or report Nareit FFO, Pro forma FFO, or AFFO. However, based on Aimco’s method for allocation of such amounts to noncontrolling interests in the Aimco Operating Partnership, as well as limited differences between the amounts of net income attributable to Aimco’s common stockholders and the Aimco Operating Partnership’s unit holders during the periods presented, Nareit FFO, Pro forma FFO, and AFFO amounts on a per unit basis for the Aimco Operating Partnership would be substantially the same as the corresponding per share amounts for Aimco.
36
Leverage Ratios
OurAs discussed under the Balance Sheet heading, our leverage strategy targets the ratio of Proportionate Debt and Preferred EquityNet Leverage to Adjusted EBITDAre to be below 7.0x and the ratio of Adjusted EBITDAre to Adjusted Interest Expense and Preferred DividendsDistributions to be greater than 2.5x. We also focus on the ratios of Proportionate Debt to Adjusted EBITDAre and Adjusted EBITDAre Coverage of Adjusted Interest. We believe these ratios, which are based in part on non-GAAP financial information, are commonly used by investors and analysts to assess the relative financial risk associated with balance sheets of companies within the same industry, and they are believed to be similar to measures used by rating agencies to assess entity credit quality. EBITDAre and Adjusted EBITDAre should not be considered alternatives to net income (loss) as determined in accordance with GAAP as indicators of performance. There can be no assurance that our method of calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real estate investment trusts.
Proportionate Debt, as used in our leverage ratios, is a non-GAAP measure and includes our share of the long-term, non-recourse property debt, and outstanding borrowings under our revolving credit facility.facility, and our term loan. Proportionate Debt excludes unamortized debt issueissuance costs because these amounts represent cash expended in earlier periods and do not reduce our contractual obligations. We reduce our recorded debt by the amounts of cash and restricted cash on-hand which(which are primarily restricted under the terms of our property debt agreements,agreements), excluding tenant security deposits included in restricted cash, assuming thesethe remaining amounts of cash and restricted cash would be used to reduce our outstanding leverage. We further reduce our recorded debt by the value of our investment in a securitization trust that holds certain of our property debt, as our payments of principal and interest associated with such property debt will ultimately repay our investments in the trust.
We believe Proportionate Debt is useful to investors as it is a measure of our net exposure to debt obligations. Proportionate Debt, as used in our leverage ratios, is calculated as set forth in the table below.
Preferred Equity,OP Units, as used in our leverage ratios, represents the redemption amountsamount for Aimco’s preferred stock and the Aimco Operating Partnership’s preferred OP Units. Preferred Equity,Units and, although perpetual in nature, is another component of our overall leverage.
The reconciliation of total indebtedness to Proportionate Debt and Preferred Equity,Net Leverage, as used in our leverage ratios as of SeptemberJune 30, 2019,2020, is as follows (in thousands):
|
| June 30, 2020 |
| |||||
Total indebtedness |
| $ | 4,254,710 |
|
| $ | 4,892,183 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Debt issue costs related to non-recourse property debt |
|
| 21,701 |
| ||||
Debt issuance costs related to non-recourse property debt and term loan |
|
| 23,490 |
| ||||
Proportionate share adjustments related to debt obligations of consolidated and unconsolidated partnerships |
|
| (11,150 | ) |
|
| (7,639 | ) |
Cash and restricted cash |
|
| (93,225 | ) |
|
| (442,508 | ) |
Tenant security deposits included in restricted cash |
|
| 14,074 |
| ||||
Proportionate share adjustments related to cash and restricted cash held by consolidated and unconsolidated partnerships |
|
| 1,139 |
|
|
| 874 |
|
Securitization trust investment |
|
| (92,892 | ) | ||||
Securitization trust investment and other |
|
| (97,311 | ) | ||||
Proportionate Debt |
| $ | 4,080,283 |
|
| $ | 4,383,163 |
|
|
|
|
|
| ||||
Preferred Equity |
|
| 101,178 |
| ||||
Proportionate Debt and Preferred Equity |
| $ | 4,181,461 |
| ||||
Preferred OP Units |
|
| 96,449 |
| ||||
Redeemable noncontrolling interests in consolidated real estate partnership |
|
| 4,492 |
| ||||
Net Leverage |
| $ | 4,484,104 |
|
39
We calculatecalculated Adjusted EBITDAre used in our leverage ratios based on the most recent three monththree-month amounts, annualized. 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 allowsallow 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:
| • | gains and losses on the dispositions of depreciated property; |
| • | impairment write-downs of depreciated property; |
| • | impairment write-downs of investments in unconsolidated partnerships caused by a decrease in the value of the depreciated property in such partnerships; and |
| • | adjustments to reflect |
37
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 for the reasons set forth below:
| • | net income attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests, to allow investors to compare a measure of our earnings before the effects of our capital structure and indebtedness with that of other companies in the real estate industry; |
| • | the amount of interest income related to our investment in the subordinated tranches in a securitization trust holding primarily Aimco property debt, as we view our interest cost on this debt to be net of any interest income received from the investment; and |
| • | the amount by which GAAP rent expense exceeds cash rents for a long-term ground lease for which expense exceeds cash payments until 2076. The excess of |
In 2019, we retitled our Adjusted EBITDA measure to Adjusted EBITDAre in our calculation of leverage ratios. The computation of Adjusted EBITDAre has been modified from our prior measure to include amortization of debt issuance costs as a component of interest expense in both the computation of Adjusted Interest Expense and EBITDAre. The impact of this change is less than 0.1x to each ratio. We also began including a reconciliation of net income to EBITDAre. EBITDAre is defined by Nareit and provides for an additional performance measure independent of capital structure for greater comparability between real estate investment trusts. The reconciliation of net income to EBITDAre and Adjusted EBITDAre for the three months ended SeptemberJune 30, 2019,2020, as used in our leverage ratios, is as follows (in thousands):
|
| Three Months Ended |
| |||||
|
| June 30, 2020 |
| |||||
Net income |
| $ | 3,970 |
|
| $ | 43,204 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Interest expense |
|
| 42,011 |
|
|
| 48,802 |
|
Income tax benefit |
|
| (3,096 | ) |
|
| (2,879 | ) |
Depreciation and amortization |
|
| 97,538 |
|
|
| 97,689 |
|
Gain on disposition of real estate |
|
| (1,146 | ) | ||||
Gain on dispositions of real estate |
|
| (47,238 | ) | ||||
Adjustment related to EBITDAre of unconsolidated partnerships |
|
| 212 |
|
|
| 212 |
|
EBITDAre |
| $ | 139,489 |
|
| $ | 139,790 |
|
Net income attributable to noncontrolling interests in Aimco Operating Partnership |
|
| 58 |
| ||||
Net loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 17 |
| ||||
EBITDAre adjustments attributable to noncontrolling interests |
|
| (649 | ) |
|
| (513 | ) |
Interest income received on securitization investment |
|
| (2,084 | ) |
|
| (2,216 | ) |
Straight-line rent and other (1) |
|
| 924 |
| ||||
Severance and restructuring costs (2) |
|
| 1,296 |
| ||||
Non-cash straight-line rent |
|
| 633 |
| ||||
Pro forma adjustments, net (1) |
|
| 1,491 |
| ||||
Adjusted EBITDAre |
| $ | 139,034 |
|
| $ | 139,202 |
|
Annualized Adjusted EBITDAre |
| $ | 556,136 |
|
| $ | 556,808 |
|
(1) |
|
|
|
40
We calculatecalculated Adjusted Interest Expense, as used in our leverage ratios, based on the most recent three months,three-month amounts, annualized. Adjusted Interest Expense is a non-GAAP measure that we believe is meaningful for investors and analysts as it presents our share of current recurring interest requirements associated with leverage. Adjusted Interest Expense represents our proportionate share of interest expense on non-recourse property debt and interest expense on our revolving credit facility borrowings.borrowings and term loan. We exclude from our calculation of Adjusted Interest Expense:
| • | debt prepayment penalties, which are items that, from time to time, affect our interest expense, but are not representative of our scheduled interest obligations; and |
| • | the income we receive on our investment in the securitization trust that holds certain of our property debt, as this income is being generated indirectly from interest we pay with respect to property debt held by the trust. |
Preferred DividendsDistributions represents the dividends paid on Aimco’s preferred stock and the distributions paid on the Aimco Operating Partnership’s preferred OP Units. We add Preferred DividendsDistributions to Adjusted Interest Expense for a more complete picture of the interest and dividend requirements of our leverage.
38
The reconciliation of interest expense to Adjusted Interest Expense and Preferred DividendsDistributions for the three months ended SeptemberJune 30, 2019,2020, as used in our leverage ratios, is as follows (in thousands):
|
| Three Months Ended |
| |||||
|
| June 30, 2020 |
| |||||
Interest expense |
| $ | 42,011 |
|
| $ | 48,802 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Proportionate share adjustments related to interest of consolidated and unconsolidated partnerships |
|
| (104 | ) |
|
| (84 | ) |
Debt prepayment penalties and other non-interest items |
|
| (1,703 | ) | ||||
Debt prepayment penalties |
|
| (6,537 | ) | ||||
Interest income earned on securitization trust investment |
|
| (2,084 | ) |
|
| (2,216 | ) |
Adjusted Interest Expense |
| $ | 38,120 |
|
| $ | 39,965 |
|
Preferred dividends |
|
| 1,933 |
| ||||
Adjusted Interest Expense and Preferred Dividends |
| $ | 40,053 |
| ||||
Preferred distributions |
|
| 1,859 |
| ||||
Adjusted Interest Expense and Preferred Distributions |
| $ | 41,824 |
| ||||
Annualized Adjusted Interest Expense |
| $ | 152,480 |
|
| $ | 159,860 |
|
Annualized Adjusted Interest Expense and Preferred Dividends |
| $ | 160,212 |
| ||||
Annualized Adjusted Interest Expense and Preferred Distributions |
| $ | 167,296 |
|
Liquidity and Capital Resources
Liquidity
Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flow from operations. Additional sources are proceeds from salesdispositions of apartment communities, proceeds from refinancing existing property debt, borrowings under new property debt, borrowings under our revolving credit facility, and proceeds from equity offerings.
As of June 30, 2020, our available liquidity was approximately $1.2 billion. We have commitments for, and expect to spend, $151 million on long-cycle redevelopment and development projects underway.
Our principal usesavailable liquidity consists of:
• | $398.4 million in cash and cash equivalents; |
• | $30.0 million of restricted cash, excluding amounts related to tenant security deposits, consists primarily of escrows held by lenders for capital additions, property taxes, and insurance; and |
• | $793.5 million of available capacity to borrow under our revolving credit facility after consideration of $6.5 million of letters of credit backed by the facility. |
Additional liquidity may also be provided through property debt financing at properties unencumbered by debt. As of June 30, 2020, we held unencumbered communities with an estimated fair market value of approximately $2.3 billion.
Uses for liquidity include normal operating activities, payments of principal and interest on outstanding property debt, capital expenditures, dividends paid to stockholders, distributions paid to noncontrolling interest partners, and acquisitions of apartment communities. We use our cash and cash equivalents and our cash provided by operating activities to meet short-term liquidity needs. In the event that our cash and cash equivalents and cash provided by operating activities are not sufficient to cover our short-term liquidity needs, we have additional means, such as short-term borrowing availability and proceeds from apartment community sales and property-level debt issuance.refinancings. We may use our revolving credit facility for working capital and other short-term purposes, such as funding investments on an interim basis. We expect to meet our long-term liquidity requirements, such as debt maturities,including redevelopment spending and apartment community acquisitions, through primarily non-recourse, long-term borrowings, the issuance of equity securities (including OP Units), the sale of apartment communities, and cash generated from operations. Additionally, we expect to meet our liquidity requirements associated with our debt maturities. Our revolving credit facility matures on January 22, 2022, and our term loan matures on April 20, 2021, prior to consideration of its one-year extension option.
AsThe following table summarizes the payments due under our non-recourse property debt commitments, excluding debt issuance costs, as of SeptemberJune 30, 2019, our primary sources of liquidity were as follows:2020 (in thousands):
|
|
|
|
|
|
|
| Total |
|
| Less than One Year (2020) |
|
| 2-3 Years (2021-2022) |
|
| 4-5 Years (2023-2024) |
|
| More than Five Years (2025 and Thereafter) |
| |||||
Non-recourse property debt |
| $ | 4,565,673 |
|
| $ | 123,707 |
|
| $ | 873,971 |
|
| $ | 577,229 |
|
| $ | 2,990,766 |
|
As of September 30, 2019, we held unencumbered apartment communities with an estimated fair market value of approximately $2.4 billion.
4139
During the six months ended June 30, 2020, we placed $608.8 million of new property debt and refinanced another $79.9 million in July. These financings generated incremental proceeds of $370.6 million.
Leverage and Capital Resources
The availability 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. Currently, interest rates are low compared to historical levelslevels. Recent events have increased volatility in interest rates, resulting in substantial movements, both up and many lenders are activedown, in the market. However, anyshort periods of time. Capital is still available, but with fewer sources than in past periods. Any adverse changes in the lending environment could negatively affect our liquidity. We believe we have mitigated much of this exposure by reducing our short and intermediate term maturity risk through refinancing such loans with long-dated, fixed-rate property debt. However, if property financing options become unavailable for our furtherfuture debt needs, we may consider alternative sources of liquidity, such as reductions in capital spending or proceeds from apartment community dispositions.
Two credit rating agencies rate our creditworthiness and both have rated our credit and outlook as BBB- (stable), an investment grade rating. Our investment grade rating would be useful in accessing capital through the sale of bonds in private or public transactions. However, our intention and historical practice has been to raise debt capital in the form of property-level, non-recourse, long-dated, fixed-rate, amortizing debt, the cost of which is generally less than that of recourse debt and the terms of which also provide for greater balance sheet safety.
As of SeptemberJune 30, 2019,2020, approximately 97.7%91% of our leverage consisted of property-level, non-recourse, long-dated, amortizing debt. Approximately 96.0%99% of thisour property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates, and inflation. The weighted averageweighted-average remaining term to maturity of our property-level debt was 8.17.7 years. On average, 6.7%6.2% of our unpaid principal balances will mature each year from 20202021 through 2022.2023.
During the three months ended September 30, 2019, we financed $668.0 million of new non-recourse, fixed-rate property debt. These loans have a weighted-average interest rate of 3.34%, a weighted-average term to maturity of 11.4 years, and lower our annual cost of leverage by approximately 10 basis points. We also rate-locked a $100.0 million fixed-rate, non-recourse, property loan with an eleven-year maturity and an interest rate of 3.21%, which is expected to close during the three months ended December 31, 2019.
The following table summarizes the payments due under our non-recourse property debt commitments, excluding debt issue costs, as of September 30, 2019 (in thousands):
| Total |
|
| Less than One Year |
|
| 1-3 Years |
|
| 3-5 Years |
|
| More than Five Years |
| |||||
Non-recourse property debt | $ | 4,276,411 |
|
| $ | 21,999 |
|
| $ | 1,192,676 |
|
| $ | 1,016,171 |
|
| $ | 2,045,565 |
|
While our primary source of leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt, we also have a credit facility with a syndicate of financial institutions. As of SeptemberJune 30, 2019,2020, we had no outstanding borrowings under our revolving credit facility and had capacity to borrow up to $792.8$793.5 million after consideration of $7.2$6.5 million of letters of credit backed by the facility.
During the three months ended June 30, 2020, we amended our Second Amended and Restated Senior Secured Credit Agreement to include a $350.0 million term loan. The term loan represents approximately 7% of our total leverage, includes a one-year extension option, and bears interest at 30-day LIBOR plus 185-basis points with a 50-basis point LIBOR floor.
As of SeptemberJune 30, 2019,2020, our outstanding preferred OP Units represented approximately 2.3%2% of our total leverage. Preferred OP Units are redeemable at the holder’s option; however, for illustrative purposes, we have computedcompute the weighted averageweighted-average maturity of our total leverage assuming a 40-year10-year maturity on the Units. units.
The combination of non-recourse property-level debt, borrowings under our revolving credit facility, andterm loan, preferred OP Units, thatand redeemable noncontrolling interests in a consolidated real estate partnership comprise our total leverage, reduces our refunding and re-pricing risk.leverage. The weighted averageweighted-average remaining term to maturity for our total leverage described above was 8.87.3 years as of SeptemberJune 30, 2019.2020.
Under the revolving credit facility and term loan, we have agreed to maintain a Fixed Charge Coverage ratio of 1.40x, as well as comply with other covenants customary for similar revolving credit arrangements. For the trailing twelve month12-month period ended SeptemberJune 30, 2019,2020, our Fixed Charge Coverage ratio was 2.12x, compared to a ratio of 2.01x for the trailing twelve month period ended September 30, 2018.2.02x. We expect to remain in compliance with this covenant during the next 12 months.
We like the discipline of financing our investments in real estate through the use of fixed-rate, amortizing, non-recourse property debt, as the amortization gradually reduces our leverage and reduces our refunding risk, and the fixed-rate provides a hedge against increases in interest rates, and the non-recourse feature avoids entity risk.
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 included in Item 1 of this report.
42
Operating Activities
For the ninesix months ended SeptemberJune 30, 2019,2020, net cash provided by operating activities was $278.7$184.4 million. Our operating cash flow is affected primarily by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment communities. Cash provided by operating activities for the ninesix months ended SeptemberJune 30, 2019 decreased2020, increased by $24.2$14.3 million
40
compared to 2018,2019, due to higher contribution from our Same Store, Acquisition, and Other Real Estate communities, offset partially by lower net operating income associated with apartment communities sold and the Asset Management business sold in 2018, offset by improved operating results of our Same Store communities and increased contribution from our Acquisition and Other Real Estate communities.sold.
Investing Activities
For the ninesix months ended SeptemberJune 30, 2019,2020, our net cash used in investing activities of $16.0$160.1 million consisted primarily of capital expenditures, partially offset by proceeds from the disposition of eightone apartment community.
Total capital additions at apartment communities partially offset by the acquisitions of 1001 Brickell Bay Drive, One Ardmore and 50 Rogers and capital expenditures.
Further information about the acquisitions and dispositions completed during the nine months ended September 30, 2019 is included in Note 3 to the condensed consolidated financial statements in Item 1.
Capital additions for our segments totaled $303.7$177.5 million and $238.3$177.7 million during the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of apartment communities.
We categorize capital spending for communities in our portfolio broadly into seven primary categories:
| • | capital replacements, which do not increase the useful life of an asset from its original purchase condition. Capital replacements represent capital additions made to replace the portion of our investment in acquired apartment communities consumed during our period of ownership; |
| • | capital improvements, which represent capital additions made to replace the portion of acquired apartment communities consumed prior to our period of |
| • | capital enhancements, which may include kitchen and bath remodeling, energy conservation projects, and investments in more durable, longer-lived materials designed to reduce |
| • | initial capital expenditures, which represent capital additions contemplated in the underwriting of our recently acquired communities; |
| • | redevelopment additions, which represent capital additions intended to enhance the value of the apartment community through the ability to generate higher average rental rates, and may include costs related to entitlement, which enhance the value of a community through increased density, and costs related to renovation of exteriors, common areas, or apartment homes; |
| • | development additions, which represent construction and related capitalized costs associated with the ground-up development of apartment communities; and |
| • | casualty capital additions, which represent capitalized costs incurred in connection with the restoration of an apartment community after a casualty |
We exclude the amounts of capital spending related to commercial spaces and to apartment communities sold or classified as held for sale at the end of the period from the foregoing measures. We have also excluded from these measures indirect capitalized costs, which are not yet allocated to apartment communities with capital additions, and their related capital spending categories.
4341
A summary of the capital spending for these categories, along with a reconciliation of the total for these categories to the capital expenditures reported in the accompanying condensed consolidated statements of cash flows for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, are presented below (in thousands):
|
| Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
Capital replacements |
| $ | 29,601 |
|
| $ | 22,089 |
|
| $ | 18,521 |
|
| $ | 18,886 |
|
Capital improvements |
|
| 17,550 |
|
|
| 8,771 |
|
|
| 4,648 |
|
|
| 6,100 |
|
Capital enhancements |
|
| 67,642 |
|
|
| 75,235 |
|
|
| 16,683 |
|
|
| 41,057 |
|
Redevelopment additions |
|
| 74,732 |
|
|
| 94,566 |
| ||||||||
Development additions |
|
| 93,462 |
|
|
| 30,229 |
| ||||||||
Redevelopment |
|
| 69,512 |
|
|
| 41,240 |
| ||||||||
Development |
|
| 60,198 |
|
|
| 55,611 |
| ||||||||
Initial capital expenditures |
|
| 15,279 |
|
|
| 2,631 |
|
|
| 2,203 |
|
|
| 11,052 |
|
Casualty capital additions |
|
| 5,475 |
|
|
| 4,735 |
| ||||||||
Total capital additions |
|
| 303,741 |
|
|
| 238,256 |
| ||||||||
Plus: additions related to consolidated Asset Management communities and apartment communities sold or held for sale |
|
| 958 |
|
|
| 16,827 |
| ||||||||
Casualty |
|
| 5,709 |
|
|
| 3,750 |
| ||||||||
Total apartment community capital additions |
| $ | 177,474 |
|
| $ | 177,696 |
| ||||||||
Plus: additions related to commercial spaces |
|
| 1,650 |
|
|
| 106 |
| ||||||||
Plus: additions related to apartment communities sold or held for sale |
|
| 49 |
|
|
| 3,550 |
| ||||||||
Consolidated capital additions |
|
| 304,699 |
|
|
| 255,083 |
|
| $ | 179,173 |
|
| $ | 181,352 |
|
Plus: net change in accrued capital spending and capitalized stock compensation |
|
| (11,950 | ) |
|
| (1,934 | ) | ||||||||
Plus: net change in accrued capital spending |
|
| 3,175 |
|
|
| (4,864 | ) | ||||||||
Capital expenditures per condensed consolidated statement of cash flows |
| $ | 292,749 |
|
| $ | 253,149 |
|
| $ | 182,348 |
|
| $ | 176,488 |
|
For the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, we capitalized $8.0$7.1 million and $5.7$4.5 million respectively, of interest costs, respectively, and $26.9$18.1 million and $26.8$17.6 million respectively, of other direct and indirect costs.costs, respectively.
We invested $67.6$16.7 million in capital enhancements during the nine months ended September 30, 2019, and we anticipate a full year investment ranging from $85 million to $95 million.
Redevelopment and Development
Our total estimated incremental net investment in approved and active redevelopment and development is $577.5 million with a projected weighted average net operating income yield on these investments of 5.3%, assuming untrended rents. Of this total, $264.2 million has been funded. We expect to fund the remaining redevelopment and development investment through a combination of leverage and proceeds from community sales.
We execute redevelopments using a range of approaches. We prefer to limit risk by executing redevelopments using a phased approach, in which we renovate an apartment community in stages. Smaller phases provide us the flexibility to maintain current earnings while aligning the timing of the completed apartment homes with market demand. The following table summarizes ongoing redevelopments of this nature at September 30, 2019 (dollars in millions):
|
| Location |
| Apartment Homes Approved for Redevelopment |
|
| Estimated Net Redevelopment Investment |
|
| Inception -to-Date Net Investment |
| |||
Bay Parc |
| Miami, FL |
|
| 105 |
|
| $ | 28.3 |
|
| $ | 24.1 |
|
When possible, we prefer redevelopments that can be completed one unit at a time, when that unit is vacated and available for renovation, or one floor at a time, thereby limiting the number of down units and lease-up risk. During the three months ended September 30, 2019, we completed 71 units at six smaller phase projects throughout our portfolio with another 15 units under construction as of September 30, 2019. As of the nine months ended September 30, 2019, we completed 129 units at these projects.
44
When smaller redevelopment phases are not possible, we may engage in redevelopment activities where an entire building or community is vacated. Additionally, we undertake some ground-up development when warranted by risk-adjusted investment returns, either directly or in connection with the redevelopment of an existing apartment community. The following table summarizes our investments related to these developments and redevelopments at September 30, 2019 (dollars in millions):
|
| Location |
| Apartment Homes Approved for Redevelopment or Development |
|
| Estimated Net Redevelopment Investment |
|
| Inception -to-Date Net Investment |
|
| Expected Stabilized Occupancy |
| Expected NOI Stabilization | |||
707 Leahy |
| Redwood City, CA |
|
| 110 |
|
| $ | 23.7 |
|
| $ | 6.6 |
|
| 3Q 2020 |
| 4Q 2021 |
Elm Creek Townhomes |
| Elmhurst, IL |
|
| 58 |
|
|
| 35.1 |
|
|
| 12.2 |
|
| 2Q 2021 |
| 3Q 2022 |
Flamingo Point |
| Miami Beach, FL |
|
| 886 |
|
|
| 280.0 |
|
|
| 57.9 |
|
| 4Q 2022 |
| 1Q 2024 |
The Fremont |
| Denver, CO (MSA) |
|
| 253 |
|
|
| 87.0 |
|
|
| 49.4 |
|
| 3Q 2021 |
| 4Q 2022 |
Parc Mosaic |
| Boulder, CO |
|
| 226 |
|
|
| 123.4 |
|
|
| 114.0 |
|
| 4Q 2020 |
| 1Q 2022 |
Total |
|
|
|
| 1,533 |
|
| $ | 549.2 |
|
| $ | 240.1 |
|
|
|
|
|
Net investment represents the total actual or estimated investment, net of tax and other credits earned as a direct result of our redevelopment or development of the community. For phased redevelopments, potential net investment relates to the current phase of the redevelopment.
Stabilized Occupancy represents the period in which we expect to achieve stabilized occupancy, generally greater than 90%.
NOI Stabilization represents the period in which we expect the communities to achieve stabilized rents and operating costs, generally five quarters after occupancy stabilization.
During the nine months ended September 30, 2019, we invested $168.2$129.7 million in redevelopment and development. We continued:
|
|
|
|
|
|
At Parc Mosaic, we delivered the first building in August and, as of September 30, had leased 91% of its apartment homes. In late October, we completed construction of the second building and had leased more than half of its apartment homes. The remaining buildings are on schedule to be delivered by year end.
At 707 Leahy, we are on schedule to deliver the first building in the first quarter 2020, and preleasing is underway.
At Flamingo Point, we began the full renovation of the North Tower and are on schedule to complete construction on the entryway, retail, and amenities by year end.
During the nine months ended September 30, 2019, we leased 176 apartment homes at redevelopment communities. As of September 30, 2019,707 Leahy. Further details regarding our exposure to lease-up at active redevelopment and development activities, including apartment communities was approximately 894 apartment homes, or less than 3%constructed and delivered as of our portfolio.June 30, 2020, is discussed in the Executive Overview section above.
Financing Activities
For the ninesix months ended SeptemberJune 30, 2019,2020, our net cash used inprovided by financing activities of $242.1$240.5 million was attributed to the items discussed below.
Net repayments on our revolving credit facility of $160.4 million primarily relate to the timing of apartment community acquisitions and dispositions and of property debt financing activities.
Principal payments on property loans during the period totaled $390.3 million, consisting of scheduled principal amortization of $58.0 million and repayments of $332.3 million.below:
Proceeds from non-recourse property debt borrowings during the period consisted of the closing of nine fixed-rate, amortizing, non-recourse property loans totaling $668.0$608.8 million.
45
Redemption of Preferred Stock of $125.0 million represents the cash paid upon redemption of our Class A Perpetual Preferred StockPrincipal payments on non-recourse property debt during the nineperiod totaled $274.3 million, consisting of $45.1 million of scheduled principal amortization and $229.2 million of repayments.
Proceeds of $350.0 million from the term loan that closed during the three months ended SeptemberJune 30, 2019.2020.
Net repayments on our revolving credit facility of $275.0 million are due primarily to proceeds from our term loan and property debt financing activities.
Aimco common share repurchases during the six months ended June 30, 2020, totaled $10.0 million.
Net cash used inprovided by financing activities also includes $202.9$132.7 million of payments to equity holders, as further detailed in the tabletables below.
42
Equity and Partners’ Capital Transactions
The following table presents the Aimco Operating Partnership’s distribution activity (including distributions paid to Aimco) during the ninesix months ended SeptemberJune 30, 20192020 (in thousands):
Cash distributions paid by the Aimco Operating Partnership to preferred unitholders |
| $ | 9,047 |
|
| $ | 3,728 |
|
Cash distributions paid by the Aimco Operating Partnership to common unitholders |
|
| 193,530 |
|
|
| 128,851 |
|
Cash distributions paid to holders of noncontrolling interests in consolidate real estate partnerships |
|
| 309 |
| ||||
Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships |
|
| 118 |
| ||||
Total cash distributions paid by the Aimco Operating Partnership |
| $ | 202,886 |
|
| $ | 132,697 |
|
(1) | $ |
|
|
The following table presents Aimco’s dividends paid to Aimco stockholdersdividend and OP Unit holdersdistribution activity during the ninesix months ended SeptemberJune 30, 20192020 (in thousands):
Cash distributions paid to holders of OP Units |
| $ | 16,011 |
|
| $ | 10,521 |
|
Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships |
|
| 309 |
|
|
| 118 |
|
Cash dividends paid by Aimco to preferred stockholders |
|
| 3,247 |
| ||||
Cash dividends paid by Aimco to common stockholders |
|
| 183,319 |
|
|
| 122,058 |
|
Total cash dividends and distributions paid by Aimco |
| $ | 202,886 |
|
| $ | 132,697 |
|
Future Capital Needs
We expect to fund any future acquisitions, redevelopment, development, and other capital spending principally with proceeds from apartment community sales, short-term borrowings, debt and equity financing, and operating cash flows. Our near termnear-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 2020 and beyond.
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of the dateJune 30, 2020, on a consolidated basis, we had approximately $69.5 million of this report, there have been no material changes from the marketvariable-rate property-level debt outstanding in addition to our $350.0 million term loan. We estimate that a change in 30-day LIBOR of 100 basis points with constant credit risk information providedspreads would reduce or increase interest expense by approximately $4.2 million on an annual basis.
As of June 30, 2020, we had approximately $442.5 million of cash and cash equivalents and restricted cash, a portion of which bears interest at variable rates, which may offset somewhat a change in Aimco’s and the Aimco Operating Partnership’s combined Annual Reportrates on Form 10-K for the year ended December 31, 2018.our variable-rate debt discussed above.
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 are effective.
Changes in Internal Control Over Financial Reporting
There has been no change 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 thirdsecond quarter of 20192020 that has materially affected, or is reasonably likely to materially affect, Aimco’s internal control over financial reporting.
The Aimco Operating Partnership
Disclosure Controls and Procedures
The Aimco Operating Partnership’s management, with the participation of the chief executive officer and chief financial officer of both Aimco and AIMCO-GP, Inc., the Aimco Operating Partnership’s general partner, has evaluated the effectiveness
46
of the 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
43
financial officer of AIMCO-GP, Inc. have concluded that, as of the end of such period, the Aimco Operating Partnership’s disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There has been no change in the 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 thirdsecond quarter of 20192020 that has materially affected, or is reasonably likely to materially affect, the Aimco Operating Partnership’s internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1A. RISK FACTORS |
|
As of the date of this report, there have been no material changes fromwe are updating the risk factors in Aimco’s and the Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2018.2019, to include the following risk factor. The risk factors as-filed remain unchanged.
Pandemics may affect our operating results and financial condition.
A local, regional, national or international outbreak of a contagious disease, such as COVID-19, could negatively impact our tenants and our operations. The World Health Organization declared COVID-19 to be a pandemic on March 11, 2020. The outbreak of the COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting a wide variety of measures including states of emergency, mandatory quarantines, required business and school closures, implementing “shelter in place” orders and restricting travel. In addition, many cities and states have enacted, or are considering enacting, exceptions to contractual obligations for residents and commercial tenants, including government mandated rent delays or other abatement measures or concessions or prohibitions on lease terminations or evictions. Many experts predict that the outbreak will trigger a period of material global economic slowdown or a global recession.
Factors that have negatively impacted, or would negatively impact, our operations or those of entities in which we hold a partial interest (including our interest in the partnership that owns Parkmerced Apartments), during the COVID-19 pandemic or another pandemic include:
• | our ability to collect rents on a timely basis or at all, without reductions or other concessions; |
• | our ability to ensure business continuity in the event our continuity of operations plan is not effective or improperly implemented or deployed during a disruption; |
• | fluctuations in regional and local economies, local real estate conditions and rental rates; |
• | our ability to control incremental costs associated with COVID-19; |
• | our ability to dispose communities at all or on terms favorable to us; |
• | our ability to complete redevelopments and developments as planned; and |
• | potential litigation relating to the COVID-19 pandemic. |
Given the ongoing and dynamic nature of the circumstances surrounding the COVID-19 pandemic, it is difficult to predict how significant the impact of this outbreak will be on the global economy, our residents and commercial tenants, our communities, and the operations of entities in which we hold a partial interest (including our interest in the partnership that owns Parkmerced Apartments), or for how long disruptions are likely to continue. The extent of such impact will depend on developments, which are highly uncertain, rapidly evolving and cannot be predicted, including the ability to contain the virus, the duration of measures implemented and the overall impact of these measures. Such developments, depending on their nature, duration, and intensity, could have a material adverse effect on our operating results and financial condition. The COVID-19 pandemic also may have the effect of heightening many of the other risks described in our combined Annual Report on Form 10-K for the year ended December 31, 2019.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
|
Aimco
(a) Unregistered Sales of Equity Securities. Securities
From time to time, during the three months ended September 30, 2019, we issuedAimco may issue shares of Common Stock in exchange for common OP Units, tendered to thedefined under The Aimco Operating Partnership for redemption in accordance with the terms and provisions of the agreement of limited partnership of the Aimco Operating Partnership.heading below. Such shares are issued based on an exchange ratio of one share for each common OP Unit. Aimco may also issue shares of Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended SeptemberJune 30, 2019, approximately 57,0002020, Aimco issued 158,938 shares of Common Stock were issued in exchange for common OP Units in these transactions. All
45
(c)
Repurchases of Equity Securities.
There were no repurchases by Aimco of its common equity securities during the three months ended SeptemberJune 30, 2019.2020. Aimco’s Board of Directors has, from time to time, authorized Aimco to repurchase shares of its outstanding capital stock.Common Stock. As of SeptemberJune 30, 2019,2020, Aimco was authorized to repurchase approximately 10.610.4 million additional shares. This authorization has no expiration date. These repurchases may be made from time to time in the open market or in privately negotiated transactions.
The Aimco Operating Partnership
(a) Unregistered Sales of Equity Securities. Securities
The Aimco Operating Partnership did not issue any unregistered OP Unitsunits during the three months ended SeptemberJune 30, 2019.2020.
(c) Repurchases of Equity Securities. Securities
The Aimco Operating Partnership’s Partnership Agreement generally provides that after holding the common OP Units for one year, limited partners other than Aimco have the right to redeem their common OP Units for cash subject to the Aimco Operating Partnership’s prior right to cause Aimco to acquire some or, all of the common OP Units tendered for redemption in exchange forat our election, shares of Common Stock. Common OP Units redeemed forAimco Common Stock are exchanged on a one-for-one basis (subject to customary antidilution adjustments). During the three months ended SeptemberJune 30, 2019,2020, approximately 57,000158,938 common OP Units were redeemed in exchange for shares of Common Stock.
The following table summarizes the Aimco Operating Partnership’s repurchases, or redemptions in exchange for cash, of the Aimco Operating Partnership’s equity securitiescommon OP Units for the three months ended SeptemberJune 30, 2019.
2020.
Fiscal period |
| Total Number of Units Purchased |
|
| Average Price Paid per Unit |
|
| Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1) |
| Maximum Number of Units That May Yet Be Purchased Under the Plans or Programs (1) | ||
July 1, 2019 - July 31, 2019 |
|
| 8,249 |
|
| $ | 50.77 |
|
| N/A |
| N/A |
August 1, 2019 - August 31, 2019 |
|
| 4,624 |
|
| $ | 50.78 |
|
| N/A |
| N/A |
September 1, 2019 - September 30, 2019 |
|
| 3,419 |
|
| $ | 50.75 |
|
| N/A |
| N/A |
Total |
|
| 16,292 |
|
| $ | 50.77 |
|
|
|
|
|
Fiscal period |
| Total Number of Units Purchased |
|
| Average Price Paid per Unit |
|
| Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1) |
| Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (1) | ||
April 1, 2020 ‒ April 30, 2020 |
|
| 24 |
|
| $ | 43.59 |
|
| N/A |
| N/A |
May 1, 2020 ‒ May 31, 2020 |
|
| 7,407 |
|
|
| 36.52 |
|
| N/A |
| N/A |
June 1, 2020 ‒ June 30, 2020 |
|
| 19 |
|
|
| 38.56 |
|
| N/A |
| N/A |
Total |
|
| 7,450 |
|
| $ | 36.55 |
|
|
|
|
|
(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 common partnership units held by Aimco at a price per unit that is equal to the price per share Aimco pays for its Common Stock. |
Aimco and the Aimco Operating Partnership
Dividend and Distribution Payments. Payments
As a REIT, Aimco is required to distribute annually to holders of its Common Stock at least 90% 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 revolving credit facility includes customary covenants, including a restriction on dividends and distributions and other restricted payments, but permits dividends and distributions during any 12-month periodfour consecutive fiscal quarters in an aggregate amount of up to 95% of Aimco’s Funds From Operations,FFO for such period, subject to certain non-cash adjustments, for such period or such amount as may be necessary for Aimco to maintain itsAimco’s REIT status.status and avoid the payment of federal income or excise tax. Aimco’s Board of Directors targets a dividend payout ratio between 65% and 70% of AFFO.
4846
ITEM 6. EXHIBITS |
|
The following exhibits are filed with this report:
EXHIBIT NO. (1) |
| DESCRIPTION |
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| |
101 |
| The following materials from Aimco’s and the Aimco Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended |
| ||
104 |
| Cover Page Interactive Data File (embedded within the Inline XBRL document). |
(1) | Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request. |
|
|
4947
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/ Paul Beldin |
|
| Paul Beldin |
|
| Executive Vice President and Chief Financial Officer |
|
| (duly authorized officer and principal financial officer) |
|
|
|
| AIMCO PROPERTIES, L.P. | |
|
|
|
| By: | AIMCO-GP, Inc., its general partner |
|
|
|
| By: | /s/ Paul Beldin |
|
| Paul Beldin |
|
| Executive Vice President and Chief Financial Officer |
|
| (duly authorized officer and principal financial officer) |
|
|
|
Date: NovemberAugust 4, 20192020
5048