AIR Reports Second Quarter 2022 Results, Raises Same Store Revenue and NOI Guidance, Completes $640M in Acquisitions, Makes $125M in Share Repurchases, and Further Simplifies Balance Sheet.
Denver, Colorado, July 28, 2022 – Apartment Income REIT Corp. ("AIR") (NYSE: AIRC) was formed to provide investors the most efficient and effective way to allocate capital to multi-family real estate. In only 18 months, or one-half the expected time, the establishment of AIR is complete. The balance sheet has been transformed with leverage reduced by $850 million, or 23%. The relationship with Apartment Investment & Management Company ("Aimco"), approximately 14% of AIR’s net asset value ("NAV") at year-end 2020, is now approximately 34 basis points.
What AIR was designed to be is now visible through its:
Chief Executive Officer Terry Considine comments: "With a clear strategy focused on efficient operations, low leverage, a capable team, and an engaged Board, AIR has achieved substantially all of the goals set out by the Board at the separation. AIR is now well positioned to use its platform for growth and so fulfill the potential the Board saw in the separation of AIR's business from Aimco."
"AIR has low financial risk with leverage at 22% of GAV, low execution risk with no development, and lower regulatory risk after exiting markets with an appetite for rent control."
"AIR is insulated from inflation, not exposed to higher interest rates, and prepared for recession."
Chief Financial Officer Paul Beldin adds: "AIR enjoys accelerating growth. Organic growth in the quarter was strong with signed blended leases rates up 14.1% and Same Store NOI up 16.4%. At the expected levels of year-end loss-to-lease, we see the potential for Same Store Revenue to grow next year at rates in the mid- to high-single digits. We expect operating results for the acquisition portfolio will improve at an even faster pace.
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For example, market cap rates were in the high 3%s at the times we made our 2021 acquisitions and we now expect an annualized 5% NOI yield by the end of this year."
"AIR's balance sheet is strong with increased flexibility. We expanded our access to debt markets when we issued $400 million of senior unsecured notes. Our floating rate exposure is 2% of total leverage. Only 7% of our debt reprices through the end of 2024. We remain on track to achieve year-end Leverage EBITDAre of 5.5:1."
"Second quarter Pro forma FFO was $0.66 per share; $0.01 above the midpoint of guidance, pro forma for the timing of the repayment of the Aimco note. We had anticipated that the Aimco note would be fully repaid in the second quarter. Instead, the last $147 million was paid in July, shifting $0.03 of prepayment penalty income from June into July. The aggregate prepayment penalty was approximately $0.035 lower than originally anticipated due to higher than forecasted interest rates on short-term treasury notes. This was offset in our second quarter results by the $5.4 million sale, net of tax, of AIR’s 2% cost basis investment in the portfolio that served as collateral for the Aimco note."
"Looking forward, we are narrowing our expectations for full year Pro forma FFO to between $2.38 and $2.44 per share, while maintaining the midpoint of $2.41. Similarly, our expectations for run-rate FFO are unchanged at $2.19 per share. Relative to our prior guidance, we now expect:
Financial Results: Second Quarter Pro forma FFO Per Share
|
| SECOND QUARTER | YEAR-TO-DATE |
|
| ||||||||||||||||||||
(all items per common share – diluted) |
| 2022 |
|
| 2021 |
|
| Variance |
|
| 2022 |
|
| 2021 |
|
| Variance |
|
| ||||||
Net income (loss) |
| $ | 1.26 |
|
| $ | (0.12 | ) |
| nm |
|
| $ | 3.66 |
|
| $ | 0.43 |
|
| nm |
|
| ||
NAREIT Funds From Operations (FFO) |
| $ | 0.64 |
|
| $ | 0.28 |
|
|
| 128.6 | % |
| $ | 1.06 |
|
| $ | 0.75 |
|
|
| 41.3 | % |
|
Pro forma adjustments |
|
| 0.02 |
|
|
| 0.24 |
|
| nm |
|
|
| 0.17 |
|
|
| 0.27 |
|
| nm |
|
| ||
Pro forma Funds From Operations (Pro forma FFO) |
| $ | 0.66 |
|
| $ | 0.52 |
|
|
| 26.9 | % |
| $ | 1.23 |
|
| $ | 1.02 |
|
|
| 20.6 | % |
|
AIR Operating Results: Second Quarter Same Store NOI Up 3.9% Sequentially and 16.4% Year-Over-Year
The table below includes the operating results of the 64 AIR properties that meet our definition of Same Store. Same Store properties generated approximately 91% of AIR’s year to date 2022 rental revenue.
| SECOND QUARTER |
| YEAR-TO-DATE |
| ||||||||||||||||||||||||
| Year-over-Year |
|
| Sequential |
| Year-over-Year |
| |||||||||||||||||||||
($ in millions) * | 2022 |
|
| 2021 |
|
| Variance |
|
| 1st Qtr. |
|
| Variance |
| 2022 |
| 2021 |
| Variance |
| ||||||||
Revenue, before utility reimbursements | $ | 142.1 |
|
| $ | 127.3 |
|
|
| 11.6 | % |
| $ | 138.1 |
|
|
| 2.9 | % | $ | 280.2 |
| $ | 253.7 |
|
| 10.4 | % |
Expenses, net of utility reimbursements |
| 37.6 |
|
|
| 37.5 |
|
|
| 0.1 | % |
|
| 37.5 |
|
|
| 0.1 | % |
| 75.1 |
|
| 73.9 |
|
| 1.6 | % |
Net operating income (NOI) | $ | 104.5 |
|
| $ | 89.8 |
|
|
| 16.4 | % |
| $ | 100.6 |
|
|
| 3.9 | % | $ | 205.1 |
| $ | 179.8 |
|
| 14.1 | % |
*Amounts are presented on a rounded basis and the sum of the individual amounts may not foot; please refer to Supplemental Schedule 6.
Second quarter 2022 NOI margins were 73.6%, up 304 basis points from the second quarter of 2021. NOI margins benefited from Residential Rental Income growth of 9.1% and operating expenses that were up only 10 basis points compared to the prior year.
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Components of Same Store Revenue Growth – Second quarter year-over-year Same Store revenue growth was impacted by increased residential rental rates, higher average daily occupancy ("ADO"), and lower net bad debt expense. The table below summarizes the change in the components of our Same Store revenue growth.
|
| SECOND QUARTER | YEAR-TO-DATE | ||||||||||
Same Store Revenue Components |
| Year-over-Year | Sequential | Year-over-Year | |||||||||
Residential Rents |
|
| 7.5 | % |
|
| 2.5 | % |
|
| 6.2 | % |
|
Average Daily Occupancy |
|
| 1.6 | % |
|
| (1.3 | %) |
|
| 2.1 | % |
|
Residential Rental Income |
|
| 9.1 | % |
|
| 1.2 | % |
|
| 8.3 | % |
|
Bad Debt, net of recoveries |
|
| 2.0 | % |
|
| 1.1 | % |
|
| 1.3 | % |
|
Late Fees and Other |
|
| 0.3 | % |
|
| 0.6 | % |
|
| 0.4 | % |
|
Residential Revenue |
|
| 11.4 | % |
|
| 2.9 | % |
|
| 10.0 | % |
|
Commercial Revenue |
|
| 0.2 | % |
|
| — | % |
|
| 0.4 | % |
|
Same Store Revenue Growth |
|
| 11.6 | % |
|
| 2.9 | % |
|
| 10.4 | % |
|
Same Store Rental Rates – We measure changes in rental rates by comparing, on a lease-by-lease basis, the effective rate on a newly executed lease to the effective rate on the expiring lease for the same apartment. A newly executed lease is classified either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal.
The table below details changes in lease rates, as well as the weighted-average blended lease rates for leases executed in the respective period. Transacted leases are those that became effective during a reporting period and are therefore the best measure of immediate effect on current revenues. Signed leases are those executed during a reporting period and are therefore the best measure of current pricing.
| SECOND QUARTER | YEAR-TO-DATE | 2022 | |||||||
| 2022 | 2021* | Variance | 2022 | 2021* | Variance | April | May | June | July** |
Transacted Leases* |
|
|
|
|
|
|
|
|
|
|
Renewal rent changes | 11.1% | 3.2% | 7.9% | 11.2% | 2.5% | 8.7% | 11.8% | 10.7% | 10.9% | 10.6% |
New lease rent changes | 18.9% | (0.5%) | 19.4% | 18.1% | (3.2%) | 21.3% | 20.4% | 19.2% | 17.9% | 18.2% |
Weighted-average rent changes | 14.3% | 1.3% | 13.0% | 14.2% | (0.6%) | 14.8% | 15.5% | 14.5% | 13.5% | 14.2% |
|
|
|
|
|
|
|
|
|
|
|
Signed Leases* |
|
|
|
|
|
|
|
|
|
|
Renewal rent changes | 10.6% | 5.3% | 5.3% | 10.9% | 4.2% | 6.7% | 10.3% | 10.7% | 10.7% | 11.7% |
New lease rent changes | 18.4% | 2.5% | 15.9% | 18.0% | (0.4%) | 18.4% | 16.5% | 18.4% | 20.1% | 20.4% |
Weighted-average rent changes | 14.1% | 3.8% | 10.3% | 14.2% | 1.8% | 12.4% | 13.8% | 13.5% | 14.9% | 16.0% |
|
|
|
|
|
|
|
|
|
|
|
Average Daily Occupancy | 96.8% | 95.2% | 1.6% | 97.4% | 95.3% | 2.1% | 97.3% | 96.8% | 96.1% | 95.6% |
*Amounts are based on our current Same Store population and represent AIR's share, whereas previously these were reported on a non-ownership adjusted basis. Amounts may differ from those previously reported.
**July leasing results are preliminary and as of July 25, 2022. May, June, and July ADO are lower than full year ADO due to the vacancy associated with the increased turnover during the leasing season.
Same Store Markets – In the second quarter, AIR enjoyed stronger than typical consumer demand across all markets. Signed new lease rates were up 18.4% from the prior lease, with renewals up 10.6%, resulting in a weighted-average increase of 14.1%. We saw sequential declines in ADO, associated with higher move out volume during the summer leasing season. Second quarter ADO of 96.8% was 160 bps higher than the prior year.
2021 Acquisition Performance – Included in AIR's acquisition portfolio are five properties acquired in 2021. Leasing at these properties has exceeded our expectations. Transacted new lease rates were up 28%, with renewals up 25%, resulting in a weighted-average increase of 26%. Fourth quarter revenue growth in this portfolio, the first reporting period with a year-over-year comparison, is anticipated to be 600 basis points above the Same Store portfolio. We anticipate our 2022 acquisitions will also grow faster than the Same Store portfolio. We will report their results as comparative data becomes available.
Rent Collection Update
We measure residential rent collection as the dollar value of payments received as a percentage of all residential amounts owed. In the second quarter, we collected 97.9% of all residential revenue billed during the quarter, treating the balance of 2.1% as bad debt. We also received $3 million of government payments on behalf of eligible residents with past due accounts. These payments reduced accounts receivable previously reserved and
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so reduced second quarter bad debt expense by 190 basis points of revenues, resulting in net bad debt expense of approximately 20 basis points.
Outside of California, 98.7% of our residents are current, leaving approximately 150 residents where eviction notices have been filed, but the eviction process is not complete due to a slowed cycle time. Previously, in these locales, an eviction took between 45 and 90 days to complete. Today, the eviction timeline is extended and less predictable, resulting in greater amounts of unpaid rent and increased bad debt. We estimate that the prolonged timeline increased our second quarter bad debt from our historic experience of approximately 20 basis points to 100 basis points.
In California, we continue to be subject to government limitations on our ability to enforce our contractual remedies for nonpayment of rent. This has allowed approximately 400 California residents, about 5% of the total, to become delinquent by two or more months. As a result, gross bad debt expense in California was approximately 3% of second quarter residential revenues. After consideration of government payments reducing accounts receivable previously reserved, net bad debt was a $0.3 million contra-expense.
As of June 30, 2022, our proportionate share of gross residential accounts receivable was $9.9 million. After consideration of tenant security deposits and reserves for uncollectible amounts, our net exposure is $1.1 million, an amount expected to be collected during the third quarter of 2022.
Portfolio Management
Our portfolio of apartment communities is diversified across primarily "A" and "B" price points, averaging “B/B+” in quality, and also across eight core markets in the United States. Since separation, we have reduced our allocation to New York City and Chicago and increased our investment in Miami-Dade and Broward counties to 18% of GAV.
AIR uses "paired trades" to fund acquisitions, basing our cost of capital on the anticipated unlevered internal rates of return ("IRR") of the communities sold. We require an unlevered IRR at least 200 basis points higher on the communities purchased. As our cost of capital has increased, we have raised our required returns.
Since separation, we have acquired $1.4 billion of properties new to the AIR operating platform. This represents approximately 11% of our portfolio; our target is 30%. In a typical AIR Edge acquisition, the acquired property will experience NOI growth at market rates for six to 12 months, as the property is integrated onto AIR’s platform. During the following two to four years, NOI growth is expected to exceed the market growth rate by two or three times.
For example, AIR acquired five properties in 2021, at a cost of approximately $730 million. At the time, market cap rates were in the high 3% range. With confidence in the AIR Edge, we underwrote a first year yield of 4.3% and a long-term unlevered IRR of approximately 9%. We now expect these acquisitions will outperform their first-year underwriting by $2.6 million, or 9%, increasing the annualized fourth quarter 2022 yield to 5.0% and the expected long-term unlevered IRRs to over 11%.
When market conditions change, AIR adjusts its target returns and spreads to reflect the new environment. AIR seeks acquisitions that are accretive to earnings in the near term and that generate unlevered IRRs at least 200 basis points higher than the expected returns of the properties sold in the paired trade.
Transactions
Acquisitions
During the second quarter and through July, we acquired four apartment communities, one located in the Washington, D.C. area and three located in South Florida, with 1,351 apartment homes for a total purchase price of $640.1 million.
We also reached an agreement with Aimco to cancel existing master leases at four properties owned by AIR and leased to Aimco for the purpose of their development. With the developments largely completed, we agreed
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to terminate the leases for a payment of $200 million. The four properties include 865 apartment homes with average monthly rents of approximately $3,400 per home.
In aggregate, we anticipate a first year NOI yield of 4.0%. The yield is anticipated to grow to 5.0%, annualized, by the third quarter of next year. The expected unlevered IRR is approximately 9%.
Dispositions
During the second quarter, we sold four apartment communities, three located in California and one in Virginia, with 718 apartment homes, for gross proceeds of $203.1 million at a trailing twelve-month NOI cap rate of 4.7%, reflecting AIR’s low property tax basis. Adjusting for market rate real estate taxes, the NOI cap rate is 4.0%. Net sales proceeds, after transaction costs and repayment of debt at the sold properties, were $186.6 million.
During the balance of 2022, we anticipate selling approximately $550 million of communities in suburban Boston and New York City, at expected trailing twelve-month NOI cap rates of approximately 4%. The proceeds are expected to be used to fund the Aimco lease cancellation, the four apartment communities acquired in 2022, and the completed share repurchases.
Capital Allocation – Share Repurchases
During the second quarter, AIR repurchased 2.9 million shares for $125 million, an average price of $42.93 per share. We are authorized to purchase an additional $375 million of shares. We regularly consider buybacks relative to alternative uses of capital.
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Balance Sheet
We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage and primarily long-dated debt. We target a leverage to EBITDAre ratio of approximately 5:5:1, and anticipate the actual ratio will vary based on the timing of transactions. We maintain financial flexibility through ample unused and available credit, holding properties with substantial value unencumbered by property debt, maintaining an investment grade rating, and using partners’ capital when it enhances financial returns or reduces investment risk.
Components of Leverage
Our leverage includes our share of long-term, non-recourse property debt encumbering our apartment communities, together with outstanding borrowings under our revolving credit facility, our term loans, unsecured notes payable, and preferred equity.
|
| JUNE 30, 2022 |
| |||||||||
($ in millions)* |
| Amount |
|
| Weighted-Avg. |
|
| Weighted-Avg. |
| |||
Fixed rate loans payable |
| $ | 1,505 |
|
|
| 8.9 |
|
|
| 9.2 |
|
Floating rate loans payable |
|
| 138 |
|
|
| 3.6 |
|
|
| 4.2 |
|
AIR share of long-term, non-recourse property debt |
|
| 1,643 |
|
|
| 8.5 |
|
|
| 8.7 |
|
|
|
|
|
|
|
|
|
|
| |||
Term loans |
|
| 800 |
|
|
| 3.5 |
|
|
| 5.0 |
|
Unsecured notes payable |
|
| 400 |
|
|
| 8.0 |
|
|
| 8.0 |
|
Outstanding borrowings on revolving credit facility |
|
| 148 |
|
|
| 3.8 |
|
|
| 3.8 |
|
Preferred equity** |
|
| 81 |
|
|
| 9.8 |
|
|
| 9.8 |
|
Total Leverage |
| $ | 3,072 |
|
|
| 6.9 |
|
|
| 7.4 |
|
Cash and restricted cash |
|
| (84 | ) |
|
|
|
|
|
| ||
Note receivable from Aimco*** |
|
| (147 | ) |
|
|
|
|
|
| ||
Net Leverage |
| $ | 2,841 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| |||
Floating rate net leverage % |
|
| 2 | % |
|
|
|
|
|
| ||
Fixed rate net leverage % |
|
| 98 | % |
|
|
|
|
|
| ||
Total |
|
| 100 | % |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| |||
Net Leverage to Adjusted EBITDAre |
| 6.1x |
|
|
|
|
|
|
|
* Amounts are presented on a rounded basis and the sum of the individual amounts may not foot; please refer to Supplemental Schedule 5.
** AIR’s Preferred equity is perpetual in nature; however, for illustrative purposes, we have computed the weighted-average maturity of our preferred OP Units assuming a 10-year maturity and preferred stock assuming it is called at the expiration of the no-call period.
*** In July, Aimco repaid the remaining $147 million outstanding note. We consider the note a reduction of leverage, as proceeds were used to repay outstanding borrowings on our term loans and revolving credit facility.
During the second quarter, we issued three tranches of guaranteed, senior unsecured notes, totaling $400 million at a weighted-average effective interest rate of 4.3%, inclusive of the previously placed treasury lock, and a weighted-average maturity of eight years.
Proceeds from the offering were used to repay borrowings on our revolving credit facility. The private placement of unsecured notes is an important step in the transition of AIR from a secured borrower to a primarily unsecured borrower.
During the second quarter, we received $400 million from Aimco in payment on its note to AIR, inclusive of a $12.9 million prepayment penalty. The $147 million balance and a $4.5 million prepayment penalty were repaid in July. Proceeds were used to repay $350 million in term loans and to reduce borrowings on our revolving credit facility.
Liquidity
We use our revolving credit facility for working capital, other short-term purposes, and to secure letters of credit. At June 30, 2022, our share of cash and restricted cash, excluding amounts related to tenant security deposits,
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was $84 million and we had the capacity to borrow up to $841 million on our revolving credit facility, bringing total liquidity to $925 million.
We manage our financial flexibility by maintaining an investment grade rating from S&P and holding communities that are unencumbered by property debt. As of June 30, 2022, we held unencumbered apartment communities with an estimated fair market value of approximately $7.8 billion, more than double the amount from December 31, 2020.
We anticipate seeking an investment grade credit rating from Moody’s. In assigning ratings, Moody’s places significant emphasis on the amount of non-recourse property debt as a percentage of the undepreciated book value of a borrower’s assets. We have lowered the amount of non-recourse property debt by $1.5 billion since December 31, 2020. At June 30, 2022, the AIR share of non-recourse property debt represented 19% of undepreciated book value.
Dividend and Equity Capital Markets
On July 26, 2022, our Board of Directors declared a quarterly cash dividend of $0.45 per share of AIR Common Stock. This amount is payable on August 30, 2022, to stockholders of record on August 19, 2022.
In setting AIR's 2022 dividend, our Board of Directors targeted a dividend level of approximately 75% of full year FFO per share.
The after-tax dividend will benefit from AIR's refreshed tax basis. Two-thirds of the 2021 dividend was a tax- free return of capital while the remaining one-third was taxable at capital gain rates. In the same year, approximately 60% of peer dividends were taxed at ordinary income rates, with the remaining 40% taxed at capital gain rates.
In 2022, we currently project a majority of our dividend will be taxed at capital gain rates, with the remainder taxed at ordinary income rates. We believe the tax characteristics of our dividend makes our stock more attractive to taxable investors, such as foreign investors, taxable individuals, and corporations by comparison to peer shares whose dividends are taxed at higher rates.
Corporate Responsibility Update
Corporate responsibility is a longstanding AIR priority and a key part of our culture. We are committed to transparency, and continuous improvement...as measured by GRESB. Based on UN Sustainable Development Goals, we have set targets for energy, water, and greenhouse gas reductions. We contracted for expert review of the environmental impacts of our properties, and we are considering various ways to improve portfolio resilience.
During the quarter, AIR was honored as a Kingsley Elite Five, ranking first among public multi-family companies and second among all multi-family companies in customer satisfaction.
In partnership with the National Leased Housing Association, we continue our longstanding commitment to offer AIR Gives Opportunity Scholarship to students living in affordable housing. During the quarter, we awarded 14 scholarships to students living in affordable housing.
Our team is a critical part of our success. In 2022, AIR was named a National Top Workplaces winner and also for a third year a 2022 Healthiest Employer by the Denver Business Journal.
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2022 Outlook
AIR expects full year Pro forma FFO between $2.38 and $2.44 per share. Our midpoint of $2.41 per share remains unchanged. Similarly, our expectations for run-rate FFO are unchanged at $2.19 per share. Relative to our prior guidance, we now expect:
The following tables compare our previous FFO expectations, at the midpoint, to today, reflecting the impact of the above:
|
| Previous Expectation |
|
| Variance |
|
| Updated Expectation |
|
| |||
2021 FFO per share |
| $ | 2.14 |
|
| $ | — |
|
| $ | 2.14 |
|
|
Growth in Same Store NOI |
|
| 0.30 |
|
|
| 0.02 |
|
|
| 0.32 |
|
|
Contribution from lower leverage and acquisitions, net of related sales dilution |
|
| (0.03 | ) |
|
| 0.01 |
|
|
| (0.02 | ) |
|
Change in interest rates |
|
| (0.03 | ) |
|
| — |
|
|
| (0.03 | ) |
|
Change in contribution from Aimco note and gain on sale of cost basis investment |
|
| 0.05 |
|
|
| — |
|
|
| 0.05 |
|
|
Reacquisition of properties currently leased to Aimco |
|
| — |
|
|
| (0.02 | ) |
|
| (0.02 | ) |
|
Other* |
|
| (0.02 | ) |
|
| (0.01 | ) |
|
| (0.03 | ) |
|
2022 FFO per share at the midpoint |
| $ | 2.41 |
|
| $ | — |
|
| $ | 2.41 |
|
|
|
| Previous Expectation of Pro forma Run Rate |
|
| Variance |
|
| Updated Expectation of Pro forma Run Rate |
|
| |||
2021 FFO per share |
| $ | 2.14 |
|
| $ | — |
|
| $ | 2.14 |
|
|
Less: Interest income on Aimco note, net of borrowing costs |
|
| (0.12 | ) |
|
| — |
|
|
| (0.12 | ) |
|
2021 FFO per share before Aimco note contribution |
| $ | 2.02 |
|
| $ | — |
|
| $ | 2.02 |
|
|
Growth in Same Store NOI |
|
| 0.30 |
|
|
| 0.02 |
|
|
| 0.32 |
|
|
Net change in leverage, acquisitions and gain on sale of cost basis investment |
|
| (0.06 | ) |
|
| 0.01 |
|
|
| (0.05 | ) |
|
Change in interest rates |
|
| (0.05 | ) |
|
| — |
|
|
| (0.05 | ) |
|
Reacquisition of properties currently leased to Aimco |
|
| — |
|
|
| (0.02 | ) |
|
| (0.02 | ) |
|
Other* |
|
| (0.02 | ) |
|
| (0.01 | ) |
|
| (0.03 | ) |
|
2022 FFO per share at the midpoint |
| $ | 2.19 |
|
| $ | — |
|
| $ | 2.19 |
|
|
* Increase in "other" is due to higher offsite costs as a result of increasing teammate compensation at a time of high inflation. The contribution from the second quarter share repurchases is offset by higher than anticipated casualty losses.
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Our guidance ranges are based on the following components:
|
| YEAR-TO-DATE |
| FULL YEAR 2022 |
| PREVIOUS FULL YEAR 2022 |
($ Amounts represent AIR Share) |
|
|
|
|
|
|
Net Income (loss) per share (1) |
| $3.66 |
| $3.42 to $3.49 |
| $(0.33) to $(0.20) |
Pro forma FFO per share |
| $1.23 |
| $2.38 to $2.44 |
| $2.37 to $2.45 |
Run rate Pro forma FFO per share |
|
|
| $2.19 |
| $2.19 |
Pro forma FFO per share at the midpoint |
|
|
| $2.41 |
| $2.41 |
|
|
|
|
|
|
|
Same Store Operating Components |
|
|
|
|
|
|
Revenue change compared to prior year |
| 10.4% |
| 10.0% to 10.5% |
| 9.3% to 10.3% |
Expense change compared to prior year |
| 1.6% |
| 2.0% to 2.5% |
| 3.0% to 2.0% |
NOI change compared to prior year |
| 14.1% |
| 13.0% to 14.0% |
| 11.5% to 13.5% |
|
|
|
|
|
|
|
Offsite Costs |
|
|
|
|
|
|
General and administrative expenses, as defined below (2) |
| $9M |
| $16M to $18M |
| $15M to $17M |
|
|
|
|
|
|
|
Other Earnings |
|
|
|
|
|
|
Lease income |
| $13M |
| ~$18M |
| ~$30M |
Value of property acquisitions and cost of lease cancellation |
| $467M |
| ~$840M |
| ~$500M |
Proceeds from dispositions of real estate, net |
| $774M |
| ~$1.3B |
| ~$809M |
|
|
|
|
|
|
|
AIR Share of Capital Enhancements |
|
|
|
|
|
|
Capital Enhancements |
| $41M |
| $90M to $110M |
| $90M to $110M |
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
Net Leverage to Adjusted EBITDAre (3) |
| 6.1x |
| ~5.5x |
| ~5.5x |
In the third quarter of 2022, AIR anticipates Pro forma FFO between $0.54 and $0.58 per share, inclusive of $0.03 of prepayment penalty income received in July from the final payment of the Aimco note.
11
AIR Strategic Objectives
We created AIR to be the most efficient and effective way to invest in U.S. multi-family real estate, due to our simplified business model, diversified portfolio of stabilized apartment communities, and low leverage. The Board of Directors has set the following strategic objectives:
12
Earnings Conference Call Information
Live Conference Call: | Conference Call Replay: |
Friday, July 29, 2022 at 1:00 p.m. ET | Replay available until October 28, 2022 |
Domestic Dial-In Number: 1-844-200-6205 | Domestic Dial-In Number: 1-866-813-9403 |
International Dial-In Number: 1-929-526-1599 | International Dial-In Number: +44-204-525-0658 |
Passcode: 725302 | Passcode: 519599 |
Live webcast and replay: |
|
investors.aircommunities.com |
Supplemental Information
The full text of this Earnings Release and the Supplemental Information referenced in this release is available on AIR’s website at investors.aircommunities.com.
Glossary & Reconciliations of Non-GAAP Financial and Operating Measures
Financial and operating measures found in this Earnings Release and the Supplemental Information include certain financial measures used by AIR management that are measures not defined under accounting principles generally accepted in the United States ("GAAP"). Certain AIR terms and Non-GAAP measures are defined in the Glossary in the Supplemental Information and Non-GAAP measures reconciled to the most comparable GAAP measures.
About AIR
AIR is a real estate investment trust focused on the ownership and management of quality apartment communities located in the largest markets in the United States. AIR is one of the country’s largest owners and operators of apartments, with 76 communities in 11 states and the District of Columbia. AIR common shares are traded on the New York Stock Exchange under the ticker symbol AIRC, and are included in the S&P 400. For more information about AIR, please visit our website at www.aircommunities.com.
Contact
Matthew O'Grady
Senior Vice President, Capital Markets
(303) 691-4566
investors@aircommunities.com
13
Forward-looking Statements
This Earnings Release and Supplemental Information contain forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of 2022 results, including but not limited to: NAREIT FFO, Pro forma FFO and selected components thereof; expectations regarding consumer demand, growth in revenue and strength of other performance metrics and models; expectations regarding acquisitions as well as sales and joint ventures and the use of proceeds thereof; and AIR liquidity and leverage metrics. We caution investors not to place undue reliance on any such forward-looking statements.
These forward-looking statements are based on management’s current expectations, estimates and assumptions and subject to risks and uncertainties, that could cause actual results to differ materially from such forward-looking statements, including, but not limited to: the effects of the COVID-19 pandemic on AIR’s business and on the global and U.S. economies 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 herein; real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including inflation, the pace of job growth, and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing and effects of acquisitions and dispositions; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; loss of key personnel; AIR’s ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding sales of apartment communities and the use of proceeds thereof; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; financing risks, including the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; 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 AIR; our relationship with Aimco after the business separation; the ability and willingness of the parties to the business separation to meet and/or perform their obligations under the related contractual arrangements and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve the expected benefits from the business separation. Other risks and uncertainties are described in filings by AIR with the Securities and Exchange Commission ("SEC"), including the section entitled "Risk Factors" in Item 1A of AIR’s Annual Report on Form 10-K for the year ended December 31, 2021, and subsequent filings with the SEC.
In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and depends on our ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership.
These forward-looking statements reflect management’s judgment as of this date, and we assume no obligation to revise or update them to reflect future events or circumstances. This earnings release does not constitute an offer of securities for sale.
14
Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Rental and other property revenues (1) |
| $ | 181,012 |
|
| $ | 176,721 |
|
| $ | 360,273 |
|
| $ | 351,451 |
|
Other revenues |
|
| 2,488 |
|
|
| 1,612 |
|
|
| 4,705 |
|
|
| 3,295 |
|
Total revenues |
|
| 183,500 |
|
|
| 178,333 |
|
|
| 364,978 |
|
|
| 354,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Property operating expenses (1) |
|
| 63,787 |
|
|
| 64,758 |
|
|
| 127,023 |
|
|
| 129,375 |
|
Depreciation and amortization |
|
| 78,656 |
|
|
| 75,791 |
|
|
| 163,205 |
|
|
| 151,071 |
|
General and administrative expenses (2) |
|
| 5,333 |
|
|
| 5,221 |
|
|
| 11,930 |
|
|
| 9,635 |
|
Other (income) expenses, net |
|
| (3,076 | ) |
|
| 2,515 |
|
|
| 942 |
|
|
| 5,391 |
|
Total operating expenses |
|
| 144,700 |
|
|
| 148,285 |
|
|
| 303,100 |
|
|
| 295,472 |
|
Interest income (3) |
|
| 25,652 |
|
|
| 15,684 |
|
|
| 39,133 |
|
|
| 31,656 |
|
Interest expense |
|
| (26,027 | ) |
|
| (33,657 | ) |
|
| (48,134 | ) |
|
| (69,682 | ) |
Loss on extinguishment of debt |
|
| — |
|
|
| (37,150 | ) |
|
| (23,636 | ) |
|
| (38,160 | ) |
Gain on dispositions of real estate and derecognition of leased properties |
|
| 175,606 |
|
|
| 3,353 |
|
|
| 587,609 |
|
|
| 87,385 |
|
Loss from unconsolidated real estate partnerships |
|
| (873 | ) |
|
| — |
|
|
| (2,887 | ) |
|
| — |
|
Income (loss) before income tax (expense) benefit |
|
| 213,158 |
|
|
| (21,722 | ) |
|
| 613,963 |
|
|
| 70,473 |
|
Income tax (expense) benefit |
|
| (1,499 | ) |
|
| 2,035 |
|
|
| (920 | ) |
|
| (1,045 | ) |
Net income (loss) |
|
| 211,659 |
|
|
| (19,687 | ) |
|
| 613,043 |
|
|
| 69,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Noncontrolling interests: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net (income) loss attributable to noncontrolling interests in |
|
| (381 | ) |
|
| 2,397 |
|
|
| 183 |
|
|
| 2,632 |
|
Net income attributable to preferred noncontrolling interests in |
|
| (1,602 | ) |
|
| (1,603 | ) |
|
| (3,205 | ) |
|
| (3,207 | ) |
Net (income) loss attributable to common noncontrolling interests in |
|
| (12,749 | ) |
|
| 945 |
|
|
| (36,916 | ) |
|
| (3,491 | ) |
Net (income) loss attributable to noncontrolling interests |
|
| (14,732 | ) |
|
| 1,739 |
|
|
| (39,938 | ) |
|
| (4,066 | ) |
Net income (loss) attributable to AIR |
|
| 196,927 |
|
|
| (17,948 | ) |
|
| 573,105 |
|
|
| 65,362 |
|
Net income attributable to AIR preferred stockholders |
|
| (43 | ) |
|
| (43 | ) |
|
| (85 | ) |
|
| (93 | ) |
Net income attributable to participating securities |
|
| (162 | ) |
|
| (39 | ) |
|
| (417 | ) |
|
| (103 | ) |
Net income (loss) attributable to AIR common stockholders |
| $ | 196,722 |
|
| $ | (18,030 | ) |
| $ | 572,603 |
|
| $ | 65,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) attributable to AIR common stockholders per share – basic and diluted |
| $ | 1.26 |
|
| $ | (0.12 | ) |
| $ | 3.66 |
|
| $ | 0.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average common shares outstanding – basic |
|
| 155,927 |
|
|
| 154,608 |
|
|
| 156,327 |
|
|
| 151,609 |
|
Weighted-average common shares outstanding – diluted |
|
| 156,136 |
|
|
| 154,608 |
|
|
| 156,607 |
|
|
| 152,083 |
|
Rental and other property revenues for the three and six months ended June 30, 2021, are inclusive of $7.2 million and $14.3 million, respectively, of revenues related to the third-party share of properties included in the Washington, D.C. joint venture. Property operating expenses for the three and six months ended June 30, 2021, are inclusive of $1.9 million and $3.7 million, respectively, of expenses related to the third-party share of properties included in the Washington, D.C. joint venture.
Interest income for the three and six months ended June 30, 2021, includes $6.9 million and $13.9 million, respectively, of income associated with our note receivable from Aimco, and $6.5 million and $12.9 million, respectively, of interest income associated with properties leased.
15
Consolidated Balance Sheets
(in thousands) (unaudited)
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Assets |
|
|
|
|
|
| ||
Real estate |
| $ | 7,379,865 |
|
| $ | 6,885,081 |
|
Accumulated depreciation |
|
| (2,400,722 | ) |
|
| (2,284,793 | ) |
Net real estate |
|
| 4,979,143 |
|
|
| 4,600,288 |
|
Cash and cash equivalents |
|
| 74,949 |
|
|
| 67,320 |
|
Restricted cash |
|
| 25,942 |
|
|
| 25,441 |
|
Note receivable from Aimco |
|
| 147,039 |
|
|
| 534,127 |
|
Leased real estate assets |
|
| 466,013 |
|
|
| 466,355 |
|
Goodwill |
|
| 32,286 |
|
|
| 32,286 |
|
Other assets (1) |
|
| 707,913 |
|
|
| 568,051 |
|
Assets held for sale |
|
| — |
|
|
| 146,492 |
|
Total Assets |
| $ | 6,433,285 |
|
| $ | 6,440,360 |
|
|
|
|
|
|
|
| ||
Liabilities and Equity |
|
|
|
|
|
| ||
Non-recourse property debt |
| $ | 2,036,027 |
|
| $ | 2,305,756 |
|
Debt issue costs |
|
| (9,514 | ) |
|
| (11,017 | ) |
Non-recourse property debt, net |
|
| 2,026,513 |
|
|
| 2,294,739 |
|
Term loans, net |
|
| 795,905 |
|
|
| 1,144,547 |
|
Revolving credit facility borrowings |
|
| 148,000 |
|
|
| 304,000 |
|
Unsecured notes payable, net |
|
| 398,039 |
|
|
| — |
|
Accrued liabilities and other (1) |
|
| 696,673 |
|
|
| 592,774 |
|
Liabilities related to assets held for sale |
|
| — |
|
|
| 85,775 |
|
Total Liabilities |
|
| 4,065,130 |
|
|
| 4,421,835 |
|
|
|
|
|
|
|
| ||
Preferred noncontrolling interests in AIR OP |
|
| 79,330 |
|
|
| 79,370 |
|
|
|
|
|
|
|
| ||
Equity: |
|
|
|
|
|
| ||
Perpetual preferred stock |
|
| 2,000 |
|
|
| 2,129 |
|
Class A Common Stock |
|
| 1,542 |
|
|
| 1,570 |
|
Additional paid-in capital |
|
| 3,636,906 |
|
|
| 3,763,105 |
|
Accumulated other comprehensive income |
|
| 13,750 |
|
|
| — |
|
Distributions in excess of earnings |
|
| (1,521,749 | ) |
|
| (1,953,779 | ) |
Total AIR equity |
|
| 2,132,449 |
|
|
| 1,813,025 |
|
Noncontrolling interests in consolidated real estate partnerships |
|
| (70,609 | ) |
|
| (70,883 | ) |
Common noncontrolling interests in AIR OP |
|
| 226,985 |
|
|
| 197,013 |
|
Total Equity |
|
| 2,288,825 |
|
|
| 1,939,155 |
|
Total Liabilities and Equity |
| $ | 6,433,285 |
|
| $ | 6,440,360 |
|
16
Supplemental Schedule 1
Funds From Operations Reconciliation
Three and Six Months Ended June 30, 2022, Compared to Three and Six Months Ended June 30, 2021
(in thousands, except per share data) (unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income (loss) attributable to AIR common stockholders |
| $ | 196,722 |
|
| $ | (18,030 | ) |
| $ | 572,603 |
|
| $ | 65,166 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Real estate depreciation and amortization, net of noncontrolling partners’ interest |
|
| 73,922 |
|
|
| 69,588 |
|
|
| 155,379 |
|
|
| 139,083 |
|
Gain on dispositions of real estate and derecognition of leased properties, net of noncontrolling partners' interest |
|
| (175,450 | ) |
|
| (3,353 | ) |
|
| (587,453 | ) |
|
| (87,385 | ) |
Income tax adjustments related to gain on dispositions and other tax-related items |
|
| (1,100 | ) |
|
| (1,528 | ) |
|
| (1,100 | ) |
|
| 272 |
|
Common noncontrolling interests in AIR OP’s share of above adjustments |
|
| 6,240 |
|
|
| (3,217 | ) |
|
| 26,281 |
|
|
| (2,573 | ) |
Amounts allocable to participating securities |
|
| 88 |
|
|
| (7 | ) |
|
| 296 |
|
|
| — |
|
NAREIT FFO attributable to AIR common stockholders |
| $ | 100,422 |
|
| $ | 43,453 |
|
| $ | 166,006 |
|
| $ | 114,563 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss on extinguishment of debt (1) |
|
| — |
|
|
| 37,150 |
|
|
| 23,636 |
|
|
| 38,160 |
|
Separation, business transformation, and transition related costs (2) |
|
| 1,593 |
|
|
| 300 |
|
|
| 2,462 |
|
|
| 2,465 |
|
Non-cash straight-line rent (3) |
|
| 642 |
|
|
| 669 |
|
|
| 1,284 |
|
|
| 1,337 |
|
Incremental cash received from leased properties (4) |
|
| 170 |
|
|
| 147 |
|
|
| 323 |
|
|
| 308 |
|
Other |
|
| 152 |
|
|
| 797 |
|
|
| 355 |
|
|
| 780 |
|
Common noncontrolling interests in AIR OP’s share of above adjustments |
|
| (154 | ) |
|
| (1,942 | ) |
|
| (1,719 | ) |
|
| (2,140 | ) |
Amounts allocable to participating securities |
|
| (6 | ) |
|
| (14 | ) |
|
| (19 | ) |
|
| (14 | ) |
Pro forma FFO |
| $ | 102,819 |
|
| $ | 80,560 |
|
| $ | 192,328 |
|
| $ | 155,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average common shares outstanding – basic |
|
| 155,927 |
|
|
| 154,608 |
|
|
| 156,327 |
|
|
| 151,609 |
|
Dilutive common share equivalents |
|
| 209 |
|
|
| 504 |
|
|
| 280 |
|
|
| 474 |
|
Total shares and dilutive share equivalents |
|
| 156,136 |
|
|
| 155,112 |
|
|
| 156,607 |
|
|
| 152,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) attributable to AIR per share – diluted |
| $ | 1.26 |
|
| $ | (0.12 | ) |
| $ | 3.66 |
|
| $ | 0.43 |
|
NAREIT FFO per share – diluted |
| $ | 0.64 |
|
| $ | 0.28 |
|
| $ | 1.06 |
|
| $ | 0.75 |
|
Pro forma FFO per share – diluted |
| $ | 0.66 |
|
| $ | 0.52 |
|
| $ | 1.23 |
|
| $ | 1.02 |
|
17
Supplemental Schedule 2(a)
Funds From Operations Information
Three and Six Months Ended June 30, 2022, Compared to Three and Six Months Ended June 30, 2021
(consolidated amounts, in thousands) (unaudited)
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenues, before utility reimbursements |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same Store |
| $ | 155,232 |
|
| $ | 147,611 |
|
| $ | 306,031 |
|
| $ | 294,288 |
|
Other Real Estate |
|
| 17,279 |
|
|
| 1,840 |
|
|
| 32,113 |
|
|
| 3,005 |
|
Total revenues, before utility reimbursements |
|
| 172,511 |
|
|
| 149,451 |
|
|
| 338,144 |
|
|
| 297,293 |
|
Expenses, net of utility reimbursements (1) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same Store |
|
| 40,787 |
|
|
| 42,773 |
|
|
| 81,568 |
|
|
| 84,335 |
|
Other Real Estate |
|
| 6,765 |
|
|
| 1,263 |
|
|
| 12,873 |
|
|
| 2,396 |
|
Total expenses, net of utility reimbursements |
|
| 47,552 |
|
|
| 44,036 |
|
|
| 94,441 |
|
|
| 86,731 |
|
Net operating income (2) |
|
| 124,959 |
|
|
| 105,415 |
|
|
| 243,703 |
|
|
| 210,562 |
|
Lease income |
|
| 6,533 |
|
|
| 6,457 |
|
|
| 13,067 |
|
|
| 12,898 |
|
Property management expenses, net |
|
| (5,775 | ) |
|
| (5,250 | ) |
|
| (11,117 | ) |
|
| (11,588 | ) |
Property income |
|
| 125,717 |
|
|
| 106,622 |
|
|
| 245,653 |
|
|
| 211,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative expenses (1)(3) |
|
| (3,691 | ) |
|
| (3,142 | ) |
|
| (8,725 | ) |
|
| (7,556 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| (26,027 | ) |
|
| (33,657 | ) |
|
| (48,134 | ) |
|
| (69,682 | ) |
Loss on extinguishment of debt |
|
| — |
|
|
| (37,150 | ) |
|
| (23,636 | ) |
|
| (38,160 | ) |
Preferred dividends |
|
| (1,645 | ) |
|
| (1,646 | ) |
|
| (3,290 | ) |
|
| (3,300 | ) |
Interest income from note receivable from Aimco (4) |
|
| 19,299 |
|
|
| 6,944 |
|
|
| 26,243 |
|
|
| 13,889 |
|
Interest income |
|
| 2 |
|
|
| 2,283 |
|
|
| 5 |
|
|
| 4,869 |
|
Total cost of capital |
|
| (8,371 | ) |
|
| (63,226 | ) |
|
| (48,812 | ) |
|
| (92,384 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Casualties |
|
| (1,684 | ) |
|
| (585 | ) |
|
| (1,793 | ) |
|
| (1,457 | ) |
Depreciation and amortization related to non-real estate assets (1) |
|
| — |
|
|
| (869 | ) |
|
| — |
|
|
| (1,385 | ) |
Land leases |
|
| (1,324 | ) |
|
| (1,321 | ) |
|
| (2,645 | ) |
|
| (2,634 | ) |
Income from unconsolidated real estate partnerships |
|
| 775 |
|
|
| — |
|
|
| 1,904 |
|
|
| — |
|
Other expenses, net |
|
| 4,400 |
|
|
| (1,194 | ) |
|
| 1,703 |
|
|
| (2,757 | ) |
Tax benefit (expense), net |
|
| (2,633 | ) |
|
| 505 |
|
|
| (2,031 | ) |
|
| (770 | ) |
NOI related to sold and held for sale communities |
|
| 946 |
|
|
| 13,996 |
|
|
| 4,951 |
|
|
| 27,852 |
|
Total other |
|
| 480 |
|
|
| 10,532 |
|
|
| 2,089 |
|
|
| 18,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common noncontrolling interests in AIR OP |
|
| (6,583 | ) |
|
| (2,318 | ) |
|
| (10,756 | ) |
|
| (6,167 | ) |
Proportionate adjustments |
|
| (7,130 | ) |
|
| (5,015 | ) |
|
| (13,443 | ) |
|
| (10,051 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
NAREIT FFO attributable to AIR common stockholders |
| $ | 100,422 |
|
| $ | 43,453 |
|
| $ | 166,006 |
|
| $ | 114,563 |
|
Total pro forma adjustments, net of common noncontrolling interests in AIR OP and participating securities |
|
| 2,397 |
|
|
| 37,107 |
|
|
| 26,322 |
|
|
| 40,896 |
|
Pro forma FFO attributable to AIR common stockholders |
| $ | 102,819 |
|
| $ | 80,560 |
|
| $ | 192,328 |
|
| $ | 155,459 |
|
18
Supplemental Schedule 2(b)
Partially Owned Entities
Three and Six Months Ended June 30, 2022, Compared to Three and Six Months Ended June 30, 2021
(in thousands) (unaudited)
|
| Noncontrolling Interests (1) |
|
| Unconsolidated (2) |
|
| Noncontrolling Interests (1) |
|
| Unconsolidated (2) |
| ||||||||||||||||||||
|
| Three Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Revenues, before utility reimbursements |
| $ | 15,120 |
|
| $ | 13,133 |
|
| $ | 1,954 |
|
| $ | — |
|
| $ | 29,700 |
|
| $ | 26,253 |
|
| $ | 3,843 |
|
| $ | — |
|
Expenses, net of utility reimbursements |
|
| 3,853 |
|
|
| 3,783 |
|
|
| 622 |
|
|
| — |
|
|
| 7,606 |
|
|
| 7,444 |
|
|
| 1,097 |
|
|
| — |
|
Net operating income |
|
| 11,267 |
|
|
| 9,350 |
|
|
| 1,332 |
|
|
|
|
|
| 22,094 |
|
|
| 18,809 |
|
|
| 2,746 |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Property management expenses, net |
|
| (470 | ) |
|
| (409 | ) |
|
| (61 | ) |
|
| — |
|
|
| (892 | ) |
|
| (817 | ) |
|
| (120 | ) |
|
| — |
|
Casualties |
|
| 251 |
|
|
| (13 | ) |
|
| (3 | ) |
|
| — |
|
|
| 210 |
|
|
| (70 | ) |
|
| (6 | ) |
|
| — |
|
Other expense, net |
|
| (32 | ) |
|
| (23 | ) |
|
| — |
|
|
| — |
|
|
| (99 | ) |
|
| (29 | ) |
|
| — |
|
|
| — |
|
Interest expense on non-recourse property debt |
|
| (3,758 | ) |
|
| (3,828 | ) |
|
| (656 | ) |
|
| — |
|
|
| (7,528 | ) |
|
| (7,711 | ) |
|
| (1,194 | ) |
|
| — |
|
Contribution from real estate operations |
|
| 7,258 |
|
|
| 5,077 |
|
|
| 612 |
|
|
| — |
|
|
| 13,785 |
|
|
| 10,182 |
|
|
| 1,426 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other non-property (expenses) income, net |
|
| (128 | ) |
|
| (62 | ) |
|
| 75 |
|
|
|
|
|
| (342 | ) |
|
| (131 | ) |
|
| 377 |
|
|
|
| ||
FFO from real estate operations |
| $ | 7,130 |
|
| $ | 5,015 |
|
| $ | 687 |
|
| $ | — |
|
| $ | 13,443 |
|
| $ | 10,051 |
|
| $ | 1,803 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total apartment communities |
|
| 16 |
|
|
| 16 |
|
|
| 3 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total apartment homes |
|
| 5,369 |
|
|
| 5,369 |
|
|
| 1,748 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Noncontrolling interests’ share of consolidated apartment homes/AIR share of unconsolidated apartment homes |
|
| 1,721 |
|
|
| 1,721 |
|
|
| 350 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
19
Supplemental Schedule 3
Property Net Operating Income
Trailing Five Quarters
(consolidated amounts, in thousands) (unaudited)
|
| Three Months Ended |
| |||||||||||||||||
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
| |||||
Revenues, before utility reimbursements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same Store |
| $ | 155,232 |
|
| $ | 150,799 |
|
| $ | 151,932 |
|
| $ | 155,751 |
|
| $ | 147,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Real Estate |
|
| 17,279 |
|
|
| 14,834 |
|
|
| 14,290 |
|
|
| 5,558 |
|
|
| 1,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total revenues, before utility reimbursements |
|
| 172,511 |
|
|
| 165,633 |
|
|
| 166,222 |
|
|
| 161,309 |
|
|
| 149,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Expenses, net of utility reimbursements (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same Store |
|
| 40,787 |
|
|
| 40,781 |
|
|
| 39,802 |
|
|
| 42,795 |
|
|
| 42,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Real Estate |
|
| 6,765 |
|
|
| 6,108 |
|
|
| 5,350 |
|
|
| 2,985 |
|
|
| 1,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total expenses, net of utility reimbursements |
|
| 47,552 |
|
|
| 46,889 |
|
|
| 45,152 |
|
|
| 45,780 |
|
|
| 44,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property Net Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same Store (2) |
|
| 114,445 |
|
|
| 110,018 |
|
|
| 112,130 |
|
|
| 112,956 |
|
|
| 104,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Real Estate |
|
| 10,514 |
|
|
| 8,726 |
|
|
| 8,940 |
|
|
| 2,573 |
|
|
| 577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Property Net Operating Income |
| $ | 124,959 |
|
| $ | 118,744 |
|
| $ | 121,070 |
|
| $ | 115,529 |
|
| $ | 105,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
NOI related to communities sold and held for sale |
| $ | 946 |
|
| $ | 4,005 |
|
| $ | 13,755 |
|
| $ | 14,976 |
|
| $ | 13,996 |
|
20
Supplemental Schedule 4
Apartment Home Summary
As of June 30, 2022
(unaudited)
|
| Number of Apartment Communities |
|
| Number of Apartment Homes |
|
| AIR Share of Apartment Homes |
| |||
|
|
|
|
|
|
|
|
|
| |||
Same Store (1) |
|
| 64 |
|
|
| 22,022 |
|
|
| 18,903 |
|
Other Real Estate (2) |
|
| 11 |
|
|
| 3,341 |
|
|
| 3,341 |
|
Total Portfolio |
|
| 75 |
|
|
| 25,363 |
|
|
| 22,244 |
|
|
|
|
|
|
|
|
|
|
| |||
Properties, land, and land interests leased (3) |
|
| 6 |
|
|
| 865 |
|
|
| 865 |
|
21
Supplemental Schedule 5(a)
Capitalization and Financial Metrics
As of June 30, 2022
(dollars in thousands) (unaudited)
Leverage Balances and Characteristics
Debt |
| Consolidated |
|
| AIR Share of |
|
| Noncontrolling |
|
| Total |
|
| Weighted- |
|
| Weighted- |
|
| ||||||
Fixed rate loans payable (1) |
| $ | 1,977,527 |
|
| $ | — |
|
| $ | (472,315 | ) |
| $ | 1,505,212 |
|
|
| 8.9 |
|
|
| 3.3 | % |
|
Floating rate loans payable |
|
| 58,500 |
|
|
| 79,000 |
|
|
| — |
|
|
| 137,500 |
|
|
| 3.6 |
|
|
| 3.6 | % |
|
Non-recourse property debt |
| $ | 2,036,027 |
|
| $ | 79,000 |
|
| $ | (472,315 | ) |
| $ | 1,642,712 |
|
|
| 8.5 |
|
|
| 3.3 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Term Loans (1) |
|
| 800,000 |
|
|
| — |
|
|
| — |
|
|
| 800,000 |
|
|
| 3.5 |
| (2) |
| 4.1 | % |
|
Unsecured notes payable |
|
| 400,000 |
|
|
| — |
|
|
| — |
|
|
| 400,000 |
|
|
| 8.0 |
|
|
| 4.3 | % |
|
Revolving credit facility borrowings |
|
| 148,000 |
|
|
| — |
|
|
| — |
|
|
| 148,000 |
|
|
| 3.8 |
| (2) |
| 3.2 | % |
|
Preferred equity |
|
| 81,330 |
|
|
| — |
|
|
| — |
|
|
| 81,330 |
|
|
| 9.8 |
| (3) |
| 8.1 | % |
|
Total leverage |
| $ | 3,465,357 |
|
| $ | 79,000 |
|
| $ | (472,315 | ) |
| $ | 3,072,042 |
|
|
| 6.9 |
|
|
| 3.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and restricted cash (4) |
|
| (90,270 | ) |
|
| — |
|
|
| 6,716 |
|
|
| (83,554 | ) |
|
|
|
|
|
|
| ||
Note receivable from Aimco (5) |
|
| (147,039 | ) |
|
| — |
|
|
| — |
|
|
| (147,039 | ) |
|
|
|
|
|
|
| ||
Net leverage |
| $ | 3,228,048 |
|
| $ | 79,000 |
|
| $ | (465,599 | ) |
| $ | 2,841,449 |
|
|
|
|
|
|
|
|
Leverage Ratios Second Quarter 2022 (6)
|
| Annualized Current Quarter |
Proportionate Debt to Adjusted EBITDAre |
| 5.9x |
Net Leverage to Adjusted EBITDAre |
| 6.1x |
Unsecured Credit Facility Covenants |
| June 30, 2022 |
| Covenant |
Fixed Charge Coverage Ratio |
| 3.51x |
| 1.50x |
Leverage Ratio |
| 36.6% |
| ≤ 60.0% |
Secured Indebtedness Ratio (7) |
| 20.0% |
| ≤ 45.0% |
Unsecured Leverage Ratio |
| 27.5% |
| ≤ 60.0% |
22
Supplemental Schedule 5(b)
Capitalization and Financial Metrics
As of June 30, 2022
(dollar amounts in thousands) (unaudited)
AIR Share of Non-Recourse Property Debt and Term Loans
|
| Amortization |
|
| Maturities |
|
| Sub-Total Non-Recourse Property Debt |
|
| Unsecured Debt (1) |
|
| Total |
|
| Maturities as a |
|
| Average Rate on |
| |||||||
2022 Q3 |
| $ | 5,979 |
|
| $ | — |
|
| $ | 5,979 |
|
| $ | — |
|
| $ | 5,979 |
|
|
| — | % |
|
| — | % |
2022 Q4 |
|
| 5,938 |
|
|
| 53,276 |
|
|
| 59,214 |
|
|
| — |
|
|
| 59,214 |
|
|
| 1.9 | % |
|
| 5.1 | % |
Total 2022 |
|
| 11,917 |
|
|
| 53,276 |
|
|
| 65,193 |
|
|
| — |
|
|
| 65,193 |
|
|
| 1.9 | % |
|
| 5.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
2023 Q1 |
|
| 5,783 |
|
|
| — |
|
|
| 5,783 |
|
|
| — |
|
|
| 5,783 |
|
|
| — | % |
|
| — | % |
2023 Q2 |
|
| 5,703 |
|
|
| 27,551 |
|
|
| 33,254 |
|
|
| — |
|
|
| 33,254 |
|
|
| 1.0 | % |
|
| 3.8 | % |
2023 Q3 |
|
| 5,693 |
|
|
| — |
|
|
| 5,693 |
|
|
| — |
|
|
| 5,693 |
|
|
| — | % |
|
| — | % |
2023 Q4 |
|
| 5,746 |
|
|
| — |
|
|
| 5,746 |
|
|
| — |
|
|
| 5,746 |
|
|
| — | % |
|
| — | % |
Total 2023 |
|
| 22,925 |
|
|
| 27,551 |
|
|
| 50,476 |
|
|
| — |
|
|
| 50,476 |
|
|
| 1.0 | % |
|
| 3.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
2024 |
|
| 23,902 |
|
|
| 88,500 |
|
|
| 112,402 |
|
|
| — |
|
|
| 112,402 |
|
|
| 3.1 | % |
|
| 4.1 | % |
2025 |
|
| 23,040 |
|
|
| 285,721 |
|
|
| 308,761 |
|
|
| 600,000 |
| (2) |
| 908,761 |
|
|
| 31.2 | % |
|
| 3.9 | % |
2026 |
|
| 18,629 |
|
|
| 98,790 |
|
|
| 117,419 |
|
|
| 200,000 |
|
|
| 317,419 |
|
|
| 10.5 | % |
|
| 3.8 | % |
2027 |
|
| 17,065 |
|
|
| 127,565 |
|
|
| 144,630 |
|
|
| 100,000 |
|
|
| 244,630 |
|
|
| 8.0 | % |
|
| 3.9 | % |
2028 |
|
| 13,949 |
|
|
| 94,463 |
|
|
| 108,412 |
|
|
| — |
|
|
| 108,412 |
|
|
| 3.3 | % |
|
| 3.4 | % |
2029 |
|
| 13,659 |
|
|
| 84,146 |
|
|
| 97,805 |
|
|
| 100,000 |
|
|
| 197,805 |
|
|
| 6.5 | % |
|
| 3.9 | % |
2030 |
|
| 10,891 |
|
|
| 267,939 |
|
|
| 278,830 |
|
|
| — |
|
|
| 278,830 |
|
|
| 9.4 | % |
|
| 3.1 | % |
2031 |
|
| 4,965 |
|
|
| 149,475 |
|
|
| 154,440 |
|
|
| — |
|
|
| 154,440 |
|
|
| 5.3 | % |
|
| 3.0 | % |
Thereafter |
|
| 136,976 |
|
|
| 67,368 |
|
|
| 204,344 |
|
|
| 200,000 |
|
|
| 404,344 |
|
|
| 9.4 | % |
|
| 4.0 | % |
Total |
| $ | 297,918 |
|
| $ | 1,344,794 |
|
| $ | 1,642,712 |
|
| $ | 1,200,000 |
|
| $ | 2,842,712 |
|
|
| 89.5 | % |
|
| 3.8 | % |
Preferred Equity
|
| Amount Outstanding |
|
| Date First Available for Redemption by AIR |
| Coupon |
|
| Amount |
| |||
Class A Perpetual Preferred Stock |
|
| 20 |
|
| December 2025 |
|
| 8.50 | % |
| $ | 2,000 |
|
Preferred Partnership Units |
|
| 2,934,063 |
|
| n/a |
|
| 8.08 | % |
|
| 79,330 |
|
Total Preferred Equity |
|
|
|
|
|
|
| 8.09 | % |
| $ | 81,330 |
|
Common Stock, Partnership Units and Equivalents (shares and units in thousands)
|
| June 30, 2022 |
| |
Class A Common Stock outstanding |
|
| 153,858 |
|
Participating unvested restricted stock |
|
| 121 |
|
Dilutive options, share equivalents and non-participating unvested restricted stock |
|
| 348 |
|
Total shares and dilutive share equivalents |
|
| 154,327 |
|
Common Partnership Units and equivalents outstanding |
|
| 10,231 |
|
Total shares, units, and dilutive share equivalents |
|
| 164,558 |
|
23
Supplemental Schedule 6(a)
Same Store Operating Results
Three Months Ended June 30, 2022, Compared to Three Months Ended June 30, 2021
(proportionate amounts, in thousands, except community, home, and per home data) (unaudited)
The table below presents AIR’s Same Store portfolio as of June 30, 2022.
|
|
|
|
| Revenues, Before Utility |
| Expenses, Net of Utility |
| Net Operating Income |
|
| Net Operating |
| Average Daily |
| Average | ||||||||
| Apartment | Apartment | AIR Share |
| 2Q | 2Q | Growth |
| 2Q | 2Q | Growth |
| 2Q | 2Q | Growth |
|
| 2Q |
| 2Q | 2Q |
| 2Q | 2Q |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bay Area | 7 | 1,967 | 1,412 |
| $13,161 | $12,468 | 5.6% |
| $3,428 | $3,421 | 0.2% |
| $9,733 | $9,047 | 7.6% |
|
| 74.0% |
| 97.2% | 94.6% |
| $3,196 | $3,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston | 11 | 2,462 | 2,462 |
| 18,608 | 16,744 | 11.1% |
| 5,598 | 5,198 | 7.7% |
| 13,010 | 11,546 | 12.7% |
|
| 69.9% |
| 96.9% | 95.7% |
| 2,600 | 2,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denver | 7 | 2,027 | 1,988 |
| 11,271 | 10,445 | 7.9% |
| 2,880 | 3,109 | (7.4%) |
| 8,391 | 7,336 | 14.4% |
|
| 74.4% |
| 95.6% | 95.4% |
| 1,976 | 1,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington, D.C. (1) | 6 | 4,103 | 2,681 |
| 13,527 | 12,691 | 6.6% |
| 3,659 | 3,447 | 6.2% |
| 9,868 | 9,244 | 6.8% |
|
| 73.0% |
| 97.9% | 95.1% |
| 1,718 | 1,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles | 9 | 3,815 | 2,966 |
| 30,181 | 24,812 | 21.6% |
| 6,181 | 6,459 | (4.3%) |
| 24,000 | 18,353 | 30.8% |
|
| 79.5% |
| 97.7% | 96.3% |
| 3,471 | 2,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami | 5 | 1,725 | 1,725 |
| 13,155 | 11,585 | 13.6% |
| 4,223 | 4,049 | 4.3% |
| 8,932 | 7,536 | 18.5% |
|
| 67.9% |
| 94.3% | 97.5% |
| 2,695 | 2,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philadelphia | 9 | 2,748 | 2,669 |
| 21,155 | 19,251 | 9.9% |
| 5,925 | 6,154 | (3.7%) |
| 15,230 | 13,097 | 16.3% |
|
| 72.0% |
| 96.3% | 91.3% |
| 2,744 | 2,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Diego | 6 | 2,367 | 2,192 |
| 15,643 | 14,164 | 10.4% |
| 3,266 | 3,213 | 1.6% |
| 12,377 | 10,951 | 13.0% |
|
| 79.1% |
| 97.4% | 96.8% |
| 2,443 | 2,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Markets | 4 | 808 | 808 |
| 5,365 | 5,145 | 4.3% |
| 2,396 | 2,469 | (3.0%) |
| 2,969 | 2,676 | 10.9% |
|
| 55.3% |
| 96.4% | 95.9% |
| 2,296 | 2,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | 64 | 22,022 | 18,903 |
| $142,066 | $127,305 | 11.6% |
| $37,556 | $37,519 | 0.1% |
| $104,510 | $89,786 | 16.4% |
|
| 73.6% |
| 96.8% | 95.2% |
| $2,589 | $2,357 |
24
Supplemental Schedule 6(b)
Same Store Operating Results
Three Months Ended June 30, 2022, Compared to Three Months Ended March 31, 2022
(proportionate amounts, in thousands, except community, home, and per home data) (unaudited)
The table below presents AIR’s Same Store portfolio as of June 30, 2022.
|
|
|
|
| Revenues, Before Utility |
| Expenses, Net of Utility |
| Net Operating Income |
|
| Net Operating |
| Average Daily |
| Average | ||||||||
| Apartment | Apartment | AIR Share |
| 2Q | 1Q | Growth |
| 2Q | 1Q | Growth |
| 2Q | 1Q | Growth |
|
| 2Q |
| 2Q | 1Q |
| 2Q | 1Q |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bay Area | 7 | 1,967 | 1,412 |
| $13,161 | $12,916 | 1.9% |
| $3,428 | $3,358 | 2.1% |
| $9,733 | $9,558 | 1.8% |
|
| 74.0% |
| 97.2% | 98.5% |
| $3,196 | $3,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston | 11 | 2,462 | 2,462 |
| 18,608 | 18,497 | 0.6% |
| 5,598 | 5,680 | (1.4%) |
| 13,010 | 12,817 | 1.5% |
|
| 69.9% |
| 96.9% | 98.4% |
| 2,600 | 2,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denver | 7 | 2,027 | 1,988 |
| 11,271 | 11,194 | 0.7% |
| 2,880 | 2,568 | 12.1% |
| 8,391 | 8,626 | (2.7%) |
|
| 74.4% |
| 95.6% | 98.4% |
| 1,976 | 1,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington, D.C. (1) | 6 | 4,103 | 2,681 |
| 13,527 | 13,534 | (0.1%) |
| 3,659 | 3,681 | (0.6%) |
| 9,868 | 9,853 | 0.2% |
|
| 73.0% |
| 97.9% | 98.8% |
| 1,718 | 1,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles | 9 | 3,815 | 2,966 |
| 30,181 | 28,221 | 6.9% |
| 6,181 | 6,213 | (0.5%) |
| 24,000 | 22,008 | 9.1% |
|
| 79.5% |
| 97.7% | 98.5% |
| 3,471 | 3,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami | 5 | 1,725 | 1,725 |
| 13,155 | 12,524 | 5.0% |
| 4,223 | 4,202 | 0.5% |
| 8,932 | 8,322 | 7.3% |
|
| 67.9% |
| 94.3% | 95.9% |
| 2,695 | 2,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philadelphia | 9 | 2,748 | 2,669 |
| 21,155 | 20,801 | 1.7% |
| 5,925 | 6,106 | (3.0%) |
| 15,230 | 14,695 | 3.6% |
|
| 72.0% |
| 96.3% | 97.7% |
| 2,744 | 2,659 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Diego | 6 | 2,367 | 2,192 |
| 15,643 | 15,145 | 3.3% |
| 3,266 | 3,254 | 0.4% |
| 12,377 | 11,891 | 4.1% |
|
| 79.1% |
| 97.4% | 98.5% |
| 2,443 | 2,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Markets | 4 | 808 | 808 |
| 5,365 | 5,276 | 1.7% |
| 2,396 | 2,441 | (1.8%) |
| 2,969 | 2,835 | 4.7% |
|
| 55.3% |
| 96.4% | 97.7% |
| 2,296 | 2,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | 64 | 22,022 | 18,903 |
| $142,066 | $138,108 | 2.9% |
| $37,556 | $37,503 | 0.1% |
| $104,510 | $100,605 | 3.9% |
|
| 73.6% |
| 96.8% | 98.1% |
| $2,589 | $2,482 |
25
Supplemental Schedule 6(c)
Same Store Operating Results
Six Months Ended June 30, 2022, Compared to Six Months Ended June 30, 2021
(proportionate amounts, in thousands, except community, home, and per home data) (unaudited)
The table below presents AIR’s Same Store portfolio as of June 30, 2022.
|
|
|
|
| Revenues, Before Utility |
| Expenses, Net of Utility |
| Net Operating Income |
|
| Net Operating |
| Average Daily |
| Average | ||||||||
| Apartment | Apartment | AIR Share |
| YTD | YTD | Growth |
| YTD | YTD | Growth |
| YTD | YTD | Growth |
|
| YTD |
| YTD | YTD |
| YTD | YTD |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bay Area | 7 | 1,967 | 1,412 |
| $26,077 | $24,931 | 4.6% |
| $6,786 | $6,766 | 0.3% |
| $19,291 | $18,165 | 6.2% |
|
| 74.0% |
| 97.8% | 93.2% |
| $3,146 | $3,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boston | 11 | 2,462 | 2,462 |
| 37,105 | 33,442 | 11.0% |
| 11,278 | 10,583 | 6.6% |
| 25,827 | 22,859 | 13.0% |
|
| 69.6% |
| 97.6% | 96.2% |
| $2,573 | $2,354 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denver | 7 | 2,027 | 1,988 |
| 22,465 | 20,651 | 8.8% |
| 5,448 | 5,854 | (6.9%) |
| 17,017 | 14,797 | 15.0% |
|
| 75.7% |
| 97.0% | 95.7% |
| $1,940 | $1,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington, D.C. (1) | 6 | 4,103 | 2,681 |
| 27,061 | 25,466 | 6.3% |
| 7,340 | 6,818 | 7.7% |
| 19,721 | 18,648 | 5.8% |
|
| 72.9% |
| 98.3% | 95.5% |
| $1,711 | $1,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles | 9 | 3,815 | 2,966 |
| 58,402 | 49,790 | 17.3% |
| 12,394 | 12,728 | (2.6%) |
| 46,008 | 37,062 | 24.1% |
|
| 78.8% |
| 98.1% | 96.3% |
| $3,345 | $2,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miami | 5 | 1,725 | 1,725 |
| 25,679 | 22,791 | 12.7% |
| 8,425 | 7,886 | 6.8% |
| 17,254 | 14,905 | 15.8% |
|
| 67.2% |
| 95.1% | 97.7% |
| $2,609 | $2,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philadelphia | 9 | 2,748 | 2,669 |
| 41,956 | 38,384 | 9.3% |
| 12,031 | 12,022 | 0.1% |
| 29,925 | 26,362 | 13.5% |
|
| 71.3% |
| 97.0% | 90.8% |
| $2,702 | $2,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Diego | 6 | 2,367 | 2,192 |
| 30,788 | 28,081 | 9.6% |
| 6,520 | 6,428 | 1.4% |
| 24,268 | 21,653 | 12.1% |
|
| 78.8% |
| 98.0% | 97.3% |
| $2,391 | $2,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Markets | 4 | 808 | 808 |
| 10,641 | 10,208 | 4.2% |
| 4,837 | 4,828 | 0.2% |
| 5,804 | 5,380 | 7.9% |
|
| 54.5% |
| 97.1% | 95.9% |
| $2,262 | $2,197 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | 64 | 22,022 | 18,903 |
| $280,174 | $253,744 | 10.4% |
| $75,059 | $73,913 | 1.6% |
| $205,115 | $179,831 | 14.1% |
|
| 73.2% |
| 97.4% | 95.3% |
| $2,535 | $2,347 |
26
Supplemental Schedule 6(d)
Same Store Operating Expense Detail
(proportionate amounts, in thousands) (unaudited)
Quarterly Comparison
|
| 2Q 2022 |
|
| % of Total |
|
| 2Q 2021 |
|
| $ Change |
|
| % Change |
| |||||
Operating expenses (1) |
| $ | 19,494 |
|
|
| 51.9 | % |
| $ | 18,979 |
|
| $ | 515 |
|
|
| 2.7 | % |
Utility expense, net of reimbursement |
|
| 2,232 |
|
|
| 5.9 | % |
|
| 2,001 |
|
|
| 231 |
|
|
| 11.5 | % |
Real estate taxes |
|
| 13,686 |
|
|
| 36.4 | % |
|
| 14,372 |
|
|
| (686 | ) |
|
| (4.8 | %) |
Insurance |
|
| 2,144 |
|
|
| 5.8 | % |
|
| 2,167 |
|
|
| (23 | ) |
|
| (1.1 | %) |
Total |
| $ | 37,556 |
|
|
| 100.0 | % |
| $ | 37,519 |
|
| $ | 37 |
|
|
| 0.1 | % |
Sequential Comparison
|
| 2Q 2022 |
|
| % of Total |
|
| 1Q 2022 |
|
| $ Change |
|
| % Change |
| |||||
Operating expenses (1) |
| $ | 19,494 |
|
|
| 51.9 | % |
| $ | 18,031 |
|
| $ | 1,463 |
|
|
| 8.1 | % |
Utility expense, net of reimbursement |
|
| 2,232 |
|
|
| 5.9 | % |
|
| 2,630 |
|
|
| (398 | ) |
|
| (15.1 | %) |
Real estate taxes |
|
| 13,686 |
|
|
| 36.4 | % |
|
| 14,696 |
|
|
| (1,010 | ) |
|
| (6.9 | %) |
Insurance |
|
| 2,144 |
|
|
| 5.8 | % |
|
| 2,146 |
|
|
| (2 | ) |
|
| (0.1 | %) |
Total |
| $ | 37,556 |
|
|
| 100.0 | % |
| $ | 37,503 |
|
| $ | 53 |
|
|
| 0.1 | % |
Year-to-Date Comparison
|
| YTD 2Q 2022 |
|
| % of Total |
|
| YTD 2Q 2021 |
|
| $ Change |
|
| % Change |
| |||||
Operating expenses (1) |
| $ | 37,525 |
|
|
| 50.0 | % |
| $ | 36,523 |
|
| $ | 1,002 |
|
|
| 2.7 | % |
Utility expense, net of reimbursement |
|
| 4,862 |
|
|
| 6.5 | % |
|
| 4,298 |
|
|
| 564 |
|
|
| 13.1 | % |
Real estate taxes |
|
| 28,382 |
|
|
| 37.8 | % |
|
| 28,964 |
|
|
| (582 | ) |
|
| (2.0 | %) |
Insurance |
|
| 4,290 |
|
|
| 5.7 | % |
|
| 4,128 |
|
|
| 162 |
|
|
| 3.9 | % |
Total |
| $ | 75,059 |
|
|
| 100.0 | % |
| $ | 73,913 |
|
| $ | 1,146 |
|
|
| 1.6 | % |
27
Supplemental Schedule 7
Portfolio Data by Market
Second Quarter 2022 Compared to Second Quarter 2021
(proportionate amounts) (unaudited)
|
| Quarter Ended June 30, 2022 |
|
| Quarter Ended June 30, 2021 |
| ||||||||||||||||||||||||||||||||||
|
| Apartment |
|
| Apartment |
|
| AIR Share of |
|
| % AIR |
|
| Average |
|
| Apartment |
|
| Apartment |
|
| AIR Share of |
|
| % AIR |
|
| Average |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Bay Area |
|
| 7 |
|
|
| 1,967 |
|
|
| 1,412 |
|
|
| 8.6 | % |
| $ | 3,196 |
|
|
| 9 |
|
|
| 2,212 |
|
|
| 1,657 |
|
|
| 9.3 | % |
| $ | 2,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Boston |
|
| 11 |
|
|
| 2,462 |
|
|
| 2,462 |
|
|
| 11.5 | % |
|
| 2,600 |
|
|
| 11 |
|
|
| 2,462 |
|
|
| 2,462 |
|
|
| 10.6 | % |
|
| 2,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Denver |
|
| 7 |
|
|
| 2,027 |
|
|
| 1,988 |
|
|
| 7.4 | % |
|
| 1,976 |
|
|
| 7 |
|
|
| 2,026 |
|
|
| 1,987 |
|
|
| 6.7 | % |
|
| 1,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Washington, D.C. |
|
| 11 |
|
|
| 6,011 |
|
|
| 4,589 |
|
|
| 13.8 | % |
|
| 1,935 |
|
|
| 11 |
|
|
| 5,238 |
|
|
| 5,215 |
|
|
| 16.4 | % |
|
| 1,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Los Angeles |
|
| 9 |
|
|
| 3,815 |
|
|
| 2,966 |
|
|
| 21.3 | % |
|
| 3,471 |
|
|
| 13 |
|
|
| 4,347 |
|
|
| 3,498 |
|
|
| 19.5 | % |
|
| 2,794 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Miami |
|
| 7 |
|
|
| 2,721 |
|
|
| 2,721 |
|
|
| 10.9 | % |
|
| 2,659 |
|
|
| 6 |
|
|
| 2,425 |
|
|
| 2,425 |
|
|
| 7.5 | % |
|
| 1,897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Philadelphia |
|
| 9 |
|
|
| 2,748 |
|
|
| 2,669 |
|
|
| 12.4 | % |
|
| 2,572 |
|
|
| 9 |
|
|
| 2,748 |
|
|
| 2,669 |
|
|
| 11.1 | % |
|
| 2,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
San Diego |
|
| 6 |
|
|
| 2,367 |
|
|
| 2,192 |
|
|
| 11.0 | % |
|
| 2,443 |
|
|
| 9 |
|
|
| 3,051 |
|
|
| 2,875 |
|
|
| 12.9 | % |
|
| 2,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Other Markets |
|
| 8 |
|
|
| 1,245 |
|
|
| 1,245 |
|
|
| 3.1 | % |
|
| 2,196 |
|
|
| 21 |
|
|
| 1,913 |
|
|
| 1,913 |
|
|
| 6.0 | % |
|
| 2,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Total |
|
| 75 |
|
|
| 25,363 |
|
|
| 22,244 |
|
|
| 100.0 | % |
| $ | 2,528 |
|
|
| 96 |
|
|
| 26,422 |
|
|
| 24,701 |
|
|
| 100.0 | % |
| $ | 2,215 |
|
28
Supplemental Schedule 8
Apartment Community Disposition and Acquisition Activity
(dollars in millions, except average revenue per home) (unaudited)
Dispositions (1) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Apartment |
| Number of |
| Weighted- |
| Gross |
| NOI Cap |
| Free Cash |
| Property |
| Net Sales |
| Average Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2022 Dispositions | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
| 718 |
| 100.0% |
| $203.1 |
| 4.7% |
| 4.2% |
| $(14.6) |
| $186.6 |
| $1,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full Year 2022 Dispositions | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 |
| 2,050 |
| 100.0% |
| $781.1 |
| 4.5% |
| 4.2% |
| $(114.0) |
| $646.8 |
| $2,096 |
Acquisitions | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartment Community Name |
| Location |
| Month |
| Apartment |
| Purchase |
| Average Revenue per Apartment Home (4) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter and Year-to-Date 2022 Acquisitions | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
The Reserve at Coconut Point |
| Fort Myers, FL |
| May |
| 180 |
| $71.7 |
| $2,230 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
The Watermarc at Biscayne Bay |
| Miami, FL |
| June |
| 296 |
| $210.4 |
| $3,790 | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
Willard Towers |
| Washington, D.C. |
| June |
| 525 |
| $185.0 |
| $2,871 |
29
Supplemental Schedule 9
Apartment Community Capital Additions Information
Three and Six Months Ended June 30, 2022
(consolidated amounts in thousands, except per apartment home data) (unaudited)
We classify capital additions as Capital Replacements (“CR”), Capital Improvements (“CI”), Capital Enhancements (“CE”), or Other Capital Expenditures. Recurring capital additions are apportioned between CR and CI based on the useful life of the item under consideration and the period over which we have owned the item. Under this method of classification, CR represents the portion of the item consumed during our ownership of the item, while CI represents the portion of the item consumed prior to our period of ownership.
The table below includes our capital spend in consolidated amounts, not adjusted for noncontrolling interest.
|
| Three Months Ended |
|
| Six Months Ended |
| ||
Capital Additions (1) |
|
|
|
|
|
| ||
Capital Replacements |
|
|
|
|
|
| ||
Buildings and grounds |
| $ | 6,584 |
|
| $ | 11,302 |
|
Turnover capital additions |
|
| 617 |
|
|
| 997 |
|
Capitalized site payroll and indirect costs |
|
| 622 |
|
|
| 1,036 |
|
Capital Replacements |
|
| 7,823 |
|
|
| 13,335 |
|
Capital Improvements |
|
| 5,109 |
|
|
| 6,924 |
|
Capital Enhancements |
|
| 29,900 |
|
|
| 44,002 |
|
Initial Capital Expenditures |
|
| 7,146 |
|
|
| 12,806 |
|
Casualty |
|
| 1,657 |
|
|
| 10,986 |
|
Entitlement and Planning |
|
| 973 |
|
|
| 1,606 |
|
|
| $ | 52,608 |
|
| $ | 89,659 |
|
|
|
|
|
|
|
| ||
Total apartment homes |
|
| 25,363 |
|
|
| 25,363 |
|
|
|
|
|
|
|
| ||
Capital Replacements per apartment home |
| $ | 308 |
|
| $ | 526 |
|
30
GLOSSARY AND RECONCILIATIONS OF NON-GAAP FINANCIAL AND OPERATING MEASURES
This Earnings Release and Supplemental Information include certain financial and operating measures used by AIR management that are not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”). Our definitions and calculations of these non-GAAP financial and operating measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. These non-GAAP financial and operating measures should not be considered an alternative to GAAP net income or any other GAAP measurement of performance and should not be considered an alternative measure of liquidity.
AIR OPERATING PARTNERSHIP: Apartment Income REIT, L.P., a Delaware limited partnership, is the operating partnership in AIR’s UPREIT structure. AIR owns approximately 92.2% of the legal interest in the common partnership units of the AIR Operating Partnership and 93.8% of the economic interest in the common partnership units of the AIR Operating Partnership.
AIR PROPORTIONATE FINANCIAL INFORMATION: Within this Earnings Release and Supplemental Information, we provide certain financial information necessary to calculate our share of financial information. This information is not, nor is it intended to be, a presentation in accordance with GAAP. Our proportionate share of financial information includes our share of unconsolidated real estate partnerships and excludes the noncontrolling interest partners’ share of consolidated real estate partnerships.
We do not control the unconsolidated real estate partnerships and the calculation of our share of the assets and liabilities and revenues and expenses does not represent a legal claim to a proportionate share of such items. The amount of cash distributions partners in such partnerships may receive is based upon specific provisions in the partnership agreements and may vary based on whether such distributions are generated from operations, capital events or liquidation.
Proportionate information benefits the users of our financial information by providing the amount of revenues, expenses, assets, liabilities, and other items attributable to our stockholders. Other companies may calculate their proportionate information differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, the non-GAAP AIR proportionate financial information should not be considered in isolation or as a substitute for information included in our financial statements as reported under GAAP.
AVERAGE REVENUE PER APARTMENT HOME: Represents our proportionate average monthly rental and other property revenues, excluding utility cost reimbursements, divided by the number of occupied apartment homes as of the end of the period.
CAPITAL ADDITIONS DEFINITIONS
CAPITAL IMPROVEMENTS (CI): CI represent capital additions made to replace the portion of acquired apartment communities consumed prior to our period of ownership and not contemplated in our underwriting of an acquisition.
CAPITAL REPLACEMENTS (CR): Unlike CI, CR does not increase the useful life of an asset from its original purchase condition. CR represent capital additions made to replace the portion of acquired capital assets consumed during our period of ownership.
CAPITAL ENHANCEMENTS (CE): CE may include kitchen and bath remodeling; energy conservation projects; and investments in longer-lived materials designed to reduce costs. CE does not significantly disrupt property operations.
INITIAL CAPITAL EXPENDITURES (ICE): ICE represent capital additions contemplated in the underwriting at our recently acquired communities. These amounts are considered in the underwriting of the acquisition and are therefore included when determining expected returns.
31
CASUALTY: Casualty capital additions represent capitalized costs incurred in connection with the restoration of an apartment community after a casualty event.
FREE CASH FLOW: Free Cash Flow, as calculated for our retained portfolio, represents an apartment community’s property net operating income, less spending for Capital Replacements. Capital Replacement spending is a measure of the cost of capital asset used during the period. We believe that Free Cash Flow 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.
FREE CASH FLOW CAP RATE: Free Cash Flow Cap Rate represents the NOI Cap Rate, adjusted for assumed Capital Replacements spending of $1,200 per apartment home.
FREE CASH FLOW MARGIN: Free Cash Flow Margin represents an apartment community’s property net 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.
LEVERAGE RATIO DEFINITIONS
We target Net Leverage to Adjusted EBITDAre below 6.0x. We also focus on Proportionate Debt to Adjusted EBITDAre. 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.
Our net leverage includes our share of long-term, non-recourse property debt, outstanding borrowings on our revolving credit facility, term loans, and preferred equity, reduced by cash and restricted cash on-hand, excluding tenant security deposits, and our note receivable from Aimco. We reconcile consolidated balances to our net leverage on Supplemental Schedule 5(a).
We calculate Adjusted EBITDAre used in our leverage ratios based on annualized current quarter amounts.
EBITDAre AND ADJUSTED EBITDAre
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION FOR REAL ESTATE (“EBITDAre”): NAREIT defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, depreciation and amortization expense, further adjusted for:
We believe that EBITDAre is useful to investors, creditors and rating agencies as a supplemental measure of our ability to incur and service debt because it is a recognized measure of performance by the real estate industry and facilitates comparison of credit strength between AIR and other companies.
32
ADJUSTED EBITDAre: Adjusted EBITDAre is defined as EBITDAre adjusted to exclude the effect of the following items for the reasons set forth below:
A reconciliation of net income (loss) to EBITDAre and Adjusted EBITDAre for our portfolio for the quarter ended June 30, 2022, is as follows (in thousands, unaudited):
|
| Quarter Ended |
| |
|
| June 30, 2022 |
| |
Net income |
| $ | 211,659 |
|
Adjustments: |
|
|
| |
Interest expense |
|
| 26,027 |
|
Income tax expense |
|
| 1,499 |
|
Depreciation and amortization |
|
| 78,656 |
|
Gain on dispositions of real estate and derecognition of leased properties |
|
| (175,606 | ) |
EBITDAre |
| $ | 142,235 |
|
Net income attributable to noncontrolling interests in consolidated real estate partnerships |
|
| (381 | ) |
EBITDAre adjustments attributable to noncontrolling interests and unconsolidated real estate partnerships |
|
| (7,285 | ) |
Interest income and prepayment penalties on note receivable from Aimco |
|
| (19,297 | ) |
Pro forma FFO adjustments, net (1) |
|
| 6,176 |
|
Adjusted EBITDAre |
| $ | 121,448 |
|
Annualized Adjusted EBITDAre, unadjusted for non-recurring items |
| $ | 485,792 |
|
Removal of annualization impact for non-recurring items (2) |
|
| (21,731 | ) |
Annualized Adjusted EBITDAre |
| $ | 464,061 |
|
FIXED CHARGE COVERAGE RATIO: As defined by our credit agreement, the ratio of (a) EBITDA to (b) fixed charges, which represent the sum of (i) our proportionate share of interest expense (excluding prepayment penalties and amortization of debt issuance costs), (ii) debt amortization, and (iii) Preferred Dividends, for the four fiscal quarters preceding the date of calculation. The calculation of certain of these measures as defined by our Credit Agreement may differ from those used in the calculations of our Leverage Ratios.
PREFERRED DIVIDENDS: Preferred Dividends include dividends paid with respect to AIR’s Preferred Stock and the AIR OP’s Preferred Partnership Units, exclusive of preferred equity redemption related amounts.
PREFERRED EQUITY: Preferred equity represents the redemption amounts for AIR’s Preferred Stock and the AIR OP’s Preferred Partnership Units and may be found in AIR’s consolidated balance sheets and on Supplemental Schedule 5(b).
OTHER LEVERAGE: Other Leverage includes Preferred OP Units and redeemable noncontrolling interests.
PREFERRED OP UNITS: Preferred OP Units represent the redemption amounts for the AIR OP’s Preferred Partnership Units and may be found in our consolidated balance sheets and on Supplemental Schedule 5(b).
33
PROPORTIONATE DEBT TO ADJUSTED EBITDAre RATIO: The ratio of (a) our share of net leverage as calculated on Supplemental Schedule 5(a), excluding Preferred Equity, to (b) Annualized Adjusted EBITDAre.
NET LEVERAGE TO ADJUSTED EBITDAre RATIO: The ratio of (a) our share of net leverage as calculated on Supplemental Schedule 5(a), to (b) Annualized Adjusted EBITDAre.
NAREIT FUNDS FROM OPERATIONS (NAREIT FFO): NAREIT FFO is a commonly used measure of REIT performance, which the National Association of Real Estate Investment Trusts (NAREIT) defines as net income computed in accordance with GAAP, excluding: (i) depreciation and amortization related to real estate; (ii) gains and losses from sales or impairment of depreciable assets and land used in the primary business of the REIT; (iii) and income taxes directly associated with a gain or loss on sale of real estate; and including (iv) our share of NAREIT FFO of unconsolidated partnerships and joint ventures. We compute NAREIT FFO for all periods presented in accordance with the guidance set forth by NAREIT.
In addition to NAREIT FFO, we use PRO FORMA FUNDS FROM OPERATIONS (Pro forma FFO) to measure short-term performance. Pro forma FFO represents NAREIT FFO as defined above, excluding certain amounts that are unique or occur infrequently. Our pro forma adjustments are defined in further detail in the footnotes to Supplemental Schedule 1.
NAREIT FFO and Pro forma FFO are non-GAAP measures that we believe are helpful to investors in understanding our short-term performance because they capture features particular to real estate performance by recognizing that real estate assets generally appreciate over time or maintain residual value to a much greater extent than other capital assets such as machinery, computers or other personal property. NAREIT FFO and Pro forma FFO should not be considered alternatives to net income as determined in accordance with GAAP, as indicators of performance. There can be no assurance that our method of computing NAREIT FFO and Pro forma FFO is comparable with that of other real estate investment trusts.
NET OPERATING INCOME (NOI) CAP RATE: NOI Cap Rate is calculated based on our share of the proportionate property NOI for the trailing twelve months prior to sale, less a 3% management fee, divided by gross proceeds.
NET OPERATING INCOME (NOI) MARGIN: Represents an apartment community’s net operating income as a percentage of the apartment community’s rental and other property revenues.
OTHER EXPENSES, NET: Other expenses, net, allocated to contribution from real estate operations on Supplemental Schedule 2 generally includes franchise taxes, expenses specifically related to our administration of our real estate partnerships (for example, services such as audit, tax, and legal), ground lease rent expense, and risk management activities related to certain other corporate expenses.
PROPERTY NET OPERATING INCOME (NOI) and PROPORTIONATE PROPERTY NOI: NOI is defined as total property rental and other property revenues less direct property operating expenses, including real estate taxes. NOI does not include: property management revenues; casualties; property management expenses; depreciation; or interest expense. NOI is helpful because it helps both investors and management to understand the operating performance of real estate excluding costs associated with decisions about acquisition pricing, overhead allocations, and financing arrangements. NOI is also considered by many in the real estate industry to be a useful measure for determining the value of real estate. Reconciliations of NOI as presented in this Earnings Release and Supplemental Information to our consolidated GAAP amounts are provided below.
Due to the diversity of our economic ownership interests in our apartment communities in the periods presented, we evaluate the performance of the apartment communities in our segments using Proportionate Property NOI, which represents our share of the NOI for the apartment communities that we consolidate and manage, but excludes apartment communities that we do not consolidate. Proportionate Property NOI is defined as our share of rental and other property revenue less our share of property operating expenses. In our evaluation of community results, we exclude utility cost reimbursement from rental and other property revenues and reflect such amount as a reduction of the related utility expense within property operating expenses.
34
The following table presents the reconciliation of GAAP rental and other property revenue to the proportionate revenues before utility reimbursements and GAAP property operating expenses to proportionate expenses, net of utility reimbursements. The table also presents the reconciliation of consolidated Same Store revenue before utility reimbursements and expenses, net of utility reimbursements as presented on Supplemental Schedule 2(a) to the proportionate amounts presented on Supplemental Schedule 6.
Segment NOI Reconciliation |
|
|
|
|
| |||||||||||
(in thousands) (unaudited) |
| Three Months Ended June 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Revenues, |
|
| Expenses, |
|
| Revenues, |
|
| Expenses, |
| ||||
Total Real Estate Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total (per consolidated statements of operations) |
| $ | 183,500 |
|
| $ | 63,787 |
|
| $ | 178,333 |
|
| $ | 64,758 |
|
Adjustment: Utilities reimbursement (1) |
|
| (6,881 | ) |
|
| (6,881 | ) |
|
| (6,267 | ) |
|
| (6,267 | ) |
Adjustment: Sold properties and other amounts not allocated (2) |
|
| (4,108 | ) |
|
| (9,775 | ) |
|
| (22,615 | ) |
|
| (14,455 | ) |
Adjustment: Non-real estate depreciation (3) |
|
| — |
|
|
| 421 |
|
|
| — |
|
|
| — |
|
Total (per Supplemental Schedule 2) |
| $ | 172,511 |
|
| $ | 47,552 |
|
| $ | 149,451 |
|
| $ | 44,036 |
|
Proportionate adjustment (4) |
|
| (13,166 | ) |
|
| (3,231 | ) |
|
| (13,133 | ) |
|
| (3,783 | ) |
Proportionate property net operating income |
| $ | 159,345 |
|
| $ | 44,321 |
|
| $ | 136,318 |
|
| $ | 40,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Same Store Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same Store amounts (per Supplemental Schedule 2) |
| $ | 155,232 |
|
| $ | 40,787 |
|
| $ | 147,611 |
|
| $ | 42,773 |
|
Proportionate adjustment (4) |
|
| (13,166 | ) |
|
| (3,231 | ) |
|
| (20,306 | ) |
|
| (5,762 | ) |
Non-real estate depreciation adjustment (3) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 508 |
|
Same Store amounts, adjusted (per Supplemental Schedule 6) |
| $ | 142,066 |
|
| $ | 37,556 |
|
| $ | 127,305 |
|
| $ | 37,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Six Months Ended June 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Revenues, |
|
| Expenses, |
|
| Revenues, |
|
| Expenses, |
| ||||
Total Real Estate Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total (per consolidated statements of operations) |
| $ | 364,978 |
|
| $ | 127,023 |
|
| $ | 354,746 |
|
| $ | 129,375 |
|
Adjustment: Utilities reimbursement (1) |
|
| (13,887 | ) |
|
| (13,887 | ) |
|
| (12,370 | ) |
|
| (12,370 | ) |
Adjustment: Sold properties and other amounts not allocated (2) |
|
| (12,947 | ) |
|
| (19,393 | ) |
|
| (45,083 | ) |
|
| (30,274 | ) |
Adjustment: Non-real estate depreciation (3) |
|
| — |
|
|
| 698 |
|
|
| — |
|
|
| — |
|
Total (per Supplemental Schedule 2) |
| $ | 338,144 |
|
| $ | 94,441 |
|
| $ | 297,293 |
|
| $ | 86,731 |
|
Proportionate adjustment (4) |
|
| (25,857 | ) |
|
| (6,509 | ) |
|
| (26,253 | ) |
|
| (7,444 | ) |
Proportionate property net operating income |
| $ | 312,287 |
|
| $ | 87,932 |
|
| $ | 271,040 |
|
| $ | 79,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Same Store Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same Store amounts (per Supplemental Schedule 2) |
| $ | 306,031 |
|
| $ | 81,568 |
|
| $ | 294,288 |
|
| $ | 84,335 |
|
Proportionate adjustment (4) |
|
| (25,857 | ) |
|
| (6,509 | ) |
|
| (40,544 | ) |
|
| (11,278 | ) |
Non-real estate depreciation adjustment (3) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 856 |
|
Same Store amounts, adjusted (per Supplemental Schedule 6) |
| $ | 280,174 |
|
| $ | 75,059 |
|
| $ | 253,744 |
|
| $ | 73,913 |
|
35
PORTFOLIO QUALITY RATINGS: 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 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.
REAL ESTATE CLASSIFICATIONS: Our portfolio of apartment communities is diversified by both price point and geography. Our portfolio is classified into two segments, as follows:
SAME STORE: Same Store apartment communities are apartment communities that (a) are owned and managed by AIR, and (b) had reached a stabilized level of operations.
OTHER REAL ESTATE: Includes communities that do not meet the criteria to be classified as Same Store.
SOLD AND HELD FOR SALE APARTMENT COMMUNITIES: Apartment communities either sold since January 1, 2021 or classified as held for sale at the end of the period. For purposes of highlighting results of operations related to our retained portfolio, results for Sold and Held For Sale Apartment Communities are excluded from property net operating income and presented separately on a net basis on Supplemental Schedule 2.
TURNOVER and RETENTION: Turnover represents the percentage of residents who have moved out in the trailing twelve months. It is calculated by dividing the number of move outs in the trailing twelve months, exclusive of intra-community transfers, by the daily average number of occupied apartment homes during the trailing twelve months. At June 30, 2022, Turnover was 41.9%, 937 basis points lower than June 30, 2021. Inclusive of intra-community transfers, Turnover was 38.4% for the trailing twelve months ended June 30, 2022.
Retention represents the inverse of Turnover, as defined above.
36