AIR Reports Third Quarter 2022 Results Ahead of Plan; Operating Fundamentals Across All Markets Remain Strong, On Track For Full Year Record Same Store NOI Growth; Announces $460 Million of Accretive Investments: Southgate Towers ($298M) and Share Repurchases ($162M)
Denver, Colorado, November 3, 2022 – Apartment Income REIT Corp. ("AIR") (NYSE: AIRC) announced today third quarter results for 2022.
Chief Executive Officer Terry Considine comments: “Business is good! In 3Q:
"AIR's prospects for 2023 are excellent. A 5% earn-in from 2022 leases provides a baseline for growth in Same Store Revenue. Current loss-to-lease is 5%. Rents continue to increase. NOI from our 2021 acquisitions is increasing at more than twice the Same Store NOI growth rate. 2022 acquisitions are performing in line with expectations."
"AIR enjoys peer leading margins and peer leading conversion of rent to free cash flow. These advantages are considerable, and durable."
Commenting further, Chief Financial Officer Paul Beldin added: "We are pleased with our third quarter results, and continue to see strong momentum through year-end 2022, and into 2023. The transformation of AIR’s balance sheet was completed in the quarter. With the Aimco note fully repaid, and approximately $500 million of property sales expected later this month, third quarter Pro forma leverage to EBITDAre is 5.9:1, consistent with our targeted 5.0x to 6.0x leverage ratio range. EBITDAre at projected 2022 levels is sufficient to repay annual average debt service plus fund maturities through 2031, with a 30% cushion."
"Third quarter Pro forma FFO was $0.58 per share, $0.02 above the midpoint of guidance, due primarily to the timing of favorable litigation outcomes and real estate tax appeals, all of which were previously anticipated to occur in the fourth quarter. During the third quarter, Same Store revenue increased by 9.6%. During a period of inflationary pressure, property level expenses were almost flat and controllable operating expenses were down 400 bps, resulting in a 13.3% increase in year-over-year NOI."
"Looking forward, we are maintaining our Same Store revenue growth expectations of 10.25% at the midpoint and reducing expense growth expectations by 125 basis points to 1%, at the midpoint. The result is a 40 basis point increase in expected NOI growth."
3
"Full year, Pro forma FFO is expected to be between $2.39 and $2.43 per share, unchanged the midpoint of $2.41, as incremental Same Store NOI is offset by higher general and administrative expenses. Similarly, our expectations for Pro forma Run Rate FFO are unchanged at $2.19 per share at the midpoint."
Financial Results: Third Quarter Pro Forma FFO Per Share
|
| THIRD QUARTER | YEAR-TO-DATE |
|
| ||||||||||||||||||||
(all items per common share – diluted) |
| 2022 |
|
| 2021 |
|
| Variance |
|
| 2022 |
|
| 2021 |
|
| Variance |
|
| ||||||
Net income |
| $ | 0.01 |
|
| $ | 0.06 |
|
|
| (83.3 | %) |
| $ | 3.68 |
|
| $ | 0.48 |
|
| nm |
|
| |
NAREIT Funds From Operations (FFO) |
| $ | 0.53 |
|
| $ | 0.47 |
|
|
| 12.8 | % |
| $ | 1.59 |
|
| $ | 1.22 |
|
|
| 30.3 | % |
|
Pro forma adjustments * |
|
| 0.05 |
|
|
| 0.09 |
|
|
| (44.4 | %) |
|
| 0.22 |
|
|
| 0.36 |
|
|
| (38.9 | %) |
|
Pro forma Funds From Operations (Pro forma FFO) |
| $ | 0.58 |
|
| $ | 0.56 |
|
|
| 3.6 | % |
| $ | 1.81 |
|
| $ | 1.58 |
|
|
| 14.6 | % |
|
* Third quarter and year-to-date 2022 includes adjustments related to casualty losses due to Hurricane Ian-related wind damage, primarily at one of our communities in South Florida, currently estimated to be $2.3 million, and flooding at one of our communities in Boston, currently estimated at $1.7 million.
Operating Results: Third Quarter Same Store NOI Up 13.3% Year-Over-Year, 4.6% Sequentially, and 14.1% Year-to-Date
The table below includes the operating results of the 58 AIR properties that meet our definition of Same Store. During the third quarter, six properties were removed from our Same Store portfolio due to their expected sale in November. Same Store properties generated approximately 88% of AIR’s year-to-date 2022 rental revenue.
| THIRD QUARTER |
|
| YEAR-TO-DATE |
| ||||||||||||||||||||||||||
| Year-over-Year |
|
| Sequential |
|
| Year-over-Year |
| |||||||||||||||||||||||
($ in millions) * | 2022 |
|
| 2021 |
|
| Variance |
|
| 2nd Qtr. |
|
| Variance |
|
| 2022 |
|
| 2021 |
|
| Variance |
| ||||||||
Revenue, before utility reimbursements | $ | 138.9 |
|
| $ | 126.8 |
|
|
| 9.6 | % |
| $ | 133.8 |
|
|
| 3.8 | % |
| $ | 402.8 |
|
| $ | 365.6 |
|
|
| 10.2 | % |
Expenses, net of utility reimbursements |
| 35.7 |
|
|
| 35.6 |
|
|
| 0.1 | % |
|
| 35.2 |
|
|
| 1.4 | % |
|
| 105.8 |
|
|
| 105.2 |
|
|
| 0.6 | % |
Net operating income (NOI) | $ | 103.3 |
|
| $ | 91.1 |
|
|
| 13.3 | % |
| $ | 98.7 |
|
|
| 4.6 | % |
| $ | 297.1 |
|
| $ | 260.4 |
|
|
| 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.
Third quarter 2022 NOI margins were 74.3%, up 240 basis points from the third quarter of 2021. NOI margins benefited from Residential Rental Income growth of 9.8% and a decrease of 400 basis points in controllable operating expenses.
Components of Same Store Revenue Growth – The table below summarizes the change in the components of our Same Store Revenue growth.
|
| THIRD QUARTER | YEAR-TO-DATE | ||||||||||
Same Store Revenue Components |
| Year-over-Year | Sequential | Year-over-Year | |||||||||
Residential Rents |
|
| 10.4 | % |
|
| 5.0 | % |
|
| 7.6 | % |
|
Average Daily Occupancy |
|
| (0.6 | %) |
|
| (0.8 | %) |
|
| 1.2 | % |
|
Residential Rental Income |
|
| 9.8 | % |
|
| 4.2 | % |
|
| 8.8 | % |
|
Bad Debt, net of recoveries |
|
| 0.3 | % |
|
| (0.9 | %) |
|
| 1.0 | % |
|
Late Fees and Other |
|
| 0.5 | % |
|
| 0.4 | % |
|
| 0.5 | % |
|
Residential Revenue |
|
| 10.6 | % |
|
| 3.7 | % |
|
| 10.3 | % |
|
Commercial Revenue |
|
| (1.0 | %) |
|
| 0.1 | % |
|
| (0.1 | %) |
|
Same Store Revenue Growth |
|
| 9.6 | % |
|
| 3.8 | % |
|
| 10.2 | % |
|
Same Store Rental Rates – Changes in rental rates are measured 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.
4
The table below depicts 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.
| THIRD QUARTER |
| YEAR-TO-DATE |
| 2022 | |||||||
| 2022 | 2021* | Variance |
| 2022 | 2021* | Variance |
| July | Aug | Sept | Oct |
Transacted Leases* |
|
|
|
|
|
|
|
|
|
|
|
|
Renewal rent changes | 11.1% | 7.3% | 3.8% |
| 11.0% | 4.7% | 6.3% |
| 10.4% | 11.0% | 12.9% | 11.7% |
New lease rent changes | 17.1% | 8.5% | 8.6% |
| 17.5% | 1.8% | 15.7% |
| 17.8% | 17.3% | 15.8% | 13.2% |
Weighted-average rent changes | 14.0% | 7.9% | 6.1% |
| 14.0% | 3.2% | 10.8% |
| 13.9% | 13.9% | 14.4% | 12.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Signed Leases* |
|
|
|
|
|
|
|
|
|
|
|
|
Renewal rent changes | 11.8% | 9.3% | 2.5% |
| 11.0% | 5.5% | 5.5% |
| 11.5% | 11.9% | 12.9% | 10.4% |
New lease rent changes | 17.0% | 11.0% | 6.0% |
| 17.4% | 3.0% | 14.4% |
| 19.4% | 16.6% | 13.8% | 12.1% |
Weighted-average rent changes | 14.5% | 10.3% | 4.2% |
| 14.0% | 4.1% | 9.9% |
| 15.3% | 14.1% | 13.6% | 11.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Daily Occupancy | 95.9% | 96.5% | (0.6%) |
| 96.9% | 95.7% | 1.2% |
| 95.5% | 96.0% | 96.3% | 96.7% |
*Amounts are based on our current Same Store population and represent AIR's share, whereas prior to 2022 these were reported on a non-ownership adjusted basis. Amounts may differ from those previously reported.
Same Store Markets – Consumer demand remained strong through the quarter, with signed new lease rates up 17.0% from the prior leases and renewals up 11.8%, resulting in a weighted-average increase of 14.5%. We saw a sequential decline in ADO of 90 basis points to 95.9%, reflecting the frictional vacancy consistent with the higher move out volume that is typical during the summer leasing season. Year-to-date ADO of 96.9% was 120 bps higher than in the prior year. We anticipate continued occupancy gains throughout the fourth quarter.
Acquisition Portfolio – The acquisition portfolio is currently comprised of five properties acquired in 2021, four acquired in 2022, and represents 14% of AIR GAV. At those properties acquired in 2021, leasing continues to exceed expectations. Signed new lease rates were up 25.1% in the third quarter, with renewals up 23.2%, resulting in a weighted-average increase of 24.1%. Fourth quarter revenue growth for the 2021 acquisitions, the first reporting period with a year-over-year comparison, is anticipated to be 50% above the Same Store portfolio. At properties we acquired in 2022, performance is consistent with our expectations, and rental rate achievement is ahead of our initial projections. We will provide year-over-year comparable data as it 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 third quarter, residents paid, on a current basis, 98.1% of all residential revenue billed during the quarter. The remaining 1.9% of revenue was treated as bad debt. Offsetting this bad debt was $1.1 million of government assistance payments, reducing our bad debt percentage by 80 basis points. The result was net bad debt expense of 1.1% of third quarter residential revenues.
Outside of California, 99.1% of our residents are current, leaving approximately 100 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 third quarter bad debt by approximately 100 basis points.
In California, our ability to pursue remedies for unpaid rent now has fewer restrictions, though protections and moratoriums continue to prevent normal pursuit of delinquent balances. This has allowed approximately 300 California residents, about 3.5% of the total, to become delinquent by two or more months. Of the 300 California residents with multiple months of past due balances, approximately 175 are currently in the eviction process. The remaining 125 residents have continuing protections, that for now are scheduled to expire in February 2023.
As of September 30, 2022, our proportionate share of gross residential accounts receivable was $8.6 million. After consideration of tenant security deposits and reserves for uncollectible amounts, our net exposure is $0.2 million, an amount expected to be collected during the fourth quarter of 2022.
5
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. In the past two years, AIR has recycled approximately $5.4 billion, or 40%, of its gross asset value as part of and since the Separation, property sales, and joint ventures, all during a period of attractive pricing for multi-family properties, using the proceeds to simplify its business, reduce leverage, and improve the quality and expected profitability of its real estate portfolio.
We have improved AIR's portfolio through reducing our allocation to New York City and Chicago markets with regulatory risk, and reallocating capital into higher growth submarkets, such as Miami-Dade and Broward counties, now 19% of AIR GAV, in markets with limited REIT competition.
| Aimco | AIR |
|
| Q4 2019 or 2019A | Q3 2022 | Change |
Residents |
|
|
|
Average Household Income | $165,000 | $251,000 | 52% |
Median Household Income | $116,000 | $170,000 | 47% |
CSAT Score (out of 5) | 4.30 | 4.33 (2021) | 0.03 |
Kingsley Index* | 4.09 | 4.05 | (0.04) |
Portfolio |
|
|
|
Properties | 124 | 80 | (35%) |
Apartment Homes | 32,598 | 23,499 | (28%) |
Average Revenue per Apartment Home | 2,272 | $2,711 | 19% |
Redevelopment and Development ($M) | $230 | $– | ($230) |
Mezzanine Investments ($M) | $280 | $– | ($280) |
Low G&A |
|
|
|
Net G&A as % of GAV | 36 bps (per GSA) | <15 bps (at AIR Target) | -21 bps |
Balance Sheet |
|
|
|
Net Leverage / EBITDAre | 7.6x | 5.9x | (1.7x) |
Refunding: Next 3-Years (% Total Debt) | 23% | 10% | (13%) |
Repricing: Next 3-Years (% Total Debt) | 23% | 10% | (13%) |
Unencumbered Properties ($B) | $2.4 | $8.3 | $5.9 |
* AIR named Kingsley Elite Five in 2022, #2 among all operators and #1 for public REITs.
AIR uses “paired trades” to fund acquisitions, basing our cost of capital on the anticipated unlevered internal rates of return (“IRR”) of the communities or joint venture interests sold. We require a "spread" or accretion of an unlevered IRR at least 200 basis points higher on the communities purchased. This excess return is driven in part by what we call the AIR Edge, the cumulative result of our focus on resident selection, satisfaction, and retention, as well as relentless innovation in delivering best-in-class property management.
In the past two years, we have acquired $1.4 billion, or 14% of GAV, of properties new to the AIR operating platform. New purchases will increase to 17% of GAV with the anticipated acquisition in early next year of Southgate Towers in Miami Beach. (Please see below for further information regarding this acquisition.)
We estimate real estate values declined by approximately 10% during 2022, the result of approximately 85 basis points of NOI cap rate expansion, about half offset by strong NOI growth. As a paired trade investor, AIR is agnostic as to market changes insofar as it buys and sells properties in the same market conditions, and is focused on gaining an accretive “spread”. As market conditions change, AIR adjusts its target returns and spreads to reflect its new cost of capital. Our “paired trade” approach is intended to ensure that new acquisitions are accretive to earnings in the near-term, and will generate attractive spreads to IRRs in the long-term.
Transactions
Acquisitions
As previously announced, we acquired The District at Flagler Village in Fort Lauderdale, FL for $173 million in the third quarter. The property has 350 apartment homes and was newly constructed in 2021. It sits in the affluent and growing Flagler Village neighborhood with access to the Brightline train station. Year-to-date, we have acquired $640 million of properties new to the AIR platform.
6
Additionally, and as previously announced, we canceled existing master leases at four properties owned by AIR and previously leased to Aimco for purpose of their development. As part of the cancellation, AIR paid $200 million to Aimco for the added improvements. The four properties include 865 apartment homes with average revenue per apartment home of $3,669 and are located in the South Beach neighborhood of Miami Beach, FL, Kendall Square in Cambridge, MA, the Anschutz Medical Campus in Aurora, CO, and Redwood City, CA.
In aggregate, we expect a NOI yield in 2023 of mid 4%s and a long-term unlevered IRR of approximately 9%.
During the quarter, we also went under contract with a non-refundable deposit to acquire Southgate Towers, located in the South Beach neighborhood of Miami Beach with 495 apartment homes for $298 million. The acquisition is expected to close in early January 2023. We expect unlevered IRRs greater than 10% and at a spread of more than 200 basis points to the properties sold to fund its acquisition.
Dispositions
We had no dispositions in the third quarter. We anticipate selling six properties located in the New England area in November for a gross sales price of approximately $500 million, representing a trailing twelve-month NOI cap rate of 4.4%. These have been classified as held for sale as of September 30, 2022.
Capital Allocation – Share Repurchases
During the third quarter, AIR repurchased 1.2 million shares for $47 million, at an average price of $39.07 per share. Subsequent to quarter end and through November 2, 2022 we have purchased an additional 3.1 million shares for $115 million. In aggregate, we have repurchased 7.2 million shares during 2022 at an average price of $39.96. We are authorized by the AIR Board of Directors to repurchase an additional $213 million of shares. We consider share buybacks as part of a balanced investment program.
7
Balance Sheet
We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage and primarily long-dated debt. We target a Net Leverage to EBITDAre ratio between 5.0x and 6.0x and anticipate the actual ratio will vary based on the timing of transactions. We maintain financial flexibility through ample unused and available credit, holding properties with substantial value unencumbered by property debt, maintaining an investment grade rating, and using partners’ capital when it enhances financial returns or reduces investment risk. We seek to minimize refunding and repricing risk.
Components of Leverage
Our leverage includes our share of long-term, non-recourse property debt encumbering our apartment communities, together with outstanding borrowings under our revolving credit facility, our term loans, unsecured notes payable, and preferred equity.
|
| SEPTEMBER 30, 2022 |
|
|
|
| ||||||
($ in millions)* |
| Amount |
|
| Weighted-Avg. |
|
| Weighted-Avg. |
| |||
Fixed rate loans payable |
| $ | 1,499 |
|
|
| 8.7 |
|
|
| 9.2 |
|
Floating rate loans payable** |
|
| 138 |
|
|
| 3.3 |
|
|
| 4.0 |
|
AIR share of long-term, non-recourse property debt |
|
| 1,637 |
|
|
| 8.2 |
|
|
| 8.6 |
|
|
|
|
|
|
|
|
|
|
| |||
Term loans |
|
| 800 |
|
|
| 3.3 |
|
|
| 4.7 |
|
Unsecured notes payable |
|
| 400 |
|
|
| 7.7 |
|
|
| 7.7 |
|
Outstanding borrowings on revolving credit facility |
|
| 479 |
|
|
| 3.5 |
|
|
| 3.5 |
|
Preferred equity*** |
|
| 81 |
|
|
| 9.8 |
|
|
| 9.8 |
|
Total Leverage |
| $ | 3,397 |
|
|
| 6.4 |
|
|
| 6.9 |
|
Cash and restricted cash |
|
| (100 | ) |
|
|
|
|
|
| ||
Net Leverage |
| $ | 3,298 |
|
|
|
|
|
|
| ||
Leverage reduction funded by anticipated November 2022 property sales |
|
| (460 | ) |
|
|
|
|
|
| ||
Net Leverage, Pro forma for anticipated November 2022 sales |
| $ | 2,838 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| |||
Floating rate leverage not subject to interest rate caps and excluding borrowings on the revolving credit facility |
| 3% |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Net Leverage to Adjusted EBITDAre, Pro forma for anticipated November sales |
| 5.9x |
|
|
|
|
|
|
|
* Amounts are presented on a rounded basis and the sum of the individual amounts may not foot; please refer to Supplemental Schedule 5.
** Includes one loan with an interest rate cap at 5.35% and a second floating rate loan that is expected to be refinanced during the fourth quarter.
*** 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 of our preferred stock assuming it is called at the expiration of its no-call period.
As of September 30, 2022, about $170 million of AIR’s debt matures before 2025 and it is expected to be refunded before year end with $55 million at 4.9%, $14 million repaid and the remainder at a fixed rate to be determined. Once completed, AIR will have no debt maturing before the second quarter of 2025.
AIR anticipates using the net proceeds from the November property sales discussed above to reduce borrowings on its revolving credit facility.
Pro forma the completion of these refinancing activities, and exclusive of any remaining borrowings under its revolving credit facility, AIR’s floating rate debt exposure is anticipated to be $79 million. This debt has is subject to an interest rate cap at an effective rate of 5.35%.
8
Liquidity
We use our revolving credit facility for working capital, other short-term purposes, and to secure letters of credit. At September 30, 2022, our share of cash and restricted cash, excluding amounts related to tenant security deposits, was $100 million and we had the capacity to borrow up to $510 million on our revolving credit facility, bringing total liquidity to $610 million. Liquidity is expected to increase by approximately $460 million with the closing of the November property sales.
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 September 30, 2022, we held unencumbered apartment communities with an estimated fair market value of approximately $8.3 billion, almost triple the amount as of December 31, 2020.
As previously announced, AIR is seeking an investment-grade Issuer Credit Rating from Moody’s and we anticipate receiving our rating during the fourth quarter.
Dividend and Equity Capital Markets
On November 1, 2022, our Board of Directors declared a quarterly cash dividend of $0.45 per share of Common Stock. This amount is payable on November 30, 2022, to stockholders of record on November 18, 2022. On an annualized basis, the dividend represents $1.80 per share, reflecting a dividend yield of approximately 4.7% based on AIR's closing share price on Tuesday, November 1, 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 taxable at capital gain rates, with the remainder taxable 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. For example, if AIR's 2022 dividend is characterized as 50% capital gains and 50% as ordinary income and peer 2022 dividends are characterized consistently with 2021, AIR's estimated after tax dividend would be approximately 35% higher than peer average.
Corporate Governance and Responsibility Update
During the quarter, AIR engaged with holders of approximately 70% of outstanding common shares, which included the participation of multiple Board members alongside senior management, in a series of lunches, dinners, video meetings, and calls. Numerous topics were discussed such as governance, investment strategy, operations, and corporate responsibility, including CEO succession planning and matters related to Environmental, Social, and Governance ("ESG"). Board members have also participated in several industry conferences and private meetings throughout the year. AIR's Board is highly proactive and welcomes investor feedback to ensure stockholder perspectives are well heard in Board deliberations.
AIR launched new corporate responsibility webpages during the quarter to highlight our commitments to ESG, and published corporate responsibility goals consistent with the United Nations Sustainable Development Goals. AIR also launched an inaugural materiality assessment and surveyed investors, its Board of Directors, teammates, vendors, and community partners to identify which topics they consider most material to the Company. Subsequent to quarter end, AIR published its 2021-2022 Corporate Responsibility Report, which demonstrates AIR's commitment to being an outstanding corporate citizen, and reinforces its dedication to ESG goal setting and reporting on progress through transparent, data-driven disclosures consistent with the Sustainability Accounting and Standards Board (“SASB”).
9
AIR has made progress on its goals to reduce the Company's environmental impact by 2025, which include a 15% energy use reduction, 10% water usage reduction, and 15% greenhouse gas reduction, all by 2025. This is in addition to more than a decade of investment in clean energy, energy efficiency and water conservation, including $7.9 million invested in energy conservation between 2019 and 2021.
AIR recently received its first public GRESB score of 78, which included an “A” grade for both ESG public disclosure and alignment with the Task Force for Climate-Related Financial Disclosures (“TCFD”). AIR received a “Green Star” from GRESB for overall Management and Performance in 2021, a perfect social responsibility score, and a near-perfect corporate governance score.
2022 Outlook
AIR's midpoint of FFO per share of $2.41 remains unchanged. Similarly, our expectations for run-rate FFO are unchanged at $2.19 per share. AIR expects full-year Pro forma FFO between $2.39 and $2.43 per share.
The following tables compare our 2021 FFO results to our full-year 2022 FFO expectations, at the midpoint:
|
|
|
|
|
| |
2021 FFO per share |
|
| $ | 2.14 |
|
|
Growth in Same Store NOI |
|
|
| 0.32 |
|
|
Contribution from lower leverage and acquisitions, net of related sales dilution |
|
|
| (0.02 | ) |
|
Change in interest rates |
|
|
| (0.03 | ) |
|
Change in contribution from Aimco note prepayment |
|
|
| 0.05 |
|
|
Reacquisition of properties previously leased to Aimco |
|
|
| (0.02 | ) |
|
Other |
|
|
| (0.03 | ) |
|
2022 FFO per share at the midpoint |
|
| $ | 2.41 |
|
|
|
|
| Expectation of Pro forma Run Rate |
|
| |
2021 FFO per share |
|
| $ | 2.14 |
|
|
Less: Interest income on Aimco note, net of borrowing costs |
|
|
| (0.12 | ) |
|
2021 FFO per share before Aimco note contribution |
|
| $ | 2.02 |
|
|
Growth in Same Store NOI |
|
|
| 0.32 |
|
|
Net change in leverage, acquisitions and contribution from Aimco note prepayment |
|
|
| (0.05 | ) |
|
Change in interest rates |
|
|
| (0.05 | ) |
|
Reacquisition of properties previously leased to Aimco |
|
|
| (0.02 | ) |
|
Other |
|
|
| (0.03 | ) |
|
2022 FFO per share at the midpoint |
|
| $ | 2.19 |
|
|
10
Our guidance ranges are based on the following components:
|
| YEAR-TO-DATE |
| FULL YEAR 2022 |
| PREVIOUS |
($ Amounts represent AIR Share) |
|
|
|
|
|
|
Net Income per share (1) |
| $3.68 |
| $3.42 to $3.49 |
| $3.42 to $3.49 |
Pro forma FFO per share |
| $1.81 |
| $2.39 to $2.43 |
| $2.38 to $2.44 |
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 |
| 10.2% |
| 10.0% to 10.5% |
| 10.0% to 10.5% |
Expense change compared to prior year |
| 0.6% |
| 0.5% to 1.5% |
| 2.0% to 2.5% |
NOI change compared to prior year |
| 14.1% |
| 13.4% to 14.4% |
| 13.0% to 14.0% |
|
|
|
|
|
|
|
Offsite Costs |
|
|
|
|
|
|
General and administrative expenses, as defined below (2) |
| $15M |
| $17M to $19M |
| $16M to $18M |
|
|
|
|
|
|
|
Other Earnings |
|
|
|
|
|
|
Lease income |
| $18M |
| ~$18M |
| ~$18M |
Value of property acquisitions and cost of lease cancellation (3) |
| $840M |
| $840M |
| ~$840M |
Proceeds from dispositions of real estate, net |
| $774M |
| ~$1.3B |
| ~$1.3B |
|
|
|
|
|
|
|
AIR Share of Capital Enhancements |
|
|
|
|
|
|
Capital Enhancements |
| $73M |
| $90M to $110M |
| $90M to $110M |
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
Net Leverage to Adjusted EBITDAre (4) |
| 5.9x |
| 6.0x |
| ~5.5x |
In the fourth quarter of 2022, AIR anticipates Pro forma FFO between $0.58 and $0.62 per share.
11
Appendix A – AIR Perspective on Macroeconomic Factors
AIR was designed with emphasis on stability, predictability, and efficiency in its business model. Through our high-quality portfolio and best-in-class property operations, what we call the AIR Edge, we expect to be able to generate stable and durable growth across economic cycles. As markets remain turbulent, AIR is either well positioned, well prepared, or both, around several macroeconomic factors impacting operating performance and cost of capital.
The result of an increasing top-line and stable expenses make for levered improvement to growth in Same Store NOI, expected at 13.9% for 2022. In general, inflation that is “higher for longer” will support relative outperformance by apartment owners in general, and by AIR in particular.
In general, the rate of bad debt, early termination of leases, and rates of turnover are a function of the quality of the property’s customer base at the arrival of the recession. In the third quarter of 2022, the average and median household income of AIR's new residents were $251,000 and $170,000, respectively, and our rent-to-income ratio was 18% for a household. More importantly, our residents also have FICO scores that average 90 points higher than the national renter average. We do not expect a significant increase in bad debt in the event of a recession.
Recessions are often localized to particular markets or industries. The recession in 2001 following the collapse of the “dot-com” economy was severe in the Bay Area technology markets, but less so, by example, in Philadelphia or Washington, D.C. The AIR portfolio is intentionally diversified across markets and submarkets with different and usually offsetting dynamics. Further, the AIR portfolio is diversified by price point with an expectation in a recession that “B” apartments gain even as “A” apartments potentially decline. AIR owns both “A” and “B” properties (52% and 48% of GAV, respectively), and offers apartment units at monthly price points ranging from less than $1,000 to over $20,000. Both property classes have similar rent-to-income coverage (17% in the "A" portfolio and 19% in the "B" portfolio); however, “B” properties are likely to benefit from increased demand from customers made more price sensitive in a recession, while “A” communities benefit from increased demand from customers “trading up” during a time of economic recovery.
Our experience in the recessions of the Great Financial Crisis ("GFC") and the recent pandemic may be instructive. For the full-year 2009, AIR's Same Store Revenue and Same Store NOI declined by 2.5% and 4.2%, respectively. 2010 was flat before returning to Same Store Revenue and Same Store NOI growth of 2.8% and 5.3%, respectively, in 2011. In the pandemic, AIR's Same Store Revenue and Same Store NOI declined by 2.4% and 4.0%, respectively, in 2020, while 2021 produced 1.7% and 1.6% of Same Store Revenue and Same Store NOI growth, respectively.
12
During the GFC, there was not the same extent of government interference with creditor remedies as was the case during the pandemic, which is still continuing. In the GFC, bad debt increased by 50 basis points before reverting to the then long-term trend in our portfolio of 60 basis points within 17 months. During the pandemic, there was extensive government interference with creditor remedies in many markets, which greatly magnified customer bad debt.
In general, the year-over-year growth rate in Same Store Revenue in a future year can be considered as the sum of (i) the “earn-in” of rents on leases made in the prior year, (ii) the magnitude of loss-to-lease (gain-to-lease), the difference between leases in place at year-end and the higher (lower) rents being paid in the future year, (iii) market rent growth in the future year, and (iv) changes in average daily occupancy or bad debt. In 2023, we estimate Same Store Revenue will begin with an approximately 5% “earn-in”, while loss-to-lease, market rent growth, and changes in average daily occupancy or bad debt will be determined by the local economies.
13
Appendix B – 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:
14
Earnings Conference Call Information
Live Conference Call: | Conference Call Replay: |
Friday, November 4, 2022 at 1:00 p.m. ET | Replay available until February 2, 2023 |
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: 342431 | Passcode: 726049 |
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 80 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
Mary Jensen
Head of Investor Relations
(303) 691-4349
investors@aircommunities.com
15
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 and 2023 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; 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 AIR. 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.
16
Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Rental and other property revenues (1) |
| $ | 198,413 |
|
| $ | 190,082 |
|
| $ | 558,686 |
|
| $ | 541,533 |
|
Other revenues |
|
| 2,458 |
|
|
| 1,695 |
|
|
| 7,163 |
|
|
| 4,990 |
|
Total revenues |
|
| 200,871 |
|
|
| 191,777 |
|
|
| 565,849 |
|
|
| 546,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Property operating expenses (1) |
|
| 71,250 |
|
|
| 73,925 |
|
|
| 198,273 |
|
|
| 203,300 |
|
Depreciation and amortization |
|
| 90,445 |
|
|
| 81,121 |
|
|
| 253,650 |
|
|
| 232,192 |
|
General and administrative expenses (2) |
|
| 7,663 |
|
|
| 5,875 |
|
|
| 19,593 |
|
|
| 15,510 |
|
Other expenses, net |
|
| 4,941 |
|
|
| 3,816 |
|
|
| 5,883 |
|
|
| 9,207 |
|
Total operating expenses |
|
| 174,299 |
|
|
| 164,737 |
|
|
| 477,399 |
|
|
| 460,209 |
|
Interest income (3) |
|
| 9,613 |
|
|
| 13,432 |
|
|
| 48,746 |
|
|
| 45,088 |
|
Interest expense |
|
| (32,656 | ) |
|
| (30,530 | ) |
|
| (80,790 | ) |
|
| (100,212 | ) |
Loss on extinguishment of debt |
|
| — |
|
|
| (6,673 | ) |
|
| (23,636 | ) |
|
| (44,833 | ) |
Gain on dispositions of real estate and derecognition of leased properties |
|
| — |
|
|
| 7,127 |
|
|
| 587,609 |
|
|
| 94,512 |
|
Loss from unconsolidated real estate partnerships |
|
| (87 | ) |
|
| — |
|
|
| (2,974 | ) |
|
| — |
|
Income before income tax (expense) benefit |
|
| 3,442 |
|
|
| 10,396 |
|
|
| 617,405 |
|
|
| 80,869 |
|
Income tax (expense) benefit |
|
| (46 | ) |
|
| 275 |
|
|
| (966 | ) |
|
| (770 | ) |
Net income |
|
| 3,396 |
|
|
| 10,671 |
|
|
| 616,439 |
|
|
| 80,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Noncontrolling interests: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss attributable to noncontrolling interests in |
|
| 102 |
|
|
| 785 |
|
|
| 285 |
|
|
| 3,417 |
|
Net income attributable to preferred noncontrolling interests in |
|
| (1,602 | ) |
|
| (1,603 | ) |
|
| (4,807 | ) |
|
| (4,810 | ) |
Net income attributable to common noncontrolling interests in |
|
| (137 | ) |
|
| (475 | ) |
|
| (37,053 | ) |
|
| (3,966 | ) |
Net income attributable to noncontrolling interests |
|
| (1,637 | ) |
|
| (1,293 | ) |
|
| (41,575 | ) |
|
| (5,359 | ) |
Net income attributable to AIR |
|
| 1,759 |
|
|
| 9,378 |
|
|
| 574,864 |
|
|
| 74,740 |
|
Net income attributable to AIR preferred stockholders |
|
| (43 | ) |
|
| (43 | ) |
|
| (128 | ) |
|
| (136 | ) |
Net income attributable to participating securities |
|
| 44 |
|
|
| (46 | ) |
|
| (373 | ) |
|
| (149 | ) |
Net income attributable to AIR common stockholders |
| $ | 1,760 |
|
| $ | 9,289 |
|
| $ | 574,363 |
|
| $ | 74,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income attributable to AIR common stockholders per share – basic |
| $ | 0.01 |
|
| $ | 0.06 |
|
| $ | 3.69 |
|
| $ | 0.49 |
|
Net income attributable to AIR common stockholders per share – diluted |
| $ | 0.01 |
|
| $ | 0.06 |
|
| $ | 3.68 |
|
| $ | 0.48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average common shares outstanding – basic |
|
| 153,811 |
|
|
| 156,646 |
|
|
| 155,488 |
|
|
| 153,289 |
|
Weighted-average common shares outstanding – diluted |
|
| 154,057 |
|
|
| 157,042 |
|
|
| 157,440 |
|
|
| 153,650 |
|
Rental and other property revenues for the three and nine months ended September 30, 2021, are inclusive of $7.5 million and $21.8 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 nine months ended September 30, 2021, are inclusive of $1.8 million and $5.5 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 nine months ended September 30, 2021, includes $6.9 million and $20.8 million, respectively, of income associated with our note receivable from Aimco, and $6.5 million and $19.4 million, respectively, of interest income associated with leased properties.
17
Consolidated Balance Sheets
(in thousands) (unaudited)
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Assets |
|
|
|
|
|
| ||
Real estate |
| $ | 8,038,570 |
|
| $ | 6,885,081 |
|
Accumulated depreciation |
|
| (2,370,792 | ) |
|
| (2,284,793 | ) |
Net real estate |
|
| 5,667,778 |
|
|
| 4,600,288 |
|
Cash and cash equivalents |
|
| 87,732 |
|
|
| 67,320 |
|
Restricted cash |
|
| 26,914 |
|
|
| 25,441 |
|
Note receivable from Aimco |
|
| — |
|
|
| 534,127 |
|
Leased real estate assets |
|
| — |
|
|
| 466,355 |
|
Goodwill |
|
| 32,286 |
|
|
| 32,286 |
|
Other assets (1) |
|
| 779,205 |
|
|
| 568,051 |
|
Assets held for sale |
|
| 128,538 |
|
|
| 146,492 |
|
Total Assets |
| $ | 6,722,453 |
|
| $ | 6,440,360 |
|
|
|
|
|
|
|
| ||
Liabilities and Equity |
|
|
|
|
|
| ||
Non-recourse property debt |
| $ | 2,028,658 |
|
| $ | 2,305,756 |
|
Debt issue costs |
|
| (9,241 | ) |
|
| (11,017 | ) |
Non-recourse property debt, net |
|
| 2,019,417 |
|
|
| 2,294,739 |
|
Term loans, net |
|
| 796,334 |
|
|
| 1,144,547 |
|
Revolving credit facility borrowings |
|
| 479,000 |
|
|
| 304,000 |
|
Unsecured notes payable, net |
|
| 397,417 |
|
|
| — |
|
Accrued liabilities and other (1) |
|
| 758,441 |
|
|
| 592,774 |
|
Liabilities related to assets held for sale |
|
| 472 |
|
|
| 85,775 |
|
Total Liabilities |
|
| 4,451,081 |
|
|
| 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 |
|
| 1,530 |
|
|
| 1,570 |
|
Additional paid-in capital |
|
| 3,583,111 |
|
|
| 3,763,105 |
|
Accumulated other comprehensive income |
|
| 45,948 |
|
|
| — |
|
Distributions in excess of earnings |
|
| (1,589,409 | ) |
|
| (1,953,779 | ) |
Total AIR equity |
|
| 2,043,180 |
|
|
| 1,813,025 |
|
Noncontrolling interests in consolidated real estate partnerships |
|
| (76,200 | ) |
|
| (70,883 | ) |
Common noncontrolling interests in AIR OP |
|
| 225,062 |
|
|
| 197,013 |
|
Total Equity |
|
| 2,192,042 |
|
|
| 1,939,155 |
|
Total Liabilities and Equity |
| $ | 6,722,453 |
|
| $ | 6,440,360 |
|
18
Supplemental Schedule 1
Funds From Operations Reconciliation
Three and Nine Months Ended September 30, 2022, Compared to Three and Nine Months Ended September 30, 2021
(in thousands, except per share data) (unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income attributable to AIR common stockholders |
| $ | 1,760 |
|
| $ | 9,289 |
|
| $ | 574,363 |
|
| $ | 74,455 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Real estate depreciation and amortization, net of noncontrolling partners’ interest |
|
| 85,057 |
|
|
| 74,864 |
|
|
| 240,436 |
|
|
| 213,947 |
|
Gain on dispositions of real estate and derecognition of leased properties, net of noncontrolling partners' interest |
|
| — |
|
|
| (7,127 | ) |
|
| (587,453 | ) |
|
| (94,512 | ) |
Income tax adjustments related to gain on dispositions and other tax-related items |
|
| (348 | ) |
|
| (122 | ) |
|
| (1,448 | ) |
|
| 150 |
|
Common noncontrolling interests in AIR OP’s share of above adjustments |
|
| (5,198 | ) |
|
| (3,269 | ) |
|
| 21,083 |
|
|
| (5,842 | ) |
Amounts allocable to participating securities |
|
| (52 | ) |
|
| — |
|
|
| 244 |
|
|
| — |
|
NAREIT FFO attributable to AIR common stockholders |
| $ | 81,219 |
|
| $ | 73,635 |
|
| $ | 247,225 |
|
| $ | 188,198 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss on extinguishment of debt (1) |
|
| — |
|
|
| 6,673 |
|
|
| 23,636 |
|
|
| 44,833 |
|
Separation, business transformation, and transition related costs (2) |
|
| 1,419 |
|
|
| 1,393 |
|
|
| 3,881 |
|
|
| 3,858 |
|
Non-cash straight-line rent (3) |
|
| 3,660 |
|
|
| 642 |
|
|
| 4,944 |
|
|
| 1,979 |
|
Incremental cash received from leased properties (4) |
|
| 109 |
|
|
| 191 |
|
|
| 432 |
|
|
| 500 |
|
Casualty and other (5) |
|
| 4,280 |
|
|
| 5,364 |
|
|
| 4,635 |
|
|
| 6,144 |
|
Common noncontrolling interests in AIR OP’s share of above adjustments |
|
| (581 | ) |
|
| (690 | ) |
|
| (2,300 | ) |
|
| (2,829 | ) |
Amounts allocable to participating securities |
|
| — |
|
|
| (13 | ) |
|
| (19 | ) |
|
| (29 | ) |
Pro forma FFO attributable to AIR common stockholders |
| $ | 90,106 |
|
| $ | 87,195 |
|
| $ | 282,434 |
|
| $ | 242,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average common shares outstanding – basic |
|
| 153,811 |
|
|
| 156,646 |
|
|
| 155,488 |
|
|
| 153,289 |
|
Dilutive common share equivalents (6) |
|
| 246 |
|
|
| 396 |
|
|
| 269 |
|
|
| 361 |
|
Total shares and dilutive share equivalents |
|
| 154,057 |
|
|
| 157,042 |
|
|
| 155,757 |
|
|
| 153,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income attributable to AIR per share – diluted |
| $ | 0.01 |
|
| $ | 0.06 |
|
| $ | 3.68 |
|
| $ | 0.48 |
|
NAREIT FFO per share – diluted |
| $ | 0.53 |
|
| $ | 0.47 |
|
| $ | 1.59 |
|
| $ | 1.22 |
|
Pro forma FFO per share – diluted |
| $ | 0.58 |
|
| $ | 0.56 |
|
| $ | 1.81 |
|
| $ | 1.58 |
|
Supplemental Schedule 2(a)
Funds From Operations Information
Three and Nine Months Ended September 30, 2022, Compared to Three and Nine Months Ended September 30, 2021
(consolidated amounts, in thousands) (unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenues, before utility reimbursements |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same Store |
| $ | 152,219 |
|
| $ | 147,898 |
|
| $ | 441,725 |
|
| $ | 427,046 |
|
Other Real Estate (1) |
|
| 30,258 |
|
|
| 5,558 |
|
|
| 62,371 |
|
|
| 8,563 |
|
Total revenues, before utility reimbursements |
|
| 182,477 |
|
|
| 153,456 |
|
|
| 504,096 |
|
|
| 435,609 |
|
Expenses, net of utility reimbursements (2) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same Store |
|
| 39,050 |
|
|
| 40,656 |
|
|
| 115,598 |
|
|
| 120,516 |
|
Other Real Estate |
|
| 10,606 |
|
|
| 2,982 |
|
|
| 23,485 |
|
|
| 5,370 |
|
Total expenses, net of utility reimbursements |
|
| 49,656 |
|
|
| 43,638 |
|
|
| 139,083 |
|
|
| 125,886 |
|
Net operating income (3) |
|
| 132,821 |
|
|
| 109,818 |
|
|
| 365,013 |
|
|
| 309,723 |
|
Lease income |
|
| 4,483 |
|
|
| 6,489 |
|
|
| 17,550 |
|
|
| 19,387 |
|
Property management expenses, net |
|
| (5,627 | ) |
|
| (6,256 | ) |
|
| (16,730 | ) |
|
| (17,844 | ) |
Property income |
|
| 131,677 |
|
|
| 110,051 |
|
|
| 365,833 |
|
|
| 311,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative expenses (2)(4) |
|
| (5,943 | ) |
|
| (4,836 | ) |
|
| (14,668 | ) |
|
| (12,392 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| (32,656 | ) |
|
| (30,530 | ) |
|
| (80,790 | ) |
|
| (100,212 | ) |
Loss on extinguishment of debt |
|
| — |
|
|
| (6,673 | ) |
|
| (23,636 | ) |
|
| (44,833 | ) |
Preferred dividends |
|
| (1,645 | ) |
|
| (1,646 | ) |
|
| (4,935 | ) |
|
| (4,946 | ) |
Interest income from note receivable from Aimco (5) |
|
| 4,978 |
|
|
| 6,943 |
|
|
| 31,221 |
|
|
| 20,832 |
|
Interest income |
|
| 230 |
|
|
| — |
|
|
| 235 |
|
|
| 4,869 |
|
Total cost of capital |
|
| (29,093 | ) |
|
| (31,906 | ) |
|
| (77,905 | ) |
|
| (124,290 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Casualties |
|
| (4,478 | ) |
|
| (6,394 | ) |
|
| (6,271 | ) |
|
| (7,851 | ) |
Depreciation and amortization related to non-real estate assets (2) |
|
| — |
|
|
| (818 | ) |
|
| — |
|
|
| (2,203 | ) |
Land leases |
|
| (5,281 | ) |
|
| (1,321 | ) |
|
| (7,926 | ) |
|
| (3,955 | ) |
Income from unconsolidated real estate partnerships |
|
| 1,018 |
|
|
| — |
|
|
| 2,922 |
|
|
| — |
|
Other income (expense), net |
|
| 340 |
|
|
| (2,495 | ) |
|
| 2,043 |
|
|
| (5,252 | ) |
Tax (expense) benefit, net |
|
| (407 | ) |
|
| 151 |
|
|
| (2,438 | ) |
|
| (619 | ) |
NOI related to sold and held for sale communities |
|
| 5,556 |
|
|
| 20,687 |
|
|
| 22,004 |
|
|
| 59,196 |
|
Total other |
|
| (3,252 | ) |
|
| 9,810 |
|
|
| 10,334 |
|
|
| 39,316 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common noncontrolling interests in AIR OP |
|
| (5,343 | ) |
|
| (3,790 | ) |
|
| (16,099 | ) |
|
| (9,957 | ) |
Proportionate adjustments |
|
| (6,827 | ) |
|
| (5,694 | ) |
|
| (20,270 | ) |
|
| (15,745 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
NAREIT FFO attributable to AIR common stockholders |
| $ | 81,219 |
|
| $ | 73,635 |
|
| $ | 247,225 |
|
| $ | 188,198 |
|
Total pro forma adjustments, net of common noncontrolling interests in AIR OP and participating securities |
|
| 8,887 |
|
|
| 13,560 |
|
|
| 35,209 |
|
|
| 54,456 |
|
Pro forma FFO attributable to AIR common stockholders |
| $ | 90,106 |
|
| $ | 87,195 |
|
| $ | 282,434 |
|
| $ | 242,654 |
|
20
Supplemental Schedule 2(b)
Partially Owned Entities
Three and Nine Months Ended September 30, 2022, Compared to Three and Nine Months Ended September 30, 2021
(in thousands) (unaudited)
|
| Noncontrolling Interests (1) |
|
| Unconsolidated (2) |
|
| Noncontrolling Interests (1) |
|
| Unconsolidated (2) |
| ||||||||||||||||||||
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Revenues, before utility reimbursements |
| $ | 15,193 |
|
| $ | 13,796 |
|
| $ | 2,081 |
|
| $ | — |
|
| $ | 44,893 |
|
| $ | 40,049 |
|
| $ | 5,924 |
|
| $ | — |
|
Expenses, net of utility reimbursements |
|
| 3,917 |
|
|
| 3,792 |
|
|
| 499 |
|
|
| — |
|
|
| 11,523 |
|
|
| 11,236 |
|
|
| 1,496 |
|
|
| — |
|
Net operating income |
|
| 11,276 |
|
|
| 10,004 |
|
|
| 1,582 |
|
|
|
|
|
| 33,370 |
|
|
| 28,813 |
|
|
| 4,428 |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Property management expenses, net |
|
| (528 | ) |
|
| (421 | ) |
|
| (66 | ) |
|
| — |
|
|
| (1,420 | ) |
|
| (1,238 | ) |
|
| (186 | ) |
|
| — |
|
Casualties |
|
| (26 | ) |
|
| (28 | ) |
|
| (6 | ) |
|
| — |
|
|
| 184 |
|
|
| (98 | ) |
|
| (12 | ) |
|
| — |
|
Other expense, net |
|
| (47 | ) |
|
| (32 | ) |
|
| — |
|
|
| — |
|
|
| (146 | ) |
|
| (61 | ) |
|
| — |
|
|
| — |
|
Interest expense on non-recourse property debt |
|
| (3,745 | ) |
|
| (3,795 | ) |
|
| (948 | ) |
|
| — |
|
|
| (11,273 | ) |
|
| (11,506 | ) |
|
| (2,142 | ) |
|
| — |
|
Contribution from real estate operations |
|
| 6,930 |
|
|
| 5,728 |
|
|
| 562 |
|
|
| — |
|
|
| 20,715 |
|
|
| 15,910 |
|
|
| 2,088 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other non-property (expenses) income, net |
|
| (103 | ) |
|
| (34 | ) |
|
| 456 |
|
|
|
|
|
| (445 | ) |
|
| (165 | ) |
|
| 834 |
|
|
|
| ||
FFO from real estate operations |
| $ | 6,827 |
|
| $ | 5,694 |
|
| $ | 1,018 |
|
| $ | — |
|
| $ | 20,270 |
|
| $ | 15,745 |
|
| $ | 2,922 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
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 (3) |
|
| 1,703 |
|
|
| 1,721 |
|
|
| 350 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Supplemental Schedule 3
Property Net Operating Income
Trailing Five Quarters
(consolidated amounts, in thousands) (unaudited)
|
| Three Months Ended |
| |||||||||||||||||
|
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
| |||||
Revenues, before utility reimbursements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same Store |
| $ | 152,219 |
|
| $ | 146,883 |
|
| $ | 142,623 |
|
| $ | 143,782 |
|
| $ | 147,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Real Estate (1) |
|
| 30,258 |
|
|
| 17,279 |
|
|
| 14,834 |
|
|
| 14,290 |
|
|
| 5,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total revenues, before utility reimbursements |
|
| 182,477 |
|
|
| 164,162 |
|
|
| 157,457 |
|
|
| 158,072 |
|
|
| 153,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Expenses, net of utility reimbursements (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same Store |
|
| 39,050 |
|
|
| 38,361 |
|
|
| 38,187 |
|
|
| 37,274 |
|
|
| 40,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Real Estate |
|
| 10,606 |
|
|
| 6,775 |
|
|
| 6,104 |
|
|
| 5,347 |
|
|
| 2,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total expenses, net of utility reimbursements |
|
| 49,656 |
|
|
| 45,136 |
|
|
| 44,291 |
|
|
| 42,621 |
|
|
| 43,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property Net Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same Store (3) |
|
| 113,169 |
|
|
| 108,522 |
|
|
| 104,436 |
|
|
| 106,508 |
|
|
| 107,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Real Estate |
|
| 19,652 |
|
|
| 10,504 |
|
|
| 8,730 |
|
|
| 8,943 |
|
|
| 2,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Property Net Operating Income |
| $ | 132,821 |
|
| $ | 119,026 |
|
| $ | 113,166 |
|
| $ | 115,451 |
|
| $ | 109,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
NOI related to communities sold and held for sale |
| $ | 5,556 |
|
| $ | 6,865 |
|
| $ | 9,583 |
|
| $ | 19,374 |
|
| $ | 20,687 |
|
22
Supplemental Schedule 4
Apartment Home Summary
As of September 30, 2022
(unaudited)
|
| Number of Apartment Communities |
|
| Number of Apartment Homes |
|
| AIR Share of Apartment Homes |
| |||
|
|
|
|
|
|
|
|
|
| |||
Same Store (1) |
|
| 58 |
|
|
| 20,730 |
|
|
| 17,629 |
|
Other Real Estate (2) |
|
| 16 |
|
|
| 4,556 |
|
|
| 4,556 |
|
Held for Sale |
|
| 6 |
|
|
| 1,314 |
|
|
| 1,314 |
|
Total Portfolio |
|
| 80 |
|
|
| 26,600 |
|
|
| 23,499 |
|
|
|
|
|
|
|
|
|
|
| |||
Land and land interests leased (3) |
|
| 2 |
|
|
|
|
|
|
|
Supplemental Schedule 5(a)
Capitalization and Financial Metrics
As of September 30, 2022
(dollars in thousands) (unaudited)
Leverage Balances and Characteristics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Debt |
| Consolidated |
|
| AIR Share of |
|
| Noncontrolling |
|
| Total |
|
| Weighted- |
|
| Weighted- |
|
|
| ||||||
Fixed rate loans payable (1) |
| $ | 1,970,158 |
|
| $ | — |
|
| $ | (470,804 | ) |
| $ | 1,499,354 |
|
|
| 8.7 |
|
|
| 3.3 | % |
|
|
Floating rate loans payable |
|
| 58,500 |
|
|
| 79,000 |
|
|
| — |
|
|
| 137,500 |
|
|
| 3.3 |
|
|
| 5.1 | % |
|
|
Non-recourse property debt |
| $ | 2,028,658 |
|
| $ | 79,000 |
|
| $ | (470,804 | ) |
| $ | 1,636,854 |
|
|
| 8.2 |
|
|
| 3.4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Term Loans (1) |
|
| 800,000 |
|
|
| — |
|
|
| — |
|
|
| 800,000 |
|
|
| 3.3 |
| (2) |
| 4.1 | % |
|
|
Unsecured notes payable |
|
| 400,000 |
|
|
| — |
|
|
| — |
|
|
| 400,000 |
|
|
| 7.7 |
|
|
| 4.3 | % |
|
|
Revolving credit facility borrowings |
|
| 479,000 |
|
|
| — |
|
|
| — |
|
|
| 479,000 |
|
|
| 3.5 |
| (2) |
| 4.1 | % |
|
|
Preferred equity |
|
| 81,330 |
|
|
| — |
|
|
| — |
|
|
| 81,330 |
|
|
| 9.8 |
| (3) |
| 8.1 | % |
|
|
Total leverage |
| $ | 3,788,988 |
|
| $ | 79,000 |
|
| $ | (470,804 | ) |
| $ | 3,397,184 |
|
|
| 6.4 |
|
|
| 3.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and restricted cash (4) |
|
| (104,401 | ) |
|
| — |
|
|
| 4,844 |
|
|
| (99,557 | ) |
|
|
|
|
|
|
|
| ||
Net leverage |
| $ | 3,684,587 |
|
| $ | 79,000 |
|
| $ | (465,960 | ) |
| $ | 3,297,627 |
|
|
|
|
|
|
|
|
|
Leverage Ratios Third Quarter 2022 (5)
|
| Annualized Current Quarter |
| Pro forma Completion of November 2022 Sales |
Proportionate Debt to Adjusted EBITDAre |
| 6.4x |
| 5.8x |
Net Leverage to Adjusted EBITDAre |
| 6.6x |
| 5.9x |
Unsecured Credit Facility Covenants |
| September 30, 2022 |
| Covenant |
Fixed Charge Coverage Ratio |
| 3.7x |
| 1.5x |
Leverage Ratio |
| 38.2% |
| ≤ 60.0% |
Secured Indebtedness Ratio (7) |
| 18.8% |
| ≤ 45.0% |
Unsecured Leverage Ratio |
| 28.4% |
| ≤ 60.0% |
Supplemental Schedule 5(b)
Capitalization and Financial Metrics
As of September 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 Q4 |
|
| 5,938 |
|
|
| 53,276 |
|
|
| 59,214 |
|
|
| — |
|
|
| 59,214 |
|
|
| 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 | % |
|
| 5.1 | % |
2025 |
|
| 23,165 |
|
|
| 285,721 |
|
|
| 308,886 |
|
|
| 600,000 |
| (2) |
| 908,886 |
|
|
| 31.2 | % |
|
| 3.9 | % |
2026 |
|
| 18,627 |
|
|
| 98,790 |
|
|
| 117,417 |
|
|
| 200,000 |
|
|
| 317,417 |
|
|
| 10.5 | % |
|
| 3.8 | % |
2027 |
|
| 17,063 |
|
|
| 127,565 |
|
|
| 144,628 |
|
|
| 100,000 |
|
|
| 244,628 |
|
|
| 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 |
| $ | 292,060 |
|
| $ | 1,344,794 |
|
| $ | 1,636,854 |
|
| $ | 1,200,000 |
|
| $ | 2,836,854 |
|
|
| 89.7 | % |
|
| 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)
|
| September 30, 2022 |
| |
Class A Common Stock outstanding |
|
| 152,669 |
|
Participating unvested restricted stock |
|
| 116 |
|
Dilutive options, share equivalents and non-participating unvested restricted stock |
|
| 344 |
|
Total shares and dilutive share equivalents |
|
| 153,129 |
|
Common Partnership Units and equivalents outstanding |
|
| 10,325 |
|
Total shares, units, and dilutive share equivalents |
|
| 163,454 |
|
25
Supplemental Schedule 6(a)
Same Store Operating Results
Three Months Ended September 30, 2022, Compared to Three Months Ended September 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 September 30, 2022.
|
|
|
|
|
|
|
| Revenues, Before Utility |
|
| Expenses, Net of Utility |
|
| Net Operating Income |
|
|
| Net |
| Average Daily |
| Average |
| |||||||||||||||||||||||||||||
| Apartment |
| Apartment |
| AIR Share |
|
| 3Q |
| 3Q |
| Growth |
|
| 3Q |
| 3Q |
| Growth |
|
| 3Q |
| 3Q |
| Growth |
|
|
| 3Q |
| 3Q | 3Q |
| 3Q |
| 3Q |
| ||||||||||||||
Bay Area |
| 7 |
|
| 1,967 |
|
| 1,412 |
|
| $ | 13,497 |
| $ | 12,542 |
|
| 7.6 | % |
| $ | 3,580 |
| $ | 3,482 |
|
| 2.8 | % |
| $ | 9,917 |
| $ | 9,060 |
|
| 9.5 | % |
|
| 73.5% |
| 95.9% | 94.8% |
| $ | 3,324 |
| $ | 3,122 |
|
Boston |
| 5 |
|
| 1,148 |
|
| 1,148 |
|
|
| 10,754 |
|
| 11,012 |
|
| (2.3 | %) |
|
| 3,103 |
|
| 3,014 |
|
| 3.0 | % |
|
| 7,651 |
|
| 7,998 |
|
| (4.3 | %) |
|
| 71.1% |
| 97.1% | 96.9% |
|
| 3,215 |
|
| 3,298 |
|
Denver |
| 7 |
|
| 2,027 |
|
| 1,988 |
|
|
| 11,967 |
|
| 11,143 |
|
| 7.4 | % |
|
| 3,071 |
|
| 3,106 |
|
| (1.1 | %) |
|
| 8,896 |
|
| 8,037 |
|
| 10.7 | % |
|
| 74.3% |
| 95.5% | 97.5% |
|
| 2,101 |
|
| 1,916 |
|
Washington, D.C. (1) |
| 6 |
|
| 4,103 |
|
| 2,700 |
|
|
| 14,939 |
|
| 13,186 |
|
| 13.3 | % |
|
| 3,674 |
|
| 3,846 |
|
| (4.5 | %) |
|
| 11,265 |
|
| 9,340 |
|
| 20.6 | % |
|
| 75.4% |
| 97.5% | 97.5% |
|
| 1,892 |
|
| 1,669 |
|
Los Angeles |
| 9 |
|
| 3,815 |
|
| 2,966 |
|
|
| 29,446 |
|
| 26,156 |
|
| 12.6 | % |
|
| 6,242 |
|
| 6,288 |
|
| (0.7 | %) |
|
| 23,204 |
|
| 19,868 |
|
| 16.8 | % |
|
| 78.8% |
| 97.2% | 97.0% |
|
| 3,404 |
|
| 3,031 |
|
Miami |
| 5 |
|
| 1,747 |
|
| 1,747 |
|
|
| 14,267 |
|
| 11,817 |
|
| 20.7 | % |
|
| 4,068 |
|
| 4,128 |
|
| (1.5 | %) |
|
| 10,199 |
|
| 7,689 |
|
| 32.6 | % |
|
| 71.5% |
| 92.4% | 96.3% |
|
| 2,968 |
|
| 2,359 |
|
Philadelphia |
| 9 |
|
| 2,748 |
|
| 2,669 |
|
|
| 22,273 |
|
| 20,659 |
|
| 7.8 | % |
|
| 6,400 |
|
| 6,085 |
|
| 5.2 | % |
|
| 15,873 |
|
| 14,574 |
|
| 8.9 | % |
|
| 71.3% |
| 94.8% | 94.7% |
|
| 2,933 |
|
| 2,724 |
|
San Diego |
| 6 |
|
| 2,367 |
|
| 2,191 |
|
|
| 16,279 |
|
| 14,816 |
|
| 9.9 | % |
|
| 3,436 |
|
| 3,307 |
|
| 3.9 | % |
|
| 12,843 |
|
| 11,509 |
|
| 11.6 | % |
|
| 78.9% |
| 97.0% | 97.2% |
|
| 2,554 |
|
| 2,321 |
|
Other Markets |
| 4 |
|
| 808 |
|
| 808 |
|
|
| 5,507 |
|
| 5,436 |
|
| 1.3 | % |
|
| 2,086 |
|
| 2,369 |
|
| (11.9 | %) |
|
| 3,421 |
|
| 3,067 |
|
| 11.5 | % |
|
| 62.1% |
| 93.9% | 96.2% |
|
| 2,418 |
|
| 2,329 |
|
Total |
| 58 |
|
| 20,730 |
|
| 17,629 |
|
| $ | 138,929 |
| $ | 126,767 |
|
| 9.6 | % |
| $ | 35,660 |
| $ | 35,625 |
|
| 0.1 | % |
| $ | 103,269 |
| $ | 91,142 |
|
| 13.3 | % |
|
| 74.3% |
| 95.9% | 96.5% |
| $ | 2,740 |
| $ | 2,485 |
|
Supplemental Schedule 6(b)
Same Store Operating Results
Three Months Ended September 30, 2022, Compared to Three Months Ended June 30, 2022
(proportionate amounts, in thousands, except community, home, and per home data) (unaudited)
The table below presents AIR’s Same Store portfolio as of September 30, 2022.
|
|
|
|
|
|
|
| Revenues, Before Utility |
|
| Expenses, Net of Utility |
|
| Net Operating Income |
|
|
| Net |
| Average Daily |
| Average |
| |||||||||||||||||||||||||||||
| Apartment |
| Apartment |
| AIR Share |
|
| 3Q |
| 2Q |
| Growth |
|
| 3Q |
| 2Q |
| Growth |
|
| 3Q |
| 2Q |
| Growth |
|
|
| 3Q |
| 3Q | 2Q |
| 3Q |
| 2Q |
| ||||||||||||||
Bay Area |
| 7 |
|
| 1,967 |
|
| 1,412 |
|
| $ | 13,497 |
| $ | 13,161 |
|
| 2.6 | % |
| $ | 3,580 |
| $ | 3,428 |
|
| 4.4 | % |
| $ | 9,917 |
| $ | 9,733 |
|
| 1.9 | % |
|
| 73.5% |
| 95.9% | 97.2% |
| $ | 3,324 |
| $ | 3,196 |
|
Boston |
| 5 |
|
| 1,148 |
|
| 1,148 |
|
|
| 10,754 |
|
| 10,258 |
|
| 4.8 | % |
|
| 3,103 |
|
| 3,172 |
|
| (2.2 | %) |
|
| 7,651 |
|
| 7,086 |
|
| 8.0 | % |
|
| 71.1% |
| 97.1% | 96.8% |
|
| 3,215 |
|
| 3,076 |
|
Denver |
| 7 |
|
| 2,027 |
|
| 1,988 |
|
|
| 11,967 |
|
| 11,271 |
|
| 6.2 | % |
|
| 3,071 |
|
| 2,880 |
|
| 6.6 | % |
|
| 8,896 |
|
| 8,391 |
|
| 6.0 | % |
|
| 74.3% |
| 95.5% | 95.6% |
|
| 2,101 |
|
| 1,978 |
|
Washington, D.C. (1) |
| 6 |
|
| 4,103 |
|
| 2,700 |
|
|
| 14,939 |
|
| 13,656 |
|
| 9.4 | % |
|
| 3,674 |
|
| 3,690 |
|
| (0.4 | %) |
|
| 11,265 |
|
| 9,966 |
|
| 13.0 | % |
|
| 75.4% |
| 97.5% | 97.8% |
|
| 1,892 |
|
| 1,723 |
|
Los Angeles |
| 9 |
|
| 3,815 |
|
| 2,966 |
|
|
| 29,446 |
|
| 30,181 |
|
| (2.4 | %) |
|
| 6,242 |
|
| 6,181 |
|
| 1.0 | % |
|
| 23,204 |
|
| 24,000 |
|
| (3.3 | %) |
|
| 78.8% |
| 97.2% | 97.7% |
|
| 3,404 |
|
| 3,471 |
|
Miami |
| 5 |
|
| 1,747 |
|
| 1,747 |
|
|
| 14,267 |
|
| 13,155 |
|
| 8.5 | % |
|
| 4,068 |
|
| 4,223 |
|
| (3.7 | %) |
|
| 10,199 |
|
| 8,932 |
|
| 14.2 | % |
|
| 71.5% |
| 92.4% | 94.3% |
|
| 2,968 |
|
| 2,681 |
|
Philadelphia |
| 9 |
|
| 2,748 |
|
| 2,669 |
|
|
| 22,273 |
|
| 21,155 |
|
| 5.3 | % |
|
| 6,400 |
|
| 5,925 |
|
| 8.0 | % |
|
| 15,873 |
|
| 15,230 |
|
| 4.2 | % |
|
| 71.3% |
| 94.8% | 96.3% |
|
| 2,933 |
|
| 2,744 |
|
San Diego |
| 6 |
|
| 2,367 |
|
| 2,191 |
|
|
| 16,279 |
|
| 15,643 |
|
| 4.1 | % |
|
| 3,436 |
|
| 3,266 |
|
| 5.2 | % |
|
| 12,843 |
|
| 12,377 |
|
| 3.8 | % |
|
| 78.9% |
| 97.0% | 97.4% |
|
| 2,554 |
|
| 2,443 |
|
Other Markets |
| 4 |
|
| 808 |
|
| 808 |
|
|
| 5,507 |
|
| 5,365 |
|
| 2.6 | % |
|
| 2,086 |
|
| 2,396 |
|
| (12.9 | %) |
|
| 3,421 |
|
| 2,969 |
|
| 15.2 | % |
|
| 62.1% |
| 93.9% | 96.4% |
|
| 2,418 |
|
| 2,296 |
|
Total |
| 58 |
|
| 20,730 |
|
| 17,629 |
|
| $ | 138,929 |
| $ | 133,845 |
|
| 3.8 | % |
| $ | 35,660 |
| $ | 35,161 |
|
| 1.4 | % |
| $ | 103,269 |
| $ | 98,684 |
|
| 4.6 | % |
|
| 74.3% |
| 95.9% | 96.8% |
| $ | 2,740 |
| $ | 2,618 |
|
27
Supplemental Schedule 6(c)
Same Store Operating Results
Nine Months Ended September 30, 2022, Compared to Nine Months Ended September 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 September 30, 2022.
|
|
|
|
|
|
|
| Revenues, Before Utility |
|
| Expenses, Net of Utility |
|
| Net Operating Income |
|
|
| Net |
| 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 |
|
| $ | 39,574 |
| $ | 37,473 |
|
| 5.6 | % |
| $ | 10,366 |
| $ | 10,256 |
|
| 1.1 | % |
| $ | 29,208 |
| $ | 27,217 |
|
| 7.3 | % |
|
| 73.8% |
| 97.2% | 93.8% |
| $ | 3,205 |
| $ | 3,145 |
|
Boston |
| 5 |
|
| 1,148 |
|
| 1,148 |
|
|
| 31,333 |
|
| 29,314 |
|
| 6.9 | % |
|
| 9,361 |
|
| 9,068 |
|
| 3.2 | % |
|
| 21,972 |
|
| 20,246 |
|
| 8.5 | % |
|
| 70.1% |
| 97.5% | 96.2% |
| $ | 3,111 |
| $ | 2,949 |
|
Denver |
| 7 |
|
| 2,027 |
|
| 1,988 |
|
|
| 34,432 |
|
| 31,794 |
|
| 8.3 | % |
|
| 8,519 |
|
| 8,970 |
|
| (5.0 | %) |
|
| 25,913 |
|
| 22,824 |
|
| 13.5 | % |
|
| 75.3% |
| 96.5% | 96.3% |
| $ | 1,993 |
| $ | 1,845 |
|
Washington, D.C. (1) |
| 6 |
|
| 4,103 |
|
| 2,700 |
|
|
| 42,250 |
|
| 38,877 |
|
| 8.7 | % |
|
| 11,081 |
|
| 10,740 |
|
| 3.2 | % |
|
| 31,169 |
|
| 28,137 |
|
| 10.8 | % |
|
| 73.8% |
| 98.0% | 96.2% |
| $ | 1,774 |
| $ | 1,664 |
|
Los Angeles |
| 9 |
|
| 3,815 |
|
| 2,966 |
|
|
| 87,848 |
|
| 75,946 |
|
| 15.7 | % |
|
| 18,636 |
|
| 19,030 |
|
| (2.1 | %) |
|
| 69,212 |
|
| 56,916 |
|
| 21.6 | % |
|
| 78.8% |
| 97.8% | 96.6% |
| $ | 3,365 |
| $ | 2,946 |
|
Miami |
| 5 |
|
| 1,747 |
|
| 1,747 |
|
|
| 39,946 |
|
| 34,608 |
|
| 15.4 | % |
|
| 12,493 |
|
| 12,023 |
|
| 3.9 | % |
|
| 27,453 |
|
| 22,585 |
|
| 21.6 | % |
|
| 68.7% |
| 94.2% | 97.2% |
| $ | 2,717 |
| $ | 2,281 |
|
Philadelphia |
| 9 |
|
| 2,748 |
|
| 2,669 |
|
|
| 64,229 |
|
| 59,043 |
|
| 8.8 | % |
|
| 18,431 |
|
| 18,121 |
|
| 1.7 | % |
|
| 45,798 |
|
| 40,922 |
|
| 11.9 | % |
|
| 71.3% |
| 96.2% | 92.1% |
| $ | 2,778 |
| $ | 2,668 |
|
San Diego |
| 6 |
|
| 2,367 |
|
| 2,191 |
|
|
| 47,067 |
|
| 42,897 |
|
| 9.7 | % |
|
| 9,956 |
|
| 9,746 |
|
| 2.2 | % |
|
| 37,111 |
|
| 33,151 |
|
| 11.9 | % |
|
| 78.8% |
| 97.6% | 97.3% |
| $ | 2,446 |
| $ | 2,237 |
|
Other Markets |
| 4 |
|
| 808 |
|
| 808 |
|
|
| 16,148 |
|
| 15,644 |
|
| 3.2 | % |
|
| 6,923 |
|
| 7,200 |
|
| (3.8 | %) |
|
| 9,225 |
|
| 8,444 |
|
| 9.2 | % |
|
| 57.1% |
| 96.0% | 96.0% |
| $ | 2,313 |
| $ | 2,241 |
|
Total |
| 58 |
|
| 20,730 |
|
| 17,629 |
|
| $ | 402,827 |
| $ | 365,596 |
|
| 10.2 | % |
| $ | 105,766 |
| $ | 105,154 |
|
| 0.6 | % |
| $ | 297,061 |
| $ | 260,442 |
|
| 14.1 | % |
|
| 73.7% |
| 96.9% | 95.7% |
| $ | 2,621 |
| $ | 2,410 |
|
28
Supplemental Schedule 6(d)
Same Store Operating Expense Detail
(proportionate amounts, in thousands) (unaudited)
Quarterly Comparison
|
| 3Q 2022 |
|
| % of Total |
|
| 3Q 2021 |
|
| $ Change |
|
| % Change |
| |||||
Operating expenses (1) |
| $ | 18,031 |
|
|
| 50.6 | % |
| $ | 18,790 |
|
| $ | (759 | ) |
|
| (4.0 | %) |
Utility expense, net of reimbursement |
|
| 2,083 |
|
|
| 5.8 | % |
|
| 1,791 |
|
|
| 292 |
|
|
| 16.3 | % |
Real estate taxes |
|
| 13,200 |
|
|
| 37.0 | % |
|
| 13,480 |
|
|
| (280 | ) |
|
| (2.1 | %) |
Insurance |
|
| 2,346 |
|
|
| 6.6 | % |
|
| 1,564 |
|
|
| 782 |
|
|
| 50.0 | % |
Total |
| $ | 35,660 |
|
|
| 100.0 | % |
| $ | 35,625 |
|
| $ | 35 |
|
|
| 0.1 | % |
Sequential Comparison
|
| 3Q 2022 |
|
| % of Total |
|
| 2Q 2022 |
|
| $ Change |
|
| % Change |
| |||||
Operating expenses (1) |
| $ | 18,031 |
|
|
| 50.6 | % |
| $ | 18,449 |
|
| $ | (418 | ) |
|
| (2.3 | %) |
Utility expense, net of reimbursement |
|
| 2,083 |
|
|
| 5.8 | % |
|
| 1,823 |
|
|
| 260 |
|
|
| 14.3 | % |
Real estate taxes |
|
| 13,200 |
|
|
| 37.0 | % |
|
| 12,849 |
|
|
| 351 |
|
|
| 2.7 | % |
Insurance |
|
| 2,346 |
|
|
| 6.6 | % |
|
| 2,040 |
|
|
| 306 |
|
|
| 15.0 | % |
Total |
| $ | 35,660 |
|
|
| 100.0 | % |
| $ | 35,161 |
|
| $ | 499 |
|
|
| 1.4 | % |
Year-to-Date Comparison
|
| YTD 3Q 2022 |
|
| % of Total |
|
| YTD 3Q 2021 |
|
| $ Change |
|
| % Change |
| |||||
Operating expenses (1) |
| $ | 53,416 |
|
|
| 50.5 | % |
| $ | 53,465 |
|
| $ | (49 | ) |
|
| (0.1 | %) |
Utility expense, net of reimbursement |
|
| 6,023 |
|
|
| 5.7 | % |
|
| 5,275 |
|
|
| 748 |
|
|
| 14.2 | % |
Real estate taxes |
|
| 39,890 |
|
|
| 37.7 | % |
|
| 40,931 |
|
|
| (1,041 | ) |
|
| (2.5 | %) |
Insurance |
|
| 6,437 |
|
|
| 6.1 | % |
|
| 5,483 |
|
|
| 954 |
|
|
| 17.4 | % |
Total |
| $ | 105,766 |
|
|
| 100.0 | % |
| $ | 105,154 |
|
| $ | 612 |
|
|
| 0.6 | % |
29
Supplemental Schedule 7
Portfolio Data by Market
Third Quarter 2022 Compared to Third Quarter 2021
(proportionate amounts) (unaudited)
|
| Quarter Ended September 30, 2022 |
|
| Quarter Ended September 30, 2021 |
| ||||||||||||||||||||||||||||||||||
|
| Apartment |
|
| Apartment |
|
| AIR Share of |
|
| % AIR |
|
| Average |
|
| Apartment |
|
| Apartment |
|
| AIR Share of |
|
| % AIR |
|
| Average |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Bay Area |
|
| 8 |
|
|
| 2,077 |
|
|
| 1,522 |
|
|
| 7.8 | % |
| $ | 3,350 |
|
|
| 9 |
|
|
| 2,212 |
|
|
| 1,657 |
|
|
| 8.6 | % |
| $ | 2,968 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Boston |
|
| 12 |
|
|
| 2,598 |
|
|
| 2,598 |
|
|
| 11.2 | % |
|
| 2,746 |
|
|
| 11 |
|
|
| 2,462 |
|
|
| 2,462 |
|
|
| 11.6 | % |
|
| 2,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Denver |
|
| 8 |
|
|
| 2,280 |
|
|
| 2,241 |
|
|
| 7.6 | % |
|
| 2,111 |
|
|
| 7 |
|
|
| 2,026 |
|
|
| 1,987 |
|
|
| 6.8 | % |
|
| 1,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Washington, D.C. |
|
| 11 |
|
|
| 6,011 |
|
|
| 4,608 |
|
|
| 14.9 | % |
|
| 2,080 |
|
|
| 11 |
|
|
| 5,238 |
|
|
| 5,215 |
|
|
| 15.6 | % |
|
| 1,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Los Angeles |
|
| 9 |
|
|
| 3,815 |
|
|
| 2,966 |
|
|
| 17.8 | % |
|
| 3,404 |
|
|
| 13 |
|
|
| 4,347 |
|
|
| 3,498 |
|
|
| 19.3 | % |
|
| 2,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Miami |
|
| 9 |
|
|
| 3,459 |
|
|
| 3,459 |
|
|
| 15.7 | % |
|
| 3,197 |
|
|
| 6 |
|
|
| 2,425 |
|
|
| 2,425 |
|
|
| 8.7 | % |
|
| 2,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Philadelphia |
|
| 9 |
|
|
| 2,748 |
|
|
| 2,669 |
|
|
| 11.3 | % |
|
| 2,760 |
|
|
| 9 |
|
|
| 2,748 |
|
|
| 2,669 |
|
|
| 11.3 | % |
|
| 2,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
San Diego |
|
| 6 |
|
|
| 2,367 |
|
|
| 2,191 |
|
|
| 9.8 | % |
|
| 2,554 |
|
|
| 9 |
|
|
| 3,051 |
|
|
| 2,875 |
|
|
| 12.5 | % |
|
| 2,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Other Markets |
|
| 8 |
|
|
| 1,245 |
|
|
| 1,245 |
|
|
| 3.9 | % |
|
| 2,495 |
|
|
| 20 |
|
|
| 1,855 |
|
|
| 1,855 |
|
|
| 5.6 | % |
|
| 2,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Total |
|
| 80 |
|
|
| 26,600 |
|
|
| 23,499 |
|
|
| 100.0 | % |
| $ | 2,711 |
|
|
| 95 |
|
|
| 26,364 |
|
|
| 24,643 |
|
|
| 100.0 | % |
| $ | 2,331 |
|
30
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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) |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
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 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
The District at Flagler Village |
| Fort Lauderdale, FL |
| July |
| 350 |
| $ | 173.0 |
|
| $ | 2,970 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Aimco Lease Cancellation (5) |
| Various (6) |
| September |
| 865 |
| $ | 200.0 |
|
| $ | 3,669 |
|
Supplemental Schedule 9
Apartment Community Capital Investment Information
Three and Nine Months Ended September 30, 2022
(consolidated amounts in thousands, except per apartment home data) (unaudited)
We classify capital investments as Capital Replacements (“CR”), Capital Improvements (“CI”), Capital Enhancements (“CE”), or Other Capital Expenditures. Recurring capital investments 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, and excludes amounts related to properties sold or classified as held for sale.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||
Capital Investments (1) |
|
|
|
|
|
| ||
Capital Replacements |
|
|
|
|
|
| ||
Buildings and grounds |
| $ | 6,614 |
|
| $ | 17,639 |
|
Turnover capital investments |
|
| 851 |
|
|
| 1,772 |
|
Capitalized site payroll and indirect costs |
|
| 420 |
|
|
| 1,409 |
|
Capital Replacements |
|
| 7,885 |
|
|
| 20,820 |
|
Capital Improvements |
|
| 3,169 |
|
|
| 10,037 |
|
Capital Enhancements |
|
| 33,686 |
|
|
| 75,606 |
|
Initial Capital Expenditures |
|
| 11,350 |
|
|
| 24,156 |
|
Casualty |
|
| 1,520 |
|
|
| 12,348 |
|
Entitlement and Planning |
|
| 565 |
|
|
| 2,171 |
|
|
| $ | 58,175 |
|
| $ | 145,138 |
|
|
|
|
|
|
|
| ||
Total apartment homes |
|
| 26,600 |
|
|
| 26,600 |
|
|
|
|
|
|
|
| ||
Capital Replacements per apartment home |
| $ | 296 |
|
| $ | 783 |
|
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 92.1% 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 INVESTMENTS DEFINITIONS
CAPITAL IMPROVEMENTS (CI): CI represent capital investments 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 investments 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 investments 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.
33
CASUALTY: Casualty capital investments 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 between 5.0x and 6.0x with a midpoint of 5.5x. 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, unsecured notes payable, and preferred equity, reduced by cash and restricted cash on-hand, excluding tenant security deposits. 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.
34
ADJUSTED EBITDAre: Adjusted EBITDAre is defined as EBITDAre adjusted for the effect of the following items for the reasons set forth below:
A reconciliation of net income to EBITDAre and Adjusted EBITDAre for our portfolio for the quarter ended September 30, 2022, is as follows (in thousands, unaudited):
|
| Quarter Ended |
| |
|
| September 30, 2022 |
| |
Net income |
| $ | 3,396 |
|
Adjustments: |
|
|
| |
Interest expense |
|
| 32,656 |
|
Income tax expense |
|
| 46 |
|
Depreciation and amortization |
|
| 90,445 |
|
EBITDAre |
| $ | 126,543 |
|
Net income attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 102 |
|
EBITDAre adjustments attributable to noncontrolling interests and unconsolidated real estate partnerships |
|
| (7,463 | ) |
Interest income and prepayment penalties on note receivable from Aimco |
|
| (5,209 | ) |
Pro forma FFO adjustments, net (1) |
|
| 11,293 |
|
Adjusted EBITDAre |
| $ | 125,266 |
|
Annualized Adjusted EBITDAre |
| $ | 501,064 |
|
Anticipated November 2022 property sales, annualized |
|
| (21,775 | ) |
Annualized Adjusted EBITDAre, Pro forma for anticipated November 2022 property sales |
| $ | 479,289 |
|
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).
35
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), 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; real estate 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 manage. 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.
36
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 September 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Revenues, |
|
| Expenses, |
|
| Revenues, |
|
| Expenses, |
| ||||
Total Real Estate Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total (per consolidated statements of operations) |
| $ | 200,871 |
|
| $ | 71,250 |
|
| $ | 191,777 |
|
| $ | 73,925 |
|
Adjustment: Utilities reimbursement (1) |
|
| (7,613 | ) |
|
| (7,613 | ) |
|
| (6,812 | ) |
|
| (6,812 | ) |
Adjustment: Sold properties and other amounts not allocated (2) |
|
| (10,781 | ) |
|
| (14,450 | ) |
|
| (31,509 | ) |
|
| (23,475 | ) |
Adjustment: Non-real estate depreciation (3) |
|
| — |
|
|
| 469 |
|
|
| — |
|
|
| — |
|
Total (per Supplemental Schedule 2) |
| $ | 182,477 |
|
| $ | 49,656 |
|
| $ | 153,456 |
|
| $ | 43,638 |
|
Proportionate adjustment (4) |
|
| (13,112 | ) |
|
| (3,418 | ) |
|
| (13,796 | ) |
|
| (3,792 | ) |
Proportionate property net operating income |
| $ | 169,365 |
|
| $ | 46,238 |
|
| $ | 139,660 |
|
| $ | 39,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Same Store Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same Store amounts (per Supplemental Schedule 2) |
| $ | 152,219 |
|
| $ | 39,050 |
|
| $ | 147,898 |
|
| $ | 40,656 |
|
Proportionate adjustment (4) |
|
| (13,290 | ) |
|
| (3,390 | ) |
|
| (21,131 | ) |
|
| (5,672 | ) |
Non-real estate depreciation adjustment (3) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 641 |
|
Same Store amounts, adjusted (per Supplemental Schedule 6) |
| $ | 138,929 |
|
| $ | 35,660 |
|
| $ | 126,767 |
|
| $ | 35,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Nine Months Ended September 30, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Revenues, |
|
| Expenses, |
|
| Revenues, |
|
| Expenses, |
| ||||
Total Real Estate Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total (per consolidated statements of operations) |
| $ | 565,849 |
|
| $ | 198,273 |
|
| $ | 546,523 |
|
| $ | 203,300 |
|
Adjustment: Utilities reimbursement (1) |
|
| (21,184 | ) |
|
| (21,184 | ) |
|
| (18,855 | ) |
|
| (18,855 | ) |
Adjustment: Sold properties and other amounts not allocated (2) |
|
| (40,569 | ) |
|
| (39,153 | ) |
|
| (92,059 | ) |
|
| (58,559 | ) |
Adjustment: Non-real estate depreciation (3) |
|
| — |
|
|
| 1,147 |
|
|
| — |
|
|
| — |
|
Total (per Supplemental Schedule 2) |
| $ | 504,096 |
|
| $ | 139,083 |
|
| $ | 435,609 |
|
| $ | 125,886 |
|
Proportionate adjustment (4) |
|
| (38,969 | ) |
|
| (10,027 | ) |
|
| (40,049 | ) |
|
| (11,236 | ) |
Proportionate property net operating income |
| $ | 465,127 |
|
| $ | 129,056 |
|
| $ | 395,560 |
|
| $ | 114,650 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Same Store Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same Store amounts (per Supplemental Schedule 2) |
| $ | 441,725 |
|
| $ | 115,598 |
|
| $ | 427,046 |
|
| $ | 120,516 |
|
Proportionate adjustment (4) |
|
| (38,898 | ) |
|
| (9,832 | ) |
|
| (61,450 | ) |
|
| (16,888 | ) |
Non-real estate depreciation adjustment (3) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,526 |
|
Same Store amounts, adjusted (per Supplemental Schedule 6) |
| $ | 402,827 |
|
| $ | 105,766 |
|
| $ | 365,596 |
|
| $ | 105,154 |
|
37
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 September 30, 2022, Turnover was 40.8%, 640 basis points lower than September 30, 2021. Inclusive of intra-community transfers, Turnover was 38.5% for the trailing twelve months ended September 30, 2022.
Retention represents the inverse of Turnover, as defined above.
38