Press Release

DENVER--(BUSINESS WIRE)-- Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today its fourth quarter and full year 2014 results.

Chief Executive Officer Terry Considine comments: "Aimco enjoyed a solid 2014. Profitability was up, with AFFO increasing 10% year-over-year. Portfolio quality was up, with average monthly revenue per apartment home increasing 14% to $1,670. Redevelopment and development projects underway are expected to create incremental net asset value equal to 35% of our investment.

The Aimco balance sheet is strong: considering the equity offering earlier this year, leverage, net of cash, is both non-recourse and about 36% of Aimco's market capitalization; more than $550 million in credit is available on the Aimco line of credit; and the unencumbered pool includes properties valued at more than $1 billion. These results reflect the hard work of a motivated team, whose collaborative culture was recognized again in 2014 as a 'Top Place to Work.'

Looking forward, we expect 2015 to be another good year with steady rent growth, disciplined cost control, and solid Same Store NOI growth. Together with increased contribution from redevelopment and acquisition properties, and reduced interest expense, we expect AFFO to be up by 10% at the midpoint of guidance.

Aimco prospects reflect disciplined portfolio management. Over the past three years, we have sold 27,000 apartment homes, eliminating related property management costs and Capital Replacement spending. We have reinvested the sales proceeds to redevelop or acquire apartment homes with higher rents, higher margins and greater expected growth.

The Aimco Board of Directors considered these results and prospects in its decision to increase the dividend by 8%."

Financial Results: Full Year AFFO Up 10%

Pro forma FFO - Year-over-year, fourth quarter Pro forma FFO decreased 5%. For the quarter, strong property operating results, increased contribution from redevelopment communities, higher income tax benefit and lower interest expense were more than offset by: the loss of income from apartment communities that were sold; lower interest income as a result of repayment of notes receivable in fourth quarter 2013; lower non-recurring income; higher preferred stock dividends attributable to Aimco's second quarter 2014 offering of its Class A Preferred Stock; and costs incurred in connection with fourth quarter 2014 acquisition activity.

Adjusted Funds from Operations - Fourth quarter AFFO was flat when compared to fourth quarter 2013, as a result of lower Pro forma FFO offset by lower Capital Replacement spending associated with multi-phase capital projects started in prior years, and lower Capital Replacement spending due to the sale of approximately 9,000 apartment homes during 2014. As Aimco concentrates its investment capital in higher quality, higher price point apartment communities, free cash flow margin is increasing as Capital Replacements decline as a percentage of net operating income.

Operating Results: Fourth Quarter Conventional Same Store NOI Up 6.1%, Full Year Up 5.5%

Rental Rates - Aimco measures changes in rental rates by comparing, on a lease-by-lease basis, the rate on a newly executed lease to the rate on the expiring lease for that same apartment. Newly executed leases are classified either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal.

Portfolio Management: Revenue Per Apartment Home Up 13.6% to $1,669

Aimco portfolio strategy seeks predictable rent growth from a portfolio of "A," "B" and "C+" quality market-rate apartment communities, averaging "B/B+" in quality, and diversified among the largest coastal and job growth markets in the U.S., as measured by total apartment value. Aimco target markets are primarily coastal markets, and also include several Sun Belt cities and Chicago, Illinois.

Aimco measures asset quality based on rents compared to local market average rents as reported by REIS, a third-party provider of commercial real estate performance information and analysis. Aimco defines asset quality as follows: "A" quality assets are those with rents greater than 125% of local market average; "B" quality assets are those with rents between 90% to 125% of local market average; "C+" quality assets are those with rents lower than 90% of local market average, but greater than $1,100 per month; and "C" quality assets are those with rents lower than 90% of local market average, but less than $1,100 per month.

Aimco's portfolio strategy is to sell each year the lowest-rated 5% to 10% of its portfolio and to reinvest the proceeds from such sales in redevelopment and acquisition of higher-quality apartment communities. Through this disciplined approach to capital recycling, Aimco has significantly increased the quality of its portfolio. Over the last three years, Aimco:

• Increased its period-end Conventional portfolio average revenue per apartment home by more than 32% to $1,669. This rate of growth reflects the impact of market rent growth, and more significantly, the impact of portfolio management through dispositions, redevelopment and acquisitions.
• Increased its Conventional portfolio free cash flow margin by 10% through the sale of lower-rent properties and reinvestment in higher-rent properties;
• Reduced by 83% the percentage of its portfolio represented by "C" quality properties and increased by 42% the percentage of its portfolio represented by "A" quality properties; and
• Increased to 90% the percentage of its Conventional Property Net Operating Income earned in Aimco's target markets.

As Aimco executes its portfolio strategy, it expects to continue to increase Conventional portfolio average revenue per apartment home at a rate greater than market rent growth; to increase further free cash flow margins; to sell the percentage of its portfolio represented by "C" quality properties; and to increase to 95% or more the percentage of its Conventional Property Net Operating Income earned in its target markets.

Fourth Quarter 2014 Dispositions -In the fourth quarter, Aimco sold two Conventional Apartment Communities and two Affordable Apartment Communities with 500 and 199 apartment homes, respectively, for $79.5 million in gross proceeds. Aimco's share of net sales proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $45.8 million.

Fourth Quarter 2014 Acquisitions - In the fourth quarter, Aimco acquired:

• Saybrook Pointe Apartment Homes for $118.4 million. This is a 324 apartment home community located in San Jose, California. Revenues per apartment home average $2,240, making this a "B" quality asset for Aimco. Aimco expects to add value through property upgrades and operational improvements.
• Tremont Apartment Homes for $25 million. This is a 78 apartment home community with 14,000 square feet of retail space in the Buckhead neighborhood of Atlanta, Georgia. Revenues per apartment home average $2,280, making this an "A" quality asset for Aimco. Aimco expects to add value through operational improvements.
• Eastpointe Apartment Homes for $18 million. This is a 140 apartment home community located in Boulder, Colorado. This low density community, built on more than seven acres in the mid-1970s, is located in a city with strong demand for housing and public policies that discourage new supply. It is across the street from a new community hospital complex and other major employment centers. Revenues per apartment home average $1,035, making this a "B" quality asset as presently operated. Aimco plans to redevelop this community.

Also in fourth quarter, Aimco acquired 2.4 acres in the heart of downtown La Jolla, California, adjoining and overlooking La Jolla Cove and the Pacific Ocean. The property is zoned for multi-family and mixed-use purposes and is currently occupied by three small commercial buildings and a limited-service hotel, which is managed for Aimco by a third party. Aimco plans to redevelop this property and considers its current use an income-producing “land bank.” Under Aimco's agreements with the sellers of this property, terms of the transactions are confidential.

Quarter-End Portfolio - Fourth quarter 2014 Conventional portfolio average monthly revenue per apartment home was $1,669, a 13.6% increase compared to fourth quarter 2013, as a result of year-over-year Same Store monthly revenue per apartment home growth of 4.4% and the sale of Conventional Apartment Communities during 2014 with average monthly revenues per apartment home substantially lower than those of the retained portfolio and reinvestment of the sales proceeds in higher-rent apartment communities through redevelopment and acquisitions. For third quarter 2014, the most recent period for which REIS information is available, Aimco Conventional Apartment Community rents averaged 108% of local market average rents.

Redevelopment: Creating Value and Maintaining Investment Pace

During fourth quarter, Aimco invested $35.5 million in redevelopment. Construction is nearing completion at Aimco's two largest redevelopment projects: Lincoln Place, in Venice, California, and Preserve at Marin, in Corte Madera, California. As of December 31, 2014, 589 of the 767 completed apartment homes at Lincoln Place and 59 of the 72 completed apartment homes at Preserve at Marin were occupied. Aimco expects to complete construction at Lincoln Place and Preserve at Marin in first quarter 2015, on time and at a cost consistent with previous reports.

During fourth quarter, Aimco completed, as planned, the redevelopment of The Palazzo at Park La Brea. Aimco also de-leased Ocean House on Prospect, located in La Jolla, California as well as one of four towers at Park Town Place, located in Center City Philadelphia. Construction at both communities is progressing as planned.

Also during fourth quarter 2014, Aimco approved a plan to continue redevelopment of The Sterling, located in Center City Philadelphia. During the third quarter, Aimco completed the redevelopment of 69 apartment homes on three floors of the 29-story building on time, on budget and achieved rents above budget. Renovation of the common areas and commercial space is proceeding as planned and Aimco continues to expect construction to be completed in second quarter 2015 at a cost consistent with underwriting. These results led to Aimco’s decision to redevelop an additional four floors with 105 apartment homes for an additional investment of approximately $11 million.

Development: Progressing as Planned

During fourth quarter, Aimco invested $15.1 million in the development of One Canal Street, located in Boston. One Canal Street will include 310 apartment homes and 22,000 square feet of commercial space. Aimco expects completion of construction in second quarter 2016 with lease-up beginning in first quarter 2016.

Balance Sheet and Liquidity: Leverage on Target and Declining

Components of Aimco Leverage

De-Levering Activities Subsequent to Year-End

In January 2015, Aimco sold in a public offering 9,430,000 shares of Common Stock at $38.90 per share, providing net proceeds of $366.8 million. Using the proceeds from this offering, Aimco repaid in January the outstanding balance on its revolving credit facility. Also, Aimco has provided the 30-day notification required to redeem the outstanding balance of its Series A Community Reinvestment Act Preferred Stock at its liquidation preference of $27 million. Aimco expects to use the remainder of the proceeds from this offering to repay $102 million of property debt, and to fund redevelopment and property upgrades during 2015 that would otherwise have been funded with property debt on a leverage-neutral basis.

Leverage Ratios

Aimco leverage targets are: Debt and Preferred Equity to EBITDA below 7.0x; and EBITDA Coverage of Interest and Preferred Dividends greater than 2.5x. Aimco also focuses on Debt to EBITDA and EBITDA Coverage of Interest ratios. See the Glossary for definitions of these metrics.

Future leverage reduction is expected from both earnings growth, especially as apartment communities now being redeveloped or developed are completed, and from regularly scheduled property debt amortization funded from retained earnings.

Liquidity

Aimco recourse debt at December 31, 2014, was limited to its revolving credit facility, which Aimco uses for working capital and other short-term purposes, and to secure letters of credit.

At year-end, Aimco had outstanding borrowings on its revolving credit facility of $112.3 million and available capacity of $445.9 million, net of $41.8 million of letters of credit backed by the facility. Aimco also held cash and restricted cash on hand of $118.3 million. Finally, Aimco held 15 apartment communities in its unencumbered asset pool with a total estimated fair market value exceeding $1 billion. After the public offering and de-levering activities described above, outstanding borrowings on Aimco's revolving credit facility are fully repaid, the available capacity is $558.2 million and Aimco held cash and restricted cash on hand of approximately $340 million.

Equity Activity

Dividend - As previously announced, the Aimco Board of Directors declared a quarterly cash dividend of $0.28 per share of Class A Common Stock for the quarter ended December 31, 2014, an increase of 8% compared to dividends paid during 2014. This dividend is payable on February 27, 2015, to stockholders of record on February 13, 2015.

2015 Outlook

2015 Pro forma FFO Reconciliation

2015 AFFO Reconciliation

Earnings Conference Call Information

Supplemental Information

The full text of this Earnings Release and the Supplemental Information referenced in this release are available on Aimco's website at http://www.aimco.com/investors/financial-reports/quarterly-earning-reports.

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 Aimco management that are not calculated in accordance with accounting principles generally accepted in the United States, or GAAP. These measures are defined in the Glossary in the Supplemental Information and, where appropriate, reconciled to the most comparable GAAP measures.

About Aimco

Aimco is a real estate investment trust that is focused on the ownership and management of quality apartment communities located in the largest markets in the United States. Aimco is one of the country's largest owners and operators of apartments, with 203 communities in 23 states and the District of Columbia. Aimco common shares are traded on the New York Stock Exchange under the ticker symbol AIV, and are included in the S&P 500. For more information about Aimco, please visit our website at www.aimco.com.

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: first quarter and full year 2015 results, including but not limited to: Pro forma FFO and selected components thereof; AFFO; Aimco's development and redevelopment investments, timelines and stabilized rents; the use of proceeds from its January 2015 common stock offering; and expectations regarding sales of Aimco's apartment communities and the use of proceeds thereof. These forward-looking statements are based on management's judgment as of this date and include certain risks and uncertainties. Risks and uncertainties include, but are not limited to: Aimco's ability to maintain current or meet projected occupancy, rental rates and property operating results; the effect of acquisitions, dispositions, developments and redevelopments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our developments and redevelopments; and our ability to comply with debt covenants, including financial coverage ratios.

Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the control of Aimco, including, without limitation: financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that our earnings may not be sufficient to maintain compliance with debt covenants; real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; the timing of acquisitions, dispositions, developments and redevelopments; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; 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 Aimco. In addition, Aimco's current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on its ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership.

Readers should carefully review Aimco's financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of Aimco's Annual Report on Form 10-K for the year ended December 31, 2013, and the other documents Aimco files from time to time with the Securities and Exchange Commission. These forward-looking statements reflect management's judgment as of this date, and Aimco assumes no obligation to revise or update them to reflect future events or circumstances. This press release does not constitute an offer of securities for sale.

Aimco
Elizabeth Coalson, 303-691-4350
Vice President-Investor Relations
investor@aimco.com

Source: Aimco