Press Release

DENVER--(BUSINESS WIRE)-- Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today second quarter 2015 results and raised full year 2015 earnings guidance.

Chairman and Chief Executive Officer Terry Considine comments: "Aimco enjoyed a solid second quarter with good progress on all fronts. With higher rents and good cost control, Same Store Net Operating Income was up 6.7% year-over-year. At almost $1,760, average revenue per apartment home was up 14% year-over-year, reflecting rent growth and portfolio improvements. We are making good progress on our redevelopment and development activities. Our balance sheet is strong. Our prospects are good as we enter the second half of the year."

Chief Financial Officer Ernie Freedman adds: "Second quarter Pro forma FFO of $0.56 per share was $0.01 per share above the high end of our guidance range, primarily due to strong property operating results and higher than expected non-recurring income. We are increasing guidance for full year Pro forma FFO, AFFO and operating results, to reflect second quarter outperformance and our expectations for the remainder of the year."

Financial Results: Second Quarter AFFO Up 5% Year-Over-Year

Pro forma FFO (per diluted common share) - Year-over-year, second quarter Pro forma FFO increased 8% as a result of: strong Property Net Operating Income growth; increased contribution from redevelopment and acquisition communities; lower interest expense due to lower debt balances; higher income tax benefit due to recognition of historic tax credits related to Aimco's Park Towne Place redevelopment; and higher non-recurring income. These increases were partially offset by the loss of income from apartment communities that were sold and higher preferred stock dividends attributable to Aimco's second quarter 2014 offering of its Class A Preferred Stock.

Adjusted Funds from Operations (per diluted common share) - Year-over-year, second quarter AFFO increased 5% as a result of higher Pro forma FFO, offset somewhat by the timing of Capital Replacement spending during 2015. As Aimco concentrates its investment capital in higher-quality, higher price point apartment communities, its free cash flow margin is increasing.

Operating Results: Second Quarter Conventional Same Store NOI Up 6.7%

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 14% to $1,759

Aimco portfolio strategy seeks predictable rent growth from a portfolio of "A," "B" and "C+" quality 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 the local market average; "B" quality assets are those with rents between 90% and 125% of the local market average; "C+" quality assets are those with rents greater than $1,100 per month but lower than 90% of the local market average. For first quarter 2015, the most recent period for which REIS information is available, Aimco Conventional apartment rents averaged 110% of local market average rents.

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. From December 31, 2011 to June 30, 2015, Aimco:

• Increased its period-end Conventional portfolio average revenue per apartment home by 39% to $1,759. 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 12% through the sale of lower-rent communities and reinvestment in higher-rent communities;
• Disposed entirely its holdings represented by "C" quality apartment communities with rents lower than 90% of local market average and less than $1,100 per month, and increased by 65% the percentage of its portfolio represented by "A" quality apartment communities; and
• Increased to 92% the percentage of its Conventional Property Net Operating Income earned in Aimco's target markets.

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

Second Quarter 2015 Dispositions -In the second quarter, Aimco sold one Conventional Apartment Community and one Affordable Apartment Community for $109.9 million in gross proceeds. Aimco's share of net sales proceeds after distributions to limited partners, repayment of existing property debt, and payment of transaction costs was $59.2 million. The Conventional Apartment Community sold during the quarter, Ramblewood, was Aimco's last Conventional property in the state of Michigan. Revenues per apartment home for Ramblewood averaged $876, half the $1,759 average of the retained portfolio.

Second Quarter 2015 Acquisitions - As previously announced, in the second quarter, Aimco acquired for $63 millionAxiom Apartment Homes located near Kendall Square in Cambridge, Massachusetts. Aimco began leasing up the newly constructed six-story building during second quarter, which includes 115 apartment homes and 3,800 square feet of retail space. As of June 30, the apartment homes were 13% occupied. Upon stabilization, revenues per apartment home are expected to average $3,550, making this an "A" quality asset for Aimco.

Also in the second quarter, Aimco acquired 270 on Third, an eight-story, 91-apartment home community currently under construction near Kendall Square in Cambridge, Massachusetts. 270 on Third is located two blocks from Axiom Apartment Homes and is contiguous to a large life science complex now under construction, the completion of which is planned for late spring or early summer 2016. Upon completion in the fourth quarter of 2015, 270 on Third will also contain more than 8,000 square feet of retail space. At closing, Aimco paid $27.9 million and agreed to fund further construction costs up to $15.1 million, for total consideration not to exceed $43 million. Aimco expects to invest an additional $2 million for other improvements and capitalized costs, bringing its total projected investment to $45 million. Upon stabilization, revenues per apartment home are expected to average $2,600, making this an "A" quality asset for Aimco.

Quarter-End Portfolio - Second quarter 2015 Conventional portfolio average monthly revenue per apartment home was $1,759, a 14% increase compared to second quarter 2014, as a result of year-over-year Same Store monthly revenue per apartment home growth of 4.4%, the sale of Conventional Apartment Communities 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.

Redevelopment: 2900 on First Completed, Lincoln Place Leased

During second quarter, Aimco invested $44.7 million in redevelopment. Construction was completed at 2900 on First in Seattle and, as of June 30, was 97% occupied. Lincoln Place in Venice, California, and The Preserve at Marin in the Bay Area were completed in first quarter and, as of June 30, were 96% and 90% occupied, respectively.

Also during second quarter, Aimco approved a plan to continue redevelopment of The Sterling, located in Center City Philadelphia. Since 2014, Aimco has completed the redevelopment of 121, or approximately one-quarter, of the apartment homes as planned, at a cost consistent with underwriting, and at rents in excess of Aimco's underwriting. These results led to Aimco’s decision to redevelop an additional five floors with 103 apartment homes for an additional investment of approximately $13.5 million.

Development: Progressing as Planned

During second quarter, Aimco invested $22.2 million in the development of One Canal Street, located in the historic Bulfinch Triangle neighborhood of Boston’s West End. 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.

Balance Sheet and Liquidity: Leverage on Target and Declining

Components of Aimco Leverage

Leverage Ratios

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

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

Liquidity

Aimco's only recourse debt at June 30 was its revolving credit facility, which Aimco uses for working capital and other short-term purposes, and to secure letters of credit.

At quarter-end, Aimco had outstanding borrowings on its revolving credit facility of $47.5 million and available capacity of $514.9 million, net of $37.6 million of letters of credit backed by the facility. Aimco also held cash and restricted cash on hand of $133.5 million.

Finally, Aimco held 23 apartment communities in its unencumbered asset pool with a total estimated fair market value of approximately $1.5 billion.

Equity Activity

Dividend - As previously announced, the Aimco Board of Directors declared a quarterly cash dividend of $0.30 per share of Class A Common Stock for the quarter ended June 30, 2015, an increase of 15% compared to the dividend for the second quarter 2014. This dividend is payable on August 31, 2015, to stockholders of record on August 14, 2015.

2015 Outlook: Guidance Raised to Reflect First Half Outperformance

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 199 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: third quarter and full year 2015 results, including but not limited to: Pro forma FFO and selected components thereof; AFFO; Aimco's redevelopment and development investments, timelines and stabilized rents; 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, redevelopments and developments; 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, redevelopments and developments; 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, 2014, 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.

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

Source: Apartment Investment and Management Company