Press Release

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

Chairman and Chief Executive Officer Terry Considine said: “2015 was a solid year for Aimco with average monthly revenue per apartment home better by 10%; leverage reduced by 11%; consensus NAV per share increased by 11%; and AFFO per share higher by 12%. We feel well prepared for 2016.”

“As we look inwardly at the Aimco business, we see continued solid demand and rising rents for our apartment homes. This makes us optimistic. Looking outside the Aimco business, we see the potential for overbuilding in some local markets and we take note of uncertainty in financial markets and in the general economy. This makes us conservative… and glad of the stability provided by the diversification of our portfolio across markets and price points, our limited exposure to redevelopment and development, and our liquid, low leverage balance sheet with limited dependence on capital markets.”

Chief Financial Officer Paul Beldin added: “In addition to guidance for 2016, we published today a forecast for 2017. We are providing an early look at 2017 to show our best guess as to the interplay of the possible slowing of rent growth; the lease-up of three communities, one in the Bay Area, one in Boston, and one in Cambridge; the reduction of non-core earnings; and the continuing reduction in our offsite costs. The net effect is improved portfolio quality, lower leverage, increased AFFO per share, and a higher quality of earnings.”

“By the end of 2017, we project average revenues per apartment home to exceed $2,000; the ratio of Debt and Preferred Equity to EBITDA to be about 6.3x; and AFFO per share to be up about 12% compared to 2016.”

Financial Results: Fourth Quarter and Full Year AFFO Up 12%

Pro forma FFO (per diluted common share) - Year-over-year, fourth quarter Pro forma FFO increased 7% as a result of: strong Property Net Operating Income growth; increased contribution from redevelopment and acquisition communities; and lower interest expense due to lower debt balances. These increases were partially offset by lower income tax benefit and by the loss of income from apartment communities that were sold in 2014 and 2015.

Adjusted Funds from Operations (per diluted common share) - Year-over-year, fourth quarter AFFO increased 12% as a result of higher Pro forma FFO and lower capital replacement spending. As Aimco concentrates its investment capital in higher-quality, higher price point apartment communities, its free cash flow margins are increasing and contributing to higher AFFO.

Operating Results: Full Year Conventional Same Store NOI Up 5.6%

Conventional Same Store 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.

Redevelopment: Scope Expanded at The Sterling

During fourth quarter, Aimco invested $19.7 million in redevelopment and also approved a plan to expand its phased redevelopment of The Sterling, a mixed-use community with 535 apartment homes located in Center City Philadelphia. Since 2014, Aimco has completed the redevelopment of 236 apartment homes, or 44% of the total as planned, at a cost consistent with underwriting, and with rents in excess of Aimco underwriting. These results led to Aimco's decision to develop an additional five floors containing 130 apartment homes for an additional investment of approximately $13 million.

Also during fourth quarter, Aimco achieved stabilized occupancy at its Ocean House redevelopment community, located in La Jolla, California. Stabilized occupancy was achieved a quarter ahead of schedule and at rents above underwriting.

Development: Progressing as Planned

During fourth quarter, Aimco invested $35.3 million in two development communities. Construction continued on plan at Aimco's One Canal development, located in the historic Bulfinch Triangle neighborhood of Boston’s West End. One Canal will include 310 apartment homes and 22,000 square feet of commercial space. Aimco expects completion of construction in second quarter 2016.

During fourth quarter, Aimco began the lease-up of its Vivo community located in Cambridge, Massachusetts, and as of December 31, 2015, 15% of the 91 homes were occupied. Leasing activity during fourth quarter was in line with underwriting. Amenity finishes, including completion of a fitness center and finishes for a rooftop terrace, are scheduled to be completed in the summer of 2016.

Portfolio Management: Revenue Per Apartment Home Up 10% to 1,840

Aimco's 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's target markets are primarily coastal markets, and also include several Sun Belt cities and Chicago, Illinois.

Aimco measures quality based on property 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 property quality as follows: “A” quality properties are those with rents greater than 125% of the local market average; “B” quality properties are those with rents between 90% and 125% of the local market average; “C+” quality properties are those with rents greater than $1,100 per month but lower than 90% of the local market average. For third quarter 2015, the most recent period for which REIS information is available, Aimco Conventional apartment rents averaged 111% 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, selective development, 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 December 31, 2015, Aimco:

• Increased its period-end Conventional portfolio average revenue per apartment home by 46% to $1,840. 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 13% through the sale of lower-rated communities and reinvestment in communities of greater quality commanding higher rents; and
• Increased to 91% the percentage of its Conventional Property Net Operating Income earned in Aimco target markets.

As a result of these efforts, as of September 30, 2015, the most recent period for which market information is available, approximately 51%, 32% and 17% of Aimco's portfolio is invested in “A,” “B” and “C+” quality apartment homes, respectively.

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 Aimco target markets.

Fourth Quarter 2015 Portfolio Transactions -In fourth quarter, Aimco sold three Conventional apartment communities with 964 apartment homes for $146.6 million in gross proceeds. Aimco's share of net sales proceeds after repayment of property debt and transaction costs was $93.6 million. Fourth quarter sales included the last two apartment communities Aimco owned in Phoenix, Arizona. Aimco did not acquire any apartment communities during the fourth quarter.

Year-End Portfolio - Fourth quarter 2015 Conventional portfolio average monthly revenue per apartment home was $1,840, a 10% increase compared to fourth quarter 2014, as a result of year-over-year Same Store monthly revenue per apartment home growth of 4.5%, 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 through redevelopment and acquisition of apartment communities with better prospects and higher rents.

Balance Sheet and Liquidity: Leverage lower by 11%

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.

* The Debt to EBITDA and Debt and Preferred Equity to EBITDA ratios presented for 2014 were adjusted on a pro-forma basis to reflect $367 million of net proceeds from Aimco's January 2015 stock offering. Actual 2014 Debt to EBITDA and 2014 Debt and Preferred Equity to EBITDA ratios were 7.1x and 7.6x, respectively.

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 December 31, 2015, was 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 $27.0 million and available capacity of $536.6 million, net of $36.4 million of letters of credit backed by the facility. Aimco also held cash and restricted cash on hand of $134.9 million.

Finally, Aimco held apartment communities in its unencumbered asset pool with a total estimated fair market value of approximately $1.8 billion.

Equity Activity

Dividend - As previously announced, the Aimco Board of Directors declared a quarterly cash dividend of $0.33 per share of Class A Common Stock for the quarter ended December 31, 2015. On an annualized basis, this represents an increase of 12% compared to the dividends paid during 2015. This dividend is payable on February 29, 2016, to stockholders of record on February 19, 2016.

2016 Outlook

2016 Pro forma FFO and AFFO Reconciliations

Aimco's 2016 outlook reflects continuation of the strategy Aimco has executed over the last several years. This strategy focuses on excellence in property operations; value creation through redevelopment and occasional development; portfolio management based on a disciplined approach to capital recycling and simplification of the business; a safe, flexible, and liquid balance sheet; and a simple business model executed by a performance-oriented and collaborative team. As Aimco continues to execute this consistent strategy, 2016 FFO and AFFO growth are expected to be muted compared to 2015. This projected lower rate of growth is primarily the result of several factors as follows:

• Accelerating Same Store revenue and Net Operating Income growth in 2016 compared to 2015, adding $0.17 per share to AFFO;
• Declining Net Operating Income caused by selling stabilized communities to fund lease-up communities with no current income, reducing AFFO compared to 2015 by $0.15 per share;
• Declining non-core earnings as Aimco continues to simplify its business, lowering AFFO by $0.10 per share; and
• Declining offsite costs as Aimco scales its overhead to its more focused activities, adding $0.02 to AFFO per share.

Aimco published today in a separate document its forecast for 2017, which reflects accelerating FFO and AFFO growth compared to 2016 with: continued growth in Same Store revenue and Net Operating Income; earn-in of income from lease-up communities; a continued reduction in non-core earnings; and declining offsite costs. Aimco's 2016 Outlook and 2017 Forecast may be found on its website at http://www.aimco.com/investors/events-presentations/presentations.

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.

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 measures not defined under 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 196 communities in 22 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 2016 results, including but not limited to: Pro forma FFO and selected components thereof; AFFO; Aimco's redevelopment and development investments, timelines and Net Operating Income contribution; Aimco’s acquisition and lease-up timelines and Net Operating Income contribution; expectations regarding sales of Aimco's apartment communities and the use of proceeds thereof; and Aimco liquidity and leverage metrics.

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; our ability to meet timelines and budgeted rental rates related to our lease-up properties; 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: 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; 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; the amount, location and quality of competitive new supply; 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