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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________________________
FORM 8-K
_____________________________________________
CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) June 4, 2018
_____________________________________________
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
_____________________________________________
 
MARYLAND
 
1-13232
 
84-1259577
(State or other jurisdiction
 
(Commission
 
(I.R.S. Employer
of incorporation or organization)
 
File Number)
 
Identification No.)
4582 SOUTH ULSTER STREET
SUITE 1100, DENVER, CO 80237
_____________________________________________
(Address of principal executive offices)
  
(Zip Code)
 
Registrant's telephone number, including area code: (303) 757-8101

NOT APPLICABLE
 (Former name or Former Address, if Changed Since Last Report)
_____________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the exchange act. o








ITEM 7.01.    Regulation FD.
On June 5-7, 2018, representatives of Apartment Investment and Management Company (“Aimco”), including Terry Considine, Chairman of the Board and Chief Executive Officer, and Paul Beldin, Executive Vice President and Chief Financial Officer, will meet with investors. During those meetings, Aimco representatives will distribute the attached presentations. The presentations are furnished herewith as Exhibit 99.1 and Exhibit 99.2.
ITEM 9.01.     Financial Statements and Exhibits.
(d)    The following exhibits are furnished with this report:
Exhibit Number
Description
Apartment Investment and Management Company Investor Presentation - June 2018
Apartment Investment and Management Company Net Asset Value Presentation - March 31, 2018





SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: June 4, 2018
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
/s/ Paul Beldin
__________________________________________
Paul Beldin
Executive Vice President and Chief Financial Officer



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Section 2: EX-99.1 (EXHIBIT 99.1)

investorpresentationjune
Locust on the Park 777 South Broad Left Bank SouthStar Lofts Investor Presentation June 2018 NAREIT Conference New Aimco Philadelphia Communities Acquisitions closed on May 1, 2018


 
AIMCO QUICK FACTS Shareholder Goal AIMCO seeks to earn LONG-TERM RETURNS on equity that are SUPERIOR to those of the equity REIT and S&P 500 indices by investing in a portfolio of high quality multifamily communities, DIVERSIFIED by both geography and price point, whose CASH FLOWS are PREDICTABLE and RISING. 12 $54 NAV 7% 5-year 1994 Primary Markets per share AFFO CAGR Aimco IPO 138 $13B 11% 5-year 2003 Apartment Communities Gross Asset Value Share Price CAGR Added to S&P 500 (1) Represents the compounded annual return for Economic Income, calculated through Aimco’s last published NAV at 3/31/2018, which represents the annual change in Aimco NAV per share plus cash dividends per share. 2


 
AIMCO QUICK FACTS Consistent Growth Over Time; Better Than Peer Average (1) Peer group consists of AvalonBay, Camden, Equity Residential, Essex, MAA and UDR. Source for peer simple average: SNL Financial. (2) Source for peer average: Company financials. 3 (3) Aimco 2018E AFFO represents the midpoint of guidance.


 
CONTENTS Aimco Quick Facts 2-3 Leadership Team 5 Strategic Objectives 6 Economic Income 7 Property Operations 8-10 Redevelopment & Development 11-13 Portfolio Management 14-19 Capital Allocation History 15 Paired Trade Analysis 16 Philadelphia Market Profile 17-19 Portfolio Diversification & Supply 20-22 Balance Sheet 23 Team & ESG 24-26 4


 
LEADERSHIP TEAM Aimco benefits from a long-tenured team with an average of 16 years of Aimco service. Paul Beldin John Bezzant Lisa Cohn Terry Considine Miles Cortez Steve Crane Matt Eilen EVP & EVP & EVP & Chairman & EVP & Real Estate Tax Property Operations Chief Financial Officer Chief Investment General Counsel CEO Chief Administrative 15 Years Finance 10 Years Officer 15 Years 43 Years Officer 8 Years 12 Years 16 Years Michael Englhard Patti Fielding Richard Hawthorne Kristina Howe Jennifer Johnson Keith Kimmel Stephanie Lambert Redevelopment EVP: Debt & Treasurer Redevelopment Property Operations Human Resources EVP Redevelopment Construction Services President: Construction Services Shared Services 13 Years Property Operations Finance 5 Years Aimco Investment Partners 10 Years 16 Years 16 Years 17 Years 21 Years Didi Meredith Leann Morein Kevin Mosher Susan Pickens Wes Powell Patti Shwayder Martin Sprang Lynn Stanfield Property Operations Compliance Property Operations IT Strategy EVP Government Relations Asset Quality & Finance & Tax West Operations 24 Years East Operations 23 Years Redevelopment & Communications Service 17 Years 12 Years 10 Years 14 Years 15 Years 12 Years 5


 
STRATEGIC OBJECTIVES Operational Excellence Redevelopment Portfolio Management Balance Sheet Focus on Customer Selection and Create Value by Repositioning Enhance Rent Growth and Limit Risk Through Balance Satisfaction to Produce Properties Within Existing Increase Long Term Capital Sheet Structure Predictable and Growing Free Portfolio and by Constructing Values Through Portfolio Cash Flow(1) New Properties Design • Employ low leverage, 35% of LTV(2) at 3/31/18 • Lower resident turnover, 45.8% in • Invest up to 3% of GAV annually • Employ strategic capital 1Q 2018, through careful customer allocation to emphasize land • Finance primarily with non- selection and emphasis on • Focus on location quality and value, location, and recourse property debt, 87% of measured customer satisfaction excellence of design submarket selection total leverage at 3/31/18 o Median income of new residents in 1Q 2018 was over $100K for • Achieve Free Cash Flow IRRs of • Reduce revenue volatility by: • Match long-lived investments the fifth consecutive quarter ~10% on current projects o Geographic with long-dated leverage o Customer satisfaction rating of diversification across 12 >4 (out of 5) for over 4 years • Create lasting value for primary markets, and • Maintain a pool of o Residents make a “Good- shareholders o Price point diversification unencumbered properties with Neighbor Commitment” o Current projects are ~50% "A" communities substantial value ($2.0B at expected to create value and ~50% "B/C+" 3/31/18) and ample unused and • Produce predictable and growing >35% of our investment communities available credit Free Cash Flow o For the five years ended o Greater than 4% NOI growth, 2017, Redevelopment • Maintain investment-grade each year, from 2011 through activities created ~$400M of rating 2017 value o 680 bps NOI margin expansion over the five years ended 2017 Team and Culture Focus intentionally on a collaborative and productive culture based on respect for others and personal responsibility, reinforced by a preference for promotion from within based on talent development and succession planning to produce a strong, stable team that is the enduring foundation of Aimco success. (1) Free Cash Flow is calculated as net operating income or NOI, less capital replacement spending or CR. (2) Loan-to-value is calculated as the Aimco share of consolidated property debt to the corresponding property value. 6


 
ECONOMIC INCOME While Adjusted Funds From Operations (“AFFO”) is Aimco’s primary measure of current financial performance, Aimco’s primary measure of long-term financial performance is Economic Income. • Economic Income reflects shareholder value creation as measured by: (Net Asset Value Δ) + (Cash Dividends) Net Asset Value = The market value of a company's assets less its liabilities and obligations • Net Asset Value is used by many investors in real estate companies because the value of company assets can be readily estimated, even for non-earning assets such as land or properties under development. Net Asset Value has the advantage of incorporating the investment decisions of thousands of real estate investors. It enhances comparability among companies that have differences in their accounting. It avoids distortions that can result from application of GAAP to investment properties and ownership structures. • While Net Asset Value is not identical to liquidation value in that some costs and benefits are disregarded, it is often considered a floor with upside for value ascribed to the operating platform. Net Asset Value also provides an objective basis for the perceived quality and predictability of future cash flows as well as their expected growth as these are factors considered by real estate investors. As a result, Net Asset Value can be a valuable starting point for projecting future earnings. • Aimco publishes semi-annually its internal estimate of Net Asset Value. Aimco estimates are consistent with prices received in property sales… which have totaled $2.4B over the past five years. Most recently, Aimco estimates were confirmed when the seller of the new Philadelphia communities took partial payment in OP Units valued at $53 per share, in line with Aimco’s published NAV estimate at the time. • Since IPO, Aimco Economic Income has compounded annually at 14.1%, 40 bps ahead of peer average.(1) • Future Economic Income growth will be driven by increases in operating income, value creation from redevelopments and developments, and retained earnings. (1) Represents the compounded annual return assuming a) IPO share price, b) quarterly cash dividends when paid, c) stock dividends declared in 2007-2008 as though sold for cash, and d) NAV as of March 31, 2018. Source for peer NAVs: Green Street Advisors. Peer group consists of AVB, CPT, EQR, ESS, MAA, and UDR. 7


 
PROPERTY OPERATIONS STRATEGY Focus on Customer Selection and Satisfaction to Produce Predictable and Growing Returns, as Measured by Free Cash Flow. • Aimco residents have an average credit rating of 710, 60 points or ~10% HIGHER than the national average for renters.(1) • Customer SATISFACTION has averaged more than 4 (out of 5) for over four years and averaged 4.26 in 1Q 2018. • Aimco resident RETENTION averaged 52%(2) over the five years ended 1Q 2018 and Aimco achieved renewal lease rent increases of at least 4.5% in each quarter during this same period. 1Q 2018 resident retention of 54.2% was an improvement of 470 bps from 1Q 2017. • Aimco expected 2018 five-year Same Store expense CAGR is LOWER than peer average(3) by 160 bps. • Aimco expected 2018 five-year Same Store NOI CAGR is AHEAD of peer average(3) by 20 bps. (1) National average data source: “What Credit Score Do You Need to Rent an Apartment?”, www.RENTCafe.com, November 27, 2017. RENTCafe is a sister company to Yardi. (2) Retention is calculated as the difference between 100% and turnover. 8 (3) Peer group consists of AVB, CPT, EQR, ESS, MAA, and UDR. Data Source: SNL Financial.


 
PREDICTABLE REVENUE GROWTH Aimco is on track to achieve 2018 Same Store revenue growth guidance of between 2.1% and 3.1%. • Earn-in from 2017 leasing activity contributes 1.2% to 2018 revenue growth. • 2018 blended lease rate increases and changes in occupancy contribute the balance. • YTD results, through May, are slightly ahead of the assumptions at the midpoint of full year guidance. CHANGES IN SAME STORE RENTAL Full Year 1Q Apr May YTD RATES(1) 2017 2018 2018 2018(2) Leases RENEWALS 4.6% 4.9% 4.7% 4.8% 4.9% NEW LEASES 0.6% 0.4% 0.6% 1.7% 0.8% WT. AVG. 2.5% 2.7% 2.6% 3.4% 2.9% AVERAGE DAILY OCCUPANCY 96.0% 96.3% 96.4% 96.4% 96.3% (“ADO”) • YTD May 2018 leasing activity is ahead of the same period in 2017 with blended lease rates ahead by 50 bps and ADO up 40 bps. (1) Aimco measures changes in Same Store 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. (2) May leasing data is updated as of 5/31/2018, and is considered preliminary, actual results to be published with the 2Q 2018 Earnings Release may differ. 9


 
INNOVATION & PRODUCTIVITY • Focus on efficient, productive operations: Aimco uses Controllable Operating Expenses ("COE"), which are property level operating expenses before taxes, insurance, and utilities, as a measure of operating efficiency. o For the five years ending 2018, Aimco COE growth is expected to be 1.2%. o For the ten years ending 2018, Aimco COE growth is expected to be 0.1%. • Innovation is the foundation of Aimco cost control efforts. Innovative activities include: Same Store Expense Growth 2013 - 2018E o Redesign work: moving administrative tasks to the Shared Service Center reduces cost and allows site 120 CAGR (1) teams to focus on sales and service. 3.1% Peer Avg 115 o Standardize: reduce complexity, increase purchasing volume discounts. 110 1.5% Aimco o Invest: focus on total lifecycle costs by installing 1.2% Aimco COE more durable in-unit materials such as plank flooring 105 instead of carpet and granite countertops instead of 100 laminate. • enhance customer 95 Leverage Technology: 2013 2014 2015 2016 2017 2018E experience through website design and package lockers, meeting today’s customer preference for self-service. (1) In 2018, Aimco changed its presentation of revenue and expenses to reflect utilities costs net of amounts reimbursed by residents, which were previously included in revenue. Prior amounts have been revised to conform to this presentation. Peer group consists of AvalonBay, Camden, Equity Residential, Essex, MAA and UDR. Data Source: SNL Financial. 10


 
REDEVELOPMENT STRATEGY Create Value based on Quality of Location and Excellence of Design by Repositioning Properties Within the Aimco Portfolio and by Constructing New Properties. REDEVELOPMENT APPROACH • Own communities where land value is a high percentage of total value. Lower price-point communities with high land values support redevelopment and entitlement activities. • Provide predictable cash flows through excellence in property operations and incubate land value while it appreciates. • Where appropriate, re-entitle land in anticipation of adding future value. Entitlement requires little capital. • Redevelop properties when market conditions support accretive repositioning. • Execute projects in phases, to refine product offerings and to reduce risk. • Adjust pace and scope of redevelopment to match market acceptance and to reduce lease-up inventory risk. • Measure results by the rate and quality of returns. • Adhere to Aimco Risk Management policies: limit annual redevelopment spending to less than 3% of GAV, limit lease-up inventory risk, arrange in advance required capital funding, rely on the expertise and balance sheet of third party developers where indicated, and require unlevered returns that reflect risk acceptance. 11


 
REDEVELOPMENT VALUE CREATION CONSISTENT VALUE CREATION • Aimco has numerous opportunities within its portfolio for continuing value creation through redevelopment. • Aimco also seeks acquisitions with characteristics that lead to opportunities for value creation through redevelopment. • Over the five years ended 2017, Aimco has redeveloped 16 properties and purchased six properties with opportunities for redevelopment. Additionally, Aimco completed the lease-up of three newly developed assets. • Redevelopment and development activities predictably results in value creation. o Over the five years ended 2017, Aimco invested $1B in redevelopment and development creating more than $400M of net asset value, averaging $80M, more than $0.50 per share, annually. • Current redevelopments under construction are on track to create value >35% of the new investment and to earn stabilized NOI yields approximately 160 bps above market cap rates. 12


 
WHAT'S NEXT FOR REDEVELOPMENT? REDEVELOPMENT PIPELINE • Aimco plans future starts to backfill its redevelopment pipeline. • In 2018, Aimco expects to spend $120M to $200M on redevelopment and development activities. DENVER MINNEAPOLIS 21 Fitzsimons (New Phase) Calhoun Beach Club Township at Highlands (Expanded Scope) CHICAGO 100 Forest Place Yorktown Apartments (Expansion) NEW YORK CITY BAY AREA East 88th & 2nd Ave 707 Leahy Preserve At Marin (Expansion) PHILADELPHIA Chestnut Hall GREATER LA Villas at Park La Brea GREATER HillCreste WASHINGTON, DC Foxchase Merrill House Shenandoah Crossing SAN DIEGO Bent Tree Mariner's Cove (New Acquisition) MIAMI Flamingo South Beach (Expanded Scope) Yacht Club at Brickell The menu shown above is representative of the communities whose redevelopment or development is being considered. Actual projects and their scope may differ materially from the above. 13


 
PORTFOLIO MANAGEMENT Enhance rent growth and increase long term capital values through portfolio design emphasizing land value as well as location and submarket selection while reducing revenue volatility by geographic and price point diversification. • Aimco portfolio design includes: • DIVERSIFICATION by geography and price point sufficient to moderate volatility and concentration risk, while focusing investment in higher rent-growth, higher-margin submarkets; and • Offering a product that ATTRACTS highly qualified residents with positive prospects for income growth and the ability and willingness to pay for high quality homes and service. • Aimco upgrades its portfolio through its capital allocation strategy based on a strict paired trade discipline with: • DISPOSITION of up to 10% of its portfolio annually, primarily from submarkets with lower revenue growth prospects; and • REINVESTMENT of disposition proceeds in communities with higher land value, higher expected rent growth, and higher projected free cash flow internal rates of return. 14


 
CAPITAL ALLOCATION HISTORY Aimco has a demonstrated record of enhancing portfolio quality through its portfolio strategy and disciplined capital allocation. • For the five years ended 2017, Aimco invested $2.6B in redevelopment, development, property upgrades, and acquisitions. • Aimco funded the investments primarily through $2.4B of property sales, approximating 4% of GAV annually. • These paired trades enhanced Aimco portfolio quality and increased its portfolio allocation to Los Angeles, Boston, Denver, and the Bay Area while reducing its allocation to southern Virginia, Baltimore, Phoenix, and Houston. Capital Allocation Investments Sold Results Average Age(1) 9 years 34 years - 25 years QUALITY COMPARISON Average revenue per apartment home $2,990 $1,070 + $1,920 Median home values(2) ~$685K ~$295K + ~$390K Historical long term annual revenue growth rate(3) 3.9% 2.8% + 110 bps 10-Year FCF IRR(4) 9.7% 6.3% + 340 bps FINANCIAL COMPARISON FCF yield(4) 6.0% 5.1% + 90 bps NOI yield 6.2% 6.2% + 0 bps FCF margin 75% 44% + 3100 bps (1) Average age for investments includes only Aimco acquisitions. (2) Source: ESRI (3) Source: REIS (4) FCF assumes annual capital replacements spending of $1,200 per apartment home for the communities acquired and sold. 15


 
2018 PAIRED TRADE Through the first five months of 2018, Aimco continued its portfolio enhancement by acquiring Bent Tree Apartments in Fairfax County, VA for $160M and agreeing to purchase an “A” quality portfolio of six Philadelphia area apartment communities for $445M. Aimco has closed on the acquisition of four of the six with the fifth expected to close this summer and the sixth closing upon completion of construction in 2019. Aimco will fund these investments with the sale of its Asset Management business and four Affordable communities for $590M (closing expected in 3Q 2018) plus the pending sale of Chestnut Hill Village, an older asset in north suburban Philadelphia. • This trade is a good example of our choosing long-term value creation and free cash flow growth, even if there is some reduction in short-term earnings. Bent Tree Philadelphia Sales to Fund Investment Investment Investment Net Variance 10-Year Avg. Rent Growth Rate 4.5% 3.1% 3.4% +10 bps 10-Year FCF IRR 9.7% 7.9% 4.4% +400 bps PAIRED TRADE METRICS FCF Yield 5.1% 4.9% 6.7%(1) -170 bps NOI Yield 5.6% 5.3% 6.9%(1) -150 bps (1) The FCF and NOI yield for Sales to Fund Investment is elevated in year 1 from the contribution from the Asset Management business, this contribution would reduce to zero by 2025. Absent the contribution from the Asset Management business the yields are reduced by approximately 200 bps. 16


 
PHILADELPHIA MARKET PROFILE Center City, Philadelphia is a market that Aimco knows well, and we have a positive view on its long-term prospects. • It is the fifth largest city in the United States by population and the Philadelphia MSA is also eighth largest in the nation in terms of GDP. • The education and medical sectors, or “eds and meds,” are at the foundation of Philadelphia’s stable economy, representing a solid resident base for our communities. • Philadelphia boasts a strong university system, including 90 institutions of higher education, with 19 colleges and universities in and around Greater Center City. • 1 in 6 doctors in the United States received some of their medical training in Philadelphia. • Center City holds 42% of all jobs in Philadelphia with unemployment of 2.9% as of 2017, compared to 4.1% nationally. Following the completion of the Existing Aimco Portfolio 1 Chestnut Hill Village $445M, six-property Philadelphia 2 Park Towne Place portfolio acquisition and the 3 Chestnut Hall planned sale of Chestnut Hill 4 The Sterling 5 Riverloft Village, Aimco will have 10% of its gross asset value invested in the Acquired from Dranoff 1 One Ardmore Place Philadelphia market, up from 8% at 2 The Left Bank 1Q 2018, and repositioned in more 3 Locust on the Park 4 The Victor attractive submarkets. 5 SouthStar Lofts 6 777 South Broad Source: US Census, BEA, MPF Research, Center City District & Central Philadelphia Development Corporation, BLS 17


 
CENTER CITY DEMOGRAPHICS Center City’s Population is Highly Educated Educational attainment levels for Center City residents rival that of Palo Alto, CA and Cambridge, MA Looking at the prime renter cohort of 25 to 34-year-olds, the educational attainment levels are even better. Source: Census, The American Community Survey 18


 
CENTER CITY RENT GROWTH Center City has achieved a 15-year compound annual rent growth of 3.3%, placing it number four among Aimco’s 12 target markets. Its 10-year compound annual rent growth is 2.9% consistent with Boston, Chicago, and Miami at number five among Aimco’s 12 target markets. Center City represents a steady-eddy market with consistent rent growth, similar to other gateway markets, with lower volatility. Source: REIS 19


 
PORTFOLIO DIVERSIFICATION • The benefit of a diversified portfolio is that some markets accelerate while other markets decelerate. These offsetting results mute the volatility of local building cycles. • Aimco has a concentration of communities in the coastal, gateway markets, with 57% of its asset value invested in the Los Angeles, Bay Area, Seattle, Boston, Washington, DC, and New York City areas. • Aimco investments in large markets such as Denver, Philadelphia, and Miami afford diversification and provide market rent growth rates similar to or greater than New York City, Boston, and Washington, DC. Geographic Diversification1 (% Real Estate GAV) SEATTLE, 1% CHICAGO, 6% BOSTON, 10% DENVER, 4% NEW YORK, 4% BAY AREA, 12% PHILADELPHIA, 10% LOS ANGELES, 21% WASHINGTON, DC, 9% ATLANTA, 1% SAN DIEGO, 6% MIAMI, 9% (1) Represents expected Aimco portfolio in target markets proforma the transactions announced in April. Non-target markets account for 6% of Aimco GAV. 20


 
PORTFOLIO DIVERSIFICATION • Price point diversification and submarket location provide insulation from local new supply and contribute to stable revenue growth. • Aimco analyzes and grades its portfolio of communities based on rents earned as a percentage of local market rent. Aimco further refines this grading by comparing the property rent level to its submarket average. • Where there is new supply, it is typically delivered at the highest rents in the market, putting competitive pressure primarily on existing high-rent “A” communities. • A community that grades as an “A” in the overall market may be located in a superior submarket with rents so much above the overall market that the same community grades as a “B” in that submarket and is thus somewhat protected from the impacts of new supply. (1) Aimco defines apartment community quality as follows: “A” quality communities are those earning rents greater than 125% of local market/submarket average; “B” quality communities are those earning rents 90% to 125% of local market/submarket average; “C+” quality communities are those earning rents less than 90% of local market average, and earning rents greater than $1,100 per month; and “C” quality communities are those earning rents less than 90% of local market average and earning rents less than $1,100 per month. The charts above illustrate Aimco’s 1Q 2018 portfolio. 21


 
AIMCO EXPOSURE TO NEW SUPPLY • As a result of diversification, Aimco exposure to competitive new supply is primarily limited to its “A” price point communities in submarkets with projected completions of more than 2% of existing stock during 2018 … or approximately 20% of Aimco GAV. • This exposure is mitigated in some submarkets, where the rate of job growth is greater than the rate of supply growth and in other submarkets, where Aimco’s “A” rents are substantially lower than the rents charged by new supply. Aimco Supply Exposure Factors Mitigating Impact of New Supply % Aimco GAV Invested in New Jobs "A" Submarket Graded Completions as a % of per Unit (1) MARKET: Submarket(s) Communities Existing Stock Completed(2) Aimco Specific Factors LOS ANGELES: Mid-Wilshire 8.7% 2.1% 4 Aimco rents are ~85% of new supply rents.(3) Aimco redevelopment lease-ups at Sterling and Park Towne PHILADELPHIA: Center City 4.9% 5.0% 10 Place have been successful at leasing >1,100 apartment homes over the past four years. Property operations YTD are consistent with 2018 expectations; BAY AREA: San Mateo 3.0% 3.9% 6 new jobs data suggests supply could be absorbed. Redeveloped units at Calhoun could experience supply pressure. MINNEAPOLIS: Uptown 1.0% 3.3% 8 One advantage of redevelopment is that it can be deferred until new supply pressure has eased. GREATER NEW YORK: Bergen County, NJ 0.9% 2.7% 1 Aimco rents are ~90% of new supply rents.(3) Aimco rents are ~90% of new supply rents.(3) In Midtown, ATLANTA: Buckhead, Midtown 0.7% 6.7% 5 deliveries are expected to be down from 2017. NASHVILLE: West Nashville 0.5% 6.1% 5 Aimco rents are ~70% of new supply rents.(3) DENVER: Littleton 0.4% 3.2% 2 Aimco rents are ~85% of new supply rents.(3) Supply pressure could exist, however new jobs data suggests CHICAGO: DuPage County 0.4% 2.1% 6 supply should be absorbed. (1) Based on submarket data for deliveries in 2018 as a percentage of beginning of year stock as of 1Q 2018, available from MPF Research. (2) Employment figures are based on market data as reported by Green Street Advisors (April 2018). As a rule of thumb, at least five new jobs are necessary to absorb one unit. (3) Aimco rents are measured against per square foot rents of new buildings within a three mile radius of the Aimco community. Construction and lease-up data as reported by 22 AxioMetrics as of 1Q 2018.


 
HIGH QUALITY BALANCE SHEET Aimco limits risk through balance sheet structure, employing low leverage, primarily non-recourse and long-dated property debt, and builds financial flexibility by maintaining ample unused and available credit as well as a pool of properties with substantial value unencumbered by property debt. Unencumbered Pool Value: $2.0 Billion Standard & Poor’s Investment Grade Ratings Services Refunding risk is lower than total leverage due to principal amortization Credit Ratings Fitch Ratings paid from retained earnings, and because Aimco’s perpetual preferred equity is not subject to mandatory refunding. 1Q 2018 Activity 23


 
TEAM AND CULTURE Focus intentionally on a collaborative and productive culture based on respect for others and personal responsibility, reinforced by a preference for promotion from within based on talent development and succession planning to produce a strong, stable team that is the enduring foundation of Aimco success. TEAM ENGAGEMENT • Out of hundreds of participating companies, Aimco is one of only eight recognized as a "Top Place to Work" in Colorado for each of the past six years. • For the past five years, Aimco team engagement scores, on a 1 to 5 scale, have averaged better than 4. TALENT AND SUCCESSION PLANNING • In 2017, Aimco invested $2.1M in team member training and development. • Aimco has a policy preferring promotion from within and maintains a talent pipeline for every executive officer position, including the CEO. • Aimco maintains a forward-looking approach to succession. Positions are filled considering the business strategy and needs at the time of a vacancy and the candidates’ skills, experience, expertise, leadership, and fit. • The Aimco Board of Directors participates actively in succession planning and reviews in detail the executive talent pipeline and candidate development progress at least once a year. Further, the Board engages directly and regularly with executive officers and the candidates for their succession. 24


 
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (“ESG”) STOCKHOLDER OUTREACH • We regularly engage on ESG matters with stockholders holding approximately 2/3 of our outstanding shares. • In response to input gathered through this engagement, Aimco has: o Enhanced its ESG Disclosure o Included a Matrix of Director Qualifications and Expertise in our Proxy o Expanded its Disclosure on Management Succession o Added More Graphical Disclosure in our Proxy o Adopted Proxy Access o Overhauled our LTI Program o Replaced Single Trigger Change in Control Provisions with Double Trigger Change in Control Provisions o Adopted a Clawback Policy o Committed to no Excise Tax Gross-Ups BOARD REFRESHMENT & COMPOSITION • Aimco remains focused on a talented and engaged Board, including its regular refreshment. INDEPENDENT DIRECTORS RECENTLY ADDED TO HONORED IN 2017 FOR BOARD COMPOSITION OUR BOARD: • Ann Sperling, 2018 • Nina Tran, 2016 • Kathleen Nelson, 2010 DECLASSIFIED BOARD The biennial Breakfast of Corporate Champions salutes • All Aimco directors have always been elected annually . Fortune 1000 and S&P 500 Companies with at least 25% of board seats held by women. 25


 
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (“ESG”) COMMITMENT TO COMMUNITY COMMITMENT TO CONSERVATION Team members turn their passion for community In 2017, Aimco invested strategically $4.5M in energy service into action through Aimco Cares, which gives conservation. Over the last ten years, Aimco has teammates 15 paid hours each year to apply to achieved: volunteer activities of their choosing. In 2017: 8,840,044 796,233,615 5964 Therms of natural gas Gallons of water saved conserved through efficiency Hours volunteered by team members through Aimco Cares 137 Aimco Cares volunteer events 150 189,866,952 157,697 Nonprofits served kWh of electricity saved Metric tons of through through efficient fixtures greenhouse gas volunteerism and emissions eliminated donations $530,000 Raised through Aimco Cares Charity Golf Classic benefitting patriotic causes and providing scholarships for students in affordable housing 26


 
FORWARD LOOKING STATEMENTS & OTHER INFORMATION This presentation contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of 2018 results, including but not limited to: Pro forma FFO and selected components thereof; AFFO; Aimco redevelopment and development investments and projected value creation from such investments; and Aimco liquidity and leverage metrics. These forward-looking statements are based on management’s judgment as of this date, which is subject to risks and uncertainties. Risks and uncertainties include, but are not limited to: Aimco’s ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, redevelopments and developments; Aimco’s ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to Aimco redevelopments and developments; and Aimco’s 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 Aimco’s control, including, without limitation: • Real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which Aimco operates and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing of acquisitions, dispositions, redevelopments and developments; and changes in operating costs, including energy costs; • Financing risks, including the availability and cost of capital markets’ financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; and the risk that earnings may not be sufficient to maintain compliance with debt covenants; • Insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; and • Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of governmental regulations that affect Aimco and interpretations of those 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 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 Aimco’s 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, 2017, 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 presentation does not constitute an offer of securities for sale. Glossary & Reconciliations of Non-GAAP Financial and Operating Measures Financial and operating measures discussed in this document include certain financial measures used by Aimco management, some of which are measures not defined under accounting principles generally accepted in the United States, or GAAP. These measures are defined in the Glossary and Reconciliations of Non-GAAP Financial and Operating Measures included in Aimco’s First Quarter 2018 Earnings Release dated May 7, 2018. 27


 
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit


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                                                                    1

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INTRODUCTION

Net Asset Value is calculated as the market value of a company's assets less its liabilities and obligations. Net Asset Value is used by many investors in real estate companies because the value of company assets can be readily estimated, even for non-earning assets such as land or properties under development. Net Asset Value has the advantage of incorporating the investment decisions of the many thousands of real estate investors. It enhances comparability among companies that have differences in their accounting. It avoids distortions that can result from application of GAAP to investment properties and ownership structures.

While Net Asset Value is not identical to liquidation value in that some costs and benefits are disregarded, it is often considered a floor with upside for any value ascribed to the operating platform. Net Asset Value also provides an objective basis for the perceived quality, or predictability, of future cash flows as well as their expected growth as these are factors considered by real estate investors. As a result, Net Asset Value can be a valuable starting point for projecting future earnings.












                                                                    2

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GENERAL DISCLOSURES

The information provided in this presentation is intended to assist users in estimating Aimco’s Net Asset Value per share. This is not an offer to sell securities and does not constitute legal, tax, investment or other professional advice on any subject matter. Information provided is not all-inclusive and should not be relied upon as being all-inclusive.

This presentation describes a process to calculate Aimco's estimated Net Asset Value per share as of March 31, 2018. This value will fluctuate over time. Aimco's estimated Net Asset Value per share is based upon subjective judgments, assumptions and opinions and includes 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; Aimco's ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to its redevelopments and developments; and Aimco's ability to meet timelines and budgeted rental rates related to its lease-up properties.

                                                                    3

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GENERAL DISCLOSURES (CONTINUED)

This Net Asset Value per share information is intended to measure Aimco’s value as a going concern, consistent with International Financial Reporting Standards (“IFRS”), and is not necessarily representative of the amount a stockholder could expect to receive in a liquidation event, now or in the future. Certain opportunities are excluded as are transaction costs, transfer taxes, income taxes, and any real estate tax adjustments that may impact the value a stockholder might receive and a buyer might ascribe to Aimco’s communities (see page 8).

Aimco's estimated Net Asset Value is based on management's judgments, assumptions and opinions as of this date, and Aimco assumes no obligation to revise or update them to reflect future events or circumstances.

Actual results may differ materially from management's forecasts as of this date and, in addition, will be affected by a variety of risks and factors, some of which are beyond Aimco's control, including, without limitation:
Real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which Aimco operates and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing of acquisitions, dispositions, redevelopments and developments; and changes in operating costs, including energy costs;
Financing risks, including the availability and cost of capital markets financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; and the risk that our earnings may not be sufficient to maintain compliance with debt covenants;

                                                                    4

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GENERAL DISCLOSURES (CONTINUED)

Insurance risk, including the cost of insurance; and natural disasters and severe weather such as hurricanes; and
Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of governmental regulations that affect Aimco and interpretations of those 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 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, 2017, and the other documents Aimco files from time to time with the Securities and Exchange Commission.

                                                                    5

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VALUATION METHODOLOGY

Real Estate - Aimco estimated the value of its communities using methods management believes to be appropriate based on the characteristics of the communities. For valuation purposes, Aimco segregated its portfolio into the following categories: Stabilized Portfolio; Redevelopment Communities Under Construction; Lease-Up Communities; and Other Real Estate. Communities in these categories were valued as follows:
Stabilized Portfolio - includes 117 communities valued using a direct capitalization rate ("cap rate") method based on annualized 1Q 2018 property NOI, less a 2% management fee, and market cap rates. This valuation method was utilized for approximately 73% of real estate fair value.

Redevelopment Communities Under Construction and Lease-Up Communities - includes 11 communities valued based on discounting projected future cash flows. This valuation method was utilized for approximately 22% of real estate fair value.

Other Real Estate Portfolio - includes five communities under contract for sale valued at contract prices, one recently acquired community valued at cost, and certain land investments valued at Aimco's cost. This valuation method was utilized for approximately 5% of real estate fair value.


                                                                    6

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VALUATION METHODOLOGY (CONTINUED)

Asset Management Business - represents the contract price of the binding agreement to sell the Asset Management business.

Other Tangible Assets - consist of cash, restricted cash, accounts receivable and other assets for which Aimco reasonably expects to receive cash through the normal course of operations.

Debt - the fair value of Aimco's debt has been calculated based on the Money-Weighted Average interest rate on its debt, which rate takes into account the duration of the property debt as well as its loan to value and debt service coverage.

Other Tangible Liabilities - consist of accounts payable, accrued liabilities and other tangible liabilities Aimco reasonably expects to settle in cash through the normal course of operations.

Preferred Equity - the fair value of Aimco's preferred equity includes a mark-to-market adjustment for listed securities based on their closing share price on March 31, 2018.

                                                                    7

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VALUATION METHODOLOGY (CONTINUED)

Other Items of Note

Real estate values are based on Aimco's current uses and most importantly do not include the value of unused or underused land or air rights.

Real estate values do not take into consideration transaction costs or other items such as real estate tax adjustments that may impact the value a buyer might ascribe to Aimco's communities.

This calculation of Aimco’s Net Asset Value includes the value of assets less liabilities and obligations as of March 31, 2018 and does not include asset acquisitions or dispositions subsequent to March 31, 2018.

This calculation of Aimco’s Net Asset Value does not include the value of fee income such as property management revenues, or non-recurring investment management revenues.

This calculation of Aimco’s Net Asset Value does not consider enterprise value.

Additional details of Aimco's calculations and methodologies are included on the following pages.

                                                                    8

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March 31, 2018 Estimated Net Asset Value: $54 per share*


$77
 
+$3
 
-$26
 
 
 
 
 

Fair Value of Real Estate
 

Fair Value of Other Tangible Assets and Liabilities

   Cash and restricted cash
+ Other tangible assets
+ Asset Management Business
- Other tangible liabilities



 

Fair Value of Leverage


   Carrying value of debt
+ Mark-to-market adjustment + Fair value of preferred equity
 
 
 
 
 

Estimated NAV per share increased by $1 from the third quarter 2017 calculation. The increase in NAV as presented is primarily due to the valuation of the Asset Management business and four affordable housing properties which are under contract to be sold (closing expected in 3Q 2018). It is important to note that the first quarter NOI includes seasonally higher expenses, which are annualized in this computation. Removing the impact of seasonality would result in an increase in gross asset value of at least $0.50 per share.


Fair Value of Real Estate: IFRS permit measurement of investment property at fair value. While Aimco does not report under IFRS, it believes the estimation of the fair value of real estate provided herein is determined consistently with IFRS requirements for investment properties.




*Refer to additional details and disclosures beginning on page 11.                                    9    


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March 31, 2018 Estimated
Fair Value of Real Estate:
$77 per share*

393760998_chart-d2fd8a5054d897a3acca01.jpg
Stabilized Real Estate Portfolio
Annualized 1Q 2018 NOI
Less:     Management fee of 2% of revenue
Divided By:     NOI cap rate of 5.1%
 
Redevelopment Portfolio
Cash flows discounted from property stabilization to March 31, 2018.
 
Lease-Up Portfolio
Cash flows discounted from property stabilization to March 31, 2018.
 
Other Real Estate Portfolio
Other Investments: Certain land valued at cost.

For Sale Communities: Communities currently under contract for sale.

Recent Acquisition: Bent Tree community valued at cost.




*Refer to additional details and disclosures beginning on page 11.                                    10    


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Fair Value of Real Estate as of March 31, 2018 ($M)

Stabilized Portfolio
 
 
NOI, less management fee
$
466

(1)
NOI cap rate
5.1
%
(2)
Stabilized Portfolio Value
$
9,137

 
 
 
 
Non-Stabilized Portfolio
 
 
Redevelopment communities under construction
$
2,221

(3)
Lease-up communities
600

(4)
Other Real Estate
632

(5)
Non-Stabilized Portfolio Value
$
3,453

 
 
 
 
Fair Value of Real Estate
$
12,590

 
















*Refer to Footnotes beginning on page 14.
11



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Fair Value of Other Assets and Liabilities, Preferred Equity and Debt as of March 31, 2018 ($M)

 
Consolidated Amounts as Reported
Ownership Adjustments (6)
Fair Value Adjustments
Adjusted Amounts
 
Other Tangible Assets
 
 
 
 
 
Cash and cash equivalents
$
52

$
(1
)
$

$
51

 
Restricted cash
39



39

 
Goodwill
38


(38
)

(7)
Other tangible assets
333

(13
)

320

 
Asset Management Business
24


276

300

(8)
Fair Value of Other Tangible Assets
$
486

$
(14
)
$
238

$
710

 
 
 
 
 
 
 
Other Tangible Liabilities
 
 
 
 
 
Deferred income
$
27

$

$
(27
)
$

(9)
Accounts payable
40



40

 
Other tangible liabilities
140

(1
)

139

 
Fair Value of Other Tangible Liabilities
$
207

$
(1
)
$
(27
)
$
179

 
 
 
 
 
 
 
Fair Value Other Tangible Assets and Liabilities, Net
$
279

$
(13
)
$
265

$
531

 
 
 
 
 
 
 
Preferred Equity
 
 
 
 
 
Preferred noncontrolling interests in Aimco Operating Partnership
$
101

$

$

$
101

 
Perpetual preferred stock
125


2

$
127

(10)
Fair Value of Preferred Equity
$
226

$

$
2

$
228

 
 
 
 
 
 
 
Debt
 
 
 
 
 
Non-recourse property debt
$
3,719

$
(10
)
$
(4
)
$
3,705

 
Term loan, net
250



250

 
Revolving credit facility borrowings
79



79

 
Fair Value of Debt
$
4,048

$
(10
)
$
(4
)
$
4,034

(11)
 
 
 
 
 
 
Fair Value of Leverage
$
4,274

$
(10
)
$
(2
)
$
4,262

 



*Refer to Footnotes beginning on page 14.
12



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Net Asset Value as of March 31, 2018 ($M, except per share amounts)
 
 
 
 
 
 
Fair Value of Real Estate
$
12,590

 
 
 
 
Fair Value of Other Tangible Assets and Liabilities, Net
$
531

 
 
 
 
Fair Value of Leverage
$
(4,262
)
 
 
 
 
Net Asset Value
$
8,859

 
 
 
 
Total Shares, Units and Dilutive Share Equivalents Outstanding
164

(12)
 
 
 
Net Asset Value per Share *
$
54

 

It bears repeating that this NAV per share calculation is made at a point in time and its result may be expected to fluctuate based on subsequent events. Many factors influence this calculation including operating results, changes in use or density, the broader economy, and alternative investment opportunities. Our methodology relies on CBRE reporting of cap rates applicable to transactions in 2H 2017 which incorporated the facts and circumstances then prevalent. If cap rates were to increase or decrease by 25 basis points, then Aimco’s GAV and NAV would change by ~$500M which equates to $3 per share.







*Refer to Footnotes beginning on page 14.
13



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Footnotes
1.
Represents Stabilized Portfolio Property NOI for the three months ended March 31, 2018, annualized, and adjusted for an assumed property management fee. Market property management fees range between 1.5% and 3.0% with larger, higher quality portfolios at the lower end of that range. For the purposes of this calculation of Net Asset Value, Aimco has assumed a 2% management fee. For the purposes of this calculation of Net Asset Value, 1Q 2018 Property NOI is multiplied by four to arrive at annualized Property NOI. It is important to note that the first quarter NOI includes seasonally higher expenses, which are annualized in this computation. Removing the impact of seasonality would result in an increase in gross asset value of at least $0.50 per share.
 
Three Months Ended March 31, 2018
Stabilized Portfolio NOI ($000s)
Consolidated Amount
 
Ownership Adjustments
 
Adjustments
 
Adjusted Amounts
 
 
 
 
 
 
 
 
Rental and other property revenues
 
 
 
 
 
 
 
Same Store
$
145,520

 
$
(667
)
 
$

 
$
144,853

Acquisitions, Redevelopment and Development
50,311

 
(68
)
 
(35,675
)
a
14,568

Other Real Estate
19,333

 
519

 
(15,306
)
b
4,546

Total rental and other property revenues
$
215,164

 
$
(216
)
 
$
(50,981
)
 
$
163,967

 
 
 
 
 
 
 
 
Less: Direct property operating expenses
 
 
 
 
 
 
 
Same Store
$
(39,125
)
 
$
209

 
$

 
$
(38,916
)
Acquisitions, Redevelopment and Development
(16,456
)
 
22

 
12,422

a
(4,012
)
Other Real Estate
(6,585
)
 
(136
)
 
5,486

b
(1,235
)
Total property operating expenses
$
(62,166
)
 
$
95

 
$
17,908

 
$
(44,163
)
 
 
 
 
 
 
 
 
Property Net Operating Income
$
152,998

 
$
(121
)
 
$
(33,073
)
 
$
119,804

 
 
 
 
 
 
 
 
Less: Assumed property management fee of 2% of revenue
(4,303
)
 
4

 
1,020

 
(3,279
)
 
 
 
 
 
 
 
 
Property Net Operating Income after 2% management fee
$
148,695

 
$
(117
)
 
$
(32,053
)
 
$
116,525

 
 
 
 
 
 
 
 
Annualized Property Net Operating Income
$
594,780

 
$
(468
)
 
$
(128,212
)
 
$
466,100

        
Refer to the following pages for explanation of adjustments for purposes of computing Stabilized Portfolio Property NOI.

                                                                    14

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Footnotes (continued)
1.(continued)
    
a.
Represents revenues and expenses related to nine redevelopment communities currently under construction: The Palazzo at Park La Brea and Villas at Park La Brea, located in Los Angeles, California; Saybrook Pointe, located in San Jose, California; Parc Mosaic, located in Boulder, Colorado; Flamingo South Beach and Bay Parc, located in Miami, Florida; Yorktown, located in Lombard, Illinois; and Park Towne Place and The Sterling, both located in Center City Philadelphia, Pennsylvania. Also included in these adjustments are the revenue and expense items related to One Canal, located in Boston, Massachusetts and completed in 2Q 2016; Indigo, located in Redwood City, California and purchased in August 2016; and Bent Tree Apartments, located in Centreville, Virginia and purchased in February 2018. Aimco's redevelopment communities currently under construction and its lease-up communities are valued based on discounted cash flows as described in notes 3 and 4 on page 18. For the purposes of this Net Asset Value calculation, The Palazzo at Park La Brea, Villas at Park La Brea, Saybrook Pointe, Parc Mosaic, Flamingo South Beach, Bay Parc, Yorktown, Park Towne Place and The Sterling are included in Aimco's Redevelopment Portfolio value. For the purpose of this Net Asset Value calculation, One Canal and Indigo are included in Aimco's Lease-Up Portfolio; Bent Tree Apartments is included in Other Real Estate Portfolio, valued at the purchased price.

After excluding the results related to the communities described above, stabilized NOI related to redevelopment and development communities represents the results of operations from the following communities: Palazzo East at Park La Brea, located in Los Angeles, California; Broadway Lofts, located in San Diego, California; and Calhoun Beach Club, located in Minneapolis, Minnesota.

b.
Represents revenue and expenses related primarily to Aimco’s investment in land and communities under contract for sale. Such properties are included in Aimco's Net Asset Value as described in notes on page 19.



                                                                    15

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Footnotes (continued)

2.
Represents Aimco's estimated current NOI cap rate for its Stabilized Portfolio, which was calculated by Aimco on a property-by-property basis, based primarily on information published by CBRE in its 2H 2017 Cap Rate Survey. CBRE is a nationally recognized provider of real estate data. Such Survey includes ranges of current cap rates based on the following community characteristics: market in which the community is located; infill or suburban location within the market; property quality grade; and whether the community is stabilized or value-add. In estimating the appropriate current cap rate for its Stabilized Portfolio, Aimco categorized communities in the portfolio using the framework described above and, using its judgment and detailed knowledge of each community’s condition and location, other than the exceptions noted below, Aimco selected an appropriate current cap rate from within the range provided in CBRE's Cap Rate Survey. The results of this analysis are detailed on the following page.


                                                                    16

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Footnotes (continued)
2.(continued)
1Q 2018 Stabilized Portfolio
 
 
 
 
 
 
 
Range of CBRE Cap Rates for Aimco's Portfolio
 
 
 
Communities
Apartment Homes
Average Revenue per Apartment Home
Average Rent as a Percentage of Market Average
Average Quality Grade
Low
High
Aimco Selected Cap Rate
 
Atlanta
5

817


$1,646

151
%
A
5.0%
5.7%
5.2%
 
Bay Area
10

1,845

2,790

98
%
B
4.3%
4.8%
4.7%
 
Boston
14

4,379

1,759

77
%
C+
5.9%
6.5%
6.1%
 
Chicago
9

2,882

1,648

117
%
B
5.3%
5.6%
5.7%
a
Denver
7

1,925

1,626

120
%
B
5.1%
5.7%
5.4%
 
Greater Washington, DC
12

5,085

1,545

88
%
C+
5.5%
6.2%
5.7%
 
Los Angeles
11

3,576

2,830

149
%
A
4.2%
4.7%
4.4%
 
Miami
3

873

2,185

145
%
A
4.3%
4.7%
4.5%
 
Greater New York
18

1,040

3,307

106
%
B
4.6%
5.3%
4.4%
b
Philadelphia
2

499

1,888

142
%
A
5.0%
5.5%
5.1%
 
San Diego
12

2,423

1,855

105
%
B
4.9%
5.3%
5.5%
a
Seattle
2

239

2,319

130
%
A
4.8%
5.1%
4.9%
 
Other Markets
12

3,756

1,699

119
%
B
5.2%
5.6%
5.5%
 
 
 
 
 
 
 
 
 
 
 
Total/Weighted Average
117

29,339


$1,973

108
%
B
4.9%
5.4%
5.1%
 
a.
Based on the quality of its communities and locations within the market, Aimco estimates the current NOI cap rates for its Chicago and San Diego portfolios are slightly higher than the high end of the range of cap rates indicated by the results of Aimco's analysis using the CBRE Cap Rate Survey.

b.
Aimco estimates the current NOI cap rates for its communities located in New York City are on average 20 basis points lower than the low end of the range of cap rates that is indicated by the results of Aimco's analysis using the CBRE Cap Rate Survey. Aimco believes this lower cap rate is appropriate because the Survey reflects cap rates for the New York City metro area while Aimco's portfolio is concentrated in Manhattan, where today cap rates are lower.

                                                                    17

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Footnotes (continued)

3.
Represents the value of nine communities currently under redevelopment: The Palazzo at Park La Brea & Villas at Park La Brea, located in Los Angeles, California; Saybrook Pointe, located in San Jose, California; Parc Mosaic, located in Boulder, Colorado; Flamingo South Beach & Bay Parc Plaza, located in Miami, Florida; Yorktown, located in Lombard, Illinois; and Park Towne Place and The Sterling, both located in Center City Philadelphia, Pennsylvania. Such communities are valued based on discounted cash flows using the following assumptions:

a.
Revenues: based on in-place rents, projected submarket rent growth to property stabilization based on the average of projections published by REIS and AXIOmetrics, and the completion of redevelopment.

b.
Expenses: estimated operating costs adjusted for inflation as projected by Moody's Economy.com; management fee equal to 2% of projected revenue.

c.
Cost to complete construction: based on current estimates. Please see Supplemental Schedule 10 to Aimco’s 1Q 2018 Earnings Release for additional information and descriptions of these redevelopments.

d.
Terminal value: based on current market cap rate plus 5 basis points per year from March 31, 2018, to property stabilization.

e.
Sales cost: 0.50% - 2.00% of terminal value.

f.
Discount rate: 5.90% - 7.92% depending on construction and lease-up progress at March 31, 2018.

4.
Represents the value of two communities that completed lease-up in 2017 but that have not yet achieved stabilized operations: One Canal located in Boston, Massachusetts; and Indigo located in Redwood City, California. Communities are valued based on discounted cash flows using the same assumptions described in note 3 above for redevelopment communities under construction and a discount rate of 6.0%.



                                                                    18

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Footnotes (continued)

5.
Represents the expected sales price of communities under contract for sale, the recent acquisition of Bent Tree community valued at cost, and certain land valued at cost.

6.
Represents adjustments to reflect Aimco’s share of the financial results of unconsolidated real estate partnerships and to exclude the non-controlling interest partners’ share of the financial results of consolidated real estate partnerships.

7.
For the purposes of this Net Asset Value calculation, no realizable value has been assigned to goodwill.

8.
The value of the Asset Management Business represents the contract price of the binding agreement to sell the Asset Management business.

9.
Deferred income includes below market lease liabilities related to rent-controlled or rent-stabilized apartment homes, which were recognized under GAAP in connection with purchase of the related apartment communities. Deferred income also includes cash received by Aimco in prior periods required under GAAP to be deferred upon receipt and recognized in income in future periods. For the purposes of this Net Asset Value calculation, Deferred Income is excluded and its impact on NAV is zero.


                                                                    19

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Footnotes (continued)

10.
Represents the fair value of Aimco's preferred stock, which is estimated by Aimco as the closing stock price on March 31, 2018, less accrued dividends. Such accrued dividends are assumed to be accounted for in the closing stock price and these amounts are also included on Aimco's balance sheet in accrued liabilities. As such, an adjustment is made to the value of Aimco's preferred stock so as not to overstate the fair value of Aimco's liabilities and preferred stock on a combined basis.

11.
Represents the carrying value of Aimco's non-recourse property debt, adjusted for the mark-to-market asset on Aimco's fixed-rate property debt as of March 31, 2018. Such mark-to-market has been computed by Aimco using a Money-Weighted Average Interest Rate of 3.99% which rate takes into account the timing of amortization and maturities, and a market rate of 4.01%, which takes into account the duration of the existing property debt, the loan-to-value and debt service coverage, as well as timing of amortization and maturities. Refer to Supplemental Schedule 5a to Aimco’s 1Q 2018 Earnings Release for additional information regarding Aimco’s leverage in general and property debt specifically, and a reconciliation of Aimco’s computation of leverage amounts to the most comparable GAAP amounts.

12.
Represents total shares of Aimco common stock, common partnership units of the Aimco Operating Partnership held by entities other than Aimco, and potential dilutive share equivalents outstanding, which information may be found in Supplemental Schedule 5b to Aimco’s 1Q 2018 Earnings Release.


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Definitions

AIMCO OPERATING PARTNERSHIP (OP): AIMCO Properties, L.P., a Delaware limited partnership, is the operating partnership in Aimco's UPREIT structure. Aimco owns approximately 95% of the common partnership units of the Aimco OP. 

PORTFOLIO QUALITY RATINGS: Aimco measures portfolio quality based on apartment community 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 portfolio quality as follows: "A" quality apartment communities are those earning rents greater than 125% of the local market average; "B" quality apartment communities are those earning rents between 90% and 125% of the local market average; "C+" quality apartment communities are those earning rents greater than $1,100 per month but lower than 90% of the local market average; and "C" quality apartment communities are those earning rents less than $1,100 per month and lower than 90% of the local market average.



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