DENVER--(BUSINESS WIRE)--Apartment Income REIT Corp. ("AIR" or the "Company") (NYSE: AIRC) announced today results for the second quarter of 2023.
During the second quarter, the Company:
- Delivered Pro forma FFO per share of $0.58, reflecting 13.7% year-over-year growth (adjusting for prior contribution of the Aimco note prepayment) and beating the midpoint of guidance by $0.01 per share;
- Delivered Same Store NOI growth of 10.6%;
- Formed two joint ventures to recapitalize 11 properties valued at $1.2 billion, with nine of 11 properties now closed and the remaining two expected to close by year-end;
- Used proceeds from the joint ventures to reduce Net Leverage to Adjusted EBITDAre to 5.9x on a pro forma basis, within AIR's targeted range;
- Expects to use the balance of proceeds to purchase properties, now in advanced negotiations, with current returns neutral to 2023 FFO and $0.01 accretive to 2024 FFO, with long-term unlevered IRRs in excess of 10%;
- Raises Same Store Revenue and NOI guidance by 20 and 40-basis points, respectively, at their midpoints;
- Narrows the guidance range for 2023 Pro forma FFO per share to $2.38 to $2.44 while maintaining $2.41 as the midpoint, which is unchanged due to higher than anticipated casualty losses. The $2.41 midpoint represents a 10% growth versus 2022 Run-Rate FFO per share of $2.19; and
- Expects Pro forma FFO per share between $0.61 and $0.65 in the third quarter, and between $1.26 and $1.32 in the second half of 2023, driven primarily by property operations increasing its first half contribution by $20.4 million, or $0.13 of FFO per share.
With more than 80% of 2023 leasing now complete, the Company expects the earn-in to Same Store Revenue growth in 2024 in the low-to-mid 2% range. With largely fixed operating expenses, low G&A, and fixed interest rates, 2024 growth in NOI - from both Same Store and Acquisition portfolios - is expected to translate directly to growth in Pro forma FFO per share.
Financial Results: Second Quarter Run-Rate FFO Per Share Up 13.7%
In the second quarter of 2022, with the support of shareholders, AIR accepted prepayment of the Aimco note, which contributed $0.15 to 2022 Pro forma FFO per share. This makes 2022 not comparable to 2023. Adjusting for this event, second quarter FFO of $0.58 per share is 13.7% higher in 2023 than in 2022.
SECOND QUARTER | YEAR-TO-DATE | ||||||||||||||||||
(all items per common share - diluted) | 2023 | 2022 | Variance | 2023 | 2022 | Variance | |||||||||||||
Net (loss) income | $ | (0.01 | ) | $ | 1.26 | nm | $ | (0.09 | ) | $ | 3.66 | nm | |||||||
NAREIT Funds From Operations (FFO) | $ | 0.62 | $ | 0.64 | (3.1%) | $ | 1.11 | $ | 1.06 | 4.7% | |||||||||
Pro forma adjustments | (0.04 | ) | 0.02 | nm | 0.01 | 0.17 | nm | ||||||||||||
Pro forma Funds From Operations (Pro forma FFO) | $ | 0.58 | $ | 0.66 | (12.1%) | $ | 1.12 | $ | 1.23 | (8.9%) | |||||||||
Contribution from Aimco note | - | (0.15 | ) | nm | - | (0.19 | ) | nm | |||||||||||
Run-Rate FFO | $ | 0.58 | $ | 0.51 | 13.7% | $ | 1.12 | $ | 1.04 | 7.7% | |||||||||
Operating Results: Second Quarter Same Store NOI Up 10.6% YoY and 11.6% YTD
AIR's Same Store portfolio comprises 63 properties and provided 85% of year-to-date rental revenue.
SECOND QUARTER | YEAR-TO-DATE | |||||||||||||||||||
Year-over-Year | Sequential | Year-over-Year | ||||||||||||||||||
($ in millions) * | 2023 | 2022 | Variance | 1st Qtr. | Variance | 2023 | 2022 | Variance | ||||||||||||
Revenue, before utility reimbursements | $ | 158.8 | $ | 146.0 | 8.8 | % | $ | 156.6 | 1.5 | % | $ | 315.4 | $ | 288.2 | 9.4 | % | ||||
Expenses, net of utility reimbursements | 41.0 | 39.4 | 4.1 | % | 40.8 | 0.4 | % | 81.8 | 78.9 | 3.7 | % | |||||||||
Net operating income (NOI) | 117.8 | 106.6 | 10.6 | % | 115.7 | 1.8 | % | 233.5 | 209.3 | 11.6 | % | |||||||||
*Amounts are presented on a rounded basis and the sum of the individual amounts may not foot; please refer to Supplemental Schedule 6. |
Second quarter 2023 Same Store NOI margin was 74.2%, up 120-basis points year-over-year and an AIR record for the second quarter, the result of:
- 8.8% growth in Residential Rents, and
- Sustained cost control with controllable expenses increasing only 100 basis points.
Components of Same Store Revenue Growth
SECOND QUARTER 2023 | YEAR-TO-DATE | |||||
Same Store Revenue Components | Year-over-Year | Sequential | Year-over-Year | |||
Residential Rents | 8.8 | % | 1.3 | % | 9.4 | % |
Average Daily Occupancy | (1.1 | %) | (1.9 | %) | (0.7 | %) |
Residential Rental Income | 7.7 | % | (0.6 | %) | 8.7 | % |
Bad Debt, net of recoveries | - | % | 0.7 | % | 0.1 | % |
Other Residential Income | 1.0 | % | 1.1 | % | 0.6 | % |
Residential Revenue | 8.7 | % | 1.2 | % | 9.4 | % |
Commercial Revenue | 0.1 | % | 0.3 | % | - | % |
Same Store Revenue Growth | 8.8 | % | 1.5 | % | 9.4 | % |
Same Store Rental Rates & Occupancy
SECOND QUARTER | YEAR-TO-DATE | 2023 | ||||||||||||||||||
(amounts represent AIR share)* | 2023 | 2022 | Variance | 2023 | 2022 | Variance | April | May | June | July** | ||||||||||
Transacted Leases | ||||||||||||||||||||
Renewal rent changes | 8.0 | % | 11.5 | % | (3.5 | %) | 8.2 | % | 11.7 | % | (3.5 | %) | 8.6 | % | 8.2 | % | 7.7 | % | 6.7 | % |
New lease rent changes | 6.6 | % | 18.8 | % | (12.2 | %) | 7.5 | % | 18.2 | % | (10.7 | %) | 8.4 | % | 6.6 | % | 5.7 | % | 5.1 | % |
Weighted-average rent changes | 7.4 | % | 14.6 | % | (7.2 | %) | 7.8 | % | 14.7 | % | (6.9 | %) | 8.5 | % | 7.4 | % | 6.7 | % | 5.8 | % |
Signed Leases | ||||||||||||||||||||
Renewal rent changes | 7.0 | % | 11.2 | % | (4.2 | %) | 7.4 | % | 11.4 | % | (4.0 | %) | 7.8 | % | 7.5 | % | 6.1 | % | 5.7 | % |
New lease rent changes | 6.0 | % | 18.1 | % | (12.1 | %) | 6.6 | % | 17.9 | % | (11.3 | %) | 7.6 | % | 5.5 | % | 5.3 | % | 4.7 | % |
Weighted-average rent changes | 6.5 | % | 14.3 | % | (7.8 | %) | 7.0 | % | 14.4 | % | (7.4 | %) | 7.7 | % | 6.5 | % | 5.7 | % | 5.1 | % |
Average Daily Occupancy | 95.5 | % | 96.6 | % | (1.1 | %) | 96.5 | % | 97.2 | % | (0.7 | %) | 96.4 | % | 95.6 | % | 94.7 | % | 94.6 | % |
Note: Transacted leases are those that became effective during the reporting period and are therefore the best measure of immediate effect on current revenues. Signed leases are those executed during a reporting period and are therefore the best measure of current pricing and an important driver of future results. All lease-to-lease data is reported on an effective rent basis. |
*Amounts are based on our current Same Store population and may differ from those previously reported. |
**July leasing results are preliminary and as of July 26, 2023. |
- Second quarter signed lease rate growth is higher than assumed in our annual plan with a blended rate increase of 6.5% benefiting from (i) 10-basis points from 2021 acquisitions (now in Same Store) and (ii) 70-basis points from capital enhancement activity.
- Average Daily Occupancy ("ADO") declined 190-basis points sequentially due to (i) normal and expected seasonality (110-basis points of decline) due to the frictional vacancy of the leasing season and (ii) increased move-outs of non-paying residents as COVID-related protections expired (60-basis points).
- ADO is anticipated to reach its low point in July, and then increase in the third and fourth quarters.
Rent Collections & Bad Debt
During the second quarter, AIR recognized 98.8% of all residential revenue billed in the quarter with the remaining 1.2% reserved as gross bad debt. Payments received during the second quarter with respect to revenue treated as bad debt in previous periods, totaled 60-basis points of second quarter residential revenue resulting in bad debt for the second quarter, net of the contra entry, of 0.6% of residential revenue.
- Of the 1.2% in gross bad debt: (i) 50-basis points reflects a level of delinquency that is slightly higher than AIR's experience in 2019, (ii) 40-basis points is due to slower action by courts as a result of backlogs created by pandemic-related government shutdowns, and (iii) 30-basis points is due to the move-out and related fees charged to individuals who were evicted or terminated their lease early.
- There are currently 150 delinquent residents in AIR's portfolio. 70 residents represents a "normalized" rate for credit issues, slightly higher than pre-COVID levels of approximately 50 residents, on average per month. The slower action by courts. noted above, provides more time for delinquent residents and increase the amount of bad debt per defaulting resident, which explains the incremental 80 residents in the process of collection.
- As of June 30, 2023, AIR's proportionate share of residential accounts receivable was $4.8 million, or $0.1 million net of security deposits and reserves for uncollectible amounts.
Acquisition Portfolio Performance
Year-over-Year Variance | |||||
Year | Apartment
| % of GAV | Rev | Exp | NOI |
Class of 2021** | 5 | 8.0% | 19.0% | (2.2%) | 30.5% |
Sequential Variance | |||||
Year | Apartment
| % of GAV | NOI | ||
Class of 2021** | 5 | 8.0% | 4.9% | ||
Class of 2022 and 2023* | 5 | 9.0% | 3.4% | ||
Acquisition Portfolio | 10 | 17.0% | 4.1% | ||
Total Portfolio | 73 | 100.0% | 1.7% | ||
*Acquisition property results are often volatile, sometimes by design, when properties are first added to the AIR platform. Common examples are the implementation of AIR's "no smoking" policy and AIR's requirement of high credit ratings from new residents. Over three or four years, results become stable as new residents are selected by AIR, increasing numbers of high quality residents renew their leases, and the disturbance of property upgrades is in the past. |
**Acquisitions from 2021 are included in, and contribute to, Same Store Portfolio metrics. |
Transactions
AIR has property operation expertise, termed the AIR Edge, which results in higher property NOI, enabling AIR to acquire properties and deploy the AIR Edge to improve their profitability and value. This enables AIR to sell properties at market NOI cap rates and unlevered IRRs, and to reinvest capital in acquisition properties which generally enjoy accelerated growth in profitability relative to general market rates.
AIR's business is to acquire properties, deploy the AIR Edge, and generate returns 200-basis points, or higher, than AIR's cost of capital, as measured by unlevered IRR. "Paired trades" make agnostic to changes in market conditions insofar as AIR is buying and selling at roughly the same time. The benefits - enhanced total NOI growth and higher FFO - are realized primarily in years two through four as it requires more than one turn of the rent roll to implement AIR's menu of high credit standards, measured customer satisfaction, customer retention, lowered operating costs, and completion of planned capital improvements.
Joint Venture Transactions
As previously announced, AIR formed two joint ventures in the quarter, the first of which closed on June 30, 2023 through the sale of a 70% interest in Huntington Gateway (the "Value-Add JV"), and the second of which closed on July 17, 2023 through the sale of a 47% interest in eight of ten properties (the "Core JV"). The remaining two properties within the Core JV are expected to close before year-end. AIR now has four separate joint venture partnerships, each (i) with world-class investors interested in doing more with AIR, (ii) paying asset and property management fees, and (iii) providing substantial opportunity to earn "promotes." For AIR, joint ventures are a strategic source of attractively priced capital, and provide AIR the resources to pursue a broader opportunity set to pursue growth. AIR expects to sell further interests of the existing joint ventures to increase expected returns on its retained investment, and to make available additional capital to invest in future AIR Edge properties with higher returns.
California JV | Washington, D.C. JV | Core JV | Value-Add JV | |
September 2020 | October 2021 | July 2023 | June 2023 | |
GAV @ 100% | $2.4B | $0.5B | $1.1B | $0.1B |
AIR / JV Partner Ownership | 61% / 39% | 20% / 80% | 53% / 47% | 30% / 70% * |
Number of Properties | 12 | 3 | 10 | 1 |
Units | 4,051 | 1,748 | 3,093 | 443 |
Average Revenue per Unit | $3,389 | $2,070 | $2,534 | $2,307 |
*Legal ownership sold is 70%, while AIR will receive 50% of JV cash flow during the hold period. |
Dispositions
AIR is nearing completion of its strategic exit from New York City through:
- The sale of two properties with 62 apartment homes to a developer for gross proceeds of $33.2 million and a non-cash GAAP loss of $8.2 million; and
- Signing a contract to sell its remaining New York City property, at a price which resulted in a non-cash GAAP write-down of $15.4 million.
In aggregate since the Separation, AIR has recognized non-cash GAAP gains of $1.5 billion on $2.2 billion of dispositions.
Balance Sheet & Liquidity
To lower its cost of capital and enhance financial returns, AIR targets Net Leverage to EBITDAre between 5.0x to 6.0x with focus on fixed-rate, long-term debt with well laddered maturities. We maintain flexibility through (i) ample unused and available credit, (ii) holding properties with substantial value unencumbered by property debt, and (iii) maintaining an investment grade rating.
Balance sheet highlights, pro forma for the announced joint ventures, include:
- Reduction in Net Leverage to EBITDAre to 5.9x, within AIR's targeted range, and extension of its weighted-average maturities by more than seven months;
- 96% fixed-rate leverage with limited repricing risk before the second quarter of 2025;
- Available liquidity of $2.3 billion and access to more potentially secured by $5.8 billion in unencumbered property value; and
- Limited refunding risk with the ability to fund all maturities through 2027 from cash on hand, and a 10-year commitment to make $1 billion of property loans with up to 10-year maturities.
Dividend & Equity Capital Markets
On July 25, 2023, the AIR Board of Directors declared a quarterly cash dividend of $0.45 per share of Common Stock, payable on August 29, 2023 to shareholders of record on August 18, 2023. The Board of Directors targeted a 75% payout ratio on Pro forma FFO in setting the dividend for 2023, which is also expected to have favorable tax characteristics due to AIR's tax basis refreshed at the time of the Separation from Aimco.
Components of AIR Pro forma FFO
With a total of approximately $2.2 billion of third party capital assets now under management, third party asset, property management and transaction related fees are a small, but growing component of AIR FFO. In 2023, AIR anticipates 96% of its Pro forma FFO will be earned from levered property operations, with the remaining 4%, or $0.11 per share, largely attributable to property management, asset management, and transactional services provided to third parties and venture partners.
2023 | 2022 | Variance | |||||
Levered Property Operations | $ | 2.30 | $ | 2.08 | 10.6% | ||
Third Party Services, net (1) | 0.11 | 0.11 | -% | ||||
Run-rate FFO, at the midpoint | $ | 2.41 | $ | 2.19 | 10.0% | ||
Aimco Note Prepayment (2) | - | 0.22 | nm | ||||
Total Pro forma FFO, at the midpoint | $ | 2.41 | $ | 2.41 | -% |
(1) | Third party services are a natural result of AIR's joint ventures and acquisitions: | ||
(a) | Asset management fees are a revenue stream created by the formation of joint ventures, and | ||
(b) | Property management fees prior to purchase of the related property permit AIR to begin implementation of the AIR Edge, for example in requirement of high credit standards prior to taking ownership. | ||
Of this amount, approximately $0.06 is expected to continue for the life of the joint ventures. The $0.05 in remaining fees are specific to 2023 activities. AIR earned a similar level of such fees in 2022 and we anticipate a similar amount will be earned in 2024 and beyond. | |||
(2) | 2022 Pro forma FFO included a non-recurring $0.22 per share contribution from the Aimco note prepayment. | ||
2023 Outlook
AIR's midpoint of Pro forma FFO per share of $2.41 remains unchanged. Our guidance ranges are shown below and generally tightened based on activities completed year-to-date:
YEAR-TO-DATE
| FULL YEAR 2023 | PREVIOUS FULL
| |
($ amounts represent AIR share) | |||
Net (loss) income per share | $(0.09) | $0.66 to $0.76 | ($0.18) to ($0.06) |
Pro forma FFO per share | $1.12 | $2.38 to $2.44 | $2.36 to $2.46 |
Pro forma FFO per share at the midpoint | $2.41 | $2.41 | |
Same Store Operating Components | |||
Revenue change compared to prior year | 9.4% | 7.8% to 8.6% | 7.0% to 9.0% |
Expense change compared to prior year | 3.7% | 5.0% to 5.6% | 5.0% to 6.5% |
NOI change compared to prior year | 11.6% | 8.6% to 9.8% | 7.3% to 10.3% |
Other Earnings | |||
Proceeds from dispositions of real estate | $33M | $54M | $50M |
Proceeds from joint venture transactions (1) | $554M | $599M | $- |
AIR Share of Capital Enhancements | |||
Capital Enhancements | $42M | $80M to $90M | $80M to $90M |
Balance Sheet | |||
Net Leverage to Adjusted EBITDAre (1) | 5.9x | =6.0x | =6.0x |
(1) | In July 2023, AIR completed the Core JV with a global institutional investor. As part of the transaction, AIR raised $611 million in new mortgage financing. In aggregate, the joint venture partner took title subject to $275 million of the total mortgage obligation reflecting its 47% share of the property debt, and AIR received $185 million in cash. We anticipate that, upon the closing of the final two properties, the joint venture partner will take title subject to $28 million of the related mortgage loan obligation, and AIR will receive $17 million in additional cash. Proceeds, net of transaction costs, were used to repay $292 million on the revolving credit facility, $325 million of term loans, with the remaining invested in short-term liquid investments. |
In the third quarter of 2023, AIR anticipates Pro forma FFO between $0.61 and $0.65 per share.
Earnings Conference Call Information
Live Conference Call: | Conference Call Replay: |
Friday, July 28, 2023 at 2:00 p.m. ET | Replay available until October 26, 2023 |
Domestic Dial-In Number: 1-888-886-7786 | Domestic Dial-In Number: 1-877-674-7070 |
International Dial-In Number: 080-0652-2435 | International Dial-In Number: 1-416-764-8658 |
Passcode: 11736488 | Passcode: 736488 |
Live Webcast: investors.aircommunities.com |
Supplemental Information
The full text of this Earnings Release and the Supplemental Information referenced in this release is available on AIR's website at investors.aircommunities.com.
Glossary & Reconciliations of Non-GAAP Financial and Operating Measures
Financial and operating measures found in this Earnings Release and the Supplemental Information include certain financial measures used by AIR management that are measures not defined under accounting principles generally accepted in the United States ("GAAP"). Certain AIR terms and Non-GAAP measures are defined in the Glossary in the Supplemental Information and Non-GAAP measures reconciled to the most comparable GAAP measures.
About AIR
Apartment Income REIT Corp (NYSE: AIRC) is a publicly traded, self-administered real estate investment trust ("REIT"). AIR's portfolio comprises 73 communities totaling 25,739 apartment homes located in 10 states and the District of Columbia. AIR offers a simple, predictable business model with focus on what we call the AIR Edge, the cumulative result of our focus on resident selection, satisfaction, and retention, as well as relentless innovation in delivering best-in-class property management. The AIR Edge is a durable operating advantage in driving organic growth, as well as making possible the opportunity for excess returns for properties new to AIR's platform. For additional information, please visit aircommunities.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 2023 results, including but not limited to: NAREIT FFO, Pro forma FFO, Run-rate FFO and selected components thereof; expectations regarding consumer demand, growth in revenue and strength of other performance metrics and models; expectations regarding acquisitions, as well as sales, and joint ventures and the use of proceeds thereof; and AIR liquidity and leverage metrics. We caution investors not to place undue reliance on any such forward-looking statements.
These forward-looking statements are based on management's current expectations, estimates and assumptions and subject to risks and uncertainties, that could cause actual results to differ materially from such forward-looking statements, including, but not limited to: real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including inflation, the pace of job growth, and the level of unemployment; the amount, location, and quality of competitive new housing supply, which may be impacted by global supply chain disruptions; the timing and effects of acquisitions and dispositions; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; loss of key personnel; AIR's ability to maintain current or meet projected occupancy, rental rate, and property operating results; expectations regarding sales of apartment communities and the use of proceeds thereof; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; financing risks, including interest rate changes and the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; and possible environmental liabilities, including costs, fines, or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by AIR. Other risks and uncertainties are described in filings by AIR with the Securities and Exchange Commission ("SEC"), including the section entitled "Risk Factors" in Item 1A of AIR's Annual Report on Form 10-K for the year ended December 31, 2022, and subsequent filings with the SEC.
In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the "Code"), and depends on our ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership.
These forward-looking statements reflect management's judgment as of this date, and we assume no obligation to revise or update them to reflect future events or circumstances. This earnings release does not constitute an offer of securities for sale.
Consolidated Statements of Operations | |||||||||||||||
(in thousands, except per share data) (unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | ||||||||||||
REVENUES | |||||||||||||||
Rental and other property revenues (1) | $ | 212,492 | $ | 181,012 | $ | 422,415 | $ | 360,273 | |||||||
Other revenues | 2,068 | 2,488 | 4,138 | 4,705 | |||||||||||
Total revenues | 214,560 | 183,500 | 426,553 | 364,978 | |||||||||||
OPERATING EXPENSES | |||||||||||||||
Property operating expenses (1) | 72,012 | 63,787 | 147,465 | 127,023 | |||||||||||
Depreciation and amortization | 89,260 | 78,656 | 184,926 | 163,205 | |||||||||||
General and administrative expenses (2) | 6,023 | 5,333 | 13,203 | 11,930 | |||||||||||
Other (income) expenses, net | 2,519 | (3,076 | ) | 6,179 | 942 | ||||||||||
Total operating expenses | 169,814 | 144,700 | 351,773 | 303,100 | |||||||||||
Interest income | 1,507 | 25,652 | 3,032 | 39,133 | |||||||||||
Interest expense | (37,554 | ) | (26,027 | ) | (73,741 | ) | (48,134 | ) | |||||||
Loss on extinguishment of debt | - | - | (2,008 | ) | (23,636 | ) | |||||||||
(Loss) gain on dispositions and impairments of real estate | (17,472 | ) | 175,606 | (17,472 | ) | 587,609 | |||||||||
Gain on derivative instruments, net | 11,390 | - | 9,252 | - | |||||||||||
Loss from unconsolidated real estate partnerships | (842 | ) | (873 | ) | (1,877 | ) | (2,887 | ) | |||||||
Income (loss) before income tax expense | 1,775 | 213,158 | (8,034 | ) | 613,963 | ||||||||||
Income tax expense | (1,177 | ) | (1,499 | ) | (1,316 | ) | (920 | ) | |||||||
Net income (loss) | 598 | 211,659 | (9,350 | ) | 613,043 | ||||||||||
Noncontrolling interests: | |||||||||||||||
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships | (684 | ) | (381 | ) | (1,369 | ) | 183 | ||||||||
Net income attributable to preferred noncontrolling interests in AIR OP | (1,570 | ) | (1,602 | ) | (3,140 | ) | (3,205 | ) | |||||||
Net loss (income) attributable to common noncontrolling interests in AIR OP | 315 | (12,749 | ) | 1,141 | (36,916 | ) | |||||||||
Net income attributable to noncontrolling interests | (1,939 | ) | (14,732 | ) | (3,368 | ) | (39,938 | ) | |||||||
Net (loss) income attributable to AIR | (1,341 | ) | 196,927 | (12,718 | ) | 573,105 | |||||||||
Net income attributable to AIR preferred stockholders | (42 | ) | (43 | ) | (85 | ) | (85 | ) | |||||||
Net income attributable to participating securities | (56 | ) | (162 | ) | (93 | ) | (417 | ) | |||||||
Net (loss) income attributable to AIR common stockholders | $ | (1,439 | ) | $ | 196,722 | $ | (12,896 | ) | $ | 572,603 | |||||
Net (loss) income attributable to AIR common stockholders per share - basic and diluted | $ | (0.01 | ) | $ | 1.26 | $ | (0.09 | ) | $ | 3.66 | |||||
Weighted-average common shares outstanding - basic | 148,832 | 155,927 | 148,821 | 156,327 | |||||||||||
Weighted-average common shares outstanding - diluted | 148,832 | 156,136 | 148,821 | 156,607 | |||||||||||
(1) | Rental and other property revenues for the three and six months ended June 30, 2023 are inclusive of $0.2 million and $0.5 million, respectively, of revenues related to sold properties. Rental and other property revenues for the three and six months ended June 30, 2022 are inclusive of $10.3 million and $25.5 million, respectively, of revenues related to sold properties. Property operating expenses for the six months ended June 30, 2023 are inclusive of $0.3 million of expenses related to sold properties. Property operating expenses for the three and six months ended June 30, 2022 are inclusive of $3.4 million and $8.9 million, respectively, of expenses related to sold properties. | |
(2) | In setting our G&A benchmark of 15 bps of Gross Asset Value, we consider asset management fees earned in our joint ventures as a reduction of general and administrative expenses. In accordance with GAAP, general and administrative expenses are shown gross of these asset management fees. The California Joint Venture is consolidated on our balance sheet and accordingly, fees earned in this venture are included in the determination of net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships. The Washington D.C. area Joint Venture is not consolidated on our balance sheet and accordingly, fees earned in this venture are included in loss from unconsolidated real estate partnerships. Fees earned from joint ventures were $1.5 million and $3.0 million for three and six months ended June 30, 2023, respectively, and $1.7 million and $3.4 million for three and six months ended June 30, 2022, respectively. Beginning in the third quarter, AIR's share of the Core and Value-Add Joint Ventures will be included within loss from unconsolidated real estate partnerships. |
Consolidated Balance Sheets | |||||||
(in thousands) (unaudited) | |||||||
June 30, 2023 | December 31, 2022 | ||||||
Assets | |||||||
Real estate | $ | 8,233,320 | $ | 8,076,394 | |||
Accumulated depreciation | (2,562,252 | ) | (2,449,883 | ) | |||
Net real estate | 5,671,068 | 5,626,511 | |||||
Cash and cash equivalents | 106,349 | 95,797 | |||||
Restricted cash | 23,564 | 205,608 | |||||
Goodwill | 32,286 | 32,286 | |||||
Other assets (1) | 573,743 | 591,681 | |||||
Total assets | $ | 6,407,010 | $ | 6,551,883 | |||
Liabilities and Equity | |||||||
Non-recourse property debt | $ | 2,211,002 | $ | 1,994,651 | |||
Debt issue costs | (13,565 | ) | (9,221 | ) | |||
Non-recourse property debt, net | 2,197,437 | 1,985,430 | |||||
Term loans, net | 797,471 | 796,713 | |||||
Revolving credit facility borrowings | 292,000 | 462,000 | |||||
Unsecured notes payable, net | 397,669 | 397,486 | |||||
Accrued liabilities and other (1) | 476,400 | 513,805 | |||||
Total liabilities | 4,160,977 | 4,155,434 | |||||
Preferred noncontrolling interests in AIR OP | 77,143 | 77,143 | |||||
Equity: | |||||||
Perpetual Preferred Stock | 2,000 | 2,000 | |||||
Class A Common Stock | 1,492 | 1,491 | |||||
Additional paid-in capital | 3,430,731 | 3,436,635 | |||||
Accumulated other comprehensive income | 39,343 | 43,562 | |||||
Distributions in excess of earnings | (1,474,101 | ) | (1,327,271 | ) | |||
Total AIR equity | 1,999,465 | 2,156,417 | |||||
Noncontrolling interests in consolidated real estate partnerships | (80,087 | ) | (78,785 | ) | |||
Common noncontrolling interests in AIR OP | 249,512 | 241,674 | |||||
Total equity | 2,168,890 | 2,319,306 | |||||
Total Liabilities and Equity | $ | 6,407,010 | $ | 6,551,883 | |||
(1) | Other assets includes the Parkmerced mezzanine investment, and accrued liabilities and other includes the offsetting liabilities. The benefits and risks of ownership of the Parkmerced mezzanine investment have been transferred to Aimco, but legal transfer has not occurred. As of June 30, 2023, the Parkmerced mezzanine investment had an offsetting $158.5 million asset and liability balance. During the second quarter, the interest rate swap option asset and offsetting liability associated with the Parkmerced mezzanine investment was settled for approximately $53 million, resulting in equal decreases in other assets and accrued liabilities and other. |
Contacts
Matthew O'Grady
Senior Vice President, Capital Markets
(303) 691-4566
Mary Jensen
Head of Investor Relations
(303) 691-4349
investors@aircommunities.com
