Morningstar | Strong Operating Results for AIMCO, but Larger Volume of Dispositions Leads to Slight Miss
Results for Apartment Investment & Management Company's portfolio were well above our assumptions in the first quarter. However, the company also sold significantly more than we expected, so AIMCO's bottom line slightly missed our estimate. As a result, we do not anticipate any material changes to our $46 fair value estimate for the no-moat rated company. Same-store occupancy was flat sequentially at 97.0%, beating our estimate of a 30-basis-point drop. Average monthly rates for the same-store portfolio were up 3.2%, leading to same-store revenue growth of 4.2% that beat our 2.1% estimate. The company also outperformed on expense growth by containing costs to only grow 0.8% in the first quarter as marketing costs were down due to higher tenant retention. This led to same-store net operating income growth of 5.5%, ahead of our 2.5% NOI growth assumption. While internal growth was higher than expected, dispositions were also higher as the company sold seven properties for $408.6 million compared with our assumption of $250 million in the quarter. As a result, pro forma funds from operations missed our estimate by a penny with a $0.61 number for the quarter.Despite the outperformance in the first quarter, AIMCO's management chose not to raise guidance for 2019. Same-store revenue and NOI growth was above the high end, while expense growth was below the low end of management's guidance range for the full year. Although there are still three quarters left in the year, the early success establishes a run-rate that makes it likely that management will raise same-store operating guidance as the year progresses. We hope the strong portfolio performance then leads to management raising FFO guidance as the company's current FFO range of $2.41 to $2.51 is below our 2019 estimate of $2.57. We are encouraged by the strong operating results in the quarter as it increases the likelihood of the company matching our lofty bottom-line estimate.
Apartment Investment and Management is a self-administered and self-managed real estate investment trust, focused on the ownership, management, redevelopment and limited development of apartment communities located in the United States. The company, through its wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, owns a majority of the ownership interests in AIMCO Properties, L.P. (the Aimco Operating Partnership). The company conducts all of its business and owns all of its assets through the Aimco Operating Partnership. The company owns and operates a portfolio of apartment communities in several states and the District of Columbia.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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