COVER STORY

Another Side of Aimco

AFFORDABLE HOUSING FINANCE • May 2008

BY DONNA KIMURA

DENVER -- Best known for its substantial market-rate property portfolio, Apartment Investment and Management Co. (Aimco) has also claimed a big stake in affordable housing.

At first glance, the real estate investment trust (REIT) is one of the nation’s largest owners and operators of apartments. Aimco owns 439 conventional apartment communities with 127,532 units. A further look reveals that Aimco is also one of the largest affordable housing owners, with 312 properties and 37,104 units.

“We have an intense desire to add to our [low-income housing] tax credit (LIHTC) redevelopment pipeline,” said Jeff Kimes, senior vice president of affordable properties for the Denver-based company.

Aimco will be looking at acquisition opportunities this year. But 2008 will also be a year that the company considers disposing of properties, both on the conventional and the affordable sides. The company, which saw more than a 30 percent decline in its share price during 2007, has been a net seller of properties for the past few years.

Aimco disposed of 30 affordable housing properties in 2007, generating net cash proceeds of $15.4 million. The firm also sold 46 conventional properties last year.

During the last quarter of 2007, the REIT’s affordable property operations generated net operating income of $19.2 million. Average month-end occupancy decreased 60 basis points from 97.2 percent in 2006 to 96.6 percent for calendar 2007, while rents increased $28 per unit, or 3.9 percent, from $711 to $739 per unit, according to the fourth-quarter report.

The majority of Aimco’s affordable portfolio is made up of project-based Sec. 8 units. The company also owns LIHTC, Sec. 236, and U.S. Department of Agriculture Rural Development housing, according to Kimes.

Aimco received more than $100 million in LIHTC reservations to redevelop 12 properties in 2007, including nearly $10 million in Massachusetts and $8.2 million in New York. Kimes hopes to receive a similar amount this year.

The company has used tax credits mostly to redevelop projects in its portfolio, including tearing down properties and rebuilding, adding units, and rehabilitating projects. The average annual tax credit redevelopment cost to the company is $75,000 per unit, according to Kimes. That includes both interior and exterior work.

The company’s tax credits are syndicated by Aimco Capital, the unit that provides asset management and transaction services to the company’s entire portfolio. Under a reorganization, Aimco Capital became responsible for strategic planning, capital allocation, investments, joint ventures, and transactions for the company’s overall $14 billion portfolio.

In addition to the properties that Aimco owns, the company handles property and asset management for more than 38,000 units for other owners.

Many REITs have been hard hit lately. Overall, Aimco had total revenue of $1.7 billion and net income of $29.9 million last year, an 83 percent drop from the year before. It recorded a net loss attributable to common stockholders of $36.1 million for the year. In comparison, Aimco had net income of $176.8 million and net income attributable to common stockholders of $95.7 million in 2006.

The decreases were principally due to a drop in net gains on dispositions, an increase in interest expense reflecting higher loan principal balances, and an increase in depreciation and amortization expenses, according to reports filed with the Securities and Exchange Commission. Aimco said the effect on the operating results was partially offset by an increase in net operating income associated with property operations.

The company made a big push to have its affordable properties recognized as Communities of Quality (COQ) by the National Affordable Housing Management Association. The designation recognizes excellence in affordable property management, customer service, and other areas of performance. Aimco had just a handful of properties with the designation at the start of 2007, but finished the year with 69 COQ properties, earning an award for having the nation’s highest number of COQ communities.