AIR Reports First Quarter 2022 Results; First Quarter FFO of $0.57 per share $0.02 above Midpoint of Guidance; Pro Forma Leverage to EBITDAre at 5.4x, within targeted range.
Denver, Colorado, May 2, 2022 – Apartment Income REIT Corp. ("AIR") (NYSE: AIRC) announced today first quarter results for 2022.
Chief Executive Officer Terry Considine comments: "AIR began the year with strong results, the product of intentional focus on a simple business model, comparative advantage in property operations, low G&A costs, and a commitment to low leverage."
"Comparing first quarter 2022 to first quarter 2021: Same Store revenue and NOI are up 9.2% and 11.7%, respectively. NOI margins are up 162 basis points to 72.8%. Average daily occupancy improved by 270 basis points to 98.1%."
"We seized the opportunity to sell our lowest rated properties at prices fueled by then historic low interest rates, generating $1.7 billion in sales proceeds over the past eight months. We agreed with Aimco for the prepayment of its $534 million note, plus an estimated $23.5 million prepayment penalty, 20 months prior to its maturity. Its collection is expected later this quarter and will increase capital generated to $2.3 billion. We will use $1.5 billion to reduce leverage… by $300 million last year and $1.2 billion in this year alone… and to lengthen maturities at fixed interest rates."
"Last year we used the $750 million balance of capital generated from asset sales to purchase five properties that we expect when added to the AIR platform will generate IRRs 200 to 300 bps higher than those of the properties sold to fund their purchase. While it remains 'early days', their performance has exceeded our underwriting and demonstrates the value added by the 'AIR Edge'… our combination of customer selection, satisfaction, and retention, disciplined productivity to control operating costs, and high yielding property upgrades… and we expect this portfolio to have NOI growth 50% above that of our same store portfolio in 2022."
"We are focused on the continued systematic enhancement of our portfolio through disciplined, accretive growth funded by 'paired trades' for additional properties which will benefit from the AIR Edge."
Chief Financial Officer Paul Beldin further adds: "AIR's balance sheet was strengthened substantially and our liquidity profile was also improved. I am pleased to report that we ended the quarter with Net Leverage to EBITDAre of 5.7x, within on our long-term targeted range of 5.0x to 6.0x, and 5.4x pro forma April sales activity. In addition to the deleveraging already mentioned, we exercised the accordion feature on our revolving credit facility, increasing the revolver and our liquidity by $400 million to $1.0 billion."
"First quarter 2022 Pro forma FFO of $0.57 per share was $0.02 higher than the midpoint of guidance due to a $0.01 outperformance in property operations and $0.01 of other items that may reverse during the balance of the year."
"We now expect full year FFO between $2.37 and $2.45. Our expectations for Same Store NOI growth have increased by 50 basis points, adding $0.01 to FFO. The prepayment penalty income resulting from the early collection of the Aimco loan adds interest income of $0.14 in the second quarter, offset by lost interest income of $0.09 in the second half of the year, for a net increase of $0.05 per share in 2022. Lower borrowings reduce interest expense by $0.04, while higher rates increase interest expense by $0.09, for a net increased cost of $0.05 per share in 2022."
"Our Same Store guidance range contemplates the potential for continued Same Store Revenue and NOI outperformance driven by higher rental rate achievement, lower bad debt expense, and lower property operating expenses. There is also the potential for lower general and administrative expenses. Accordingly, we see a path where the $0.05 of incremental interest expense is offset by these items."
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Financial Results: First Quarter Pro Forma FFO per share
|
| FIRST QUARTER |
|
|
|
|
| ||||||
(all items per common share – diluted) |
| 2022 |
|
| 2021 |
|
| Variance |
|
| |||
Net income |
| $ | 2.39 |
|
| $ | 0.56 |
|
| nm |
|
| |
NAREIT Funds From Operations (FFO) |
| $ | 0.42 |
|
| $ | 0.48 |
|
|
| (12.5 | %) |
|
Pro forma adjustments |
|
| 0.15 |
|
|
| 0.02 |
|
| nm |
|
| |
Pro forma Funds From Operations (Pro forma FFO) |
| $ | 0.57 |
|
| $ | 0.50 |
|
|
| 14.0 | % |
|
AIR Operating Results: First Quarter Same Store Revenue Up 1.0% Sequentially and 9.2% Year-Over-Year
The table below includes the operating results of the 64 AIR properties that meet our definition of Same Store. Same Store properties generated approximately 91% of AIR’s 2022 rental revenue.
| FIRST QUARTER |
| |||||||||||||||||
| Year-over-Year |
|
| Sequential |
| ||||||||||||||
($ in millions) * | 2022 |
|
| 2021 |
|
| Variance |
|
| 4th Qtr. |
|
| Variance |
| |||||
Revenue, before utility reimbursements | $ | 138.1 |
|
| $ | 126.4 |
|
|
| 9.2 | % |
| $ | 136.8 |
|
|
| 1.0 | % |
Expenses, net of utility reimbursements |
| 37.5 |
|
|
| 36.4 |
|
|
| 3.1 | % |
|
| 36.3 |
|
|
| 3.2 | % |
Net operating income (NOI) | $ | 100.6 |
|
| $ | 90.1 |
|
|
| 11.7 | % |
| $ | 100.4 |
|
|
| 0.2 | % |
*Amounts are presented on a rounded basis and the sum of the individual amounts may not foot; please refer to Supplemental Schedule 6.
First quarter 2022 NOI margins were 72.8%, up 162 basis points from the first quarter of 2021. NOI margins benefited from year-over-year rental rate growth of 5.0% and a 270 basis point increase in average daily occupancy.
Components of Same Store Revenue Growth – The table below summarizes the change in the components of our Same Store revenue growth.
|
| FIRST QUARTER | |||||||
Same Store Revenue Components |
| Year-over-Year | Sequential | ||||||
Residential Rents |
|
| 5.0 | % |
|
| 0.9 | % |
|
Average Daily Occupancy |
|
| 2.8 | % |
|
| — | % |
|
Residential Rental Income |
|
| 7.8 | % |
|
| 0.9 | % |
|
Bad Debt |
|
| 0.6 | % |
|
| (0.4 | %) |
|
Late Fees and Other |
|
| 0.3 | % |
|
| 0.2 | % |
|
Residential Revenue |
|
| 8.7 | % |
|
| 0.7 | % |
|
Commercial Revenue |
|
| 0.5 | % |
|
| 0.3 | % |
|
Same Store Revenue Growth |
|
| 9.2 | % |
|
| 1.0 | % |
|
Same Store Rental Rates – We measure changes in rental rates by comparing, on a lease-by-lease basis, the effective rate on a newly executed lease to the effective rate on the expiring lease for that same apartment. A newly executed lease is classified either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal.
The table below details changes in lease rates, as well as the weighted-average (blended) lease rates for leases executed in the respective period. Transacted leases are those that became effective during a 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 activity.
| FIRST QUARTER | 2022 | |||||
| 2022 | 2021 | Variance | Jan | Feb | March | April |
Transacted Leases* |
|
|
|
|
|
|
|
Renewal rent changes | 11.8% | 0.5% | 11.3% | 10.2% | 12.1% | 11.9% | 12.0% |
New lease rent changes | 16.1% | (8.1%) | 24.2% | 13.2% | 14.8% | 18.8% | 21.4% |
Weighted-average rent changes | 14.2% | (4.8%) | 19.0% | 12.7% | 14.0% | 14.8% | 16.0% |
|
|
|
|
|
|
|
|
Signed Leases* |
|
|
|
|
|
|
|
Renewal rent changes | 11.3% | 2.3% | 9.0% | 12.2% | 11.4% | 10.8% | 10.3% |
New lease rent changes | 17.8% | (5.4%) | 23.2% | 14.7% | 18.2% | 19.3% | 18.8% |
Weighted-average rent changes | 14.1% | (1.6%) | 15.7% | 13.5% | 13.7% | 14.6% | 14.9% |
|
|
|
|
|
|
|
|
Average Daily Occupancy | 98.1% | 95.4% | 2.7% | 98.4% | 98.3% | 97.7% | 97.4% |
*Amounts are based on our current Same Store population and represent AIR's share, whereas previously these were reported on a non-ownership adjusted basis. Amounts may differ from those previously reported.
4
Same Store Markets – AIR enjoyed stronger than typical consumer demand across all markets in the first quarter. Signed new lease rates were up 17.8% from the prior lease, with renewals up 11.3%, resulting in a weighted-average increase of 14.1%. Occupancy was high throughout the quarter, averaging 98.1%. With limited availability, demand remained strong with volume above 2020's pre-COVID levels.
Consistent with our expectations, average daily occupancy declined sequentially in March and April as we began to experience higher frictional vacancy associated with the increased turnover of peak leasing season.
2021 Acquisition Performance – In sourcing acquisitions, AIR seeks to identify properties that will benefit from AIR’s operating acumen, or the “AIR Edge.” These acquisitions are typically expected to deliver unlevered IRRs of 200 basis points or more than AIR’s stabilized Same Store portfolio. In today’s market, we target IRRs greater than 8%. In a typical acquisition, the acquired property will experience NOI growth at market rates for 6 to 12 months, as the property is integrated onto AIR’s platform with AIR customer selection, satisfaction, and retention, cost control, capital enhancements, and good neighbor policies. During the following two to four years, NOI growth is expected to exceed the market growth rate by two or three times.
AIR acquired five properties in 2021, at a cost of ~$730 million, with an expected first year yield of 4.3% and a long-term unlevered IRR of approximately 9%. During the quarter, ADO increased by 40 basis points related to these properties, and we signed 275 new and renewal leases at rates 23% above expiring leases.
Based on performance to date, we now expect the first year yield to be 4.5%, 20 basis points above underwriting.
Rent Collection Update
We measure residential rent collection as the dollar value of payments received as a percentage of all residential amounts owed. In the first quarter, we recognized 98.8% of all residential revenue owed during the quarter, treating the balance of 1.2% as bad debt. 3.0% of our residents have extended delinquencies, much of which we expect to collect either from the residents, based on their high credit scores, or from rent relief programs established by the State of California. 97.0% of our residents pay rent timely with their bad debt under 30 basis points of revenue, a level somewhat elevated from our historical experience.
As of March 31, 2022, our proportionate share of gross residential accounts receivable was $11.9 million. After consideration of tenant security deposits and reserves for uncollectible amounts, our net exposure is $1.3 million, an amount expected to be collected during the second quarter of 2022.
Of the $11.9 million of uncollected accounts receivable, 75% relates to California residents. During the quarter, we received $1.9 million from California’s rent relief program.
We remain cautiously optimistic that we will be able to recover previously uncollected rents. We await the state’s response to an additional $1.5 million of rent relief requests made. Additionally, with the recent modification to the California eviction moratorium, collections from past due residents in April were $1.4 million higher than average monthly collections in the first quarter of 2022.
Portfolio Management and Quality
Our portfolio of apartment communities is diversified across primarily “A” and “B” price points, averaging “B/B+” in quality, and is also diversified across several of the largest markets in the United States. During the first quarter of 2022, we exited the Chicago market and reduced our exposure to California.
Transactions
Acquisitions
We did not acquire any apartment communities in the first quarter. During the balance of the year we anticipate acquiring approximately $500 million of properties, where the "AIR Edge" is expected to provide IRRs above 8%, and 200 basis points above our cost of capital.
5
Dispositions
During the first quarter, we sold eight apartment communities located in Chicago and various cities in California, with 1,332 apartment homes, for gross proceeds of $578 million at a NOI cap rate of 4.5%. Net sales proceeds, after transaction costs and repayment of debt at the sold properties, from these transactions were $460 million. The NOI cap rate reflects AIR’s low property tax basis in the seven California properties sold. Adjusting for market rate real estate taxes, the NOI cap rate is 3.7%.
Subsequent to quarter end, we sold an additional three apartment communities located in California for gross proceeds of $161 million. Net proceeds, after transaction costs, were $159 million. Our NOI cap rate of 4.8% reflects AIR’s low property tax basis in these properties. Adjusting for market rate real estate taxes, the NOI cap rate is 3.9%.
Balance Sheet
We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage and primarily long-dated debt. We maintain financial flexibility through ample unused and available credit, holding properties with substantial value unencumbered by property debt, maintaining an investment grade rating, and using partners’ capital when it enhances financial returns or reduces investment risk.
Components of Leverage
Our leverage includes our share of long-term, non-recourse property debt encumbering our apartment communities, together with outstanding borrowings under our revolving credit facility, our term loans, and our preferred equity.
As of March 31, 2022, AIR had $1.5 billion of floating rate debt. Of this amount:
6
AIR’s leverage, pro forma the above actions is:
|
| MARCH 31, 2022 |
|
| PRO FORMA ADJUSTMENTS |
|
| PRO FORMA |
| |||
($ in thousands) |
|
|
|
|
|
|
|
|
| |||
Fixed rate loans payable |
| $ | 1,481,336 |
|
| $ | — |
|
| $ | 1,481,336 |
|
Floating rate loans payable, to be hedged |
|
| 167,500 |
|
|
| (167,500 | ) |
|
| — |
|
Floating rate loans payable, hedged |
|
| — |
|
|
| 167,500 |
|
|
| 167,500 |
|
Non-recourse property debt |
|
| 1,648,836 |
|
|
| — |
|
|
| 1,648,836 |
|
|
|
|
|
|
|
|
|
|
| |||
Term loan to be repaid with proceeds from Aimco note |
|
| 350,000 |
|
|
| (350,000 | ) |
|
| — |
|
Term loan to be repaid with proceeds from new fixed rate bond offering |
|
| 400,000 |
|
|
| (400,000 | ) |
|
| — |
|
Term loan to be hedged/repaid |
|
| 400,000 |
|
|
| (400,000 | ) |
|
| — |
|
Floating rate term loans |
|
| 1,150,000 |
|
|
| (1,150,000 | ) |
|
| — |
|
|
|
|
|
|
|
|
|
|
| |||
Floating revolving credit facility borrowings |
|
| 177,000 |
|
|
| (177,000 | ) | (1) |
| — |
|
Term loans now hedged |
|
| — |
|
|
| 232,500 |
|
|
| 232,500 |
|
New fixed rate bond offering |
|
| — |
|
|
| 400,000 |
|
|
| 400,000 |
|
Preferred equity |
|
| 81,354 |
|
|
| — |
|
|
| 81,354 |
|
Total Leverage |
|
| 3,057,190 |
|
|
| (694,500 | ) |
|
| 2,362,690 |
|
|
|
|
|
|
|
|
|
|
| |||
Cash and restricted cash |
|
| (88,860 | ) |
|
| (22,000 | ) | (1) |
| (110,860 | ) |
|
|
|
|
|
|
|
|
|
| |||
Leverage, net of cash and restricted cash |
| $ | 2,968,330 |
|
| $ | (716,500 | ) |
| $ | 2,251,830 |
|
|
|
|
|
|
|
|
|
|
| |||
Floating rate leverage %, net of cash |
|
| 47 | % |
|
|
|
|
| — | % | |
Fixed rate leverage %, net of cash |
|
| 53 | % |
|
|
|
|
| 100 | % | |
Total |
|
| 100 | % |
|
|
|
|
| 100 | % | |
|
|
|
|
|
|
|
|
|
| |||
Weighted average maturity |
| 6.3 years |
|
|
|
|
| 8.2 years |
| |||
Weighted average interest rate |
|
| 2.7 | % |
|
|
|
|
| 3.5 | % | |
Gross Leverage to Adjusted EBITDAre |
| 6.5x |
|
|
|
|
| 5.4x |
| |||
Net Leverage to Adjusted EBITDAre |
| 5.7x |
|
|
|
|
| 5.4x |
|
The result is a stronger and more flexible balance sheet with limited repricing risk and a better maturity profile.
Since AIR's separation from Aimco, and pro forma for the above, AIR has:
Liquidity
We use our revolving credit facility for working capital, other short-term purposes, and to secure letters of credit. At March 31, 2022, our share of cash and restricted cash was $89 million and we had the capacity to borrow up to $412 million under our revolving credit facility, bringing total liquidity to $501 million. We increased liquidity by $400 million through the exercise of the accordion feature on our revolving credit facility. After consideration of April property sales and the exercise of the accordion, our liquidity is more than $1.0 billion.
7
We manage our financial flexibility by maintaining an investment grade rating and holding communities that are unencumbered by property debt. AIR credit has been rated BBB by Standard & Poor’s.
We anticipate seeking an investment grade credit rating from Moody’s. In assigning ratings, Moody’s places significant emphasis on the amount of non-recourse property debt as percentage of the undepreciated book value of a company’s assets. We have lowered the amount of non-recourse property debt by $1.5 billion since December 31, 2020. At March 31, 2022 AIR share of non-recourse property debt represented 19% of undepreciated book value.
Dividend and Equity Capital Markets
On April 26, 2022, our Board of Directors declared a quarterly cash dividend of $0.45 per share of AIR Common Stock. This amount is payable on May 31, 2022, to stockholders of record on May 20, 2022.
In setting AIR's 2022 dividend, our Board of Directors targets a dividend level of approximately 75% of full year FFO per share.
We expect that the after-tax dividend will benefit from AIR's refreshed tax basis. Two-thirds of the 2021 dividend was considered return of capital while the remaining one-third was treated as capital gains.
The Board of Directors recently authorized both a common stock repurchase program of up to $500 million and an at-the-market offering program of up to $500 million. To date, neither has been used.
Corporate Responsibility Update
Corporate responsibility is a longstanding priority and a key part of our culture. We strive for transparency, and continuous improvement, as measured by GRESB. We are aligned with the UN Sustainable Development Goals. We have established targets for energy, water, and greenhouse gas reductions, embarked on environmental certifications for our properties, and are implementing resilience strategies including physical and climate risk assessments of the portfolio.
AIR was recognized for our gender-balanced board by the Women’s Leadership Foundation in Colorado and as only one of 16 public companies in Colorado to achieve this milestone.
We are continuing our longstanding commitment to offer the AIR Gives Opportunity Scholarship to students living in affordable housing across the country in partnership with the National Leased Housing Association.
Our team is a critical part of our success. In 2022 AIR was named a National Top Workplaces winner and also a 2022 Healthiest Employer for the third year by the Denver Business Journal.
8
2022 Outlook
AIR now expects full year FFO between $2.37 and $2.45 per share; $0.01 above our expectation at the beginning of the year. The increase is a result of:
The following table compares our beginning of the year FFO expectations, at the midpoint, to today, reflecting the impact of the above:
|
| Original Expectation |
|
| Updated Expectation |
|
| Pro forma Run Rate |
|
| |||
2021 FFO per share |
| $ | 2.14 |
|
| $ | 2.14 |
|
| $ | 2.14 |
|
|
Growth in Same Store NOI |
|
| 0.29 |
|
|
| 0.30 |
|
|
| 0.30 |
|
|
Contribution from acquisitions |
|
| 0.14 |
|
|
| 0.14 |
|
|
| 0.14 |
|
|
Change in leverage (1) |
|
| 0.24 |
|
|
| 0.28 |
|
|
| 0.30 |
|
|
Change in interest rates (2) |
|
| 0.06 |
|
|
| (0.03 | ) |
|
| (0.05 | ) |
|
Dilution from sales |
|
| (0.45 | ) |
|
| (0.45 | ) |
|
| (0.45 | ) |
|
Lower interest income on the Aimco note (3) |
|
| — |
|
|
| (0.09 | ) |
|
| (0.17 | ) |
|
Prepayment penalty income on the Aimco note (3) |
|
| — |
|
|
| 0.14 |
|
|
| — |
|
|
Other |
|
| (0.02 | ) |
|
| (0.02 | ) |
|
| (0.02 | ) |
|
2022 FFO per share at the midpoint (4) |
| $ | 2.40 |
|
| $ | 2.41 |
|
| $ | 2.19 |
|
|
9
Our guidance ranges are based on the following components:
|
| YEAR-TO-DATE |
| FULL YEAR 2022 |
| PREVIOUS FULL YEAR 2022 |
($ Amounts represent AIR Share) |
|
|
|
|
|
|
Net Income (loss) per share (1) |
| $2.39 |
| $(0.33) to $(0.20) |
| $(0.33) to $(0.20) |
Pro forma FFO per share |
| $0.57 |
| $2.37 to $2.45 |
| $2.36 to $2.44 |
Pro forma FFO per share at the midpoint, before prepayment penalty |
|
|
| $2.27 |
| n/a |
Pro forma FFO per share at the midpoint |
|
|
| $2.41 |
| $2.40 |
|
|
|
|
|
|
|
Same Store Operating Components of NAREIT FFO |
|
|
|
|
|
|
Revenue change compared to prior year |
| 9.2% |
| 9.3% to 10.3% |
| 8.9% to 9.9% |
Expense change compared to prior year |
| 3.1% |
| 3.0% to 2.0% |
| 3.0% to 2.0% |
NOI change compared to prior year |
| 11.7% |
| 11.5% to 13.5% |
| 11.0% to 13.0% |
|
|
|
|
|
|
|
Offsite Costs |
|
|
|
|
|
|
General and administrative expenses, as defined below (2) |
| $5M |
| $15M to $17M |
| ~$17M |
|
|
|
|
|
|
|
Other Earnings |
|
|
|
|
|
|
Lease income |
| $7M |
| ~$30M |
| ~$30M |
Value of property acquisitions |
| — |
| ~$500M |
| ~$500M |
Proceeds from dispositions of real estate, net |
| $412M |
| ~$809M |
| ~$774M |
|
|
|
|
|
|
|
AIR Share of Capital Investments |
|
|
|
|
|
|
Capital Enhancements |
| $13M |
| $90M to $110M |
| $90M to $110M |
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
Net Leverage to Adjusted EBITDAre (3) |
| 5.4x |
| ~5.5x |
| ~5.5x |
In the second quarter of 2022, AIR anticipates Pro forma FFO between $0.66 and $0.70 per share. For the second half of 2022, which reflects no contribution from the Aimco note, and does reflect the higher interest expense associated with fixing $800 million of previously floating rate debt, we expect FFO between $1.13 and $1.19 per share.
10
AIR Strategic Objectives
We created AIR to be the most efficient and effective way to invest in U.S. multi-family real estate, due to its simplified business model and diversified portfolio of stabilized apartment communities. The Board has set the following strategic objectives on a go forward basis:
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Earnings Conference Call Information
Live Conference Call: | Conference Call Replay: |
Tuesday, May 3, 2022 at 1:00 p.m. ET | Replay available until July 28, 2022 |
Domestic Dial-In Number: 1-844-200-6205 | Domestic Dial-In Number: 1-866-813-9403 |
International Dial-In Number: 1-929-526-1599 | International Dial-In Number: +44-204-525-0658 |
Passcode: 233945 | Passcode: 752550 |
Live webcast and replay: |
|
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
AIR is a real estate investment trust focused on the ownership and management of quality apartment communities located in the largest markets in the United States. AIR is one of the country’s largest owners and operators of apartments, with 76 communities in 11 states and the District of Columbia. AIR common shares are traded on the New York Stock Exchange under the ticker symbol AIRC, and are included in the S&P 400. For more information about AIR, please visit our website at www.aircommunities.com.
Contact
Beth Hagan
(303) 757-8101
investors@aircommunities.com
12
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 2022 results, including but not limited to: NAREIT FFO, Pro forma 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: the effects of the COVID-19 pandemic on AIR’s business and on the global and U.S. economies generally, and the ongoing, dynamic and uncertain nature and duration of the pandemic, all of which heightens the impact of the other risks and factors described herein; 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; 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 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; 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; our relationship with Aimco after the business separation; the ability and willingness of the parties to the business separation to meet and/or perform their obligations under the related contractual arrangements and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve the expected benefits from the business separation. 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, 2021, 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.
13
Consolidated Statements of Operations
(in thousands, except per share data) (unaudited)
|
| Three Months Ended |
|
| |||||
|
| March 31, |
|
| |||||
|
| 2022 |
|
| 2021 |
|
| ||
REVENUES |
|
|
|
|
|
|
| ||
Rental and other property revenues (1) |
| $ | 179,261 |
|
| $ | 174,730 |
|
|
Other revenues |
|
| 2,217 |
|
|
| 1,683 |
|
|
Total revenues |
|
| 181,478 |
|
|
| 176,413 |
|
|
|
|
|
|
|
|
|
| ||
OPERATING EXPENSES |
|
|
|
|
|
|
| ||
Property operating expenses (1) |
|
| 63,236 |
|
|
| 64,617 |
|
|
Depreciation and amortization |
|
| 84,549 |
|
|
| 75,280 |
|
|
General and administrative expenses (2) |
|
| 6,597 |
|
|
| 4,414 |
|
|
Other expenses, net |
|
| 4,018 |
|
|
| 2,876 |
|
|
Total operating expenses |
|
| 158,400 |
|
|
| 147,187 |
|
|
Interest income (3) |
|
| 13,481 |
|
|
| 15,972 |
|
|
Interest expense |
|
| (22,107 | ) |
|
| (36,025 | ) |
|
Loss on extinguishment of debt |
|
| (23,636 | ) |
|
| (1,010 | ) |
|
Gain on derecognition of leased properties and dispositions of real estate |
|
| 412,003 |
|
|
| 84,032 |
|
|
Loss from unconsolidated real estate partnerships |
|
| (2,014 | ) |
|
| — |
|
|
Income before income tax benefit (expense) |
|
| 400,805 |
|
|
| 92,195 |
|
|
Income tax benefit (expense) |
|
| 579 |
|
|
| (3,080 | ) |
|
Net income |
|
| 401,384 |
|
|
| 89,115 |
|
|
|
|
|
|
|
|
|
| ||
Noncontrolling interests: |
|
|
|
|
|
|
| ||
Net loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 564 |
|
|
| 235 |
|
|
Net income attributable to preferred noncontrolling interests in AIR OP |
|
| (1,603 | ) |
|
| (1,604 | ) |
|
Net income attributable to common noncontrolling interests in AIR OP |
|
| (24,167 | ) |
|
| (4,436 | ) |
|
Net income attributable to noncontrolling interests |
|
| (25,206 | ) |
|
| (5,805 | ) |
|
Net income attributable to AIR |
|
| 376,178 |
|
|
| 83,310 |
|
|
Net income attributable to AIR preferred stockholders |
|
| (42 | ) |
|
| (50 | ) |
|
Net income attributable to participating securities |
|
| (255 | ) |
|
| (64 | ) |
|
Net income attributable to AIR common stockholders |
| $ | 375,881 |
|
| $ | 83,196 |
|
|
|
|
|
|
|
|
|
| ||
Net income attributable to AIR common stockholders per share – basic |
| $ | 2.40 |
|
| $ | 0.56 |
|
|
|
|
|
|
|
|
|
| ||
Net income attributable to AIR common stockholders per share – diluted |
| $ | 2.39 |
|
| $ | 0.56 |
|
|
|
|
|
|
|
|
|
| ||
Weighted-average common shares outstanding – basic |
|
| 156,736 |
|
|
| 148,611 |
|
|
Weighted-average common shares outstanding – diluted |
|
| 157,088 |
|
|
| 148,830 |
|
|
Rental and other property revenues and property operating expenses for the three months ended March 31, 2021, are inclusive of $7.1 million of revenues and $1.8 million of expenses, respectively, related to the third-party share of properties included Washington, D.C. joint venture.
14
Consolidated Balance Sheets
(in thousands) (unaudited)
|
| March 31, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Assets |
|
|
|
|
|
| ||
Real estate |
| $ | 6,892,257 |
|
| $ | 6,885,081 |
|
Accumulated depreciation |
|
| (2,341,446 | ) |
|
| (2,284,793 | ) |
Net real estate |
|
| 4,550,811 |
|
|
| 4,600,288 |
|
Cash and cash equivalents |
|
| 77,867 |
|
|
| 67,320 |
|
Restricted cash |
|
| 26,044 |
|
|
| 25,441 |
|
Note receivable from Aimco |
|
| 534,127 |
|
|
| 534,127 |
|
Leased real estate assets |
|
| 466,203 |
|
|
| 466,355 |
|
Goodwill |
|
| 32,286 |
|
|
| 32,286 |
|
Other assets (1) |
|
| 601,198 |
|
|
| 568,051 |
|
Assets held for sale |
|
| 14,320 |
|
|
| 146,492 |
|
Total Assets |
| $ | 6,302,856 |
|
| $ | 6,440,360 |
|
|
|
|
|
|
|
| ||
Liabilities and Equity |
|
|
|
|
|
| ||
Non-recourse property debt |
| $ | 2,043,649 |
|
| $ | 2,305,756 |
|
Debt issue costs |
|
| (9,944 | ) |
|
| (11,017 | ) |
Non-recourse property debt, net |
|
| 2,033,705 |
|
|
| 2,294,739 |
|
Term loans, net |
|
| 1,145,226 |
|
|
| 1,144,547 |
|
Revolving credit facility borrowings |
|
| 177,000 |
|
|
| 304,000 |
|
Accrued liabilities and other (1) |
|
| 603,308 |
|
|
| 592,774 |
|
Liabilities related to assets held for sale |
|
| 425 |
|
|
| 85,775 |
|
Total Liabilities |
|
| 3,959,664 |
|
|
| 4,421,835 |
|
|
|
|
|
|
|
| ||
Preferred noncontrolling interests in AIR OP |
|
| 79,354 |
|
|
| 79,370 |
|
|
|
|
|
|
|
| ||
Equity: |
|
|
|
|
|
| ||
Perpetual preferred stock |
|
| 2,000 |
|
|
| 2,129 |
|
Class A Common Stock |
|
| 1,571 |
|
|
| 1,570 |
|
Additional paid-in capital |
|
| 3,762,457 |
|
|
| 3,763,105 |
|
Accumulated other comprehensive loss |
|
| (783 | ) |
|
| — |
|
Distributions in excess of earnings |
|
| (1,648,077 | ) |
|
| (1,953,779 | ) |
Total AIR equity |
|
| 2,117,168 |
|
|
| 1,813,025 |
|
Noncontrolling interests in consolidated real estate partnerships |
|
| (70,157 | ) |
|
| (70,883 | ) |
Common noncontrolling interests in AIR OP |
|
| 216,827 |
|
|
| 197,013 |
|
Total Equity |
|
| 2,263,838 |
|
|
| 1,939,155 |
|
Total Liabilities and Equity |
| $ | 6,302,856 |
|
| $ | 6,440,360 |
|
15
Supplemental Schedule 1
Funds From Operations Reconciliation
Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021
(in thousands, except per share data) (unaudited)
|
| Three Months Ended |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Net income attributable to AIR common stockholders |
| $ | 375,881 |
|
| $ | 83,196 |
|
Adjustments: |
|
|
|
|
|
| ||
Real estate depreciation and amortization, net of noncontrolling partners’ interest |
|
| 81,457 |
|
|
| 69,495 |
|
Gain on derecognition of leased properties and dispositions of real estate |
|
| (412,003 | ) |
|
| (84,032 | ) |
Income tax adjustments related to gain on dispositions and other tax-related items |
|
| — |
|
|
| 1,800 |
|
Common noncontrolling interests in AIR OP’s share of above adjustments |
|
| 20,041 |
|
|
| 644 |
|
Amounts allocable to participating securities |
|
| 208 |
|
|
| 7 |
|
NAREIT FFO attributable to AIR common stockholders |
| $ | 65,584 |
|
| $ | 71,110 |
|
Adjustments: |
|
|
|
|
|
| ||
Loss on extinguishment of debt (1) |
|
| 23,636 |
|
|
| 1,010 |
|
Separation and transition related costs (2) |
|
| 869 |
|
|
| 2,165 |
|
Non-cash straight-line rent (3) |
|
| 642 |
|
|
| 669 |
|
Incremental cash received from leased properties (4) |
|
| 153 |
|
|
| 162 |
|
Casualty losses and other (5) |
|
| 203 |
|
|
| — |
|
Common noncontrolling interests in AIR OP’s share of above adjustments |
|
| (1,565 | ) |
|
| (215 | ) |
Amounts allocable to participating securities |
|
| (13 | ) |
|
| (2 | ) |
Pro Forma FFO |
| $ | 89,509 |
|
| $ | 74,899 |
|
|
|
|
|
|
|
| ||
Weighted-average common shares outstanding – basic |
|
| 156,736 |
|
|
| 148,611 |
|
Dilutive common share equivalents |
|
| 352 |
|
|
| 219 |
|
Total shares and dilutive share equivalents |
|
| 157,088 |
|
|
| 148,830 |
|
|
|
|
|
|
|
| ||
Net income attributable to AIR per common share – diluted |
| $ | 2.39 |
|
| $ | 0.56 |
|
NAREIT FFO per share – diluted |
| $ | 0.42 |
|
| $ | 0.48 |
|
Pro forma FFO per share – diluted |
| $ | 0.57 |
|
| $ | 0.50 |
|
16
Supplemental Schedule 2(a)
Funds From Operations Information
Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021
(consolidated amounts, in thousands) (unaudited)
|
| Three Months Ended |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Revenues, before utility reimbursements |
|
|
|
|
|
| ||
Same Store |
| $ | 150,799 |
|
| $ | 146,678 |
|
Other Real Estate |
|
| 15,644 |
|
|
| 1,914 |
|
Total revenues, before utility reimbursements |
|
| 166,443 |
|
|
| 148,592 |
|
Expenses, net of utility reimbursements (1) |
|
|
|
|
|
| ||
Same Store |
|
| 40,781 |
|
|
| 41,563 |
|
Other Real Estate |
|
| 6,354 |
|
|
| 1,364 |
|
Total expenses, net of utility reimbursements |
|
| 47,135 |
|
|
| 42,927 |
|
Net operating income (2) |
|
| 119,308 |
|
|
| 105,665 |
|
Lease income |
|
| 6,534 |
|
|
| 6,441 |
|
Property management expenses, net |
|
| (5,342 | ) |
|
| (6,338 | ) |
Property income |
|
| 120,500 |
|
|
| 105,768 |
|
|
|
|
|
|
|
| ||
General and administrative expenses (3) |
|
| (5,034 | ) |
|
| (4,414 | ) |
|
|
|
|
|
|
| ||
Interest expense |
|
| (22,107 | ) |
|
| (36,025 | ) |
Loss on extinguishment of debt |
|
| (23,636 | ) |
|
| (1,010 | ) |
Preferred dividends |
|
| (1,645 | ) |
|
| (1,654 | ) |
Interest income from note receivable from Aimco |
|
| 6,944 |
|
|
| 6,945 |
|
Interest income |
|
| 3 |
|
|
| 2,586 |
|
Total cost of capital |
|
| (40,441 | ) |
|
| (29,158 | ) |
|
|
|
|
|
|
| ||
Casualties |
|
| (109 | ) |
|
| (872 | ) |
Depreciation and amortization related to non-real estate assets |
|
| — |
|
|
| (516 | ) |
Land leases |
|
| (1,321 | ) |
|
| (1,313 | ) |
Income from unconsolidated real estate partnerships |
|
| 1,129 |
|
|
| — |
|
Other expenses, net |
|
| (2,697 | ) |
|
| (1,561 | ) |
Tax benefit (expense), net |
|
| 602 |
|
|
| (1,280 | ) |
NOI related to sold and held for sale communities |
|
| 3,441 |
|
|
| 13,341 |
|
Total other |
|
| 1,045 |
|
|
| 7,799 |
|
|
|
|
|
|
|
| ||
Common noncontrolling interests in AIR OP |
|
| (4,173 | ) |
|
| (3,849 | ) |
Proportionate adjustments |
|
| (6,313 | ) |
|
| (5,036 | ) |
|
|
|
|
|
|
| ||
NAREIT FFO attributable to AIR common stockholders |
| $ | 65,584 |
|
| $ | 71,110 |
|
Total pro forma adjustments, net of common noncontrolling interests in AIR OP and participating securities |
|
| 23,925 |
|
|
| 3,789 |
|
Pro forma FFO attributable to AIR common stockholders |
| $ | 89,509 |
|
| $ | 74,899 |
|
17
Supplemental Schedule 2(b)
Partially Owned Entities
Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021
(in thousands) (unaudited)
|
| Noncontrolling Interests (1) |
|
| Unconsolidated (2) |
| ||||||||||
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenues, before utility reimbursements |
| $ | 14,580 |
|
| $ | 13,120 |
|
| $ | 1,889 |
|
| $ | — |
|
Expenses, net of utility reimbursements |
|
| 3,753 |
|
|
| 3,661 |
|
|
| 462 |
|
|
| — |
|
Net operating income |
|
| 10,827 |
|
|
| 9,459 |
|
|
| 1,427 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Property management expenses, net |
|
| (422 | ) |
|
| (408 | ) |
|
| (59 | ) |
|
| — |
|
Casualties |
|
| (41 | ) |
|
| (57 | ) |
|
| (3 | ) |
|
| — |
|
Other expense, net |
|
| (67 | ) |
|
| (6 | ) |
|
| — |
|
|
| — |
|
Interest expense on non-recourse property debt |
|
| (3,770 | ) |
|
| (3,883 | ) |
|
| (538 | ) |
|
| — |
|
Contribution from real estate operations |
|
| 6,527 |
|
|
| 5,105 |
|
|
| 827 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other non-property (expenses) income, net |
|
| (214 | ) |
|
| (69 | ) |
|
| 302 |
|
|
|
| |
FFO from real estate operations |
| $ | 6,313 |
|
| $ | 5,036 |
|
| $ | 1,129 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total apartment communities |
|
| 16 |
|
|
| 16 |
|
|
| 3 |
|
|
| — |
|
Total apartment homes |
|
| 5,369 |
|
|
| 5,369 |
|
|
| 1,748 |
|
|
| — |
|
Noncontrolling interests’ share of consolidated apartment homes/AIR share of unconsolidated apartment homes |
|
| 1,721 |
|
|
| 1,721 |
|
|
| 350 |
|
|
| — |
|
18
Supplemental Schedule 3
Property Net Operating Income
Trailing Five Quarters
(consolidated amounts, in thousands) (unaudited)
|
| Three Months Ended |
| |||||||||||||||||
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| |||||
Revenues, before utility reimbursements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same Store |
| $ | 150,799 |
|
| $ | 151,932 |
|
| $ | 155,751 |
|
| $ | 147,611 |
|
| $ | 146,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Real Estate |
|
| 15,644 |
|
|
| 15,122 |
|
|
| 6,350 |
|
|
| 2,582 |
|
|
| 1,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total revenues, before utility reimbursements |
|
| 166,443 |
|
|
| 167,054 |
|
|
| 162,101 |
|
|
| 150,193 |
|
|
| 148,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Expenses, net of utility reimbursements (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same Store |
|
| 40,781 |
|
|
| 39,802 |
|
|
| 42,795 |
|
|
| 42,773 |
|
|
| 41,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Real Estate |
|
| 6,354 |
|
|
| 5,627 |
|
|
| 3,275 |
|
|
| 1,553 |
|
|
| 1,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total expenses, net of utility reimbursements |
|
| 47,135 |
|
|
| 45,429 |
|
|
| 46,070 |
|
|
| 44,326 |
|
|
| 42,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Property Net Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Same Store (2) |
|
| 110,018 |
|
|
| 112,130 |
|
|
| 112,956 |
|
|
| 104,838 |
|
|
| 105,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Other Real Estate |
|
| 9,290 |
|
|
| 9,495 |
|
|
| 3,075 |
|
|
| 1,029 |
|
|
| 550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total Property Net Operating Income |
| $ | 119,308 |
|
| $ | 121,625 |
|
| $ | 116,031 |
|
| $ | 105,867 |
|
| $ | 105,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
NOI related to communities sold and held for sale |
| $ | 3,441 |
|
| $ | 13,200 |
|
| $ | 14,474 |
|
| $ | 13,541 |
|
| $ | 13,341 |
|
19
Supplemental Schedule 4
Apartment Home Summary
As of March 31, 2022
(unaudited)
|
| Number of Apartment Communities |
|
| Number of Apartment Homes |
|
| AIR Share of Apartment Homes |
| |||
|
|
|
|
|
|
|
|
|
| |||
Same Store (1) (2) |
|
| 64 |
|
|
| 22,020 |
|
|
| 18,901 |
|
Other Real Estate (3) |
|
| 9 |
|
|
| 2,499 |
|
|
| 2,499 |
|
Held for Sale (4) |
|
| 3 |
|
|
| 559 |
|
|
| 559 |
|
Total Portfolio |
|
| 76 |
|
|
| 25,078 |
|
|
| 21,959 |
|
|
|
|
|
|
|
|
|
|
| |||
Properties leased (5) |
|
| 4 |
|
|
| 865 |
|
|
| 865 |
|
20
Supplemental Schedule 5(a)
Capitalization and Financial Metrics
As of March 31, 2022
(dollars in thousands) (unaudited)
Leverage Balances and Characteristics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Debt |
| Consolidated |
|
| AIR Share of |
|
| Noncontrolling |
|
| Total |
|
| Weighted- |
|
| Weighted- |
|
| ||||||
Fixed rate loans payable |
| $ | 1,955,149 |
|
| $ | — |
|
| $ | (473,813 | ) |
| $ | 1,481,336 |
|
|
| 9.3 |
|
|
| 3.2 | % |
|
Floating rate loans payable |
|
| 88,500 |
|
|
| 79,000 |
|
|
| — |
|
|
| 167,500 |
|
|
| 3.6 |
|
|
| 2.7 | % |
|
Non-recourse property debt |
| $ | 2,043,649 |
|
| $ | 79,000 |
|
| $ | (473,813 | ) |
| $ | 1,648,836 |
|
|
| 8.7 |
|
|
| 3.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Term Loans |
|
| 1,150,000 |
|
|
| — |
|
|
| — |
|
|
| 1,150,000 |
|
|
| 2.9 |
| (1) |
| 1.9 | % |
|
Revolving credit facility borrowings |
|
| 177,000 |
|
|
| — |
|
|
| — |
|
|
| 177,000 |
|
|
| 4.0 |
| (1) |
| 1.6 | % |
|
Preferred equity |
|
| 81,354 |
|
|
| — |
|
|
| — |
|
|
| 81,354 |
|
|
| 9.8 |
| (2) |
| 8.1 | % |
|
Total leverage |
| $ | 3,452,003 |
|
| $ | 79,000 |
|
| $ | (473,813 | ) |
| $ | 3,057,190 |
|
|
| 6.3 |
|
|
| 2.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and restricted cash (3) |
|
| (92,908 | ) |
|
| — |
|
|
| 4,048 |
|
|
| (88,860 | ) |
|
|
|
| n/a |
|
| ||
Note receivable from Aimco (4) |
|
| (534,127 | ) |
|
| — |
|
|
| — |
|
|
| (534,127 | ) |
|
|
|
|
| 5.2 | % |
| |
Net leverage |
| $ | 2,824,968 |
|
| $ | 79,000 |
|
| $ | (469,765 | ) |
| $ | 2,434,203 |
|
|
|
|
|
| 2.2 | % |
|
Leverage Ratios First Quarter 2022 (5)
|
| Annualized Current Quarter |
| Pro forma Completion of April 2022 Sales |
Proportionate Debt to Adjusted EBITDAre |
| 5.5x |
| 5.2x |
Net Leverage to Adjusted EBITDAre |
| 5.7x |
| 5.4x |
Unsecured Credit Facility Covenants |
| March 31, 2022 |
| Covenant |
Fixed Charge Coverage Ratio |
| 3.05x |
| 1.50x |
Leverage Ratio |
| 35.0% |
| ≤ 60.0% |
Secured Indebtedness Ratio (7) |
| 19.3% |
| ≤ 45.0% |
Unsecured Leverage Ratio |
| 29.8% |
| ≤ 60.0% |
21
Supplemental Schedule 5(b)
Capitalization and Financial Metrics
As of March 31, 2022
(dollar amounts in thousands) (unaudited)
AIR Share of Non-Recourse Property Debt and Term Loans
|
| Amortization |
|
| Maturities |
|
| Sub-Total Non-Recourse Property Debt |
|
| Term Loans |
|
| Total |
|
| Maturities as a |
|
| Average Rate on |
| |||||||
2022 Q2 |
| $ | 5,928 |
|
| $ | — |
|
| $ | 5,928 |
|
| $ | — |
|
| $ | 5,928 |
|
|
| — | % |
|
| — | % |
2022 Q3 |
|
| 5,976 |
|
|
| — |
|
|
| 5,976 |
|
|
| — |
|
|
| 5,976 |
|
|
| — | % |
|
| — | % |
2022 Q4 |
|
| 5,936 |
|
|
| 53,276 |
|
|
| 59,212 |
|
|
| — |
|
|
| 59,212 |
|
|
| 1.9 | % |
|
| 5.1 | % |
Total 2022 |
|
| 17,840 |
|
|
| 53,276 |
|
|
| 71,116 |
|
|
| — |
|
|
| 71,116 |
|
|
| 1.9 | % |
|
| 5.1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
2023 Q1 |
|
| 5,781 |
|
|
| — |
|
|
| 5,781 |
|
|
| 350,000 |
|
|
| 355,781 |
|
|
| 12.5 | % |
|
| 1.7 | % |
2023 Q2 |
|
| 5,701 |
|
|
| 27,551 |
|
|
| 33,252 |
|
|
| — |
|
|
| 33,252 |
|
|
| 1.0 | % |
|
| 3.8 | % |
2023 Q3 |
|
| 5,691 |
|
|
| — |
|
|
| 5,691 |
|
|
| — |
|
|
| 5,691 |
|
|
| — | % |
|
| — | % |
2023 Q4 |
|
| 5,744 |
|
|
| — |
|
|
| 5,744 |
|
|
| — |
|
|
| 5,744 |
|
|
| — | % |
|
| — | % |
Total 2023 |
|
| 22,917 |
|
|
| 27,551 |
|
|
| 50,468 |
|
|
| 350,000 |
|
|
| 400,468 |
|
|
| 13.5 | % |
|
| 1.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
2024 |
|
| 23,893 |
|
|
| 88,500 |
|
|
| 112,393 |
|
|
| — |
|
|
| 112,393 |
|
|
| 3.2 | % |
|
| 3.2 | % |
2025 |
|
| 23,267 |
|
|
| 285,721 |
|
|
| 308,988 |
|
|
| 600,000 |
| (1) |
| 908,988 |
|
|
| 31.6 | % |
|
| 2.4 | % |
2026 |
|
| 18,630 |
|
|
| 98,790 |
|
|
| 117,420 |
|
|
| 200,000 |
|
|
| 317,420 |
|
|
| 10.7 | % |
|
| 2.4 | % |
2027 |
|
| 17,067 |
|
|
| 127,565 |
|
|
| 144,632 |
|
|
| — |
|
|
| 144,632 |
|
|
| 4.6 | % |
|
| 3.3 | % |
2028 |
|
| 13,949 |
|
|
| 94,463 |
|
|
| 108,412 |
|
|
| — |
|
|
| 108,412 |
|
|
| 3.4 | % |
|
| 3.4 | % |
2029 |
|
| 13,659 |
|
|
| 84,146 |
|
|
| 97,805 |
|
|
| — |
|
|
| 97,805 |
|
|
| 3.0 | % |
|
| 3.4 | % |
2030 |
|
| 10,891 |
|
|
| 267,939 |
|
|
| 278,830 |
|
|
| — |
|
|
| 278,830 |
|
|
| 9.6 | % |
|
| 3.1 | % |
2031 |
|
| 4,965 |
|
|
| 149,475 |
|
|
| 154,440 |
|
|
| — |
|
|
| 154,440 |
|
|
| 5.3 | % |
|
| 3.0 | % |
Thereafter |
|
| 136,964 |
|
|
| 67,368 |
|
|
| 204,332 |
|
|
| — |
|
|
| 204,332 |
|
|
| 2.4 | % |
|
| 3.0 | % |
Total |
| $ | 304,042 |
|
| $ | 1,344,794 |
|
| $ | 1,648,836 |
|
| $ | 1,150,000 |
|
| $ | 2,798,836 |
|
|
| 89.1 | % |
|
| 2.6 | % |
Preferred Equity
|
| Amount Outstanding |
|
| Date First Available for Redemption by AIR |
| Coupon |
|
| Amount |
| |||
Class A Perpetual Preferred Stock |
|
| 20 |
|
| December 2025 |
|
| 8.50 | % |
| $ | 2,000 |
|
Preferred Partnership Units |
|
| 2,935,035 |
|
| n/a |
|
| 8.08 | % |
|
| 79,354 |
|
Total Preferred Equity |
|
|
|
|
|
|
| 8.09 | % |
| $ | 81,354 |
|
Common Stock, Partnership Units and Equivalents (shares and units in thousands)
|
| March 31, |
| |
Class A Common Stock outstanding |
|
| 156,768 |
|
Participating unvested restricted stock |
|
| 106 |
|
Dilutive options, share equivalents and non-participating unvested restricted stock |
|
| 681 |
|
Total shares and dilutive share equivalents |
|
| 157,555 |
|
Common Partnership Units and equivalents outstanding |
|
| 10,879 |
|
Total shares, units, and dilutive share equivalents |
|
| 168,434 |
|
22
Supplemental Schedule 6(a)
Same Store Operating Results
Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021
(proportionate amounts, in thousands, except community, home, and per home data) (unaudited)
The table below presents AIR’s Same Store portfolio as of March 31, 2022.
|
|
|
|
|
|
|
| Revenues, Before Utility |
|
| Expenses, Net of Utility |
|
| Net Operating Income |
|
|
| Net Operating |
| Average Daily |
| Average |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Apartment |
| Apartment |
| AIR Share |
|
| 1Q |
| 1Q |
| Growth |
|
| 1Q |
| 1Q |
| Growth |
|
| 1Q |
| 1Q |
| Growth |
|
|
| 1Q |
| 1Q | 1Q |
| 1Q |
| 1Q |
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Bay Area |
| 7 |
|
| 1,967 |
|
| 1,412 |
|
| $ | 12,916 |
| $ | 12,463 |
|
| 3.6 | % |
| $ | 3,358 |
| $ | 3,345 |
|
| 0.4 | % |
| $ | 9,558 |
| $ | 9,118 |
|
| 4.8 | % |
|
| 74.0% |
| 98.5% | 91.8% |
| $ | 3,097 |
| $ | 3,203 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Boston |
| 11 |
|
| 2,462 |
|
| 2,462 |
|
|
| 18,497 |
|
| 16,697 |
|
| 10.8 | % |
|
| 5,680 |
|
| 5,385 |
|
| 5.5 | % |
|
| 12,817 |
|
| 11,312 |
|
| 13.3 | % |
|
| 69.3% |
| 98.4% | 96.6% |
|
| 2,546 |
|
| 2,339 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Denver |
| 7 |
|
| 2,026 |
|
| 1,987 |
|
|
| 11,194 |
|
| 10,206 |
|
| 9.7 | % |
|
| 2,568 |
|
| 2,744 |
|
| (6.4 | %) |
|
| 8,626 |
|
| 7,462 |
|
| 15.6 | % |
|
| 77.1% |
| 98.4% | 96.0% |
|
| 1,907 |
|
| 1,784 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Washington, D.C. (1) |
| 6 |
|
| 4,103 |
|
| 2,681 |
|
|
| 13,534 |
|
| 12,775 |
|
| 5.9 | % |
|
| 3,681 |
|
| 3,370 |
|
| 9.2 | % |
|
| 9,853 |
|
| 9,405 |
|
| 4.8 | % |
|
| 72.8% |
| 98.8% | 96.0% |
|
| 1,703 |
|
| 1,655 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Los Angeles |
| 9 |
|
| 3,815 |
|
| 2,966 |
|
|
| 28,221 |
|
| 24,977 |
|
| 13.0 | % |
|
| 6,213 |
|
| 6,268 |
|
| (0.9 | %) |
|
| 22,008 |
|
| 18,709 |
|
| 17.6 | % |
|
| 78.0% |
| 98.5% | 96.4% |
|
| 3,221 |
|
| 2,911 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Miami |
| 5 |
|
| 1,725 |
|
| 1,725 |
|
|
| 12,524 |
|
| 11,206 |
|
| 11.8 | % |
|
| 4,202 |
|
| 3,837 |
|
| 9.5 | % |
|
| 8,322 |
|
| 7,369 |
|
| 12.9 | % |
|
| 66.4% |
| 95.9% | 97.9% |
|
| 2,523 |
|
| 2,212 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Philadelphia |
| 9 |
|
| 2,748 |
|
| 2,669 |
|
|
| 20,801 |
|
| 19,133 |
|
| 8.7 | % |
|
| 6,106 |
|
| 5,867 |
|
| 4.1 | % |
|
| 14,695 |
|
| 13,266 |
|
| 10.8 | % |
|
| 70.6% |
| 97.7% | 90.4% |
|
| 2,659 |
|
| 2,644 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
San Diego |
| 6 |
|
| 2,367 |
|
| 2,192 |
|
|
| 15,145 |
|
| 13,917 |
|
| 8.8 | % |
|
| 3,254 |
|
| 3,214 |
|
| 1.2 | % |
|
| 11,891 |
|
| 10,703 |
|
| 11.1 | % |
|
| 78.5% |
| 98.5% | 97.9% |
|
| 2,340 |
|
| 2,164 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Other Markets |
| 4 |
|
| 807 |
|
| 807 |
|
|
| 5,276 |
|
| 5,065 |
|
| 4.2 | % |
|
| 2,441 |
|
| 2,357 |
|
| 3.6 | % |
|
| 2,835 |
|
| 2,708 |
|
| 4.7 | % |
|
| 53.7% |
| 97.7% | 95.9% |
|
| 2,230 |
|
| 2,182 |
| |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Total |
| 64 |
|
| 22,020 |
|
| 18,901 |
|
| $ | 138,108 |
| $ | 126,439 |
|
| 9.2 | % |
| $ | 37,503 |
| $ | 36,387 |
|
| 3.1 | % |
| $ | 100,605 |
| $ | 90,052 |
|
| 11.7 | % |
|
| 72.8% |
| 98.1% | 95.4% |
| $ | 2,482 |
| $ | 2,337 |
|
23
Supplemental Schedule 6(b)
Same Store Operating Results
Three Months Ended March 31, 2022, Compared to Three Months Ended December 31, 2021
(proportionate amounts, in thousands, except community, home, and per home data) (unaudited)
The table below presents AIR’s Same Store portfolio as of March 31, 2022.
|
|
|
|
|
|
|
| Revenues, Before Utility |
|
| Expenses, Net of Utility |
|
| Net Operating Income |
|
|
| Net Operating |
| Average Daily |
| Average |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Apartment |
| Apartment |
| AIR Share |
|
| 1Q |
| 4Q |
| Growth |
|
| 1Q |
| 4Q |
| Growth |
|
| 1Q |
| 4Q |
| Growth |
|
|
| 1Q |
| 1Q | 4Q |
| 1Q |
| 4Q |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Bay Area |
| 7 |
|
| 1,967 |
|
| 1,412 |
|
| $ | 12,916 |
| $ | 12,779 |
|
| 1.1 | % |
| $ | 3,358 |
| $ | 3,453 |
|
| (2.8 | %) |
| $ | 9,558 |
| $ | 9,326 |
|
| 2.5 | % |
|
| 74.0% |
| 98.5% | 96.9% |
| $ | 3,097 |
| $ | 3,112 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Boston |
| 11 |
|
| 2,462 |
|
| 2,462 |
|
|
| 18,497 |
|
| 18,116 |
|
| 2.1 | % |
|
| 5,680 |
|
| 5,331 |
|
| 6.5 | % |
|
| 12,817 |
|
| 12,785 |
|
| 0.3 | % |
|
| 69.3% |
| 98.4% | 98.1% |
|
| 2,546 |
|
| 2,500 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Denver |
| 7 |
|
| 2,026 |
|
| 1,987 |
|
|
| 11,194 |
|
| 11,154 |
|
| 0.4 | % |
|
| 2,568 |
|
| 2,084 |
|
| 23.2 | % |
|
| 8,626 |
|
| 9,070 |
|
| (4.9 | %) |
|
| 77.1% |
| 98.4% | 98.8% |
|
| 1,907 |
|
| 1,893 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Washington, D.C. (1) |
| 6 |
|
| 4,103 |
|
| 2,681 |
|
|
| 13,534 |
|
| 13,134 |
|
| 3.0 | % |
|
| 3,681 |
|
| 3,600 |
|
| 2.3 | % |
|
| 9,853 |
|
| 9,534 |
|
| 3.3 | % |
|
| 72.8% |
| 98.8% | 98.8% |
|
| 1,703 |
|
| 1,653 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Los Angeles |
| 9 |
|
| 3,815 |
|
| 2,966 |
|
|
| 28,221 |
|
| 28,132 |
|
| 0.3 | % |
|
| 6,213 |
|
| 6,574 |
|
| (5.5 | %) |
|
| 22,008 |
|
| 21,558 |
|
| 2.1 | % |
|
| 78.0% |
| 98.5% | 98.4% |
|
| 3,221 |
|
| 3,212 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Miami |
| 5 |
|
| 1,725 |
|
| 1,725 |
|
|
| 12,524 |
|
| 12,316 |
|
| 1.7 | % |
|
| 4,202 |
|
| 3,612 |
|
| 16.3 | % |
|
| 8,322 |
|
| 8,704 |
|
| (4.4 | %) |
|
| 66.4% |
| 95.9% | 96.0% |
|
| 2,523 |
|
| 2,480 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Philadelphia |
| 9 |
|
| 2,748 |
|
| 2,669 |
|
|
| 20,801 |
|
| 20,697 |
|
| 0.5 | % |
|
| 6,106 |
|
| 6,151 |
|
| (0.7 | %) |
|
| 14,695 |
|
| 14,546 |
|
| 1.0 | % |
|
| 70.6% |
| 97.7% | 98.0% |
|
| 2,659 |
|
| 2,639 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
San Diego |
| 6 |
|
| 2,367 |
|
| 2,192 |
|
|
| 15,145 |
|
| 15,001 |
|
| 1.0 | % |
|
| 3,254 |
|
| 3,206 |
|
| 1.5 | % |
|
| 11,891 |
|
| 11,795 |
|
| 0.8 | % |
|
| 78.5% |
| 98.5% | 98.7% |
|
| 2,340 |
|
| 2,313 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Markets |
| 4 |
|
| 807 |
|
| 807 |
|
|
| 5,276 |
|
| 5,431 |
|
| (2.9 | %) |
|
| 2,441 |
|
| 2,338 |
|
| 4.4 | % |
|
| 2,835 |
|
| 3,093 |
|
| (8.3 | %) |
|
| 53.7% |
| 97.7% | 97.9% |
|
| 2,230 |
|
| 2,291 |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
Total |
| 64 |
|
| 22,020 |
|
| 18,901 |
|
| $ | 138,108 |
| $ | 136,760 |
|
| 1.0 | % |
| $ | 37,503 |
| $ | 36,349 |
|
| 3.2 | % |
| $ | 100,605 |
| $ | 100,411 |
|
| 0.2 | % |
|
| 72.8% |
| 98.1% | 98.1% |
| $ | 2,482 |
| $ | 2,459 |
|
24
Supplemental Schedule 6(c)
Same Store Operating Expense Detail
(proportionate amounts, in thousands) (unaudited)
Quarterly Comparison
|
| 1Q 2022 |
|
| % of Total |
|
| 1Q 2021 |
|
| $ Change |
|
| % Change |
| |||||
Operating expenses (1) |
| $ | 18,032 |
|
|
| 48.1 | % |
| $ | 17,536 |
|
| $ | 496 |
|
|
| 2.8 | % |
Utility expense, net of reimbursement |
|
| 2,629 |
|
|
| 7.0 | % |
|
| 2,297 |
|
|
| 332 |
|
|
| 14.5 | % |
Real estate taxes |
|
| 14,696 |
|
|
| 39.2 | % |
|
| 14,592 |
|
|
| 104 |
|
|
| 0.7 | % |
Insurance |
|
| 2,146 |
|
|
| 5.7 | % |
|
| 1,962 |
|
|
| 184 |
|
|
| 9.4 | % |
Total |
| $ | 37,503 |
|
|
| 100.0 | % |
| $ | 36,387 |
|
| $ | 1,116 |
|
|
| 3.1 | % |
Sequential Comparison
|
| 1Q 2022 |
|
| % of Total |
|
| 4Q 2021 |
|
| $ Change |
|
| % Change |
| |||||
Operating expenses (1) |
| $ | 18,032 |
|
|
| 48.1 | % |
| $ | 17,275 |
|
| $ | 757 |
|
|
| 4.4 | % |
Utility expense, net of reimbursement |
|
| 2,629 |
|
|
| 7.0 | % |
|
| 2,252 |
|
|
| 377 |
|
|
| 16.7 | % |
Real estate taxes |
|
| 14,696 |
|
|
| 39.2 | % |
|
| 14,119 |
|
|
| 577 |
|
|
| 4.1 | % |
Insurance |
|
| 2,146 |
|
|
| 5.7 | % |
|
| 2,703 |
|
|
| (557 | ) |
|
| (20.6 | %) |
Total |
| $ | 37,503 |
|
|
| 100.0 | % |
| $ | 36,349 |
|
| $ | 1,154 |
|
|
| 3.2 | % |
25
Supplemental Schedule 7
Portfolio Data by Market
First Quarter 2022 Compared to First Quarter 2021
(proportionate amounts) (unaudited)
|
| Quarter Ended March 31, 2022 |
|
| Quarter Ended March 31, 2021 |
| ||||||||||||||||||||||||||||||||||
|
| Apartment |
|
| Apartment |
|
| AIR Share of |
|
| % AIR |
|
| Average |
|
| Apartment |
|
| Apartment |
|
| AIR Share of |
|
| % AIR |
|
| Average |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Bay Area |
|
| 8 |
|
|
| 2,134 |
|
|
| 1,579 |
|
|
| 9.2 | % |
| $ | 2,966 |
|
|
| 9 |
|
|
| 2,212 |
|
|
| 1,657 |
|
|
| 9.5 | % |
| $ | 3,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Boston |
|
| 11 |
|
|
| 2,462 |
|
|
| 2,462 |
|
|
| 11.7 | % |
|
| 2,546 |
|
|
| 11 |
|
|
| 2,462 |
|
|
| 2,462 |
|
|
| 10.5 | % |
|
| 2,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Denver |
|
| 7 |
|
|
| 2,026 |
|
|
| 1,987 |
|
|
| 7.8 | % |
|
| 1,907 |
|
|
| 7 |
|
|
| 2,026 |
|
|
| 1,987 |
|
|
| 6.9 | % |
|
| 1,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Washington, D.C. |
|
| 11 |
|
|
| 5,645 |
|
|
| 4,223 |
|
|
| 14.0 | % |
|
| 1,813 |
|
|
| 11 |
|
|
| 5,238 |
|
|
| 5,215 |
|
|
| 16.9 | % |
|
| 1,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Los Angeles |
|
| 9 |
|
|
| 3,815 |
|
|
| 2,966 |
|
|
| 20.0 | % |
|
| 3,221 |
|
|
| 13 |
|
|
| 4,347 |
|
|
| 3,498 |
|
|
| 19.9 | % |
|
| 2,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Miami |
|
| 6 |
|
|
| 2,425 |
|
|
| 2,425 |
|
|
| 10.0 | % |
|
| 2,386 |
|
|
| 5 |
|
|
| 1,725 |
|
|
| 1,725 |
|
|
| 6.9 | % |
|
| 2,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Philadelphia |
|
| 9 |
|
|
| 2,748 |
|
|
| 2,669 |
|
|
| 12.4 | % |
|
| 2,506 |
|
|
| 9 |
|
|
| 2,748 |
|
|
| 2,669 |
|
|
| 11.2 | % |
|
| 2,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
San Diego |
|
| 7 |
|
|
| 2,563 |
|
|
| 2,388 |
|
|
| 11.4 | % |
|
| 2,265 |
|
|
| 8 |
|
|
| 2,281 |
|
|
| 2,105 |
|
|
| 9.0 | % |
|
| 2,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Other Markets |
|
| 8 |
|
|
| 1,260 |
|
|
| 1,260 |
|
|
| 3.5 | % |
|
| 2,058 |
|
|
| 22 |
|
|
| 2,683 |
|
|
| 2,683 |
|
|
| 9.2 | % |
|
| 2,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Total |
|
| 76 |
|
|
| 25,078 |
|
|
| 21,959 |
|
|
| 100.0 | % |
| $ | 2,389 |
|
|
| 95 |
|
|
| 25,722 |
|
|
| 24,001 |
|
|
| 100.0 | % |
| $ | 2,233 |
|
26
Supplemental Schedule 8
Apartment Community Disposition and Acquisition Activity
(dollars in millions, except average revenue per home) (unaudited)
Dispositions (1) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Apartment |
| Number of |
| Weighted- |
| Gross |
| NOI Cap |
| Free Cash |
| Property |
| Net Sales |
| Average Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter 2022 Dispositions | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
| 1,332 |
| 100.0% |
| $578.0 |
| 4.5% |
| 4.2% |
| $(99.4) |
| $460.2 |
| $2,357 |
Acquisitions |
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
We did not acquire any apartment communities during the three months ended March 31, 2022.
27
Supplemental Schedule 9
Apartment Community Capital Additions Information
Three Months Ended March 31, 2022
(consolidated amounts in thousands, except per apartment home data) (unaudited)
We classify capital additions as Capital Replacements (“CR”), Capital Improvements (“CI”), Capital Enhancements (“CE”), or Other Capital Expenditures. Recurring capital additions are apportioned between CR and CI based on the useful life of the item under consideration and the period over which we have owned the item. Under this method of classification, CR represents the portion of the item consumed during our ownership of the item, while CI represents the portion of the item consumed prior to our period of ownership.
The table below includes our capital spend in consolidated amounts, not adjusted for noncontrolling interest.
|
| Three Months Ended |
|
| |
Capital Additions (1) |
|
|
|
| |
Capital Replacements |
|
|
|
| |
Buildings and grounds |
| $ | 4,745 |
|
|
Turnover capital additions |
|
| 387 |
|
|
Capitalized site payroll and indirect costs |
|
| 420 |
|
|
Capital Replacements |
|
| 5,552 |
|
|
Capital Improvements |
|
| 1,817 |
|
|
Capital Enhancements |
|
| 14,102 |
|
|
Initial Capital Expenditures |
|
| 5,660 |
|
|
Other Capital Expenditures |
|
| 9,972 |
|
|
Total |
| $ | 37,103 |
|
|
|
|
|
|
| |
Total apartment homes |
|
| 25,078 |
|
|
|
|
|
|
| |
Capital Replacements per apartment home |
| $ | 221 |
|
|
28
GLOSSARY AND RECONCILIATIONS OF NON-GAAP FINANCIAL AND OPERATING MEASURES
This Earnings Release and Supplemental Information include certain financial and operating measures used by AIR management that are not calculated in accordance with accounting principles generally accepted in the United States (“GAAP”). Our definitions and calculations of these non-GAAP financial and operating measures and other terms may differ from the definitions and methodologies used by other REITs and, accordingly, may not be comparable. These non-GAAP financial and operating measures should not be considered an alternative to GAAP net income or any other GAAP measurement of performance and should not be considered an alternative measure of liquidity.
AIR OPERATING PARTNERSHIP: Apartment Income REIT, L.P., a Delaware limited partnership, is the operating partnership in AIR’s UPREIT structure. AIR owns approximately 92.3% of the legal interest in the common partnership units of the AIR Operating Partnership and 93.9% of the economic interest in the common partnership units of the AIR Operating Partnership.
AIR PROPORTIONATE FINANCIAL INFORMATION: Within this Earnings Release and Supplemental Information, we provide certain financial information necessary to calculate our share of financial information. This information is not, nor is it intended to be, a presentation in accordance with GAAP. Our proportionate share of financial information includes our share of unconsolidated real estate partnerships and excludes the noncontrolling interest partners’ share of consolidated real estate partnerships.
We do not control the unconsolidated real estate partnerships and the calculation of our share of the assets and liabilities and revenues and expenses does not represent a legal claim to a proportionate share of such items. The amount of cash distributions partners in such partnerships may receive is based upon specific provisions in the partnership agreements and may vary based on whether such distributions are generated from operations, capital events or liquidation.
Proportionate information benefits the users of our financial information by providing the amount of revenues, expenses, assets, liabilities, and other items attributable to our stockholders. Other companies may calculate their proportionate information differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, the non-GAAP AIR proportionate financial information should not be considered in isolation or as a substitute for information included in our financial statements as reported under GAAP.
AVERAGE REVENUE PER APARTMENT HOME: Represents our proportionate average monthly rental and other property revenues, excluding utility cost reimbursements, divided by the number of occupied apartment homes as of the end of the period.
CAPITAL ADDITIONS DEFINITIONS
CAPITAL IMPROVEMENTS (CI): CI represent capital additions made to replace the portion of acquired apartment communities consumed prior to our period of ownership and not contemplated in our underwriting of an acquisition.
CAPITAL REPLACEMENTS (CR): Unlike CI, CR does not increase the useful life of an asset from its original purchase condition. CR represent capital additions made to replace the portion of acquired capital assets consumed during our period of ownership.
CAPITAL ENHANCEMENTS (CE): CE may include kitchen and bath remodeling; energy conservation projects; and investments in longer-lived materials designed to reduce costs. CE does not significantly disrupt property operations.
INITIAL CAPITAL EXPENDITURES (ICE): ICE represent capital additions contemplated in the underwriting at our recently acquired communities. These amounts are considered in the underwriting of the acquisition and are therefore included when determining expected returns.
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OTHER CAPITAL EXPENDITURES: May include capital expenditures incurred in connection with the restoration of an apartment community after a casualty event and other capitalizable costs. During the first quarter, we incurred $7.5 million of costs associated with restoring our Park Towne Place property after a 2021 casualty event.
FREE CASH FLOW: Free Cash Flow, as calculated for our retained portfolio, represents an apartment community’s property net operating income, less spending for Capital Replacements. Capital Replacement spending is a measure of the cost of capital asset used during the period. We believe that Free Cash Flow is useful to investors as a supplemental measure of apartment community performance because it takes into consideration costs incurred during the period to replace capital assets that have been consumed during our ownership.
FREE CASH FLOW CAP RATE: Free Cash Flow Cap Rate represents the NOI Cap Rate, adjusted for assumed Capital Replacements spending of $1,200 per apartment home.
FREE CASH FLOW MARGIN: Free Cash Flow Margin represents an apartment community’s property net operating income less $1,200 per apartment home of assumed annual Capital Replacement spending, as a percentage of the apartment community’s rental and other property revenues.
LEVERAGE RATIO DEFINITIONS
We target Net Leverage to Adjusted EBITDAre below 6.0x. We also focus on Proportionate Debt to Adjusted EBITDAre. We believe these ratios, which are based in part on non-GAAP financial information, are commonly used by investors and analysts to assess the relative financial risk associated with balance sheets of companies within the same industry, and they are believed to be similar to measures used by rating agencies to assess entity credit quality. EBITDAre and Adjusted EBITDAre should not be considered alternatives to net income (loss) as determined in accordance with GAAP as indicators of performance. There can be no assurance that our method of calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real estate investment trusts.
Our net leverage includes our share of long-term, non-recourse property debt, outstanding borrowings on our revolving credit facility, term loans, and preferred equity, reduced by cash and restricted cash on-hand, excluding tenant security deposits, and our note receivable from Aimco. We reconcile consolidated balances to our net leverage on Supplemental Schedule 5(a).
We calculate Adjusted EBITDAre used in our leverage ratios based on annualized current quarter amounts.
EBITDAre AND ADJUSTED EBITDAre
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION FOR REAL ESTATE (“EBITDAre”): NAREIT defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, depreciation and amortization expense, further adjusted for:
We believe that EBITDAre is useful to investors, creditors and rating agencies as a supplemental measure of our ability to incur and service debt because it is a recognized measure of performance by the real estate industry and facilitates comparison of credit strength between AIR and other companies.
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ADJUSTED EBITDAre: Adjusted EBITDAre is defined as EBITDAre adjusted to exclude the effect of the following items for the reasons set forth below:
A reconciliation of net income (loss) to EBITDAre and Adjusted EBITDAre for our portfolio for the quarter ended March 31, 2022, is as follows (in thousands, unaudited):
|
| Quarter Ended |
| |
|
| March 31, 2022 |
| |
Net income |
| $ | 401,384 |
|
Adjustments: |
|
|
| |
Interest expense |
|
| 22,107 |
|
Loss on extinguishment of debt |
|
| 23,636 |
|
Income tax benefit |
|
| (579 | ) |
Depreciation and amortization |
|
| 84,549 |
|
Gain on derecognition of leased properties and dispositions of real estate |
|
| (412,003 | ) |
EBITDAre |
| $ | 119,094 |
|
Net loss attributable to noncontrolling interests in consolidated real estate partnerships |
|
| 564 |
|
EBITDAre adjustments attributable to noncontrolling interests and unconsolidated real estate partnerships |
|
| (5,926 | ) |
Interest income on note receivable from Aimco (1) |
|
| (6,944 | ) |
Pro forma FFO adjustments, net (2) |
|
| 342 |
|
Adjusted EBITDAre |
| $ | 107,130 |
|
Annualized Adjusted EBITDAre |
| $ | 428,520 |
|
April 2022 property sales, annualized |
|
| (7,955 | ) |
Pro forma Adjusted Annualized EBITDAre |
| $ | 420,565 |
|
FIXED CHARGE COVERAGE RATIO: As defined by our credit agreement, the ratio of (a) EBITDA to (b) fixed charges, which represent the sum of (i) our proportionate share of interest expense (excluding prepayment penalties and amortization of debt issuance costs), (ii) debt amortization, and (iii) Preferred Dividends, for the four fiscal quarters preceding the date of calculation. The calculation of certain of these measures as defined by our Credit Agreement may differ from those used in the calculations of our Leverage Ratios.
PREFERRED DIVIDENDS: Preferred Dividends include dividends paid with respect to AIR’s Preferred Stock and the AIR OP’s Preferred Partnership Units, exclusive of preferred equity redemption related amounts.
PREFERRED EQUITY: Preferred equity represents the redemption amounts for AIR’s Preferred Stock and the AIR OP���s Preferred Partnership Units and may be found in AIR’s consolidated balance sheets and on Supplemental Schedule 5(b).
OTHER LEVERAGE: Other Leverage includes Preferred OP Units and redeemable noncontrolling interests.
PREFERRED OP UNITS: Preferred OP Units represent the redemption amounts for the AIR OP’s Preferred Partnership Units and may be found in our consolidated balance sheets and on Supplemental Schedule 5(b).
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PROPORTIONATE DEBT TO ADJUSTED EBITDAre RATIO: The ratio of (a) our share of net leverage as calculated on Supplemental Schedule 5(a), excluding Preferred Equity, to (b) Annualized Adjusted EBITDAre.
NET LEVERAGE TO ADJUSTED EBITDAre RATIO: The ratio of (a) our share of net leverage as calculated on Supplemental Schedule 5(a), to (b) Annualized Adjusted EBITDAre.
NAREIT FUNDS FROM OPERATIONS (NAREIT FFO): NAREIT FFO is a commonly used measure of REIT performance, which the National Association of Real Estate Investment Trusts (NAREIT) defines as net income computed in accordance with GAAP, excluding: (i) depreciation and amortization related to real estate; (ii) gains and losses from sales or impairment of depreciable assets and land used in the primary business of the REIT; (iii) and income taxes directly associated with a gain or loss on sale of real estate; and including (iv) our share of NAREIT FFO of unconsolidated partnerships and joint ventures. We compute NAREIT FFO for all periods presented in accordance with the guidance set forth by NAREIT.
In addition to NAREIT FFO, we use PRO FORMA FUNDS FROM OPERATIONS (Pro forma FFO) to measure short-term performance. Pro forma FFO represents NAREIT FFO as defined above, excluding certain amounts that are unique or occur infrequently. Our pro forma adjustments are defined in further detail in the footnotes to Supplemental Schedule 1.
NAREIT FFO and Pro forma FFO are non-GAAP measures that we believe are helpful to investors in understanding our short-term performance because they capture features particular to real estate performance by recognizing that real estate assets generally appreciate over time or maintain residual value to a much greater extent than other capital assets such as machinery, computers or other personal property. NAREIT FFO and Pro forma FFO should not be considered alternatives to net income as determined in accordance with GAAP, as indicators of performance. There can be no assurance that our method of computing NAREIT FFO and Pro forma FFO is comparable with that of other real estate investment trusts.
NET OPERATING INCOME (NOI) CAP RATE: NOI Cap Rate is calculated based on our share of the proportionate property NOI for the trailing twelve months prior to sale, less a 3% management fee, divided by gross proceeds.
NET OPERATING INCOME (NOI) MARGIN: Represents an apartment community’s net operating income as a percentage of the apartment community’s rental and other property revenues.
OTHER EXPENSES, NET: Other expenses, net, allocated to contribution from real estate operations on Supplemental Schedule 2 generally includes franchise taxes, expenses specifically related to our administration of our real estate partnerships (for example, services such as audit, tax, and legal), ground lease rent expense, and risk management activities related to certain other corporate expenses.
PROPERTY NET OPERATING INCOME (NOI) and PROPORTIONATE PROPERTY NOI: NOI is defined as total property rental and other property revenues less direct property operating expenses, including real estate taxes. NOI does not include: property management revenues; casualties; property management expenses; depreciation; or interest expense. NOI is helpful because it helps both investors and management to understand the operating performance of real estate excluding costs associated with decisions about acquisition pricing, overhead allocations, and financing arrangements. NOI is also considered by many in the real estate industry to be a useful measure for determining the value of real estate. Reconciliations of NOI as presented in this Earnings Release and Supplemental Information to our consolidated GAAP amounts are provided below.
Due to the diversity of our economic ownership interests in our apartment communities in the periods presented, we evaluate the performance of the apartment communities in our segments using Proportionate Property NOI, which represents our share of the NOI for the apartment communities that we consolidate and manage, but excludes apartment communities that we do not consolidate. Proportionate Property NOI is defined as our share of rental and other property revenue less our share of property operating expenses. In our evaluation of community results, we exclude utility cost reimbursement from rental and other property revenues and reflect such amount as a reduction of the related utility expense within property operating expenses.
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The following table presents the reconciliation of GAAP rental and other property revenue to the proportionate revenues before utility reimbursements and GAAP property operating expenses to proportionate expenses, net of utility reimbursements. The table also presents the reconciliation of consolidated Same Store revenue before utility reimbursements and expenses, net of utility reimbursements as presented on Supplemental Schedule 2(a) to the proportionate amounts presented on Supplemental Schedule 6.
Segment NOI Reconciliation |
|
|
|
|
| |||||||||||
(in thousands) (unaudited) |
| Three Months Ended March 31, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Revenues, |
|
| Expenses, |
|
| Revenues, |
|
| Expenses, |
| ||||
Total Real Estate Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total (per consolidated statements of operations) |
| $ | 181,478 |
|
| $ | 63,236 |
|
| $ | 176,413 |
|
| $ | 64,617 |
|
Adjustment: Utilities reimbursement (1) |
|
| (7,090 | ) |
|
| (7,090 | ) |
|
| (6,188 | ) |
|
| (6,188 | ) |
Adjustment: Sold properties and other amounts not allocated (2) |
|
| (7,945 | ) |
|
| (9,287 | ) |
|
| (21,633 | ) |
|
| (15,502 | ) |
Adjustment: Non-real estate depreciation (3) |
|
| — |
|
|
| 276 |
|
|
| — |
|
|
| — |
|
Total (per Supplemental Schedule 2) |
| $ | 166,443 |
|
| $ | 47,135 |
|
| $ | 148,592 |
|
| $ | 42,927 |
|
Proportionate adjustment (4) |
|
| (12,691 | ) |
|
| (3,291 | ) |
|
| (13,120 | ) |
|
| (3,661 | ) |
Proportionate property net operating income |
| $ | 153,752 |
|
| $ | 43,844 |
|
| $ | 135,472 |
|
| $ | 39,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Same Store Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same Store amounts (per Supplemental Schedule 2) |
| $ | 150,799 |
|
| $ | 40,781 |
|
| $ | 146,678 |
|
| $ | 41,563 |
|
Proportionate adjustment (4) |
|
| (12,691 | ) |
|
| (3,534 | ) |
|
| (20,239 | ) |
|
| (5,516 | ) |
Non-real estate depreciation adjustment (3) |
|
| — |
|
|
| 256 |
|
|
| — |
|
|
| 340 |
|
Same Store amounts, adjusted (per Supplemental Schedule 6) |
| $ | 138,108 |
|
| $ | 37,503 |
|
| $ | 126,439 |
|
| $ | 36,387 |
|
PORTFOLIO QUALITY RATINGS: We measure the quality of apartment communities in our portfolio based on average rents of our apartment homes compared to local market average rents as reported by a third-party provider of commercial real estate performance and analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of local market average; as “B” quality apartment communities those earning rents between 90% and 125% of local market average.
REAL ESTATE CLASSIFICATIONS: Our portfolio of apartment communities is diversified by both price point and geography. Our portfolio is classified into two segments, as follows:
SAME STORE: Same Store apartment communities are apartment communities that (a) are owned and managed by AIR, and (b) had reached a stabilized level of operations.
OTHER REAL ESTATE: Includes communities that do not meet the criteria to be classified as Same Store.
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SOLD AND HELD FOR SALE APARTMENT COMMUNITIES: Apartment communities either sold since January 1, 2021 or classified as held for sale at the end of the period. For purposes of highlighting results of operations related to our retained portfolio, results for Sold and Held For Sale Apartment Communities are excluded from property net operating income and presented separately on a net basis on Supplemental Schedule 2.
TURNOVER and RETENTION: Turnover represents the percentage of residents who have moved out in the trailing twelve months. It is calculated by dividing the number of move outs in the trailing twelve months, exclusive of intra-community transfers, by the daily average number of occupied apartment homes during the trailing twelve months. For the three months ended March 31, 2022, Turnover was 38.7%, 474 basis points lower than the three months ended March 31, 2021. Inclusive of intra-community transfers, Turnover was 42.5% for the trailing twelve months ended March 31, 2022.
Retention represents the inverse of Turnover, as defined above.
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