SAYBROOK POINTE SAN JOSE, CA Nareit REITweek Conference Investor Presentation June 2019
CREATING VALUE OVER TIME: THE RECORD Aimco’s primary measure of long-term financial performance is Economic Income. Measuring Aimco shareholder value creation by the per share change in Net Asset Value (NAV) plus Cash Dividends paid, Aimco Economic Income has compounded: (1) o Since IPO through 1Q 2019 , at 14% annually; and o Over the last five years, through 1Q 2019, at 10.6% annually, reflecting lower leverage and stable, full pricing for assets. • Aimco publishes its NAV estimate semi-annually; as of 1Q 2019: NAV = $56 per share. Aimco has produced solid results, demonstrated by: Same Store operations, for the five years ending 2018: • Net Operating Income (NOI) CAGR ranking third among peers and 20 bps above peer average with Operations a peer-leading Same Store expense CAGR, 60 bps lower than the nearest peer; • Peer-leading Same Store NOI margin of 74%, with 820 bps of margin expansion, 3.5x better than peer-average margin expansion of ~230 bps. • ~$1B of Redevelopment and Development spending over the five years ending March 2019, Redevelopment creating ~$400M of value. • Sale of $3.2B of lower-rated assets over the five years ending March 2019; funding the purchase of $1.7B of properties, $1B of redevelopments and developments, $0.4B of share repurchases, and $0.1B of other net uses. Portfolio Management • Exit from the affordable housing business. • Improved quality of earnings. Improved the safety and flexibility of Aimco’s Investment Grade balance sheet: • Maintained the safety of non-recourse amortizing debt and long duration weighted average maturity to minimize refunding risk. Aimco’s refunding risk is the 3rd lowest of the peer group; 20 bps better than peer average.(2); Balance Sheet • Improved flexibility by: o Increasing revolving credit facility 33% to $800M; o Increasing pool of unencumbered properties from $0.4B to ~$3B. Because Aimco does not use corporate debt which requires the backing of such a pool, the entirety of these “hard assets” is available to secure access to “dry powder” even when capital markets are in distress. (1) Represents Aimco’s last published Net Asset Value of $56/sh at 3/31/2019 and share price at IPO as a proxy for NAV. (2) Refunding risk is calculated as the average annual refunding exposure as a percentage of GAV as estimated by Green Street Advisors. 2
CREATING VALUE OVER TIME: THE PROMISE Going forward, Aimco maintains its commitment to excellence in operations, disciplined capital allocation per its paired trade philosophy, and a safe, flexible, and investment grade balance sheet. Through May, Aimco: • Operations are tracking ahead of original expectations, accordingly Aimco is raising Operations 2019 Same Store revenue and NOI guidance 20 basis points at the midpoint of their respective ranges. • Redevelopment is increasing annual spending YOY by ~40% to $225-$275M … Redevelopment targeting ~$100M of value creation to boost 2019 Economic Income. • Maintains its disciplined capital allocation strategy through paired trades, while Portfolio Management regularly looking for opportunistic transactions. • Maintains a portfolio diversified by geography and price point. • Has a high quality of earnings with 98% of 2019 AFFO from “core real estate operations.”(1) Balance Sheet • Has no loan maturities remaining in 2019. Only 2% of total leverage is due in 2020. • Redeemed its 6.875% Class A perpetual preferred stock, lowering Aimco’s cost of leverage. (1) Earnings outside of “core real estate operations” represents AFFO contribution from Asset Management, historic tax credits, and other tax benefits. 3
AIMCO’S EARNINGS QUALITY • The contribution from real estate operations to Aimco bottom line has increased steadily since the planned exit from the affordable and asset management businesses was announced in 2011, and is expected to be 98% of AFFO in 2019. o Aimco’s 2019 Same Store portfolio is expected to contribute an incremental $0.11, or 5% AFFO growth. o Other Earnings expected in 2019, defined as contributions from affordable, asset management, and tax related income, are forecast to be just 2% of AFFO, or $0.05 per share, down 90% over the same eight years. At the midpoint, 2019 AFFO guidance is $2.17 per share. • $2.12 from Core Earnings; seven-year CAGR = 16% • $0.05 from Other Earnings 4
OPERATIONS UPDATE 2019 SAME STORE UPDATE Through May, Aimco has: • Completed about 50% of leasing activity expected for the year; • Increased average daily occupancy (“ADO”) year-over-year by 80 bps; and • Improved blended lease rates year-over-year by 3.3%. CHANGES IN SAME STORE 1Q Apr May YTD RENTAL RATES 2019 2019 2019(1) Leases RENEWALS 5.2% 5.0% 5.3% 5.2% NEW LEASES 0.8% 1.6% 2.0% 1.4% WT. AVG. 2.9% 3.4% 3.7% 3.3% AVERAGE DAILY 97.0% 97.0% 97.0% 97.0% OCCUPANCY (“ADO”) 2019 SAME STORE GUIDANCE Based on results through May and with half of our leasing activity for 2019 now completed, Aimco updated its ranges for full year Same Store guidance to: New Prior FY 2019 FY 2019 REVENUE GROWTH 3.10% to 3.90% 2.80% to 3.80% +20 bps at the midpoint EXPENSE GROWTH 2.00% to 3.00% 2.00% to 3.00% No change NOI GROWTH 3.10% to 4.50% 2.70% to 4.50% +20 bps at the midpoint (1) May leasing data is updated as of 5/31/2019, and is considered preliminary, actual results published with the 2Q 2019 Earnings Release may differ. 5
INNOVATION & PRODUCTIVITY • Focus on efficient, productive operations: Aimco uses Controllable Operating Expenses ("COE"), defined as property level expenses before taxes, insurance, and utilities, as one measure of operating efficiency. o 2019 COE growth expected to be 50 bps. (1) o For the five years ended 2018, Aimco COE growth was 1.1%, 100 bps below peer average. o For the ten years ended 2018, Aimco COE growth was flat. • Innovation is the foundation of Aimco cost control efforts. Innovative activities include: Same Store Expense Growth 2013 - 2018 Redesign work: moving administrative tasks to the o 120 Shared Service Center to reduce cost and allows CAGR 3.1% Peer Avg site teams to focus on sales and service. 115 o Standardize processes and purchases: reducing complexity, and increasing volume discounts. 110 2.0% Aimco 1.1% Aimco COE o Invest consistently: focus on total lifecycle costs by 105 installing more durable in-unit materials such as plank flooring instead of carpet, and granite 100 countertops instead of laminate. 95 2013 2014 2015 2016 2017 2018 o Leverage Technology: meet today’s customer preference for on-line self-service and convenience, while also reducing costs through such innovations as software controls, package lockers, and smart home technology. (1) Peer group consists of AVB, CPT, EQR, ESS, and UDR. Peer average COE is calculated, per Aimco’s COE definition, as the CAGR of peer averages. SS Expense breakout is not publicly reported by MAA in 2014, therefore it was excluded from the 5-year average. For the four years ended 2018, Aimco COE growth was 1.3%, 70 bps below peer average (including MAA). 6
REDEVELOPMENT REDEVELOPMENT PROVIDES CONSISTENT VALUE CREATION • Over the past five years, Aimco spent $1B on Redevelopment and Development, creating ~$400M of value. • In 2019, Aimco plans to spend $225-$275M on Redevelopment and Development, targeting 40% value creation or $100M. • Of the planned spending for 2019, two-thirds represents projects that are currently in-process including Parc Mosaic, Flamingo, The Fremont, Elm Creek, as well as other smaller projects. • The remaining one-third of 2019 spending is expected from new starts taken from Aimco’s deep redevelopment pipeline, including 707 Leahy which was announced with the 1Q 2019 Earnings Release. 2019/2020 POTENTIAL REDEVELOPMENT PROJECTS MINNEAPOLIS Calhoun Beach Club (Expanded Scope) DENVER NEW YORK CITY Anschutz Expansion East 88th & 2nd Ave (Additional Phases) PHILADELPHIA Chestnut Hall GREATER GREATER LA WASHINGTON, DC Villas at Park La Brea Bent Tree SAN DIEGO Mariner's Cove MIAMI Bay Parc (Additional Phases) Flamingo Point (Additional Phases) The menu shown above is representative of the communities whose redevelopment or development is being considered in 2019. Actual projects and their scope will differ depending on approvals. 7
REDEVELOPMENT CYCLE SMALL PHASE REDEVELOPMENTS - INVENTORY MANAGEMENT • When practical, Aimco prefers small phase redevelopments which provide optionality to improve its offering and flexibility to adjust volume to market demand. • Managing inventory to meet demand allows for predictable NOI growth proportional to value creation. MAJOR REDEVELOPMENTS • Aimco engages in “large phase” or major redevelopment when the scope of the project, or structure of the community, requires investment in larger building systems or common areas. • Major redevelopments have comparable value creation, but their longer cycle time increases risk and current period earnings dilution. REDEVELOPMENT CYCLE • Aimco Economic Income based on value creation is generally consistent over time, while current period contribution to AFFO is more volatile, often reduced during construction and until the community is stabilized, as described below. Stabilized Construction Lease-Up Post Redev Pre-Construction Phase NOI Stabilization Value Creation Initial Value Creation Continued Value Creation Value Creation Fully Opportunity •GAV is created as •GAV increases as Realized •Based on location and redevelopment dollars construction is completed •Full accretion from investment ability to reposition the are spent and lease-up begins and incremental value asset in the market creation AFFO Dilution AFFO Dilution AFFO Growth Opportunity •Down units and •Vacancy during lease up, Full AFFO Earnings •Stabilized NOI, with the disruption to leasing increased marketing •Maximized earnings potential potential to outpace the from construction, expenses, and minimal or through intentional community market through partially offset w/ no capitalized interest offset design, targeted marketing, repositioning capitalized interest and successful repositioning •Achieved up to 2 years after construction completion Current Example Current Example 2019 Lease-Ups Current Example •88th and 2nd Ave •707 Leahy •Parc Mosaic (2Q19 Initial •The Sterling Occupancy) 8
PORTFOLIO MANAGEMENT 2018 & 2019 YTD CAPITAL ALLOCATION • Since the beginning of 2018, Aimco has sold ~$1 billion of real estate, these were lower-rated communities in less desirable submarkets. • Aimco reinvested these proceeds in communities located in more attractive submarkets and with higher expected FCF IRRs. Property Share Total Property Spread on Acquisitions Buyback Investment Sales Reinvestment Proceeds / Investment $563M $394M $957M $941M ($16M) NOI Cap Rate 5.3% 5.6% 5.4% 5.2% +20 bps FCF Cap Rate 4.9% 5.2% 5.1% 4.7% +40 bps FCF IRR 8.5% 8.0% 8.3% 6.5% +180 bps Average Rent per Unit $2,021 $2,055 $2,039 $1,512 +$527 • In 2018, Aimco also sold its Asset Management business for $300M. The Asset Management 2019 FCF yield would have been 9%, but this was a low quality income stream that would decrease to zero in 2025. 9
PORTFOLIO MANAGEMENT 2019 CAPITAL PLANS Aimco allocates capital in accordance with its FCF IRR paired-trade discipline and on a leverage-neutral basis. Aimco considers unlevered risk- Aimco considers portfolio implications Aimco considers its cost of unlevered adjusted returns from a menu of capital and execution risks such as: equity capital, including: uses including: • Capital Enhancements • Geographic market concentrations • Sale of lower-rated properties • Redevelopment • Price point concentrations • Sale of partial interests in higher- • Development • Competitive new supply rated properties • Acquisitions • Entitlement risk • Issuance of shares or OP units • Leverage reduction • Construction risk • Share buybacks • Lease-up risk 10
PORTFOLIO MANAGEMENT 2019 CAPITAL PLANS (cont.) • Aimco continues to be active in the pursuit of value-creating opportunities both inside and outside its portfolio. o Future transactions, while opportunistic, are expected to reflect expectations similar to previous Aimco transactions, such as: Capital Allocation Category Description Aimco Example Covered-land plays Land value that approaches or exceeds the current Eastpointe/Parc Mosaic developed value. Under-managed communities Communities that benefit from Aimco’s peer-leading Bent Tree & Avery Row operational platform and management. OP unit transactions Estate planning where Aimco’s REIT platform offers Philadelphia portfolio benefit to the seller. Acquisition of new construction Aimco bears lease-up risk but no construction risk. Vivo Stock buybacks Selling assets at market prices to reinvest in the AIV has existing authorization to Aimco portfolio at a meaningful discount to NAV. repurchase 10.6M shares 11
HIGH QUALITY BALANCE SHEET AIMCO LIMITS RISK THROUGH BALANCE SHEET STRUCTURE • Manage refunding risk with low leverage: • 31% LTV at 1Q 2019 • 25% LTV subject to refunding after consideration of annual amortization, funded through retained earnings, and perpetual preferred securities • 2.8% average annual refunding risk as a percent of asset value • Limit entity risk: • Finance primarily with non-recourse property debt and preferred equity: 99% • Increase financial flexibility: • Ample available credit: $800M revolving credit facility up by one-third from $600M a year ago, with $723M available at 1Q 2019 • A pool of unencumbered properties: Valued at ~$3B, up by more than half from $2B a year ago. • Maintain investment grade rating as confirmation of the safety of Aimco’s balance sheet 12
HIGH QUALITY BALANCE SHEET Since January 2018, through refinancing activity, Aimco has Refunding risk is lower than total leverage due to principal lowered the weighted average interest rate on its property debt amortization paid from retained earnings. by 52 bps and extended the duration of this debt. By growing the value of its unencumbered properties, Aimco has improved the safety and flexibility of its balance sheet. (1) $247M of property debt is payable at par in 2020 but does not mature until 2021; Aimco intends to repay this debt in 2020. (2) Aimco’s revolving credit facility matures in January 2022. 13
TEAM AND CULTURE Focus intentionally on a collaborative and productive culture based on respect for others, personal responsibility, reinforced by a preference for promotion from within based on talent development and succession planning to produce a strong, stable team that is the enduring foundation of Aimco success. TEAM ENGAGEMENT • Out of hundreds of participating companies, Aimco is one of only seven recognized as a "Top Place to Work" in Colorado for each of the past seven years. • For the past five years, Aimco team engagement scores, on a 1 to 5 scale, have averaged better than 4. TALENT AND SUCCESSION PLANNING • In 2018, Aimco invested $1.9M in team member training and development. • Aimco prefers promotion from within and maintains a talent pipeline for every executive officer position, including the CEO. • Aimco plans in advance for succession. Positions are filled considering the business strategy and needs at the time of a vacancy, with the candidates’ skills, experience, expertise, leadership, and fit. • The Aimco Board of Directors participates actively in succession planning and reviews in detail the executive talent pipeline and candidate development annually. Further, the Board engages directly and regularly with executive officers and the candidates for their succession. 14
AIMCO SENIOR LEADERSHIP TEAM Aimco benefits from a long-tenured team with an average of 15 years of Aimco service. Paul Beldin John Bezzant Lisa Cohn Terry Considine Miles Cortez Steve Crane Matt Eilen EVP & EVP & EVP & Chairman & EVP & Real Estate Tax Property Operations Chief Financial Officer Chief Investment General Counsel CEO Chief Administrative 16 Years Finance 11 Years Officer 16 Years 44 Years Officer 9 Years 12 Years 17 Years Michael Englhard Patti Fielding Richard Hawthorne Kristina Howe Jennifer Johnson Keith Kimmel Didi Meredith Redevelopment EVP: Debt & Treasurer Redevelopment Property Operations Human Resources EVP Property Operations Construction Services President: Construction Services & Marketing 14 Years Property Operations West Operations 6 Years Aimco Investment Partners 11 Years 17 Years 17 Years 13 Years 22 Years Leann Morein Kevin Mosher Wes Powell Patti Shwayder Martin Sprang Lynn Stanfield Andrea Young Compliance Property Operations EVP Government Relations Asset Quality & EVP Finance & Tax IT 24 Years East Operations Redevelopment & Communications Service 17 Years New Hire 11 Years 15 Years 16 Years 12 Years 15
POTENTIAL 2019 RISKS Aimco regularly assesses risks that may impact its business and takes prudent precautions to ensure that the company is well-positioned. Mitigating Factors • Aimco maintains a portfolio that is diversified by geography and price point to mitigate the New Supply impact of competitive new supply. Aimco exposure to new supply is expected to be less in 2019 than in 2018 and is discussed on pg. 17. • Aimco resident retention was 56% for the twelve months ended March 31, 2019, (up 150 U.S. Economy bps YOY) limiting the impact of new lease pricing if rental demand were to decline nationally. • Aimco has limited exposure to rising interest rates: $3.7B (92% of total leverage) is fixed- Interest Rates rate for a weighted average term of 8.9 years; only ~$575M of property loans (14% of total leverage) mature by 2021. • Aimco government affairs and legal teams work directly with federal, state, and local governments and also through industry groups to make government decision making, relevant to Aimco business, better informed, for example: Aimco teams participated in the industry coalition that opposed Prop 10 in California in Political Risk o 2018 and continue to work with various groups in several states to defeat onerous rent control measures. • Aimco works with federal, state and local governments to protect the right of property owners to select their residents and their neighbors. 16
EXPOSURE TO NEW SUPPLY • Aimco considers competitive new supply to be significant primarily to “A” price point communities in submarkets with completions projected to be more than 2.0% of existing stock. Based on third-party forecasts of new supply, Aimco properties representing 19% of GAV may be so affected in 2019, down from 23% at the beginning of 2018. • Even where markets face elevated new supply, the quality of the Aimco offering or its location, or an increase in local demand (for example from job growth), can reduce or offset the impact of new supply. % Aimco GAV 2019 Invested in "A" Completions 2019 New Jobs Submarket Graded as a % of per Unit Market Submarket Communities Stock(1) Completed(2) Aimco Specific Mitigating Factors Deliveries delayed from 2018 have caused this submarket to screen at our Los Angeles Mid-Wilshire 8.9% 2.0% 3 elevated supply threshold. New supply pressure continues; however it is declining from 2018 and strong job Philadelphia Center City 6.5% 3.9% 7 growth suggests supply should be absorbed. New supply outlook for 2019 is lower than in 2018; and new jobs data suggests Chicago Central DuPage County 0.9% 2.4% 5 2019 supply should be absorbed. New supply is declining from 2018; and new jobs data suggests 2019 supply Minneapolis Uptown/St. Louis Park 0.9% 2.1% 6 should be absorbed. New supply is expected to be elevated; however, it is expected to be a different Denver Littleton 0.4% 5.2% 3 product type with appeal to a different customer, i.e., mostly 1-bedroom units vs. Aimco’s townhome community. New supply completions are expected to continue into 2019 and to pressure Atlanta Midtown Atlanta 0.5% 7.0% 6 rents at Aimco properties. New supply completions are expected to continue into 2019 and to pressure Nashville West Nashville 0.4% 5.9% 5 rents at Aimco’s property. New supply completions are expected to pressure rents at Avery Row, Aimco’s Washington D.C. North Arlington 0.2% 3.6% 6 newest acquisition, however this is a 67-unit property, currently 97% occupied with only ~20 new leases expected in 2019. Total % of Aimco GAV Exposed 18.7% Declining Continuing Increasing Supply Outlook High Supply Supply Outlook • In addition, certain Aimco communities, although graded “B” in their submarkets, face supply pressure based on the proximity of new product being delivered, e.g. Yacht Club in Miami and 3400 Avenue of the Arts in Orange County, which both have lease-ups directly across the street. (1) Based on submarket data for deliveries in 2019 as a percentage of 1Q19 forecasted stock as of 1Q 2019, available from Axio/MPF Research. (2) Employment figures are based on market data as reported by Green Street Advisors (Apr 2019). As a rule of thumb, at least five new jobs are necessary to absorb one unit of new supply. 17
WHY INVEST IN AIMCO? • Best-in-Class Operations: Lower resident turnover through intentional focus on customer selection and satisfaction drives peer- leading margins. • Paired-Trade Capital Allocation Discipline: Aimco adheres to a disciplined paired-trade strategy comparing expected unlevered returns on all of its capital allocation uses to the expected unlevered costs of capital. • Aimco invests at FCF IRRs of >10% up to 3% of its GAV annually in repositioning existing properties and constructing new ones, adding on average, $0.40 to Net Asset Value for every dollar invested in the last 5 years. • Since 2016, notwithstanding a fully priced market, Aimco has made $1.3B of opportunistic acquisitions where Aimco had a comparative “advantage” that provided outsized value creation. o Indigo, Palazzo (reacquisition of 47% interest from JV partner), Bent Tree Apartments, Philadelphia portfolio, and Avery Row; o These acquisitions, funded with paired trade sales, increased expected FCF IRR by ~300 bps. • Geographically Diversified: Targeting 12 of the largest markets in the nation, including the only publicly traded apartment REIT with significant investments in Philadelphia and Miami. • Safe and Flexible Balance Sheet: Aimco is the only REIT in its peer group that primarily uses safe, non-recourse, property level financing while maintaining an investment grade rating as confirmation of the safety of its balance sheet. 18
FORWARD LOOKING STATEMENTS & OTHER INFORMATION This presentation contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of 2019 expectations, including but not limited to: AFFO and selected components thereof; Aimco redevelopment and development investments and projected value creation from such investments; Aimco refinancing activities; and Aimco liquidity and leverage metrics. These forward-looking statements are based on management’s judgment as of this date, which is subject to risks and uncertainties. Risks and uncertainties include, but are not limited to: Aimco’s ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, redevelopments and developments; Aimco’s ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to Aimco redevelopments and developments; and Aimco’s ability to comply with debt covenants, including financial coverage ratios. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond Aimco’s control, including, without limitation: • Real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which Aimco operates and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing of acquisitions, dispositions, redevelopments and developments; and changes in operating costs, including energy costs; • Financing risks, including the availability and cost of capital markets’ financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; and the risk that earnings may not be sufficient to maintain compliance with debt covenants; • Insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; and • Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of governmental regulations that affect Aimco and interpretations of those regulations; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by Aimco. In addition, Aimco’s current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on Aimco’s ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership. Pursuant to its existing authority to repurchase up to an additional 10.6M shares, the company may make repurchases from time to time in the open market or in privately negotiated transactions at the company’s discretion and in accordance with the requirements of the SEC. The timing and amount of repurchases, if at all, will depend on market pricing as well as other conditions. Readers should carefully review Aimco’s financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of Aimco’s Annual Report on Form 10-K for the year ended December 31, 2018, and the other documents Aimco files from time to time with the Securities and Exchange Commission. These forward-looking statements reflect management’s judgment as of this date, and Aimco assumes no obligation to revise or update them to reflect future events or circumstances. This presentation does not constitute an offer of securities for sale. Glossary & Reconciliations of Non-GAAP Financial and Operating Measures Financial and operating measures discussed in this document include certain financial measures used by Aimco management, that are measures not defined under accounting principles generally accepted in the United States, or GAAP. Certain Aimco terms and Non-GAAP measures are defined in the Glossary and Reconciliations of Non-GAAP Financial and Operating Measures included in Aimco’s First Quarter 2019 Earnings Release dated May 2, 2019. 19
