APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ANNOUNCES $1.5 BILLION ACQUISITION OF 17,383 UNITS FROM
CASDEN PROPERTIES OF LOS ANGELES
INCREASES ASSET BASE TO $15 BILLION; 363,000 APARTMENT UNITS
DENVER, COLORADO, December 4, 2001
Apartment Investment and Management Company (NYSE:AIV) ("Aimco"),
the nation's largest owner and operator of apartments, has agreed to
acquire 100% ownership of 17,383 apartment units through the acquisition of
Casden Properties, a Los Angeles-based private real estate investment trust
("REIT"). As part of the transaction, the selling group, including Alan
Casden and affiliates of Blackacre Capital Management, LLC, New York, will
acquire $213 million in Aimco common stock and common OP Units at a price
of $47 per share. The $1.5 billion acquisition is comprised of:
- 6,356 conventional apartment units located in Southern
California of which 1,381 units, located in the Park La
Brea area of Los Angeles, are under development;
- 11,027 affordable apartment units (located in 25 states);
and
- National Partnership Investments Corporation ("NAPICO"),
a subsidiary of Casden Properties, which as general
partner controls more than 400 properties with more than
41,000 units.
The addition of the Casden portfolio significantly increases
Aimco's presence in Southern California. The acquisition, upon the
completion of the Park La Brea property, will increase Aimco's real estate
Free Cash Flow earned in the six county Southern California area from 3.5%
to 15.9%. The acquisition will increase the real estate Free Cash Flow
contribution from properties with monthly rents greater than $1,000 from
12.2% to 20.3%.
The acquisition increases Aimco's owned and managed asset base
from $12.5 billion to $15 billion and Aimco's total owned and managed
apartment portfolio from 304,000 to 363,000 units, with over 99% of pro
forma Free Cash Flow generated from properties in which Aimco has an
ownership interest. In addition, NAPICO increases Aimco's controlled
investment management assets by over $1 billion in gross real estate value.
The acquisition and related transactions mentioned later in the
release are expected to add $0.09 to annual Adjusted Funds From Operations
("AFFO"), $0.12 to annual Funds From Operations ("FFO") and $1.21 to
Aimco's Net Asset Value ("NAV") resulting in a pro forma NAV of $48.39.
Transaction Summary
Casden Properties and a related REIT will merge into Aimco's
operating partnership. At closing, Aimco will pay $1.063 billion for the
16,002 stabilized conventional and affordable units and NAPICO. Aimco will
issue $213 million of common stock or common OP Units, priced at $47 per
share (Aimco's Net Asset Value per share - September 30, 2001), pay
approximately $166 million in cash and assume responsibility for existing
mortgage indebtedness of approximately $684 million. The selling group may
earn up to an additional $36 million depending upon property performance
for the period ending December 2001. In addition, Aimco expects to incur
transaction costs and Initial Capital Expenditures (`ICE') aggregating
approximately $24 million.
Casden is expected to complete the three phases of the Park La
Brea property between Q2 of 2002 and Q3 of 2004. The purchase price for the
1,381 units is $418 million and is payable upon completion and 60%
occupancy. The selling group may earn up to an additional $24 million
depending on property performance.
Required Casden Properties and the related REIT shareholder
approval for the transactions have been obtained. Aimco shareholder
approval is not required. The merger transaction is subject to customary
regulatory and other approvals. Closing is expected in the first quarter of
2002.
Related Transactions
Aimco will enter into several additional transactions with Casden
Development Company, LLC, as part of the overall acquisition, including:
- Invest up to $50 million for a 20% limited liability
interest in Casden Development, which will pursue new
development opportunities in Southern California and
other markets. Alan Casden and affiliates of Blackacre
have collectively agreed to invest up to $200 million in
Casden Development. Aimco will have an option to
purchase, at completion, all multifamily rental projects
of Casden Development;
- Agree to purchase a proposed 350 apartment unit project
located in the heart of Westwood Village in West Los
Angeles with projected stabilization in 2005. The
purchase agreement is subject to several contingencies
including securing development approvals and completion
and stabilization of the property;
- Retain Casden Development to accelerate the redevelopment
of Aimco's affordable portfolio; and
- Provide a stand by facility of up to $70 million in debt
financing associated with the construction of the Park La
Brea and Westwood Village properties.
Earnings Impact
For pro forma earnings, the portfolio acquisition and related
transactions have been underwritten on a leverage neutral basis (assumed
Free Cash Flow to interest expense coverage of 2.25 to 1 and equity at a
constant cost of capital assuming all common stock at $47 per share). Aimco
expects to repay any short-term borrowings with internal operating cash
flow and proceeds from the sale of other Aimco properties.
On a leverage neutral basis, the sum of the acquisition of the
16,002 stabilized units and NAPICO, the investment in Casden Development
and the debt financing for Park La Brea are expected to add from $0.08 to
$0.11 per share to Aimco's annual AFFO ($0.09 to $0.12 per share to FFO).
The range of earnings realization is based on the rate of NOI growth for
the 16,002 stabilized properties.
With existing leverage, the sum of the acquisition of the 16,002
stabilized units and NAPICO, the investment in Casden Development and the
debt financing for Park La Brea are expected to add from $0.08 to $0.11 per
share to Aimco's annual AFFO ($0.11 to $0.14 per share to FFO). Attached as
Exhibit IV is the pro forma AFFO modeled at $0.09 per share (FFO at $0.12
per share).
The Park La Brea property, based on pro forma leverage of 55% and
interest rates ranging from 7% to 7.5%, is expected to add on a pro forma
basis:
- $2.4 million to $2.7 million to Aimco's 2003 AFFO ($2.5
million to $2.8 million to FFO)
- $9.0 million to $10.9 million to Aimco's 2004 AFFO ($9.3
million to $11.2 million to FFO)
- $15.9 million to $21.0 million to Aimco's 2005 AFFO ($16.4
million to $21.5 million FFO)
The range of earnings realization for Park La Brea is based on a
range of rental rates with the lower figures based on market rents
available today and the higher figures based on anticipated rental rents at
stabilization.
Acquisition Components
A. 6,356 Conventional Apartment Units
1. 4,975 Stabilized Conventional Apartment Units
- 16 properties (4,767 units) in Southern California and
one property (208 units) in South Florida (See Exhibit
III for detail)
- Weighted average monthly rents (9/30/01) - $1,286 per
unit and weighted average age - 15 years
- Allocated value - $630.4 million, assumed debt - $385.7
million with weighted average interest rate - 5.85%. This
is comprised of taxable debt - $166.3 million with
weighted average interest rate - 7.24% and tax-exempt
debt - $219.4 million with weighted average interest rate
- 4.8%
- Pro forma Free Cash Flow (NOI less a Capital Replacement
Reserve of $380 per unit) Yield
- 4,975 units - 8.88%
- Taxable financed properties (1,817 units)-
9.48%
- Tax-exempt financed properties (3,158
units)- 8.51%
- Pro forma NOI Yield
- 4,975 units - 9.18%
- Taxable financed properties (1,817 units) -
9.76%
- Tax-exempt financed properties (3,158 units)
- 8.82%
- Pro forma AFFO Yield - 13.66%
- Price per unit - $126,709
- Weighted average occupancy (9/30/01) - 96.1%
- Pro forma completion of the transaction, the 4,975 units
will generate $56 million in Free Cash Flow (98.8% or
$55.3 million is in Southern California) and $33.4
million in AFFO
2. Park La Brea Property - 1,381 Units
- Park La Brea is an existing 4,230 unit, large scale
residential community located north of Wilshire
Boulevard, south of West Hollywood and east of Beverly
Hills
- Aimco has agreed to acquire a new property being
constructed in three phases on Park La Brea land
according to the following pro forma schedule:
- Phase I - as of 11/16/01, the property was 24% occupied
and 40% leased
- 250 units stabilized in 2002 with pro forma
rents of $2,200 per month
- Purchase price of $55.5 million with $3.2
million earnout
- Free Cash Flow Yield
8.23% on existing market rents
8.84% on pro forma rents
- NOI Yield
8.4% on existing market rents
9.0% on pro forma rents
- Phase II
- 521 units stabilized in 2003 with pro forma
rents of $3,100 per month
- Purchase price of $162.9 million with $9.5
million earnout
- Free Cash Flow Yield
8.05% on existing market rents
9.01% on pro forma rents
- NOI Yield
8.17% on existing market rents
9.13% on pro forma rents
- Phase III
- 610 units stabilized in 2004 with pro forma
rents of $3,200 per month
- Purchase price of $199.3 million with $11.6
million earnout
- Free Cash Flow Yield
7.55% on existing market rents
9.13% on pro forma rent
- NOI Yield
7.66% on existing market rents
9.25% on pro forma rents
- Payment by Aimco of the Park La Brea acquisition purchase
price is dependent upon the seller achieving 60% economic
and physical occupancy for each phase
B. 11,027 Affordable Apartment Units
- 99 properties located in 25 states (See Exhibit III for
detail)
- Weighted average monthly rents - $669 per unit and
weighted average age - 22 years
- Pro forma Free Cash Flow Yield - 10.53%
- Pro forma NOI Yield - 11.58%
- Pro forma AFFO Yield - 17.85%
- Price per unit - $35,976
- Pro forma completion of the transaction, the affordable
properties will generate $41.8 million in Free Cash Flow
and $17.6 million in AFFO
- The affordable properties provide conventional
conversion, tax credit and sale opportunities which Aimco
will pursue consistent with its existing affordable
holdings strategy
- The affordable portfolio has a number of properties
located in major metropolitan areas, including several
locations in New York City, downtown Los Angeles, and
Springfield, Massachusetts.
C. NAPICO
- Controls more than 400 properties with more than 41,000
units as General Partner, typically as a Co-General
Partner with a local managing partner
- 35-year operating history with annual placement of
approximately $100 million in tax credit equity
- Through an affiliate provides property management to 71
properties (6,512 units)
- Provides opportunities to redevelop tax credit properties
and repurchase third party interests in NAPICO properties
- Provides significant infrastructure to maximize value
within Aimco's existing affordable portfolio
- Allocated value - $36 million
- While NAPICO generated $9.5 million in Free Cash Flow in
2000 and is expected to generate a like amount for 2001,
Aimco has used an estimate of $4 million for pro forma
NAPICO Free Cash Flow and AFFO in 2002 (of which $1
million is controlled property management Free Cash
Flow).
Integration
The Casden Properties will be integrated into Aimco's existing
conventional and affordable operating structure. The 16 Southern California
properties will be managed by Aimco's Regional Operating Center in Los
Angeles, which is currently responsible for 46 properties throughout the
state. The 170 affordable properties (99 wholly-owned and 71 through
NAPICO) will be managed by Aimco's affordable division which is currently
responsible for 524 properties throughout the United States.
In aggregate, Casden will add 187 properties or 12% to Aimco's
existing managed portfolio of approximately 1,600 properties. Other
integration elements - information technology systems, accounting and human
resources are under way and will be completed prior to closing of the
transaction.
It is expected that many of the employees of Casden and NAPICO
will be offered employment with AIMCO.
Funding of Acquisition
Aimco's total cash requirement at closing or shortly thereafter
will be $217 million (for 16,002 stabilized conventional and affordable
units, NAPICO, the development company investment and transactions costs,
net of $23 million of expected refinancing proceeds from certain of the
acquired properties). In addition, Aimco may be required to pay up to $36
million in additional cash consideration depending upon property
performance for the period ending December 2001. This cash requirement is
expected to be initially funded with short-term borrowings. The borrowings
will be repaid with internal operating cash flow and the proceeds from
property sales.
The cash required for the purchase of the Park La Brea property of
$167 million (net of pro forma long-term mortgage debt at 60% LTV) will be
paid as phases are completed and stabilized during the period from 2002 to
2004. The projected cash requirement by phase is $22 million in 2002, $65
million in 2003 and $80 million in 2004. Aimco has agreed to provide up to
$68 million in debt financing for construction of the Park La Brea phases
which will be repaid or credited against the $167 million of equity
required and will be funded by Aimco's credit facility or short-term
borrowings.
Aimco's liquidity from internal operating cash flow and customary
sales proceeds in 2002 and 2003 is expected to be approximately $350 to
$400 million per year (compared to $370 million projected for 2001). The
amount of liquidity is sufficient to fund internal uses as well as retire
any short-term borrowings from this transaction within 12 to 24 months.
Aimco's availability on the $400 million credit facility at September 30,
2001 was $291 million. Balance sheet information is attached on Exhibit V.
Net Asset Value
Aimco's Net Asset Value based on third quarter results is $47.18
per share. Pro forma the 16,002 stabilized unit acquisition, NAPICO, the
investment in Casden Development and the debt financing for Park La Brea,
Aimco's Net Asset Value increases to $48.39 per share. The pro forma Net
Asset Value will be available on Aimco's website as an attachment to this
press release. Aimco has not assumed any NAV improvement from Park La Brea,
Westwood Village or the development company investment.
Conference Call and Investor Tour in Los Angeles
Aimco will host a conference call to discuss the details of the
transaction on Thursday, December 6, 2001 at 1:00 p.m. Eastern Standard
Time. You may participate in the conference call by dialing 1-888-228-8198,
or 1-706-634-5947 for international callers, approximately five minutes
before the call is scheduled to begin and indicate that you wish to join
the Apartment Investment Management Company conference call. If you are
unable to participate in the conference call, you may access the replay by
dialing 1-800-642-1687 or 1-706-645-9291 for international callers, access
code 2575552. The replay will be available through 12:00 midnight Eastern
Standard Time on Friday, December 21, 2001.
In addition, Aimco will host an Investor and Analyst Tour and
Information Session in Los Angeles early in 2002. Aimco will provide
details of the time and place of the meeting shortly.
Company Information
Aimco is a real estate investment trust with headquarters in
Denver, Colorado and 18 regional operating centers, which holds a
geographically diversified portfolio of apartment communities. Aimco,
through its subsidiaries, operates approximately 1,600 properties,
including approximately 304,000 apartment units, and serves approximately
one million residents. Aimco's properties are located in 46 states, the
District of Columbia and Puerto Rico.
Contact: Paul J. McAuliffe, Executive Vice President and Chief Financial
Officer (303) 691-4339
Patricia Heath, Senior Vice President and Treasurer (303) 691-4343
E-Mail: investor@aimco.com
Exhibit I - Markets
A. Contribution to Real Estate Free Cash Flow Pre-Casden
- ----------------------------------------------------- ------------------------------
Percent of Real Estate Free
Top Five Markets Cash Flow
- ----------------------------------------------------- ------------------------------
Washington, D.C. 10.7%
Chicago 6.0%
Phoenix - Mesa 4.5%
Houston 4.1%
Atlanta 3.7%
===================================================== ==============================
Southern California
- -----------------------------------------------------
San Diego 1.6%
Orange County 0.8%
Los Angeles - Long Beach 0.6%
Riverside - San Bernardino 0.5%
Ventura 0.0%
- ----------------------------------------------------- ------------------------------
B. Contribution to Real Estate Free Cash Flow Pro Forma Casden
- ----------------------------------------------------- ------------------------------
Percent of Real Estate Free
Top Five Markets Cash Flow
- ----------------------------------------------------- ------------------------------
Los Angeles - Long Beach 10.4%
Washington, D.C. 8.9%
Chicago 5.1%
Phoenix - Mesa 3.7%
Houston 3.4%
===================================================== ==============================
Southern California
- -----------------------------------------------------
Orange County 2.1%
San Diego 1.8%
Ventura 0.9%
Riverside - San Bernardino 0.7%
- ----------------------------------------------------- ------------------------------
Exhibit II - Regional and Price Point Contribution To Real Estate Free
Cash Flow
A. Regions
- ---------------------------------------- ----------------- ------------------ -----------------
Pro Forma with
Regions Pre-Casden Casden Casden
- ---------------------------------------- ----------------- ------------------ -----------------
Midwest 21.2% 8.3% 19.0%
Northeast 20.7% 9.1% 18.8%
California 5.1% 77.9% 17.4%
Southeast 15.7% 2.6% 13.5%
Florida 14.1% 0.5% 11.7%
Texas 11.6% 0.8% 9.8%
West 11.6% 0.8% 9.8%
======================================== ================= ================== =================
Southern California
- ----------------------------------------
Los Angeles-Long Beach 0.6% 58.4% 10.4%
Orange County 0.8% 8.3% 2.1%
San Diego 1.6% 3.0% 1.8%
Ventura 0.0% 5.1% 0.9%
Riverside - San Bernardino 0.5% 1.9% 0.7%
----------------- ------------------ -----------------
Total 3.5% 76.7% 15.9%
- ---------------------------------------- ----------------- ------------------ -----------------
B. Price Point
- ------------------------------------- ------------------ ------------------- ------------------
Pro Forma with
Price Point Per Unit Pre-Casden Casden Casden
- ------------------------------------- ------------------ ------------------- ------------------
Greater than $1,250 3.3% 52.2% 11.1%
From $1,000 to $1,250 8.9% 11.0% 9.2%
From $900 to $1,000 9.7% 5.5% 9.0%
From $800 to $900 11.6% 0.0% 9.8%
From $700 to $800 14.0% 0.0% 11.8%
From $600 to $700 20.2% 0.5% 17.1%
From $500 to $600 18.0% 0.0% 15.1%
Less than $500 5.6% 0.0% 4.7%
------------------ ------------------- ------------------
Subtotal conventional 91.3% 69.2% 87.8%
Affordable 5.0% 30.8% 9.1%
Other 3.7% 0.0% 3.1%
- ------------------------------------- ------------------ ------------------- ------------------
Exhibit III - Property Summary
A. Conventional
- ------------------------------- ----------------------- ----------------------------------- ---------- ---------------
Metropolitan
Property Name Location Statistical Area Units Year Built
- ------------------------------- ----------------------- ----------------------------------- ---------- ---------------
California
----------
Broadcast Center Los Angeles Los Angeles-Long Beach 279 1990
Canyon Terrace Saugus Los Angeles-Long Beach 130 1984
Creekside Apartments Simi Valley Ventura 397 1985
Crescent Garden West Hollywood Los Angeles-Long Beach 130 1985
Indian Oaks Simi Valley Ventura 254 1986
Mariners Cove San Diego San Diego 500 1983
Lakes at South Coast Costa Mesa Orange County 770 1988
HillCreste Los Angeles Los Angeles-Long Beach 315 1989
Peppertree Cypress Orange County 136 1971
Pine Lake Terrace Garden Grove Orange County 111 1971
Rosewood Camarillo Ventura 150 1976
Topanga 49 Chatsworth Los Angeles-Long Beach 49 1980
Villa Azure Los Angeles Los Angeles-Long Beach 624 2000
Villa Del Sol Norwalk Los Angeles-Long Beach 120 1972
Village Grove Corona Riverside - San Bernardino 104 1974
Malibu Canyon Calabasas Los Angeles-Long Beach 698 1986
Florida
Loch Haven Lauderhill Fort Lauderdale 208 1977
- ------------------------------- ----------------------- ----------------------------------- ---------- ---------------
B. Affordable
- ----------------------------- ----------------- ------------------------- -------------------
Location Units Location Units
- ----------------------------- ----------------- ------------------------- -------------------
Alabama 100 Arizona 80
California 2,084 Colorado 50
Connecticut 384 Georgia 188
Iowa 96 Idaho 66
Illinois 875 Indiana 452
Kentucky 172 Massachusetts 616
Maryland 250 Maine 121
Michigan 694 Missouri 209
Mississippi 104 North Carolina 169
New York 831 Ohio 1,164
Pennsylvania 1,141 Rhode Island 100
Texas 368 Virginia 344
West Virginia 369
- ----------------------------- ----------------- ------------------------- -------------------
Exhibit IV - Earnings Impact
Casden Acquisition Contribution
16,002 Unit Transaction, NAPICO,
Development Company Investment and Development Financing
- ---------------------------------------------------------------------------------------------------------
Pro Forma 2002
-----------------------
Real Estate
Conventional:
Greater than $1,250 per unit $ 32,884
From $1,000 to $1,250 14,914
From $1,000 to $900 7,488
From $600 to $500 715
-----------------------
Subtotal conventional real estate contribution to Free Cash Flow 56,001
Affordable 41,754
-----------------------
Total real estate contribution to Free Cash Flow 97,755
Investment Management Business
Controlled property management 1,000
NAPICO 3,000
-----------------------
Total investment management business contribution to Free Cash Flow 4,000
Interest Income - development financing 8,400
-----------------------
Free Cash Flow 110,155
Interest Expense
Secured debt (46,776)
Short term debt, net of capitalization (1) (32,450)
-----------------------
AFFO 30,929
Add back: capital replacements 6,081
-----------------------
FFO $ 37,010
=======================
Pro Forma with Casden Acquisition
AFFO $ 524,811
FFO $ 591,312
Earnings Impact per share
AFFO $0.09
FFO $0.12
Pro Forma Fully Diluted Shares Outstanding 110,720
(1) Assumes 11% on $287 million ($217 million at closing and $70 million of
financing for Park La Brea) to reflect the cost of permanent takeout.
Exhibit V - Pro Forma Financial Data
(in thousands)
Pre-Casden as of
September 30, 2001 Pro Forma Casden
--------------------------- -----------------------
Total Market Capitalization
Secured notes payable $ 3,492,581 $ 3,957,245
Secured tax-exempt bond financing 1,023,712 1,243,125
Short-term debt 109,000 349,000
Perpetual preferred 502,520 502,520
Convertible preferred 803,129 803,129
Common and OP Unit equity 3,823,434 4,023,518
--------------------------- -----------------------
Total $ 9,754,376 $10,878,537
--------------------------- -----------------------
Shares outstanding 74,225 78,163
OP Units outstanding 12,376 12,970
--------------------------- -----------------------
Total 86,601 91,133
--------------------------- -----------------------
Share price (as of 12/03/01) $ 44.15 $ 44.15
- ----------------------------------------------------------------------------------------------------------------------
Fully diluted shares outstanding
Common share and common share equivalents 90,291 94,823
Operating Partnership and other units 15,897 15,897
--------------------------- -----------------------
106,188 110,720
=========================== =======================
- ----------------------------------------------------------------------------------------------------------------------
Total Mortgage Debt
Consolidated $ 3,736,648 4,093,632
Variable 599,513 926,605
Unconsolidated
Fixed 574,810 574,810
Variable 87,713 87,713
--------------------------- -----------------------
Total mortgage debt (consolidated and pro rata
share unconsolidated) 4,998,684 5,682,760
Minority interest (482,390) (482,390)
--------------------------- -----------------------
$ 4,516,294 5,200,370
=========================== =======================
- ----------------------------------------------------------------------------------------------------------------------
Pro Forma Pro Forma
Pre-Casden Casden Casden
3rd Qtr 2001 2nd Qtr 2002 4th Qtr 2002
---------------- ------------------ ----------------
2002 Fixed Charge Coverage Ratio
Free Cash Flow coverage of interest expense 2.59 2.47 2.54
Free Cash Flow coverage of interest expense and
preferred dividends - Note 1 1.93 1.95 2.02
Note 1 - Pro Forma assumes scheduled conversion of preferred stock
(including Preferred Class B and K, and Class B Partnership
Preferred OP units) which have conversion prices of $42 or less.
In addition, proceeds from property sales totaling $285 million
(representing gross assets of approximately $700 million are
assumed to be used to repay short-term borrowings).