Apartment Investment and Management : Aimco : Reports First Quarter 2015 Results, Raises Guidance

Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today its first quarter 2015 results and an increase in its full year 2015 earnings guidance.

Chairman and Chief Executive Officer Terry Considine comments: "Aimco made solid progress in 2015's first quarter. Operating results were ahead of guidance, notwithstanding the severe winter weather and its related costs. Portfolio quality improved with average monthly revenue per apartment home now exceeding $1,700. Construction was completed at Aimco's two large West Coast redevelopments, Lincoln Place and Preserve at Marin, and rent achievement is ahead of underwriting. Standard & Poor's upgraded its rating of the Aimco balance sheet to investment grade, BBB- with a stable outlook. The Denver Post again recognized Aimco as one of Colorado’s Top Workplaces."

Considine continues: "As announced earlier this week and considering these good facts, Aimco's Board of Directors increased the quarterly common dividend to an annual rate of $1.20 per share, which reflects an increase in Aimco's targeted AFFO payout from 60% to 65%. This higher AFFO payout target reflects the benefits of lower leverage, a higher quality portfolio and increasing quality of earnings."

Chief Financial Officer Ernie Freedman adds: "First quarter Pro forma FFO of $0.52 per share was at the high end of our guidance, primarily due to strong property operating results and higher than expected transaction income, offset somewhat by higher than anticipated casualty losses related to severe weather during the quarter and penalties incurred in connection with the voluntary early repayment of property debt to unencumber two communities. These prepayment penalties had not been anticipated in our guidance. We are increasing our full year Pro forma FFO and AFFO guidance, and operations guidance, to reflect first quarter outperformance."

Financial Results: First Quarter AFFO Up 7% Year-Over-Year

Pro forma FFO - Year-over-year, first quarter Pro forma FFO increased 4% as a result of: strong Property Net Operating Income growth; increased contribution from redevelopment communities; and higher income tax benefit attributable to the recognition of historic tax credits related to Aimco's Park Towne Place redevelopment. These increases were partially offset by: the loss of income from apartment communities that were sold; prepayment penalties incurred in first quarter 2015; and higher preferred stock dividends attributable to Aimco's second quarter 2014 offering of its Class A Preferred Stock.

Adjusted Funds from Operations - Year-over-year, first quarter AFFO increased 7% as a result of higher Pro forma FFO and lower Capital Replacement spending due to the sale of approximately 9,000 apartment homes during 2014. As Aimco concentrates its investment capital in higher-quality, higher price point apartment communities, its free cash flow margin is increasing as Capital Replacements decline as a percentage of net operating income.

Operating Results: First Quarter Conventional Same Store NOI Up 5.2%

Rental Rates - Aimco measures changes in rental rates by comparing, on a lease-by-lease basis, the rate on a newly executed lease to the rate on the expiring lease for that same apartment. Newly executed leases are classified either as a new lease, where a vacant apartment is leased to a new customer, or as a renewal.

Portfolio Management: Revenue Per Apartment Home Up 13.2% to $1,704

Aimco portfolio strategy seeks predictable rent growth from a portfolio of "A," "B" and "C+" quality apartment communities, averaging "B/B+" in quality, and diversified among the largest coastal and job growth markets in the U.S., as measured by total apartment value. Aimco target markets are primarily coastal markets, and also include several Sun Belt cities and Chicago, Illinois.

Aimco measures asset quality based on rents compared to local market average rents as reported by REIS, a third-party provider of commercial real estate performance information and analysis. Aimco defines asset quality as follows: "A" quality assets are those with rents greater than 125% of local market average; "B" quality assets are those with rents between 90% and 125% of local market average; "C+" quality assets are those with rents lower than 90% of local market average, and greater than $1,100 per month; and "C" quality assets are those with rents lower than 90% of local market average, and less than $1,100 per month. For fourth quarter 2014, the most recent period for which REIS information is available, Aimco Conventional Apartment Community rents averaged 109% of local market average rents.

Aimco's portfolio strategy is to sell each year the lowest-rated 5% to 10% of its portfolio and to reinvest the proceeds from such sales in redevelopment and acquisition of higher quality apartment communities. Through this disciplined approach to capital recycling, Aimco has significantly increased the quality of its portfolio. From December 31, 2011 to March 31, 2015, Aimco:

• Increased its period-end Conventional portfolio average revenue per apartment home by 35% to $1,704. This rate of growth reflects the impact of market rent growth, and more significantly, the impact of portfolio management through dispositions, redevelopment and acquisitions.
• Increased its Conventional portfolio free cash flow margin by 10% through the sale of lower-rent properties and reinvestment in higher-rent properties;
• Reduced by 83% the percentage of its portfolio represented by "C" quality properties and increased by 49% the percentage of its portfolio represented by "A" quality properties; and
• Increased to 90% the percentage of its Conventional Property Net Operating Income earned in Aimco's target markets.

As Aimco executes its portfolio strategy, it expects to continue to increase Conventional portfolio average revenue per apartment home at a rate greater than market rent growth; to increase further free cash flow margins; to sell the percentage of its portfolio represented by "C" quality properties; and to increase to 95% or more the percentage of its Conventional Property Net Operating Income earned in its target markets.

First Quarter 2015 Dispositions - In the first quarter, Aimco sold four Conventional Apartment Communities and two Affordable Apartment Communities with 926 and 174 apartment homes, respectively, for $147.8 million in gross proceeds. Aimco's share of net sales proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $73.3 million. Revenues per apartment home for the communities sold during first quarter averaged $1,274, 25% less than the retained portfolio average of $1,704.

Year-to-Date Acquisitions - In the first quarter, Aimco acquired for $38.3 million Mezzo Apartment Homes, a 94-apartment home community located in Atlanta, Georgia, between Midtown and Buckhead. Built in 2008, this 19-story building includes 2,800 square feet of retail space. Stabilized revenues per apartment home are expected to average $3,600, making this an "A" quality asset for Aimco.

In April, Aimco acquired for $63 million Axiom Apartment Homes located in the Kendall Square neighborhood of Cambridge, Massachusetts. Aimco has begun leasing up the newly constructed building, which includes 115 apartment homes and 3,800 square feet of retail space. Upon stabilization, revenues per apartment home are expected to average $3,550, making this an "A" quality asset for Aimco.

Quarter-End Portfolio - First quarter 2015 Conventional portfolio average monthly revenue per apartment home was $1,704, a 13.2% increase compared to first quarter 2014, as a result of year-over-year Same Store monthly revenue per apartment home growth of 4.3%, the sale of Conventional Apartment Communities with average monthly revenues per apartment home substantially lower than those of the retained portfolio, and reinvestment of the sales proceeds in higher-rent apartment communities through redevelopment and acquisitions.

Redevelopment: Lincoln Place and The Preserve at Marin Complete

During first quarter, Aimco invested $23.5 million in redevelopment and completed construction at two large redevelopment projects, Lincoln Place, in Venice, California, and The Preserve at Marin, in Corte Madera, California. As of March 31, 2015, 659 of the 795 apartment homes at Lincoln Place and 81 of the 126 apartment homes at Preserve at Marin were occupied. Construction at these projects was completed within the costs and timing revised by Aimco one year ago and rental rate achievement is above underwriting.

Development: Progressing as Planned

During first quarter, Aimco invested $17.8 million in the development of One Canal Street, located in the historic Bulfinch Triangle neighborhood of Boston’s West End. One Canal Street will include 310 apartment homes and 22,000 square feet of commercial space. Aimco expects completion of construction in second quarter 2016 with lease-up beginning in first quarter 2016.

Balance Sheet and Liquidity: Leverage on Target and Declining

Components of Aimco Leverage

Leverage Ratios

Aimco leverage targets are: Debt and Preferred Equity to EBITDA below 7.0x; and EBITDA Coverage of Interest and Preferred Dividends greater than 2.5x. Aimco also focuses on Debt to EBITDA and EBITDA Coverage of Interest ratios. See the Glossary for definitions of these metrics.

Future leverage reduction is expected from both earnings growth, especially as apartment communities now being redeveloped or developed are completed, and from regularly scheduled property debt amortization funded from retained earnings.

Liquidity

Aimco recourse debt at March 31, 2015, was limited to its revolving credit facility, which Aimco uses for working capital and other short-term purposes, and to secure letters of credit.

At quarter-end, Aimco had no outstanding borrowings on its revolving credit facility and available capacity of $562.1 million, net of $37.9 million of letters of credit backed by the facility. Aimco also held cash and restricted cash on hand of $249.4 million. Finally, Aimco held 20 apartment communities in its unencumbered asset pool with a total estimated fair market value of approximately $1.3 billion.

Equity Activity

Common Stock Offering - As previously announced, in January 2015, Aimco sold in a public offering 9,430,000 shares of Common Stock at $38.90 per share, providing net proceeds of $366.8 million. Using the proceeds from this offering, during first quarter, Aimco: repaid the outstanding balance on its revolving credit facility of $112.3 million; redeemed the outstanding balance of its Series A Community Reinvestment Act Preferred Stock at its liquidation preference of $27 million; and repaid $65.1 million of property debt, thereby unencumbering three communities. Aimco expects to use the remainder of the proceeds from this offering to repay property debt maturing during the balance of 2015 and to fund redevelopment and property upgrades during 2015 that would otherwise have been funded with property debt on a leverage-neutral basis.

Dividend - As previously announced, the Aimco Board of Directors declared a quarterly cash dividend of $0.30 per share of Class A Common Stock for the quarter ended March 31, 2015, an increase of 15% compared to the dividend for the first quarter 2014. This dividend is payable on May 29, 2015, to stockholders of record on May 15, 2015.

2015 Outlook: Guidance Raised to Reflect First Quarter Outperformance

Earnings Conference Call Information

Supplemental Information

The full text of this Earnings Release and the Supplemental Information referenced in this release are available on Aimco's website at http://www.aimco.com/investors/financial-reports/quarterly-earning-reports.

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 Aimco management that are not calculated in accordance with accounting principles generally accepted in the United States, or GAAP. These measures are defined in the Glossary in the Supplemental Information and, where appropriate, reconciled to the most comparable GAAP measures.

About Aimco

Aimco is a real estate investment trust that is focused on the ownership and management of quality apartment communities located in the largest markets in the United States. Aimco is one of the country's largest owners and operators of apartments, with 198 communities in 23 states and the District of Columbia. Aimco common shares are traded on the New York Stock Exchange under the ticker symbol AIV, and are included in the S&P 500. For more information about Aimco, please visit our website at www.aimco.com.

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: second quarter and full year 2015 results, including but not limited to: Pro forma FFO and selected components thereof; AFFO; Aimco's redevelopment and development investments, timelines and stabilized rents; the use of proceeds from its January 2015 common stock offering; and expectations regarding sales of Aimco's apartment communities and the use of proceeds thereof. These forward-looking statements are based on management's judgment as of this date and include certain risks and uncertainties. Risks and uncertainties include, but are not limited to: Aimco's ability to maintain current or meet projected occupancy, rental rates and property operating results; the effect of acquisitions, dispositions, redevelopments and developments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our developments and redevelopments; and our 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 the control of Aimco, including, without limitation: financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that our earnings may not be sufficient to maintain compliance with debt covenants; real estate 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 the pace of job growth and the level of unemployment; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; the timing of acquisitions, dispositions, redevelopments and developments; insurance risk, including the cost of insurance; natural disasters and severe weather such as hurricanes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; 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 its ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership.

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, 2014, 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 press release does not constitute an offer of securities for sale.