Some Key Quotes from AIMCO on Apartment REITs

Includes: AIV, EQR, UDR
by: Judy Weil

Apartment REIT Apartment Investment & Management Co. (AIMCO) said the real estate slowdown may spare apartment REITs as people stay put amid uncertainty. These and other trends were noted on AIMCO's (NYSE:AIV) Q3 2008 conference call:

Slower leasing, stronger rentals: 

We have seen some softening in new lease traffic in recent weeks... Resident retention remains strong and may strengthen further because the economic uncertainty may limit resident mobility… The apartment market will perform better relative to the national economy, because we will have apartment renters more likely to stay in rental apartments for a longer period of time. I think that’s true for AIMCO, I think that’s true for our peers.

Cap rates growing: (Cap rates = A determination of the value of a property investment which is calculated by dividing the property's net operating income by its purchase price)

The multi-family investment market continues to be relatively liquid. Buyers remain active [but] values continue to soften... NOI cap rates are clearly turning up and values are declining… 

New York City: 

There is some concern going forward [about the NYC market]. We’ve seen a little bit of evidence more on the commercial side than on the apartment side… A little bit of rate impact... a little pressure on rates… people looking for smaller units rather than larger units. 

Difficulty in funding ahead? 

[Property financings] have been… business as usual for us… The [credit line] revolver… has an extension through May of 2010… In advance of that, we will be remarketing… and working with our banks and potentially adding new banks to the syndication list… At the current date we have approximately $0.00 outstanding on the revolver balance. 

Spreads between bid and ask prices: 

There are fewer buyers who are submitting bids near the ask… Buyers are more rigorous... We typically are selling to buyers that are trying to get some positive leverage. They’re buying at a discount to replacement costs. And so you’re really negotiating what type of spread to their debt do they really need to get a deal done.

The bid ask on some... transactions have widened out because buyers remember the very low 4 cap rate transactions of a year ago and it’s tough for them to move off of that pricing. 

Another executive (and share price) falls victim to a margin call:
Terry Considine, CEO:

Over the… years, a Considine family partnership borrowed substantial amounts to buy AIMCO shares [and] options… The balance of the loan was about $50 million or $20 a share at the start of this month. That balance was fully repaid during the past few weeks by the involuntary sale of the related shares. When the dust settles, I plan to begin again to accumulate AIMCO shares... My family continues to hold about 3 million AIMCO shares or open units. We have skin in the game.