Apartment Investment and Management Company Announces Fourth Quarter and Full Year 2009 Results

Apartment Investment and Management Company (NYSE:AIV):

Fourth Quarter 2009

• Funds From Operations (FFO) – Fourth quarter 2009 FFO was $0.26 per share, before operating real estate impairments of $0.12 per share. Results include a $0.10 per share non-cash impairment charge related to Aimco’s interest in Casden Properties LLC, which is described in further detail below. Excluding this impairment charge, fourth quarter FFO was $0.36 per share, within the $0.32 to $0.40 per share guidance range.
• Property Operations – During the fourth quarter, total conventional and affordable property net operating income, adjusted for property acquisitions and dispositions, was 3.2% lower than in fourth quarter 2008.
  • Same Store Conventional Results – When comparing fourth quarter 2009 to fourth quarter 2008, Same Store conventional property net operating income declined 6.3%, ahead of the guidance range of negative 7.0% to negative 8.0%. Same Store conventional revenue declined 3.2% and expenses increased 2.2%. Fourth quarter 2009 Same Store conventional net operating income was flat when compared to third quarter 2009. Average daily occupancy increased 0.7% from 94.7% for fourth quarter 2008 to 95.4% for fourth quarter 2009, and increased 0.6% from third quarter 2009.
  • Non-Same Store Results – Conventional redevelopment property net operating income increased 12.2% compared to fourth quarter 2008 and affordable property operations, including affordable redevelopment operations, generated net operating income growth of 6.9% during the same period.
• Capital Markets Activity

At the beginning of fourth quarter 2009, Aimco had $260 million of term debt outstanding, which comes due in first quarter 2011. During fourth quarter 2009, Aimco repaid $170 million of term debt with proceeds from property sales. An additional payment of $35 million was made after quarter’s end, reducing the balance to $55 million as of the end of January 2010.

In connection with its recourse obligations, Aimco is subject to Debt Service and Fixed Charge Coverage covenants. On February 3, 2010, Aimco and its lenders agreed to reduce these Debt Service and Fixed Charge Coverage covenants from 1.50:1 and 1.30:1 to 1.40:1 and 1.20:1, respectively.

• Property Sales and Asset Allocation – During fourth quarter 2009, Aimco sold 32 properties for $532.8 million, generating $154.2 million in net proceeds to Aimco, after distributions to limited partners, repayment of existing property debt and transaction costs.
• Casden Properties LLC Impairment – As part of the March 2002 acquisition of Casden Properties, Inc., Aimco acquired a 20% passive interest in Casden Properties LLC, an entity organized to acquire, re-entitle, and develop land parcels in Southern California. In connection with preparation of its annual financial statements and as a result of the continued decline in Southern California land values, Aimco has determined that its interest is not fully recoverable, and accordingly recognized an impairment loss of $20.7 million, or $12.4 million net of tax, during fourth quarter 2009.

Full Year 2009 Summary

• FFO, before operating real estate impairments and the Casden Properties LLC impairment, of $1.65 per share was at the midpoint of guidance and consistent with guidance provided at the beginning of the year, adjusted for dilution from asset sales.
• Total conventional and affordable property net operating income, adjusted for property acquisitions and dispositions, was 0.5% lower than 2008.
• Same Store conventional property net operating income declined 4.2% when compared to full year 2008, which was within the guidance range provided at the beginning of the year.
• Aimco invested $56.1 million in conventional redevelopment projects during 2009 and completed 33 projects.
• During 2009, Aimco sold 90 properties for $1.3 billion, generating net proceeds to Aimco of $407.2 million and increasing its capital allocation to the 20 largest U.S. markets as measured by total market capitalization. Average rents for Aimco’s conventional property portfolio have increased more than 40% over the last five years, primarily as a result of portfolio repositioning.
• Full year 2009 Same Store conventional operating margin of 61.1% was just 20 basis points below full year 2008, despite declining revenue.
• Property sales proceeds were used during 2009 to reduce Aimco’s term debt by more than 86% from $400 million at the beginning of the year to $55 million as of the end of January 2010.
• At the beginning of 2009, Aimco’s share of property debt maturing during 2009 through 2011 was $656.1 million. During the year, through refinancing, repayment and property sales, Aimco reduced these maturities by 75% or $489.9 million, and eliminated all 2010 property debt maturities. At the end of the fourth quarter 2009, five loans totaling $166.2 million were scheduled to mature in 2011. One loan for $65 million was extended last month to mature in 2013. Aimco expects to refinance the remaining four loans, totaling $101.2 million, at their maturity. During the year, Aimco refinanced $737.5 million of property debt at a weighted average interest rate of 5.78% and a weighted average term of 9.8 years
• Through an organizational restructuring that began in fourth quarter 2008, Aimco reduced 2009 spending for offsite costs, including general and administrative expenses, by 36%, or $86.4 million, from 2008 levels. After consideration of costs capitalized in connection with redevelopment, offsite costs, including general and administrative expenses, for FFO purposes were reduced by 31% or $55.3 million

2010 Outlook

• Property Operations – Aimco’s operating focus remains on retaining existing residents, maintaining expense control and maximizing other property operating revenue. First quarter 2010 Same Store conventional net operating income is expected to decline 5.5% to 6.5% when compared to first quarter 2009 and full year 2010 Same Store conventional net operating income is expected to decline 2.0% to 4.0% compared to full year 2009. As conventional redevelopment properties are stabilized during 2010, operating results associated with the majority of these properties will be reflected in Same Store conventional results.
• Capital Recycling and Asset Allocation – Aimco is focused on owning and operating B/B+ quality apartments concentrated in the 20 largest apartment markets in the United States. Aimco intends to upgrade the quality of its portfolio through the sale of approximately 5% to 10% of its portfolio annually, with the proceeds generally used to increase Aimco’s allocation of capital to well located properties within its target markets through capital investments, redevelopment and/or acquisitions.
• FFO Outlook – For the first quarter 2010, FFO is expected to range from $0.26 to $0.30 per share. Full year 2010 FFO is expected to range from $1.25 to $1.35 per share. Expected results are lower primarily due to dilution from asset sales, lower investment management income and a decline in property net operating income. These declines are partially offset by lower offsite costs, including general and administrative expenses.

Management Comments

Chairman and Chief Executive Officer Terry Considine comments: "During 2009, Aimco accomplished many of its goals, notwithstanding a difficult operating environment and considerable uncertainty about the capital markets. We expect that the economy will remain a challenge in 2010. Aimco is focused on providing excellent service to our residents, upgrading our portfolio and strengthening our balance sheet.”

Chief Financial Officer Ernie Freedman adds: "Aimco’s balance sheet is appreciably stronger going in to 2010, with only $55 million of recourse term debt outstanding and limited near term property debt maturities. We expect 2010 FFO to be in a range from $1.25 to $1.35 with approximately 97% provided by property operations income and other recurring revenue.”

Fourth Quarter and Full Year 2009 Financial Results

• Net loss attributable to Aimco common stockholders for the quarter was $6.7 million, compared to net loss of $9.9 million for fourth quarter 2008. Fourth quarter 2009 net loss was less than fourth quarter 2008 primarily due to lower restructuring costs of $14.1 million, an impairment of real estate development assets in fourth quarter 2008 of $91.1 million, and lower property management, investment management and general and administrative expenses totaling $11.9 million. These positive results were partially offset by lower income tax benefit associated with continuing operations of $31.3 million and lower gains on dispositions of real estate of $92.3 million, net of tax and non-controlling interests. Earnings per share (EPS) attributable to Aimco common stockholders was a loss of $0.06 on a diluted basis, compared with a loss of $0.11 per share in fourth quarter 2008.
• Funds from operations (diluted) (FFO) is a non-GAAP financial measure defined in the glossary in the Supplemental Information (the Glossary). FFO calculated in accordance with the definition prescribed by the National Association of Real Estate Investment Trusts (NAREIT) was $16.1 million, or $0.14 per share, compared with a loss of $43.9 million, or $0.48 per share, in fourth quarter 2008. FFO, before operating real estate impairments, was $30.2 million, or $0.26 per share, compared with a loss of $28.9 million, or $0.32 per share, in fourth quarter 2008. Certain impairment charges related to non-operating assets negatively affected fourth quarter 2009 and 2008 FFO results as follows:

• Adjusted funds from operations (diluted) (AFFO; a non-GAAP financial measure defined in the Glossary) was $15.3 million, or $0.13 per share, compared with a loss of $56.0 million, or $0.61 per share, in fourth quarter 2008. AFFO includes deductions of $0.13 and $0.29 per share for capital replacement expenditures in fourth quarter 2009 and fourth quarter 2008, respectively.

Property Operations

Property operating results discussed below represent Aimco’s share of reported amounts.

Conventional Real Estate Operations

Conventional real estate operations relate to Aimco’s diversified portfolio of market rate apartment communities. At the end of fourth quarter 2009, this portfolio included 243 properties with 74,030 units in which Aimco had a weighted average ownership of 90%. Average rents for the conventional real estate portfolio increased 1.0% from $1,032 per unit during fourth quarter 2008 to $1,042 per unit during fourth quarter 2009. During fourth quarter 2009, conventional real estate operations generated net operating income of $121.8 million. Aimco’s Same Store conventional portfolio net operating income declined 6.3% from fourth quarter 2008, while net operating income generated by its conventional redevelopment property portfolio increased 12.2% compared to fourth quarter 2008.

"Same Store” Conventional Results

In fourth quarter 2009, the Same Store conventional portfolio included 172 communities with 51,388 Effective Units (see the Glossary) based on Aimco’s weighted average ownership of 91%.

Comparing Same Store conventional results in fourth quarter 2009 with fourth quarter 2008, total revenue decreased $5.3 million, or 3.2%. The decrease in revenue was primarily the result of lower average rent, down 4.8% or $51 per unit, from $1,055 per unit to $1,004 per unit, partially offset by higher average daily occupancy of 95.4% for fourth quarter 2009 compared to 94.7% for fourth quarter 2008. Same Store expenses increased $1.3 million or 2.2%, primarily due to higher property tax and insurance expenses, partially offset by decreased utilities and administrative costs.

Affordable Real Estate Operations

At the end of fourth quarter 2009, Aimco’s affordable real estate portfolio included 260 properties with 29,650 units in which Aimco had a weighted average ownership of 54%. During fourth quarter 2009, affordable property operations generated net operating income of $17.5 million. Total affordable property net operating income, adjusted for property dispositions, was 6.9% higher than in fourth quarter 2008. Average month-end occupancy for the affordable same store portfolio decreased 0.9% from 97.7% for fourth quarter 2008 to 96.8% for fourth quarter 2009, while average rent per unit increased 3.3% from $730 to $754 per unit.

Investment Management

Investment management includes activities related to our owned portfolio of properties as well as services provided to affiliated partnerships. Investment management includes portfolio strategy, capital allocation, joint ventures, tax credit syndication, acquisitions, dispositions and other transaction activities. Within our owned portfolio, we refer to these activities as Portfolio Management, and their benefit is seen in property operating results and in investment gains. For affiliated partnerships, we refer to these activities as Asset Management for which we are separately compensated through fees paid by third party investors.

Investment management income includes fees earned for providing asset management services to third party investors, syndication fees and deferred income related to tax credit activities, and portfolio management income earned through investment gains on our owned assets. Aimco’s share of investment management income, net of tax, was $14.0 million in the fourth quarter 2009 compared to $8.1 million in fourth quarter 2008. Income generated by transactions contributed approximately 5% of full year 2009 FFO. See Supplemental Schedule 11 for additional information on investment management income.

Portfolio Management

Portfolio management includes the ongoing allocation of investment capital to meet our geographic and product type goals. Our geographic allocation strategy focuses on the 20 largest U.S. markets as measured by total market capitalization. We believe these markets to be deep, relatively liquid and possessing desirable long-term growth characteristics. These target markets are primarily coastal markets, and also include a number of Sun Belt cities and Chicago, Illinois. As we execute this strategy, we expect to reduce our investment in markets outside the 20 largest markets and to increase our investment in the 20 largest markets both by making acquisitions and through redevelopment spending.

In fourth quarter 2009, Aimco sold 23 conventional properties and nine affordable properties with 8,113 and 985 units, respectively, for $532.8 million in gross proceeds (Aimco’s share $501.1 million). Aimco’s share of net proceeds after distributions to limited partners, repayment of existing property debt and transaction costs was $154.2 million.

See Supplemental Schedules 6 and 7 for additional details regarding Aimco’s portfolio allocation and Supplemental Schedule 8 for additional information on disposition activity.

Redevelopment

During fourth quarter 2009, Aimco invested $7.9 million in conventional redevelopment projects and completed 12 of the 16 projects that were active at the end of the third quarter. Aimco also invested $4.7 million in four tax credit redevelopment projects and completed one project during fourth quarter 2009.

Balance Sheet and Liquidity

At the end of fourth quarter 2009, Aimco leverage was provided 85% by long-term non-recourse property debt of $5.5 billion ($5.0 billion Aimco’s share) at a weighted average interest rate of 5.5% and weighted average maturity of 8.6 years. Aimco’s preferred securities represented approximately 13% of Aimco’s leverage at the end of the quarter, at which time Aimco had $776.2 million in perpetual preferred stock and preferred partnership units at a weighted average dividend rate of 7.5%.

Aimco’s recourse debt is limited to its revolving credit facility and corporate term debt, which together represented approximately 2% of Aimco’s leverage at the end of fourth quarter 2009. At that time, the balance on Aimco’s revolving credit facility was zero and available capacity was $136.2 million, net of $43.8 million of letters of credit drawn against the facility. Aimco’s revolving credit facility is used for working capital purposes and to secure letters of credit. The balance on Aimco’s corporate term debt of $90 million at December 31, 2009, matures in first quarter 2011. Subsequent to quarter’s end, Aimco repaid $35 million of the term debt, bringing the balance to $55 million at the end of January 2010.

In connection with its recourse obligations, Aimco is subject to Debt Service and Fixed Charge Coverage covenants, as defined in the Glossary. For fourth quarter 2009, Aimco’s Debt Service and Fixed Charge Coverage ratios were 1.59:1 and 1.36:1, compared to covenants in place during the quarter of 1.50:1 and 1.30:1, respectively. On February 3, 2010, Aimco and its lenders agreed to reduce these Debt Service and Fixed Charge Coverage covenants to 1.40:1 and 1.20:1, respectively. Aimco expects to remain in compliance with these covenants.

At December 31, 2009, Aimco had outstanding $5.7 billion of consolidated debt, which consisted of $5.0 billion of fixed rate property debt, $0.6 billion of floating rate property debt and $90 million of floating rate corporate debt. In addition, Aimco had outstanding $67.0 million of floating rate preferred stock. Aimco’s floating rate property debt includes $433.9 million of tax-exempt bonds with rates tied to the Securities Industry and Financial Markets Association Municipal Swap Index (SIFMA). Over the last twenty years the SIFMA rate has moved at approximately 0.73% for a 1.00% change in LIBOR, which reduces Aimco’s FFO exposure to changes in floating interest rates. Additionally, Aimco’s FFO exposure is offset by floating rate assets, such as cash and notes receivable. Based on Aimco’s proportionate share of quarter-end balances, Aimco estimates its sensitivity to a 100 basis point change in LIBOR to be less than $0.01 per share per quarter.

See Supplemental Schedules 4 and 5 for more detail on preferred equity characteristics and debt characteristics and activity.

Dividends on Common Stock

On December 18, 2009, the Aimco Board of Directors declared a quarterly cash dividend of $0.10 per share of Class A Common Stock for the quarter ended December 31, 2009, which was paid on January 29, 2010, to stockholders of record on December 31, 2009. At the end of the fourth quarter 2009, there were approximately 116.7 million shares of Class A Common Stock outstanding. See Supplemental Schedule 4 for additional detail on Aimco’s securities.

Earnings Conference Call

Please join Aimco management for the fourth quarter 2009 earnings conference call to be held Friday, February 5, 2010, at 1:00 p.m. Eastern time.

Live Conference Call
Domestic Dial-In Number: 1-866-843-0890
International Dial-In Number: 1-412-317-9250
Passcode: 7872057
Webcast: http://www.aimco.com/CorporateInformation/Overview.aspx

Conference Call Replay
Domestic Dial-In Number: 1-877-344-7529
International Dial-In Number: 1-412-317-0088
Passcode: 436827

The conference call replay will be available until 9:00 a.m. Eastern time on February 22, 2010.

Webcast Replay: http://www.aimco.com/CorporateInformation/About/Financial/news.aspx

Supplemental Information

The full text of this release and the Supplemental Information referenced in this release is available on Aimco’s Website at the link http://www.aimco.com/CorporateInformation/About/Financial/QEarnRelease.aspx.

Forward-looking Statements

This earnings release and Supplemental Information contain forward-looking statements within the meaning of the federal securities laws, including statements regarding projected results and specifically forecasts of first quarter and full year 2010 results. 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. 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; 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; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; the timing of acquisitions and dispositions; 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 properties presently owned or previously owned by Aimco.

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 and depends on our 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 notes thereto, as well as the risk factors described in Aimco’s Annual Report on Form 10-K for the year ended December 31, 2008, 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.

About Aimco

Aimco is a real estate investment trust headquartered in Denver, Colorado that owns and operates a geographically diversified portfolio of apartment communities. Aimco, through its subsidiaries and affiliates, is one of the largest owners and operators of apartment communities in the United States with 870 properties, including 135,654 apartment units, and serves approximately 500,000 residents each year. Aimco’s properties are located in 44 states, the District of Columbia and Puerto Rico. 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.