Flamingo Point Miami Beach, FL Investor Presentation Nareit REITweek Conference 2020 June 2-4
FINANCIAL PERFORMANCE Last July Aimco celebrated 25 Years as a public company. Over its first 25 years, compounded annually: • Aimco Total Shareholder Return was 11.6%; MSCI US REIT index was 10.2%; S&P 500 was 9.9%. Aimco Economic Income (1) was 14%. • • 190 of the current S&P 500 companies have been public for 25 years. Aimco outperformed two-thirds of these companies with a total return ~50% above the median. Over the five years ended December 31, 2019, compounded annually: • Aimco Total Shareholder Return was 10.4%; MSCI US REIT index was 7.0%; S&P 500 was 11.7%. Aimco Economic Income (2) was 10%. • (1) Economic Income is calculated as the per share change in Net Asset Value (NAV) plus Cash Dividends paid, Aimco uses share price at IPO as a proxy for NAV. 2 (2) Calculated using Aimco’s 12/31/19 Net Asset Value per share estimate of $59.
STRATEGIC FOCUS Aimco Economic Income is the result of performance in five key business areas. • Increase revenue based on high levels of resident retention, through superior customer selection and Operations satisfaction, coupled with disciplined innovation resulting in sustained cost control, to further improve NOI margins. Redevelopment and • Create value and future earnings growth by the renovation and repositioning of apartment communities Development through “short-cycle” and “long-cycle” redevelopments. • Own an apartment portfolio diversified by geography and price point with a focus on properties with high land value located in submarkets with outsized future growth prospects. Portfolio Management/ • Diversify the portfolio further by maintaining an allocation to both “income” properties, high quality Capital Allocation properties with predictable, “low beta” AFFO returns, and “growth” properties, usually with B or C+ rents, where we expect appreciation of the substantial land value will create opportunities for “high alpha” value creation through profitable redevelopment. • Utilize safe property debt that is low-cost, long-dated, amortizing, and non-recourse; limiting entity and Balance Sheet refunding risk while maintaining flexibility to sell or redevelop properties. • Emphasize an intentional culture that is collaborative and productive, based on respect for others and personal responsibility…strengthened by a preference for promotion from within and an explicit talent Team development and succession planning to produce the strong, stable team that is the enduring foundation of Aimco success. To further these goals, over the intermediate term, Aimco expects to: • In Operations, to strengthen relationships with residents that reinforce low resident turnover that is already peer leading; • In Redevelopment, to increase annual investment, while maintaining a balance between “long-cycle” and “short-cycle” spending (which can quickly be scaled back when times are uncertain and liquidity is valued); • In Portfolio Management, to adjust the current ~50:50 balance between “A” and “B/C+” properties to a greater % of “B” properties with potential for above-average value creation; • In Balance Sheet, to seek a lower blended cost of capital while reducing leverage-to-EBITDA; and • In Team, to increase the devolution of decision-making to local “hubs” closer to the properties and their local communities. 3
STRENGTH IN OPERATIONS Aimco is in a position of strength due to a focus on operations, and for the next five years, Aimco expects: • Above peer average Same Store NOI growth due to: • Sustained excellence in operations with world class measured customer satisfaction ( 4.29 out of 5 in 1Q 2020); • Peer-leading average daily occupancy ( 97.6% in 1Q 2020, 96.6% in April 2020); • Disciplined cost control based on innovation, o Aimco Same Store COE (1) growth was 1.0% over the last five years, 110 bps below the peer average (2) , 0.1% over the last ten years, and negative over the last twelve years (3) ; and CAGR 2.1% Peer Avg 1.0% Aimco • Improving operating margins ( 73.7% in 2019 and 74.0% in 1Q 2020, peer leading for the past eleven quarters and 130 bps better than the next highest peer in 1Q 2020 ). • Since Aimco achieved peer leading operating margins in 3Q 2017, it has expanded its margins by 250 bps, 140 bps greater than peer average during this time period . (1) COE refers to Controllable Operating Expenses, defined by Aimco as property level expenses before taxes, insurance, and utilities. (2) Peer group consists of AVB, CPT, EQR, ESS, MAA, and UDR. Peer average COE is calculated, per Aimco’s COE definition, as the CAGR of peer averages. 4 (3) Due to inadequate public Same Store COE disclosure from peers a ten-year or longer comparison is not available.
OPERATIONS In April and May, Aimco’s operating platform proved resilient when faced with economic turbulence. RESIDENTIAL UPDATE • Aimco customer selection has produced a high quality customer base: o In April, Aimco recognized 99% of residential revenue, after a 1% provision for Bad Debt. Of the 99%, 96% was received in cash and 3% was accrued based on security deposits available for offset, and the FICO scores of the resident or his guarantor. o In May, Aimco recognized 98.3% of residential revenue, after a 1.7% provision for Bad Debt. Of the 98.3%, 95% was received in cash and the remainder was accrued based on security deposits available for offset, and the FICO scores of the resident or his guarantor. o Additionally, in May, Aimco collected $1.6 million of cash associated with April and prior months accounts receivable. Aimco has now collected 98% of April rents. o Consistent with Aimco’s experience in May, additional May rent collections can be expected in June and subsequent months. o Aimco has two markets where rent collections have seen more significant declines. In Los Angeles, rent collection has declined in part due to the economy and in part due to strategic behavior by residents, incentivized by local regulation limiting recourse by landlords. In Miami, rent collection has declined due to the impact of COVID-19 on the tourism and hospitality industries as well as the number of residents who are not U.S. citizens and have either returned home or are ineligible for unemployment assistance. • Consumer demand is improving. o In mid-March, due to COVID-19, leasing pace was halved. Since the initial reduction and after consideration of seasonality, demand has recovered substantially. The impact on average daily occupancy (“ADO”), heightened by typical friction during the summer leasing season, is a lagging indicator. CHANGES IN SAME STORE ADO 2020 2019 2018 FIRST QUARTER 97.6% 97.0% 96.3% APRIL 96.6% 97.0% 96.4% MAY 95.6% 97.0% 96.4% Apr Apr Apr Prelim May May May CHANGES IN SAME STORE RENTAL RATES 2020 2019 2018 2020 2019 2018 RENEWALS 6.0% 5.0% 4.7% 5.3% 5.3% 4.8% NEW LEASES 0.9% 1.6% 0.6% (1.4%) 1.9% 1.7% WEIGHTED AVERAGE 4.2% 3.4% 2.6% 2.4% 3.7% 3.4% COMMERCIAL TENANT UPDATE Cash Rent Collection Apr May Bad Debt as 2020 2020 Total % of Rent OFFICE USES 90% 85% 87% 0% OTHER COMMERCIAL USES OTHER - ACCRUAL BASED 50% 46% 48% 0% OTHER - CASH BASED (1) 7% 10% 8% N/A (1) Based on the expected economic impact of COVID-19, Aimco wrote off, in the first quarter of 2020, $2.9 million of its straight-line rent receivable and $2.2 million of deferred broker commissions related to leases to commercial tenants with retail, restaurant, and fitness uses. Monthly rent for these tenants is approximately $0.6 million and future rental revenue will be recognized on a cash basis. Aimco currently has security 5 deposits on hand sufficient to cover all but $280k of outstanding rent due.
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