The nation's largest apartment operator sees tough times ahead in 2009. But it thinks it's adjusting accordingly.
"We recognize these are difficult times," said Terry Considine, chairman and CEO at Denver-based AIMCO, during the company's conference call to report 2008 results. "We're making hard and difficult choices to ensure that we weather the storm."
The REIT will eliminate approximately 300 jobs by March 1, 2009, across its corporate, redevelopment and construction services, property management, and investment management functions. It says those cuts, which do not include property-level personnel, will provide $70 million in savings in 2009. It's also cutting its redevelopment pipeline from $242.6 million in 2008 to between $50 million and $75 million in 2009.
Even with those cuts, 2009 will be challenging. AIMCO projects that same-store net operating income (NOI) growth will be between 0 percent and -5 percent. The firm also expects its investment management income to decline from $77.2 million in 2008 to between $36 million and $40 million in 2009.
AIMCO reported 2008 funds from operations at $2.36 per share (at the midpoint of third-quarter guidance) and same-store property operations in the fourth quarter generated NOI growth of 4.2 percent over the same quarter in 2007.
Some analysts remain concerned about the company's debt situation as the economic situation further deteriorates, but CFO Tom Herzog seems confident the firm can weather the storm. "Our liquidity and balance sheet are in good position to weather what promises to be a challenging year," he said.
AIMCO did prepay $75 million of term debt due in September 2009 and $50 million of term debt due in March 2011 but still faces $350 million of term debt that is due in March 2011. It has $273.9 million, $279.9 million, and $102.3 million due on property loans from 2009, 2010, and 2011, respectively.
The REIT plans to reduce debt by approximately $2 billion of conventional and affordable assets over the next two years. "We expect a majority of these sales will be to local operators," says David Robertson, AIMCO's chief investment officer. "But we're seeing an increase in demand from large regional and national operators."