Apartment Investment and Management Company Q2 FY2020 earnings call

• Terry Considine discussed the economic contraction's impact on Aimco, leasing trends, and the company's resilient business recovery. - Keith Kimmel highlighted property operations performance, including residential net rental income, same-store revenue, controllable expenses, and customer satisfaction. - Wes Powell provided updates on redevelopment projects, including progress on Parc Mosaic, 707 Leahy, Fremont, and Elmhurst projects, and the restart of select short-cycle redevelopment. - Paul Beldin discussed Aimco’s strong balance sheet, second quarter financial results, bad debt accounting, and the declaration of a quarterly cash dividend.

Property Operations: Residential net rental income was up 1.1% in the second quarter. Same-store revenue declined 1.1% from Q2 2019. Controllable operating expenses were down 6.3%, with same-store second quarter net operating income decreasing 1.4% year-over-year. Customer satisfaction was 4.3 out of 5 stars, turnover was 40% (a 500 basis point improvement). Redevelopment: Long-cycle redevelopment projects when stabilized will add about $30 million a year to net operating income. In the second quarter, Aimco resumed select short-cycle redevelopment projects and property upgrades, with approximately $25 million of investment expected between then and year-end.

• Aimco plans to reduce leverage to less than 7:1 through the lease-up of five long-cycle projects and approximately $350 million of property sales, with about half of the sales either closed or under contract. - The company capitalized on low interest rates by closing $689 million of fixed rate property loans, bolstering liquidity.

• Elevated unemployment and resurgence in COVID cases pose challenges. - Government actions disregarding constitutional protections could impact the economy. - Uncertainties in the transaction market and redevelopment investment due to market conditions.

Q: Just looking at the sequence of occupancy and rental growth over the last four months, both rental revenue or rents and occupancy have been declining each month. So I am wondering now, which one are you prioritizing to maximize revenue?

A: Keith Kimmel said neither, as they focus on total contribution combining occupancy, rental rates, and turnover, and it varies by market.

Q: The 1.6% of bad debt, I was wondering if you could provide any color as to product type or geography where this is unusually high and also how comfortable do you feel on the collectibility of the tenant based on the credit profile?

A: Paul Beldin explained that collections are based on past history, with expected collection of most bad debt over time, and Keith Kimmel noted Los Angeles and Miami had more pressure while Northern California and Denver had better collections.

Q: My first question, I wanted to focus, please, on the pickup in demand you saw in July. You said I believe you said that leasing volumes were higher than last year, but you continue to see early terminations. I guess can you talk a little bit more about that demand is it did particular pricing, a, b versus c? And when you survey these folks, where are they coming from?

A: Keith Kimmel said there was pent-up demand and a peak season pickup, with outperformance across markets and price points.

Q: I wanted to focus, please, on the transaction markets. I know you are it sounds like I believe you stated $350 million to sell half under contract. How aggressive will you need to be to push those sales along? I mean, what are you seeing on cap rate front? And do you expect cap rates to remain stable here?

A: Terry Considine said there's lots of demand and interest, and low interest rates have offset economic turbulence.

Q: You made a comment that a lot of your peers have made about urban-to-suburban moves. Are you seeing any of that within the Aimco portfolio or are you talking to people like if there they want to move out of the urban center, but you have this option? Are you having those types of proactive conversations with your tenants and turn the some lemons into lemonade?

A: Keith Kimmel said they call every resident individually to understand circumstances and facilitate transitions, with a coast-to-coast program to help with moves.