EX-99.1 4 d99006exv99w1.txt PRESS RELEASE DATED AUGUST 12, 2002 EXHIBIT 99.1 [AIMCO LOGO] APARTMENT INVESTMENT AND MANAGEMENT COMPANY ANNOUNCES ACQUISITION OF ELEVEN FLATLEY PROPERTIES IN GREATER BOSTON AREA DENVER, COLORADO - August 12, 2002 Apartment Investment and Management Company (NYSE:AIV) ("Aimco") has agreed to acquire 100% ownership of eleven conventional garden and mid-rise apartment properties with 4,323 apartments located in the greater Boston area for $500 million. Aimco is purchasing the properties from Thomas J. Flatley. The portfolio surrounds Boston extending from Nashua, New Hampshire, Swampscott and North Andover, Massachusetts to the north to Framingham, Marlborough and Worcester, Massachusetts to the west and Bridgewater and Fall River, Massachusetts and Warwick, Rhode Island to the south. The pro forma average monthly rent for these established communities is $1,263 and the units average 945 square feet in size. Weighted average occupancy for the portfolio is currently 94.6%. "These are very solid properties that make a great addition to the Aimco portfolio," said Terry Considine, Aimco chairman and chief executive officer. "Their developer, Tom Flatley, is a New England real estate legend and he built these 'to keep'. I am delighted that when he decided to sell, Tom Flatley chose Aimco. We will make every effort to maintain the Flatley tradition of attention to detail and customer service. We welcome to Aimco the members of the Flatley organization who have made these properties such attractive places to live. "In addition to the existing cash flows, we believe that there are excellent upsides available from the improving Boston market and utilization of Aimco efficiencies," added Mr. Considine. "The low density, campus-like settings are, literally, irreplaceable." The addition of this portfolio significantly increases Aimco's presence in the Boston area where the company currently owns one conventional property and seven affordable properties. The acquisition is projected to increase Aimco's real estate Free Cash Flow ("FCF") earned in the Boston area from less than 1% to 6%, making Boston Aimco's third largest market. The acquisition will also increase significantly Aimco's real estate Free Cash Flow from properties with monthly rents greater than $1,000: from 16% to 21%. Initial funding for the acquisition will be a combination of long-term mortgage debt together with borrowing pursuant to Aimco's credit facility, which will be repaid with operating cash flow and proceeds from the sale of lower rated properties. For the Apartment Investment and Management Company August 12, 2002 Page 2 acquisition, Aimco has secured $309 million of 20-year, fully amortizing mortgage debt at interest rates averaging 5.69%. Pro forma calendar 2003, Aimco expects the acquisition to be immediately accretive to Aimco, projecting accretion in: - Adjusted Funds From Operations ("AFFO") of approximately $2.7 million or $0.02 per share; and - Funds From Operations ("FFO") of approximately $4.9 million or $0.04 per share. This accretion is based on the cost of committed long-term property debt plus an 11% assumed cost of equity, even though the latter will be funded in the near term with lower cost borrowing under Aimco's line of credit. Pro forma Net Income and EPS will be available after closing. Aimco shareholder approval is not required for the transaction. The transaction is subject to ordinary closing conditions. Closing is expected on or before August 29, 2002. ACQUISITION SUMMARY Aimco is purchasing eleven properties consisting of 4,323 conventional apartment units in the greater Boston area. Seven of the properties are garden style and four are mid-rise. (Please see Exhibit I for further detail on the properties). - The purchase price averages $117,670 per unit and $125 per square foot, or $113,900 per unit and $121 per square foot for the garden style communities and $134,100 per unit and $141 per square foot for the mid-rise communities. - The capitalization rate is 8.31% and is based on pro forma 2003 FCF, which is net of $500 per unit in Capital Replacements. - The pro forma average rent per unit is $1,263. - The pro forma physical occupancy is 94.4%. - The pro forma economic occupancy is 91.3%. - The portfolio contains 553 acres of land or an average density of 7.8 units per acre. Imbedded in this acquisition are various opportunities that have not been factored into the earnings projections. These include: - Potential expansion: four of the properties have additional acreage that can accommodate development of approximately 750 additional units; - Continuation of a "kitchen and bath" improvement program: the Flatley Company has already begun this effort completing approximately 800 units and meeting good consumer response; Apartment Investment and Management Company August 12, 2002 Page 3 - Returning occupancy to historical levels: occupancy at month-end July was approximately 94.6%, which exceeds Aimco's budgeted figure of 94.4%. The average occupancy for the past 20 years in the Boston area has been 96.6%; and - Possible addition of garages and storage space: a number of the properties have the land and may have the demand for economically rewarding construction of additional garages and storage areas. INTEGRATION OF PROPERTIES INTO AIMCO OPERATIONS Aimco expects to retain many members of the Flatley organization responsible for operating the properties. "The Flatley organization has a well deserved reputation as excellent operators, and we hope to benefit from their experience," said Peter Kompaniez, Aimco's president. The properties will be integrated into Aimco's conventional Regional Operating Center ("ROC") structure. Aimco intends to establish a Boston ROC that will also be responsible for Aimco's conventional properties in New Hampshire and central Connecticut. Other integration efforts, for example in information technology systems, accounting and human resources, are under way and will be completed prior to closing of the transaction. FUNDING OF ACQUISITION The total cost of the acquisition will include $500 million for the properties, $6.2 million of initial capital expenditures and $2.5 million in transaction costs. Aimco will fund this total through borrowing, pursuant to commitments from two institutional lenders, $308.7 million in property debt with fixed interest rates averaging 5.69% and with full amortization over 20 year terms. The remainder of the purchase price will be funded initially from Aimco's credit facility. Aimco expects to repay the short-term debt from internal operating cash flows and with proceeds from the sale of lower rated properties. Aimco currently has more than 200 properties, with more than 38,000 units, in the process of being sold. Aimco expects to complete these dispositions over the next 12 to 15 months with cash proceeds, after the repayment of related property debt and distributions to partners, approximating $300 million. At August 9th, Aimco had $374 million available to borrow on its $400 million credit facility. Balance sheet information is attached on Exhibit V. EARNINGS IMPACT Financial projections indicate that the transaction is accretive to Aimco, and property results from the most recent quarter ending June 30, 2002 show that the portfolio is on track to deliver the expected results. The table below projects three-year Apartment Investment and Management Company August 12, 2002 Page 4 results based on the pro forma statements. Pro forma results are based on the committed $308.7 million of fixed rate mortgage debt, which has an average interest rate of 5.69%, and a hypothetical current equity cost of 11%. PROJECTED EARNINGS IMPACT 2003-2005 ($MM)
2003 2004 2005 ---------- ---------- ---------- NOI $ 44 $ 46 $ 48 FCF $ 42 $ 44 $ 46 Accretion in AFFO $ 2.7 $ 4.7 $ 6.6 Accretion in FFO $ 4.9 $ 6.8 $ 8.8
Pro forma results for calendar year 2003 of approximately $42 million free cash flow are based on the following inputs: - Rents increase by $2.4 million, or 3.8%, over June 2002. This is equivalent to $45 per unit per month; - Physical occupancy increases from an average of 93.2% during the first six months of this year to an annual average of 94.4%. (Occupancy in the Flatley portfolio has begun to recover from recent vacancies resulting from the recent recession as evidenced by the current physical occupancy of 94.6%.); - Other rent loss is reduced $1.1 million from 5.1% of gross potential rent ("GPR") to 3.1% GPR, due to a reduction in concessions from 4.0% to 2.2%; and - Expenses increase $1.1 million, primarily due to increases in taxes and insurance of approximately $1 million, as well as increases in onsite and offsite payroll costs. The budgeted expenses of $4,008 per unit are consistent with the trailing 12-month results of Aimco's Bay Ridge property in Nashua, New Hampshire. CONFERENCE CALL AND WEBSITE INFORMATION Aimco will host a conference call to discuss the details of the transaction on Monday, August 12, 2002 at 2:00 p.m. mountain time, or 4:00 p.m. eastern time. You may participate in the conference call by dialing 888-228-8198, or 706-634-5947 for international callers, approximately five minutes before the call is scheduled to begin and indicate that you wish to join the Aimco call with Terry Considine. If you are unable to participate in the conference call, you may access the replay by dialing 800-642-1687, or Apartment Investment and Management Company August 12, 2002 Page 5 706-645-9291 for international callers, access code 5260213. The replay will be available for seven business days. A map of the area and pictures of the properties will be available on Aimco's website prior to the call. Go to www.aimco.com/about and click on "Investment Information". INVESTOR TOUR IN BOSTON Aimco will host an investor and analyst tour in Boston after the transaction is closed. Details will be announced at a later time. FORWARD-LOOKING ASSUMPTIONS This news release contains forward-looking statements including statements regarding 2002 through 2005 results that are subject to certain risks and uncertainties, including but not limited to the Company's ability to maintain current occupancy, rent levels, and "same store" results. Actual results may differ materially from those described and could be affected by a variety of factors including economic conditions; changes in interest rates; governmental regulations; competition; financing risks; variations in real estate values; the failure of acquisitions to perform in accordance with expectations; possible environmental liabilities; and other risks described in our filings with the Securities and Exchange Commission. These forward-looking statements reflect management's judgment as of this date, and we assume no obligation to revise or update them to reflect future events or circumstances. COMPANY INFORMATION Aimco is a real estate investment trust with headquarters in Denver, Colorado and 19 regional operating centers that holds a geographically diversified portfolio of apartment communities. Aimco, through its subsidiaries, operates approximately 1,800 properties, including approximately 326,000 apartment units, and serves approximately one million residents each year. Aimco's properties are located in 47 states, the District of Columbia and Puerto Rico. Contacts: Paul J. McAuliffe Executive Vice President and Chief Financial Officer (303) 691-4339 Jennifer Martin Vice President Investor Relations (303) 691-4440 Email: investor@aimco.com Apartment Investment and Management Company August 12, 2002 Page 6 EXHIBIT I - PROPERTY SUMMARY
AVERAGE SQUARE AVG. RENT FEET PER JULY 2002 YEAR UNITS PER FLATLEY PORTFOLIO CITY STATE UNITS 2003 UNIT OCCUPANCY BUILT ACRES ACRE ----------------- ---- ----- ----- --------- -------- --------- ----- ----- --------- Waterford Village Bridgewater MA 588 $ 1,103 791 100.0% 1971 119 4.94 Royal Crest - Fall River Fall River MA 216 1,006 923 99.5% 1974 79 2.73 Georgetown Apartments [1] Framingham MA 207 1,347 876 92.8% 1964 8 25.36 Granada Apartments [1] Framingham MA 72 1,290 890 88.9% 1968 3 25.36 Bayberry Hill Estates [1] Framingham MA 425 1,401 922 92.5% 1971 11 39.72 Royal Crest - Marlborough Marlborough MA 473 1,294 904 89.6% 1970 36 12.99 Royal Crest - North Andover North Andover MA 588 1,568 1,169 89.8% 1970 76 7.74 Vantage Pointe [1] Swampscott MA 96 1,820 1,300 87.5% 1987 3 32.00 Wexford Village Worcester MA 264 1,096 852 99.2% 1974 50 5.33 Royal Crest - Nashua Nashua NH 902 1,153 938 94.1% 1970 88 10.25 Royal Crest - Warwick Warwick RI 492 1,193 962 99.4% 1972 80 6.15 ----- ------- --- ---- ---- --- ---- TOTAL 4,323 $ 1,263 945 94.6% 1972 553 7.82
FOOTNOTES: [1] These four properties are mid rise communities. The other 7 properties are garden style communities. Apartment Investment and Management Company August 12, 2002 Page 7 EXHIBIT II - MARKETS A. CONTRIBUTION TO REAL ESTATE FREE CASH FLOW - PRE- ACQUISITION
2Q02 PERCENT OF REAL ESTATE RANK TOP FIVE MARKETS FREE CASH FLOW ---- ---------------- ---------------------- 1 Washington, D.C. 11.2% 2 Los Angeles 9.1% 3 Chicago 5.8% 4 Houston 4.5% 5 Phoenix 3.7% 38 BOSTON 0.6%
B. CONTRIBUTION TO REAL ESTATE FREE CASH FLOW - POST ACQUISITION
2Q02 PERCENT OF REAL ESTATE RANK TOP FIVE MARKETS FREE CASH FLOW ---- ---------------- ---------------------- 1 Washington, D.C. 10.6% 2 Los Angeles 8.6% 3 BOSTON 5.7% 4 Chicago 5.5% 5 Houston 4.2%
Apartment Investment and Management Company August 12, 2002 Page 8 EXHIBIT III - REGIONAL AND PRICE POINT CONTRIBUTION TO REAL ESTATE FREE CASH FLOW A. REGIONS
2Q02 PRO FORMA WITH REGIONS PRE-ACQUISITION FLATLEY ACQUISITION ACQUISITION ------- --------------- ------------------- -------------- Midwest 19.1% 0.0% 18.1% Northeast 20.9% 100.0% 25.0% California 12.2% 0.0% 11.6% Southeast 15.0% 0.0% 14.2% Florida 12.8% 0.0% 12.1% Texas 9.9% 0.0% 9.4% West 10.1% 0.0% 9.6%
B. PRICE POINT
2Q02 PRO FORMA WITH PRICE POINT PER UNIT PRE-ACQUISITION FLATLEY ACQUISITION ACQUISITION -------------------- --------------- ------------------- -------------- 21% GREATER THAN $1,000 Greater than $1,200 per unit 11.1% 49.3% 13.1% From $1,000 to $1,200 5.0% 50.7% 7.4% ----- ----- ----- SUBTOTAL 16.1% 100.0% 20.5% ----- ----- ----- 34% FROM $700 TO $1,000 From $900 to $1,000 10.9% 0.0% 10.3% From $800 to $900 11.6% 0.0% 11.0% From $700 to $800 13.1% 0.0% 12.5% ----- ----- ----- SUBTOTAL 35.6% 0.0% 33.8% ----- ----- ----- 35% LESS THAN $700 From $600 to $700 16.6% 0.0% 15.7% From $500 to $600 16.2% 0.0% 15.3% Less than $500 per unit 3.7% 0.0% 3.5% ----- ----- ----- SUBTOTAL 36.5% 0.0% 34.5% ----- ----- ----- TOTAL CONVENTIONAL 88.2% 100.0% 88.8% Affordable 9.8% 0.0% 9.3% Other 2.0% 0.0% 1.9% ----- ----- -----
Apartment Investment and Management Company August 12, 2002 Page 9 EXHIBIT IV - EARNINGS IMPACT
PRO FORMA 2003 -------------- REAL ESTATE Greater than $1,200 per unit $ 20,852,024 From $1,000 to $1,200 21,421,574 -------------- TOTAL REAL ESTATE CONTRIBUTION 42,273,598 -------------- FREE CASH FLOW 42,273,598 -------------- INTEREST EXPENSE Secured debt [1] 17,565,030 Short term debt [2] 22,000,000 -------------- TOTAL INTEREST EXPENSE 39,565,030 AFFO $ 2,708,568 -------------- Add back: capital replacements @ $500 per door 2,161,500 -------------- FFO $ 4,870,068 ============== EARNINGS IMPACT PER SHARE AFFO $ 0.02 FFO $ 0.04 PRO FORMA FULLY DILUTED SHARES OUTSTANDING 117,685,000
FOOTNOTES: [1] $308.7 million of 20-year, fully amortizing mortgage debt at 5.69%. [2] Assumes 11% cost of equity, even though this component will be funded in the near term with low cost borrowing under Aimco's line of credit. Apartment Investment and Management Company August 12, 2002 Page 10 EXHIBIT V - PRO FORMA FINANCIAL DATA (IN THOUSANDS)
PRE ACQUISITION AS OF PRO FORMA JUNE 30, 2002 ACQUISITION ACQUISITION --------------- -------------- -------------- TOTAL MARKET CAPITALIZATION Secured notes payable [1] $ 3,972,620 $ 308,700 $ 4,281,320 Secured tax-exempt bond financing [1] 1,225,471 1,225,471 Short-term debt 150,000 200,000 350,000 Perpetual preferred 552,520 552,520 Convertible preferred 578,059 578,059 Common and OP Unit equity 5,113,159 5,113,159 -------------- -------------- -------------- Total $ 11,591,829 $ 508,700 $ 12,100,529 -------------- -------------- -------------- Shares outstanding 91,423 91,423 OP Units outstanding 12,503 12,503 -------------- -------------- -------------- Total 103,926 -- 103,926 -------------- -------------- -------------- Share price (as of 6/30/02) $ 49.20 $ 49.20 FULLY DILUTED SHARES OUTSTANDING Common share and common share equivalents 102,628 102,628 Operating Partnership and other units 15,056 15,056 -------------- -------------- -------------- Total 117,685 -- 117,685 -------------- -------------- -------------- TOTAL MORTGAGE DEBT Consolidated Fixed $ 4,186,631 $ 308,700 $ 4,495,331 Variable 868,823 868,823 Unconsolidated Fixed 553,017 553,017 Variable 70,795 70,795 -------------- -------------- -------------- Total mortgage debt (consolidated and pro rata Share unconsolidated) 5,679,266 308,700 5,987,966 -------------- -------------- -------------- Minority Interest (481,175) (481,175) -------------- -------------- -------------- Aimco's Share of Mortgage Debt $ 5,198,091 $ 308,700 $ 5,506,791 -------------- -------------- --------------
PRE- PRO FORMA ACQUISITION ACQUISITION 2ND QTR 2002 2ND QTR 2002 ------------ ------------ 2002 FIXED CHARGE COVERAGE RATIOS Free Cash Flow coverage of interest expense 1.85 1.84 And preferred dividends [2]
FOOTNOTES: [1] Minority Interest has been deducted to indicate Aimco's Share of Mortgage Debt. [2] Pro forma assumes near term borrowings under Aimco's line of credit at an annual interest rate of 4.5%.