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Why AIMCO Has Reported Subdued Revenue Growth in Recent Years

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Sources of revenue

Apartment Investment & Management Company (or AIMCO) (AIV) generates revenues primarily from leasing apartments to residents. Other revenues consist primarily of management fees that are based on the revenues of the properties being managed.

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Subdued growth momentum

AIMCO (AIV) reported a consolidated revenue of $984.4 million for fiscal 2014, up by a mere 1.1% over fiscal 2013. In 2013, revenue grew by 1.6% over 2012. Overall, AIMCO (AIV) has reported a subdued revenue growth during the past five years, with revenue growing from $958.5 million in 2010 to $984.4 million in 2014. In 1H15, revenue declined by 1.3% to $489 million over 1H14.

Revenue per apartment home

AIMCO’s conventional portfolio had an average revenue per effective apartment home of $1,669 for fiscal 2014 compared to $1,469 in fiscal 2013 and provided 66% operating margins. Average revenue per apartment home represents rental and other property revenues divided by the number of occupied apartment homes.

The rise in average revenue per effective apartment home was due to the following:

  • an increase in conventional same-store apartment communities
  • the delivery of new apartment homes
  • reinvestment of sales proceeds in higher-rent apartment communities through redevelopment and acquisitions
  • the sale of low yielding conventional apartment communities

In fiscal 2014, combined conventional same-store new and renewal lease rates were 4.4% higher than expiring lease rates. In addition, average daily occupancy for conventional same-store apartment communities increased from 95.6% in fiscal 2013 to 95.8% in fiscal 2014.

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Management fees on shaky ground

AIMCO’s tax credit and asset management revenues decreased by 9.4% in fiscal 2014 to $31.5 million. This decrease was attributed to a decrease in amortization of tax credit income and a decrease in disposition and other transactional fees.

This was the lowest management fees earned by the company during the past five years. In 2013, asset management fees decreased by 16.6% to $34.8 million due to reductions in disposition and other transactional fees.

Peer group

Compared to its peers, AIMCO (AIV) experienced one of the lowest revenue growths. For example, Essex Property Trust (ESS) posted a higher revenue growth of 59.1% in 2014 to $969.3 million. It was followed by AvalonBay Communities (AVB) with 15.2% growth to $1.7 billion and Equity Residential (EQR) with 9.5% growth to $2.6 billion. AIMCO (AIV) makes up 0.21% of the holdings of the S&P 500 Equal Weight ETF (RSP).

In the next article, we’ll delve into AIMCO’s cost structure.

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