Author Topic: AIV- Apartment Investment and Management Company  (Read 1059 times)

CorpRaider

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AIV- Apartment Investment and Management Company
« on: September 29, 2020, 10:12:36 AM »
Figured we need a thread for AIV so we don't totally co-opt the general discussion of residential REITs: 

Aimco ("AIV") is a diversified multifamily (apartments) REIT.  Enterprise value is about 9.6 billion.  Around September 14, 2020, the announced a plan to spin off their apartment holding co ("AIR") and leave behind a remaining Aimco that will hold the development rights for several properties and will continue to develop and redevelop properties for new AIR. 

Here's a link to mgmt. presentation on the transaction:  https://s1.q4cdn.com/176956323/files/doc_presentations/2020/09/Strategic-Transformation-Presentation-Sept-2020.pdf

We only have managment's summary/release of the interco relationships but basically each will have certain options or rights of first refusal on activities of the other for a period after separation.  CEO Consadine is going with AIR but will be on board of both.  Theory seems to be that a simple apartment holdco that doesn't develop or redevelop will be more richly valued and have more stable NOI/AFFO.  Spin is going to be taxable. 

Here's a link to IR site; where they posted a Q&A about WTF they were thinking and the tax issues https://investors.aimco.com/overview/default.aspx

Mgmt. thinks this lack of lumpiness/clarity will allow a slightly higher dividend from SpinCo ("AIR") and thinks it will unlock value, moving toward their estimated $58 NAV (units in low/mid 30s during all relevant periods).

Mgmt. helpfully points out tax bill from spin will increase basis.......(!)..........they also say this will be a good thing if rates go up and real estate tax provisions get revised in immediate/near future.  Mgmt. says no vote required because of the taxable spin structure.

The Q&A was posted to respond to a letter from Land & Buildings (it basically just repeats the announcement and says yeah we considered other options): as @thepupil pointed out in the other thread thusly: 

"Jonathan Litt is coming at AIV, speaking to potential motivations on the transaction:

https://landandbuildings.com/land-buildings-sends-letter-to-aiv-board-of-directors//
https://landandbuildings.com/wp-content/uploads/2020/09/LandB-Press-Release-Letter-to-AIV-Board-9-22-20.pdf"

Land and buildings has also filed a preliminary proxy solicitation which sets forth arguments why mgmt. has stunk up the joint and calling for special vote https://www.bamsec.com/filing/92189520002487?cik=922864

I don't own any, just watching. 

Might be fun to get a little to hop in with some votes to help capitalism function well in my small way.
« Last Edit: October 26, 2020, 02:06:48 PM by Parsad »


CorpRaider

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Re: AIV- AIMCO (Apartment Investment Co)
« Reply #1 on: September 29, 2020, 10:17:45 AM »
Here's more background from @thepupil:

"https://seekingalpha.com/news/3613573-apartment-investment-and-management-plans-spinoff-jv

https://seekingalpha.com/pr/18004279-aimco-announces-formation-of-apartment-income-reit-self-managed-10-billion-reit-and-closing

AIMCO splitting into a development company / stabilized company, since the market hates development and will probably value the stabilized better.

I'm not really familiar with AIV / AIMCO. Just skimmed.

Also, a nice 4.2% cap rate / $592K / unit california sale in the press release. That's a strong comp as it relates to ESS.

I found this the other day on twitter as it related to ESS.

https://www.privateeyecapital.com/why-would-any-long-term-investor/

'Aimco also announced, as part of its longer-term strategy to reduce financial leverage and to rebalance its capital allocation among target markets, that it has entered into a ten-year joint venture with a passive institutional investor to own jointly 12 multi-family properties with 4,051 units located in California. The properties were valued at $2.4 billion, or approximately $592,000 per unit, equivalent to an implied NOI cap rate of ~4.2% and an implied free cash flow cap rate of ~4.0% (based upon NOI and free cash flow annualized for the six months ended June 30, 2020). The properties secure non-recourse property debt of $1.22 billion with a weighted average interest rate of 3.17% and have an implied equity value of $1.18 billion. In exchange for a 39% interest subject to $475 million of property debt, Aimco received $461 million cash plus an additional $24 million for future redevelopment spending. Aimco retains ownership of the remaining 61% interest and is responsible to operate the properties, earning property and asset management fees. The valuation is equal to 97% of the Gross Asset Value (“GAV”), as of 1Q20, previously calculated and published by Aimco.'"
« Last Edit: September 29, 2020, 10:31:36 AM by CorpRaider »

CorpRaider

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Re: AIV- AIMCO (Apartment Investment Co)
« Reply #2 on: October 16, 2020, 12:40:55 PM »
Land and Buildings is calling for a special meeting re: the split transaction.  Says current plan is going to cost unit holders ~$8 per share in taxes.  Notes that CEO mostly holds interest via operating partnership units which will not be impacted by the phantom gains which are going to be generated pursuant to management's plan. 

L&B is soliciting proxies.  I think I'm going to buy a little (via tax advantaged account) and get in here and participate in some good, clean, fun corporate democracy.

https://aimhighaiv.com/land-buildings-files-definitive-solicitation-statement-calling-for-special-meeting-of-shareholders-at-aiv-and-delivers-open-letter-to-shareholders/
« Last Edit: October 16, 2020, 12:44:19 PM by CorpRaider »

thepupil

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Re: AIV- AIMCO (Apartment Investment Co)
« Reply #3 on: October 26, 2020, 12:41:15 PM »
you understand the special divvy yet?

I think the substance of it is a mini tender offer / buyback where if you elect stock you're automatically re-investing the big divvy whereas others are cashing out, but overall it's kind of a shuffling exercise.

Quote
Stockholders will have the opportunity to elect to receive the special dividend in the form of all cash or all stock, subject to proration if either option is oversubscribed.

Quote
Total shares of Aimco common stock outstanding following completion of both the special dividend and the reverse stock split will be unchanged from the total shares outstanding immediately prior to the special dividend, however, some individual stockholders may have more Aimco shares, and some individual stockholders may have fewer Aimco shares, after the completion of both the special dividend and the reverse stock split, compared to before, based on their individual elections.

Quote
Apartment Investment and Management Company Authorizes Special Dividend and Reverse Stock Split
Business Wire
DENVER -- October 23, 2020
Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced today that 2020 property sales, including the previously announced California Joint Venture, generated taxable gains in excess of the company’s regular quarterly dividend. On October 21, 2020, the Board of Directors (the “Board”) of Aimco declared a special dividend payable to holders of Aimco’s common stock as of the close of business on November 4, 2020 (the “Record Date”) with an aggregate value of $8.20 multiplied by the number of outstanding shares of Aimco’s common stock on the Record Date (the “Dividend Value”), comprised of cash and Aimco common stock.
The aggregate cash amount of the special dividend will be $0.82 per share (the “Cash Amount”). This amount includes Aimco’s regular quarterly cash dividend for the fourth quarter and accelerates into 2020 the payment of the first regular quarterly dividend for 2021. The aggregate value of Aimco common stock distributed pursuant to the special dividend will be determined by subtracting the Cash Amount from the Dividend Value (with the value of a share of Aimco common stock for this purpose to be determined based on the volume weighted average trading price of a share of Aimco common stock during the 10 trading day period ending at the close of business on November 24, 2020 (the “Valuation Period”)). The special dividend will be payable after the close of business on November 30, 2020, to stockholders of record as of the close of business on the Record Date.
Stockholders will have the opportunity to elect to receive the special dividend in the form of all cash or all stock, subject to proration if either option is oversubscribed.
To neutralize the dilutive impact of the Aimco common stock issued in the special dividend, the Board also authorized a reverse stock split, which will be effective on November 30, 2020, immediately after the payment of the special dividend. The split ratio for the reverse stock split will be determined at a later date shortly after the Valuation Period. Total shares of Aimco common stock outstanding following completion of both the special dividend and the reverse stock split will be unchanged from the total shares outstanding immediately prior to the special dividend, however, some individual stockholders may have more Aimco shares, and some individual stockholders may have fewer Aimco shares, after the completion of both the special dividend and the reverse stock split, compared to before, based on their individual elections. The reverse split will ensure comparability of Aimco per share results before and after these transactions.

« Last Edit: October 26, 2020, 12:44:39 PM by thepupil »

CorpRaider

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Re: AIV- Apartment Investment and Management Company
« Reply #4 on: October 26, 2020, 07:26:37 PM »
Thanks for posting, I was going to, but I've been lazy/been buried at work. 

I was thinking that too (after saying WTF like 5 times), but now I think all the machinations are so they can conserve cash while complying with the requirements around the required distributions incident to the big tax gains mgmt created via their brilliant plans/disposal.

I used to do some REIT work but it has been.a.while, so TFIW... 

It looks like they have to do at least a 10% cash component that unit holders can elect (actually it looks like 20% to me, but the REITs are/were lobbying for a temporary reduction to 10% minimum cash component...they got this during the GFC)...

I guess they have or will have a letter ruling in hand that says the 10% is ok (could be in Cares Act/stimmy bills; I didn't see that, but I haven't been following closely).

The immediate reverse split seems sketchy/desperate to me.  I guess it will/has been blessed (I mean the tax bill is going out to joe bagholder either way), but the purpose of this leg also seems to be to conserve cash. 

If they didn't do the reverse split, all else equal, they would have to pay out more total cash (due to dilution/new shares).  Alternatively, they could cut the per share cash dividend. (gasp!!!)  It seems like people/retail would understand that cut better than getting an $8.20 phantom gain with only .82 cents cash and ending up with zero additional shares...but, ok slick. 

I continue to wonder if they are just doing a bunch of stuff to try and piss off taxable and/or retail investors...like maybe a Greenblatt "yellow book" situation, but IDK. 

Maybe they just think they are implementing Steven Roth's pure play plans and are not worried about the phantom gains...either because they are insulated from the gains by their limited ownership and the structure thereof (operating pship units per L&B) or their ability to predict the future of tax policy (I am very skeptical of that; especially when they are talking about making other people write checks).


« Last Edit: Today at 06:27:20 PM by CorpRaider »