Aimco (AIV) Acquires Bent Tree Apartment Community For $160M

Apartment Investment and Management Company (NYSE:AIV) – better known as Aimco – announced the acquisition of Bent Tree apartment community in Fairfax County, VA. In the first 12 months of ownership, this $160-million deal is likely to benefit the company's adjusted funds from operations per share by about a cent.

Situated in suburban Fairfax County, the Bent Tree apartment community consists of 748-apartment homes. It is located beside two other communities owned by Aimco, having 1000-apartment homes. Bent Tree is a B-quality community with the average rent of approximately $1500 per unit. The acquisition is a strategic fit for the company, as with some capital investments, the units have the capability to generate higher than market rate revenue growth.

The transaction is in line with Aimco’s strategy of revamping its portfolio through property sales and reinvesting the proceeds in select apartment homes with higher rents, superior margins and higher-than-expected growth.

As this community is located a few minutes away from the Dulles International Airport and within traveling distance from downtown D.C., the residents are provided with opportune access to employment. In fact, onsite amenities and comfortable homes will likely hold significance for educated and high-income customers.

Aimco plans to put up for sale the same value of communities that have the probability of lower rental growth and lower expected free cash flow internal rates of return (FCF IRR), in sync with its paired trade discipline. The company expects Bent Tree’s FCF IRR to surpass the FCF IRR of the properties that will be vended to support the acquisition by minimum 300 basis points.

This acquisition was financed with bank borrowings awaiting the anticipated third-quarter sales to complete the paired trade funding.

Shares of Aimco have lost 16.5% in the past six months, compared with the decline of 15.5% recorded by the industry it belongs to.

Aimco currently carries a Zacks Rank #4 (Sell). Over the last 30 days, the Zacks Consensus Estimate for 2018 funds from operations (FFO) per share witnessed a decline of 1.2%.

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Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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