UPDATE: Apartment Investment Slashes Dividend Again

Apartment Investment and Management Co.'s (AIV) first-quarter results were a mixed bag: Net loss narrowed slightly, with results topping expectations. But the real-estate investment trust slashed its quarterly dividend another 60%.

The Denver company, also known as Aimco, projected second-quarter funds from operations, a key REIT measure, below analysts' expectations, putting its estimate at 37 cents to 43 cents a share. Analysts polled by Thomson Reuters expected 44 cents.

Shares, which have plunged more than 80% in the last year, recently fell 10 cents, or 1.4%, to $7.20 Friday. The multi-family sector, once a commercial real-estate standout, has been hit by the housing downturn and global recession. Apartments have been hammered as rising unemployment forces residents to find cheaper digs or roommates, curbing rent increases. Most developers have halted new projects.

In its earnings release, the company that owns and operates more than 160,000 units noted that "given the challenging market conditions, Aimco remains focused on retaining its existing residents and maintaining tight expense control.

"Finding new tenants can be pricey for operators. Corporate overhead expenses have been "reduced significantly," while this year's redevelopment expenditures are expected to be 75% lower than in 2008, Chairman and Chief Executive Terry Considine said in a statement.

The dividend cut to 10 cents a share will save American Investment nearly $70 million a year. In February, the company had announced job cuts and shaved its dividend 58%.

The second dividend cut in 90 days will likely overshadow the results, Fox-Pitt Kelton noted.

"While encouraged by the better than expected operating results...(Aimco) still has its work cut out," analyst Rob Stevenson wrote. Second-quarter 2009 "estimates appear too high, and while not in immediate danger, the company remains over-leveraged, and we expect their core markets to continue to decline operationally more than the country as a whole. We'd like to become more constructive on the stock, but the recent run leaves us on the sidelines for now."

On Friday, American Investment posted a net loss of $37.7 million, or 33 cents a share, compared with a year-earlier net loss of $38.9 million, or 30 cents a share. The prior year had a four-cent profit from discontinued operations.

Revenue edged up 0.4% to $349.3 million.

Funds from operations fell to 45 cents a share from 51 cents. Excluding real-estate impairment recoveries, FFO was 42 cents. Analysts surveyed by Thomson Reuters expected a loss of 46 cents, revenue of $311 million and FFO of 34 cents a share.

Apartment Investment said average rents rose 10% per unit, and occupancy fell to 93.5% from 94.8%.

The company is focusing on the largest 20 U.S. markets, measured by total market capitalization. These target areas are primarily coastal and include a number of Sun Belt cities and Chicago.

It expects to winnow its investment outside those areas to focus on the top markets via acquisitions and redevelopment spending.

But shifting course might not be as easy in a recession. During the quarter, the company continued to dispose of assets outside key markets, "albeit at a much slower pace than in 2008," pointed out Barclays Capital's Ross Smotrich.

-By Dawn Wotapka, Dow Jones Newswires; 201-938-5248; [e-mail]

(Kerry E. Grace contributed to this report.)