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DENVER-Chris Pike, an analyst for UBS Investment Research, in his recent fourth-quarter "report card" for locally based Apartment Investment and Management Co., is maintaining his "Reduce 2," or sell, rating for the company.
In his report, Pike notes that the apartment REIT posted during its fourth quarter FFO per share of 60 cents, which is down 15% from last year, but up 9% quarter over quarter. "The forth-quarter results missed our estimates by 2 cents, but included recognition of an impairment loss and outsized transaction income, offset by weaker core operations, higher interest and G&A," Pike writes. He says he is reducing his 2006 FFO by 9 cents to $2.77, but has included 6 cents of redemption charges. He is raising his 2007 estimates by 2 cents to $20.94.
It wasn't all bad news for Aimco. Pike says that performance recovered. "The company posted solid year-over-year revenue and net operating income gains across the portfolio supported by strong occupancy and rental rates gains," according to Pike. "However, much of this outperformance is a catch up as Aimco's fundamentals have lagged more supply constrained peers due to a national portfolio and recent re-engineering of property operations."
He says that he is concerned about impairments, variability and maturation. "Aimco's core NOI fell behind our expectations, offset by higher transaction income, and the add-back of an impairment loss," Pike writes. "We remain concerned about the level of variable income as well as fundamental entering the maturation phase of the apartment recovery."
He is maintaining a $38-per-share target for Aimco. On Friday, shares closed at $43.64. "Risks to our estimates and price targets include weaker than expected national job growth and continued low interest rates, which results in low financing costs related to the purchase of single-family homes," according to the UBS report. Aimco has apartments in 47 states, Washington, DC and Puerto Rico. It owns or manages a portfolio of 1,424 apartment properties containing 251,250 units.
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