DENVER--()--Apartment Investment and Management Company (“Aimco”) (NYSE: AIV) announced the closing of financing to fund its Lincoln Place redevelopment.
Lincoln Place is a 35-acre property located approximately 1.5 miles from the Pacific Ocean in Venice, California, one of southern California’s premier residential submarkets.
Lincoln Place is surrounded by numerous cultural, retail and entertainment amenities, including the world famous Venice Beach and Boardwalk, a short 10-minute bike ride from the community, and the Santa Monica Pier, less than three miles away. Los Angeles International Airport is approximately five miles to the south of Lincoln Place and residents of the community have direct access to several major freeways, arterials, as well as to public transportation, including, in two years, access to the Los Angeles light rail system. High tech companies have been attracted by these qualities, giving rise to the area sometimes being called “Silicon Beach.” For example, Google’s southern California headquarters are located 1.3 miles west of Lincoln Place.
Terry Considine, Chairman and Chief Executive Officer, comments: “It is very gratifying that the Lincoln Place redevelopment is now underway. It has taken many years to arrive here. More, it has taken the hard work of many, including officials of the City of Los Angeles, the HUD Los Angeles field office, and my Aimco teammates. I am delighted by our prospects.”
Demand for apartments in Venice is strong with approximately 30% of the submarket population in the prime renter age cohort of 24 to 40 years old and with renters accounting for 57% of all households. As of second quarter 2012, the submarket median income was $76,000 while the submarket median home value was $635,000. The submarket multifamily supply increased at the annual average of 1.74% between 1990 and 2009. Since 2009, only 70 units have been added. REIS, a third-party provider of commercial real estate performance data and analysis, projects that it will take four more years for multifamily completions as a percentage of existing stock to return to historic levels.
Lincoln Place was constructed between 1949 and 1951. Its original development included a design team led by Ralph A. Vaughn, an African-American architect interested in the Garden City Movement, popular in the United States in the 1930s, which sought to combine the amenities of urban life with ready access to nature. As a result, Lincoln Place is listed on the National Register of Historic Places, the California Register of Historic Places, and is a local Historic-Cultural Monument. The redevelopment is designed to revive the charm of the community’s existing buildings and to preserve its expansive open green spaces including almost 400 trees. Newly constructed buildings will maintain the character and appeal of this distinctive property.
An earlier phase of the Lincoln Place redevelopment began last year with the redevelopment of four buildings with 65 apartment homes. Work was completed earlier this year and 50 of the apartment homes have been re-leased to returning residents.
Over the next two years, Aimco will redevelop another 41 buildings including 631 now-vacant apartment homes, together with common areas and landscaping. Aimco will also construct on now-vacant land 13 new buildings with 99 apartment homes, a 5,000 square foot leasing center and a 6,100 square foot fitness center and pool area.
The redevelopment is being funded by a $190.7 million FHA-insured loan that closed last Friday. The loan bears interest at 2.73%, and is interest-only until 2014, when it converts to a 40-year fully amortizing loan that is freely pre-payable after 10 years. The loan represents the largest FHA Section 221(d)(4) unsubsidized loan ever insured by the U.S. Department of Housing and Urban Development. The lender and servicer of the loan is Red Mortgage Capital, LLC.
At closing, Aimco prepaid a $63 million loan secured by the property that required interest at 7.5% and that was due in fourth quarter 2013.
Additionally, because of its historic significance, the project has been approved for historic tax credits, which Aimco intends to sell, raising $16 million.
Financial details of the project are as follows ($ in millions unless otherwise noted):
|Aimco carrying value as of September 30, 2012*||$||188|
|Estimated redevelopment costs||140|
|Total estimated investment at completion||328|
|Estimated third-party tax credit equity contribution||(16||)|
|Estimated net income earned prior to stabilization||(15||)|
|Aimco net investment||$||297|
Projected stabilized rents per unit, un-trended for
Projected redevelopment investment returns*:
Estimated stabilized yield on net investment, before
|Free Cash Flow Internal Rate of Return||9.5||%|
|Levered Internal Rate of Return||15.0||%|
* Net of impairment charge of $85.4 million recognized in 4Q 2008.
|Construction start||4Q 2011|
|Returning tenant units||2Q 2012|
|Remaining existing units||2Q 2013|
|Newly constructed units||1Q 2014|
|Projected construction completion||4Q 2014|
|Projected stabilized operations||1Q 2015|
Aimco is a real estate investment trust that is focused on the ownership and management of quality apartment communities located in the largest markets in the United States. Aimco is one of the country's largest owners and operators of apartments, with 344 communities serving approximately 250,000 residents in 30 states, the District of Columbia and Puerto Rico. Aimco common shares are traded on the New York Stock Exchange under the ticker symbol AIV, and are included in the S&P 500. For more information about Aimco, please visit our website at www.aimco.com.
This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding projected results and specifically forecasts of Lincoln Place redevelopment project investments, timelines and stabilized rents. These forward-looking statements are based on management's judgment as of this date and include certain risks and uncertainties, including without limitation, Aimco's ability to: meet Lincoln Place redevelopment project budgets and timelines, achieve underwritten rental rates and raise historic tax credit equity. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the control of Aimco, including, without limitation: financing risks, including the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the terms of governmental regulations that affect Aimco and interpretations of those regulations; the competitive environment in which Aimco operates; insurance risk, including the cost of insurance; natural disasters such as earthquakes; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; energy costs; and possible environmental liabilities. In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on our ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership. Readers should carefully review Aimco's financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of Aimco's Annual Report on Form 10-K for the year ended December 31, 2011, and the other documents Aimco files from time to time with the Securities and Exchange Commission. These forward-looking statements reflect management's judgment as of this date, and Aimco assumes no obligation to revise or update them to reflect future events or circumstances. This press release does not constitute an offer of securities for sale.