Aimco Acquires 100% Ownership of Palazzo Properties
July 05 2017 - 4:15PM
Business Wire
Apartment Investment and Management Company (“Aimco”) (NYSE:AIV)
today announced that it acquired the 47% interest in the Palazzo
joint venture owned by institutional investors advised by J.P.
Morgan Asset Management for $451.5 million.
Aimco now owns 100% of the three Palazzo communities: Palazzo at
Park La Brea, a 521-apartment home community; Palazzo East, a
611-apartment home community; and Villas at Park La Brea, a
250-apartment home community. The communities are well located in
the mature Mid-Wilshire district of Los Angeles and benefit from
their central location to employment centers—two miles from Beverly
Hills, Hollywood and Century City, and six miles in opposite
directions from both Downtown LA and Santa Monica.
“First, I want to thank J.P. Morgan for our highly successful
partnership over the past decade. Second, we are glad of the
opportunity to re-acquire 100% ownership of the three Palazzo
properties. We know them well having contracted for their
construction 15 years ago and having operated them ever since,”
said Aimco Chairman and CEO Terry Considine.
“We appreciate the Mid-Wilshire submarket with its highly
educated and high-income customers who value the proximity to
transportation, job centers, and upscale retail, including The
Grove, literally across the street…and where we can see clearly
that future development is increasingly difficult. We expect to
continue the operation of the properties and to redevelop each,
over time and at the right time, to serve different and distinctive
market segments.”
The acquisition was funded by taking title subject to existing
allocable debt of $140.5 million and by payment of $311 million in
cash proceeds funded with bank borrowings pending the sales of
properties located in Rhode Island, Virginia, Maryland, and New
Jersey. This leverage neutral paired trade transaction is expected
to result in a 150 basis points higher free cash flow internal rate
of return, to increase Aimco average monthly revenue per apartment
home by $65, and to shift capital from submarkets with lower
revenue growth prospects to a submarket with higher rent growth and
higher margins.
Palazzo Acquisition Analysis:
QUALITY COMPARISON
Palazzo
Avg. ofProperty Salesto
FundAcquisition
Acquisitionvs.
PropertySales
Age 12 years
34 years - $22 Average
revenue per apartment home $3,525
$1,300
+ $2,225 Median home values (1)
$1,000,000 $280,000
+ $720,000
FINANCIAL COMPARISON
10-Year FCF
IRR (2) 8.1%
6.6% + 150 bps 10-Year
avg. annual revenue growth rate (3) 3.4%
2.6%
+ 80 bps NOI yield 4.2%
6.2% - 200
bps FCF yield (2) 4.1%
5.4% - 130 bps NOI
margin 71%
64% + 700 bps FCF margin (2)
68% 56%
+ 1200 bps
(1) Source: ESRI, one mile radius
(2) FCF assumes annual capital
replacements spending of $1,200 per apartment home for the
communities acquired and sold
(3) Source: REIS
About Aimco
Aimco is a real estate investment trust focused on the ownership
and management of quality apartment communities located in select
markets in the United States. Aimco is one of the country’s largest
owners and operators of apartments, with ownership interests in 188
communities in 22 states and the District of Columbia. 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170705005736/en/
AimcoInvestor RelationsLynn Stanfield, 303-793-4661Sr.
Vice President, FinanceInvestor@aimco.com
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