Citi Downgrades Aimco To Neutral, Cautious Going Into Earnings

With Apartment Investment and Management Co AIV ("Aimco") shares having appreciated 20 percent since mid-December 2015, the stock has outperformed REITs and apartments, and Citi’s Michael Bilerman believes the valuation is now less attractive.

Bilerman downgraded the rating on the company from Buy to Neutral, while raising the price target from $43 to $48.

A Cautious Stance

“While we remain positive on AIV on a relative basis given its geographic and price point diversification vs. apartment peers, we see elevated risk heading into earnings,” the analyst mentioned.

Bilerman expressed caution heading into earnings, due to expectations of same-store growth deceleration.

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While a majority of the deceleration is expected to be driven by Aimco’s lease optimization strategy, third party rent growth has been weaker than anticipated and is expected to impact results.

“AIV is in the process of optimizing its lease roll, which will ultimately result in more leases expiring in peak months,” Bilerman stated.

Further Concerns

In addition, given investor concerns regarding multifamily fundamentals and driven by increased supply and affordability concerns, the analyst expressed concern regarding a larger deceleration, as compared to peers, leading to increased share volatility, especially following the recent stock outperformance.

“When combined with weaker than expected 3rd party rent growth data ytd, we view earnings as a risk,” Bilerman added.

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