S&P Upgrades Aimco (AIV) to 'BBB-'; Multifamily Fundamentals Should Remain Sound

Standard & Poor's Ratings Services today raised its corporate credit rating on Apartment Investment and Management Co. (AIMCO) (NYSE: AIV) to 'BBB-' from 'BB+'. The outlook is stable. At the same time, we raised our issue-level rating on the company's preferred stock to 'BB' from 'B+'.

"We incorporate AIMCO's large and well-diversified portfolio with good geographic and price point diversity into our assessment of its business risk profile," said credit analyst Michael Souers. "Additionally, the quality of the company's portfolio has benefited from active asset recycling and redevelopment of existing communities."

The stable outlook reflects our expectations that multifamily fundamentals remain sound and will support moderate rent and NOI growth. EBITDA should increase modestly over the next one to two years, which along with moderate debt reduction should result in continued improvement in AIMCO's leverage and coverage metrics.

We would consider lowering the corporate credit rating if AIMCO cannot sustain the improvements to its balance sheet and key coverage metrics such that debt to EBITDA rises above 7.5x, FCC declines below 2.0x, and debt to undepreciated capital rises above 50% for a sustained period of time.

While unlikely over the next one to two years, we would consider raising the rating if the company rent and NOI growth outpace peers, current development projects are completed with no stumbles, and continued balance sheet deleveraging drives debt to EBITDA in the low-6x range with FCC in the mid- to high-2x range.

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