APARTMENT INVESTMENT AND MANAGEMENT COMPANY Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report on Form 10-Q contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding: the ongoing relationship between Aimco and AIR (the "Separate Entities") following the Separation; the impact of the COVID-19 pandemic, including on our ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, developments, and redevelopments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our development and redevelopment investments; expectations regarding sales of our apartment communities and the use of proceeds thereof; the availability and cost of corporate debt; and our ability to comply with debt covenants, including financial coverage ratios. These forward-looking statements are based on management's judgment as of this date, which is subject to risks and uncertainties. Risks and uncertainties that could cause actual results to differ materially from our expectations include, but are not limited to: the effects of the coronavirus pandemic on Aimco's business and on the global andU.S. economies generally, and the ongoing, dynamic and uncertain nature and duration of the pandemic, all of which heightens the impact of the other risks and factors described herein, and the impact on entities in which Aimco holds a partial interest, including its indirect interest in the partnership that ownsParkmerced Apartments , and the impact of coronavirus related governmental lockdowns on Aimco's residents, commercial tenants, and operations; real estate and operating 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 amount, location and quality of competitive new housing supply; the timing and effects of acquisitions, dispositions, developments and redevelopments; expectations regarding sales of apartment communities and the use of proceeds thereof; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; financing risks, including the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of real estate presently or previously owned by Aimco; the relationship between Aimco and Separate Entities after the Separation; the ability and willingness of the Separate Entities and their subsidiaries to meet and/or perform their obligations under the contractual arrangements that were entered into among the parties in connection with the separation and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve some or all the benefits that we expect to achieve from the Separation; and such other risks and uncertainties described from time to time in filings by Aimco or the Separate Entities with theSecurities and Exchange Commission ("SEC"). 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 of 1986, as amended (the "Code") and depends on our ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership. Readers should carefully review our financial statements and the notes thereto, as well as Item 1A. Risk Factors in Part II of this report. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. Readers should also carefully review the section entitled "Risk Factors" described in Item 1A ofApartment Investment and Management Company's andAimco OP L.P.'s combined Annual Report on Form 10-K for the year endedDecember 31, 2020 , and subsequent documents we file from time to time with theSEC . As used herein and except as the context otherwise requires, "we," "our," and "us" refer toApartment Investment and Management Company (which we refer to as Aimco),Aimco OP L.P. (which we refer to asAimco Operating Partnership ) and their consolidated subsidiaries, collectively. Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted inthe United States , or GAAP. These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading.
Executive Overview
Our strategy includes property development, redevelopment, and other opportunistic investments that offer the prospect of outsized returns on a risk-adjusted basis. We invest where the talent of our business professionals, including their local market knowledge and insight, offers a comparative advantage. We deploy a variety of project and property-level financing structures
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to improve our returns on invested capital. Additionally, we own a national portfolio of operating properties which offers diversification, capital allocation opportunity, and a stable source of cash flow from operations.
We rely on the skills and experience of our team in building a broad portfolio of value-add real estate investments, primarily focused on the multifamily sector and located within the continentalUnited States . We plan to fund our investment activities through the redeployment of Aimco equity in combination with debt and third-party equity in order to improve our returns on invested capital and to grow assets under management. Given our stated strategy, it is expected that at any point in time the value-creation process will be ongoing at numerous of our investments and will therefore be difficult to value. Over time, we expect the Aimco enterprise to produce superior returns on equity on a risk-adjusted basis and it is our plan to do so by:
• Managing and investing in the development and redevelopment of real property
Our dedicated team will source and execute development and redevelopment projects across our national platform. Aimco will seek outsized returns on incremental capital invested, for itself and its partners, through our team's local insights regarding sub-market fundamentals, the specific property location, a deep understanding of how best to meet the end users' needs and wants, a disciplined commitment to mitigating risk during the construction process, and a passion for quality. We believe that each of these components are critical to the creation of an investment platform that is both sustainable and viable independent of broader market conditions.
• Managing and investing in other value-add activities (opportunistic
investments)
We expect to have a broad set of investment opportunities due to our national platform, management's deep connections in the local markets in which we invest, and various strategic relationships. These opportunities may include, but are not limited to, portfolio acquisitions, programmatic joint ventures, debt placements, operational turnarounds, and re-entitlements. Aimco will undertake such opportunistic value-add transactions when warranted by the prospect of outsized risk-adjusted returns.
• Owning a portfolio of stabilized properties
We own a geographically diversified portfolio of stabilized properties that produces stable cash flow and serves to balance the risk and highly variable cashflows associated with our portfolio of development and redevelopments and value-add investments. We expect to maintain, at any given time, an allocation of capital to stabilized operating properties of no less than 30% of Aimco equity.
• Maintaining sufficient liquidity and utilizing financial leverage
We are highly focused on the importance of maintaining ample liquidity and of limiting our exposure to any single investment. OnMarch 31, 2021 , our cash on hand plus capacity to borrow on our revolving credit facility equaled$385.3 million . We expect to capitalize our activities through a combination of non-recourse property debt, construction loans, third-party equity, and the recycling of Aimco equity, including through retained earnings. We plan to limit the use of recourse leverage, with a strong preference towards property-level debt in order to limit risk to the Aimco enterprise. When warranted, we plan to seek equity capital from joint venture partners to improve our cost of capital, further leverage Aimco equity, reduce exposure to a single investment and, in certain cases, for strategic benefits.
• Benefiting from a national platform while leveraging local and regional
expertise
We have corporate headquarters inDenver, Colorado , andBethesda, Maryland . Our investment platform is managed by experienced professionals based in four regions:West Coast , Central and Mountain West, Mid-Atlantic and Northeast, and Southeast. By regionalizing this platform, we are able to leverage the in-depth local market knowledge of each regional leader, creating a comparative advantage when sourcing, evaluating, and executing investment opportunities.
Results for the Three Months Ended
The results from the execution of our business plan during the three months
ended
Financial Highlights
Net income attributable to Aimco common stockholders per common share, on a
dilutive basis, was
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Our business is organized around five areas of strategic focus: development and redevelopment; asset management; investment activity; balance sheet; and team and culture.
Development and Redevelopment
Construction Activity
During the three months ended
• At the
redevelopment continues on plan with approximately $43.0 million
remaining to invest and a target to complete construction in 2022 and
reach stabilization in 2023.
• At Upton Place in Washington D.C. , construction activities began inmillion remaining to complete construction and on schedule for completion
in 2024.
• As previously announced, we began construction on
Faculty Club on the Anschutz Medical Campus inAurora, Colorado . We expect a remaining investment of approximately$52.0 million with completion planned for the first quarter of 2023.
Lease-up Progress
During the three months endedMarch 31, 2021 , Aimco held three properties where newly constructed or renovated homes had been delivered but stabilization had not yet been reached.
• At 707 Leahy, in
delivered and construction was complete as of 4Q 2020. As of March 31,
2021 , the 110-unit property was 71% leased.
• At The Fremont on the Anschutz Medical Campus in
apartment homes had been delivered and construction was complete as of 4Q
2020. As of
• At Prism, located in
been delivered and construction was complete as of 1Q 2021. As of March
31, 2021 the 136-unit property was 22% leased.
The pace of absorption at these properties accelerated during April and early
May as local economies reopen and we enter the prime leasing season. In April,
leasing volume increased by more than a third when compared to March, and
leasing in May is projected to outpace April.
Asset Management
Operating Properties
We own a geographically diversified portfolio of operating properties that
produces stable cash flow and serves to balance the risk and highly variable
cashflows associated with its portfolio of development and redevelopments and
value-add investments. Our Operating Portfolio produced solid results for the
three months ended March 31, 2021 . Highlights include:
• Average daily occupancy at our Operating Portfolio of 97.6% for the three
months ended
months ended
31, 2020.
• Average revenue per occupied unit at our Operating Portfolio of
for the three months ended
essentially flat to the three months ended December 31, 2020 .
• Revenue, before utility reimbursements, was
months ended March 31, 2021 , down 2.0% year over year but up 0.6% from
the three months ended December 31, 2020 .
• Expenses, net of utility reimbursements were
months ended
three months ended
primarily to higher real estate taxes and insurance with the sequential
increase due primarily to seasonal net utility costs and snow removal.
Sequentially, expenses outside of these seasonal items were favorable 50
basis points.
• Net operating income for our Operating Portfolio decreased by 5.8% year
over year, for the three months ended
the three months ended
We measure residential rent collection as the amount of payments received as a percentage of all residential amounts owed. In the three months endingMarch 31, 2021 , we collected 97.5% of all amounts owed by Aimco residents and recognized 98.4% of revenue, reserving 160 basis points as bad debt. 26
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Other Investments
Parkmerced Mezzanine Investment : OnNovember 26, 2019 , Aimco Predecessor made a five-year,$275.0 million mezzanine loan to a partnership owningParkmerced Apartments , located in southwestSan Francisco (the "Mezzanine Investment "). The loan bears interest at a 10% annual rate, accruing if not paid from property operations. The Separation Agreement provides for AIR to transfer ownership of the subsidiaries that originated and hold the mezzanine loan, a related equity option to acquire a 30% interest in the partnership owningParkmerced Apartments and the interest rate option, or swaption, that provides partial protection against future refinancing risk through 2024 to Aimco. At the time of the Separation and as ofMay 17, 2021 , legal title of these subsidiaries had not yet transferred to Aimco. Until legal title of the subsidiaries is transferred, AIR is obligated to pass payments on such loan to us, and we are obligated to indemnify AIR against any costs and expenses related thereto. We have the risks and rewards of ownership of theMezzanine Investment and have recognized an asset related to our right to receive theMezzanine Investment from AIR. The loan is subject to certain risks, including, but not limited to, those resulting from the severe downturn inSan Francisco rents, the ongoing disruption due to the COVID-19 pandemic and associated governmental response, and the current economic situation which may result in all or a portion of the loan not being repaid. In the event we determine that a portion of theMezzanine Investment is not recoverable, we will recognize an impairment, if appropriate.Life Science Developer Investment : In the third quarter of 2020, Aimco made a$50 million commitment toIQHQ, Inc. ("IQHQ"), a privately-held life sciences real estate development company. In addition, Aimco gained the right to collaborate with IQHQ on any multifamily component at its future development sites. Investment Activity Leasehold Agreements: OnJanuary 1, 2021 , terms commenced on the leasehold agreements with AIR for 707 Leahy, TheFremont , Prism, andFlamingo Point North Tower . The combined initial value of leasehold interest, as indicative of the initial fair market values of the leased assets at the time of lease inception, was$469.0 million . The combined annual leasehold payment for these four assets is$25.3 million . We expect the total development and redevelopment expenditures related to these assets to be approximately$70.8 million with$24.1 million having been invested as ofMarch 31, 2021 . The lease agreements provide Aimco the right to terminate each lease once the leased property is stabilized with AIR then having the option to retain ownership of the land and purchase the improvements from Aimco. Should AIR exercise their option, Aimco would be due the difference between the property's fair-market value at stabilization and the initial value of the leasehold interest, less a 5% discount. Acquisitions: InFebruary 2021 , we purchased, for$6.2 million , 1.5-acres of fully entitled land on the Anschutz Medical Campus inAurora, CO plus options allowing for the purchase of an additional 5.2 acres that will accommodate more than 750,000 square feet of new development. The 1.5-acre site is now being developed asThe Benson Hotel andFaculty Club ("Benson Hotel ") which represents a critical step in advancement of the campus masterplan. The purchase is net of outstanding construction liabilities of$0.9 million .
The Aimco team continues to actively source and evaluate a wide range of potential investment opportunities.
Balance Sheet
Aimco capitalizes its activities through a combination of non-recourse property debt, construction loans, third-party equity, and the recycling of Aimco equity, including through retained earnings. We plan to limit the use of recourse leverage, with a strong preference towards property-level debt in order to limit risk to the Aimco enterprise. When warranted, we plan to seek equity capital from joint venture partners to improve its cost of capital, further leverage Aimco equity, reduce exposure to a single investment and, in certain cases, for strategic benefits. We are highly focused on the importance of maintaining ample liquidity. As ofMarch 31, 2021 , we had access to$385.3 million , including$226.1 million of cash on hand,$9.2 million of restricted cash, and the capacity to borrow up to$150 million on our revolving credit facility. Please refer to the Liquidity and Capital Resources section for additional information regarding our leverage. In evaluating our financial condition and operating performance we use non-GAAP measures, including Adjusted EBITDAre, which we believe is useful to investors and creditors as a supplemental measure of our ability to incur and service debt. Our Adjusted EBITDAre for the three months endedMarch 31, 2021 was$16.7 million . Please refer to the Non-GAAP Measures section for further information about the calculation of Adjusted EBITDAre and our leverage ratios. Please refer to the Liquidity and Capital Resources section for additional information regarding our leverage. 27
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Table of Contents Financing Activity OnApril 15, 2021 , the Company entered into a$150 million variable-rate non-recourse construction loan collateralized by our leasehold interest and AIR's fee ownership interest inFlamingo North Tower . The initial term of the loan is three years and bears interest at LIBOR plus 360 basis points subject to a minimum all-in per annum interest rate of 3.85%. Certain consolidated subsidiaries have indemnified AIR for any losses it incurs as a result of a default on the loan by Aimco
Financial Results of Operations
We have three segments: (i) Development and Redevelopment, (ii) Operating Portfolio, and (iii) Other. Our Development and Redevelopment segment includes properties that are under construction, in pre-construction, or have not achieved stabilization. The Development and Redevelopment segment also includes our four leased properties, one is under construction and three are operational but have not achieved stabilization. Our Operating Portfolio segment includes majority owned residential communities that have achieved stabilized levels of operations as ofJanuary 1, 2020 and maintained it throughout the current year and comparable period. Our Other segment consists of1001 Brickell Bay Drive , our only commercial real estate property.
The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying condensed consolidated financial statements included in Item 1.
Net income increased by
Detailed Results of Operations for the Three Months Ended
Property Results
As ofMarch 31, 2021 , our Development and Redevelopment segment included three properties that were under construction, three properties in lease-up andHamilton on the Bay, which is being prepared for construction, our Operating Portfolio segment included 24 communities with 6,067 apartment homes, and our Other segment includes one office building. We use proportionate property net operating income to assess the operating performance of our segments. Proportionate property net operating income is defined as our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues, in accordance with GAAP. Accordingly, the results of operations of our segments discussed below are presented on a proportionate basis and exclude the results of four apartment communities with an aggregate 142 apartment homes that we neither manage nor consolidate, notes receivable, our investment in IQHQ and theMezzanine Investment .
We do not include property management costs and casualty gains or losses, reported in consolidated amounts, in our assessment of segment performance. Accordingly, these items are not allocated to our segment results discussed below.
Please refer to Note 8 to the condensed consolidated financial statements in
Item 1 for further discussion regarding our segments, including a reconciliation
of these proportionate amounts to consolidated rental and other property
revenues and property operating expenses.
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Proportionate Property Net Operating Income
The results of our segments for the three months endedMarch 31, 2021 and 2020, as presented below, are based on segment classifications as ofMarch 31, 2021 . Three Months Ended March 31, Historical Change (in thousands) 2021 2020 $ % Rental and other property revenues, before utility reimbursements: Development and Redevelopment$ 2,257 $ -$ 2,257 100 % Operating Portfolio 32,689 33,361 (672 ) (2.0 %) Other 3,027 3,277 (250 ) (7.6 %) Total 37,973 36,637 1,336 3.6 % Property operating expenses, net of utility reimbursements: Development and Redevelopment 1,867 - 1,867 100 % Operating Portfolio 11,170 10,510 660 6.3 % Other 985 990 (5 ) (0.5 %) Total 14,022 11,500 2,522 21.9 % Proportionate property net operating income: Development and Redevelopment 390 - 390 100 % Operating Portfolio 21,519 22,851 (1,332 ) (5.8 %) Other 2,042 2,287 (245 ) (10.7 %) Total$ 23,951 $ 25,138 $ (1,187 ) (4.7 %) For the three months endedMarch 31, 2021 , compared to 2020, our Operating Portfolio proportionate property net operating income decreased by$1.3 million , or 5.8%. This decrease was attributable to a$0.7 million , or 2.0%, decrease in rental and other property revenues due to lower average revenues of$37 per apartment home and a$0.7 million , or 6.3%, increase in property operating expenses due primarily to higher real estate taxes and insurance.
For the three months ended
Non-Segment Real Estate Operations
Operating income amounts not attributed to our segments include offsite costs associated with property management, casualty losses, write-off of straight-line rent receivables, and the results of apartment communities sold or held for sale, reported in consolidated amounts, which we do not allocate to our segments for purposes of evaluating segment performance.
Depreciation and Amortization
For the three months ended
General and Administrative Expenses
For the three months ended
Interest Expense
For the three months endedMarch 31, 2021 , compared to 2020, interest expense increased by$7.0 million , or 124.3%, due primarily to interest associated with the notes payable to AIR entered into in conjunction with the Separation.
Mezzanine Investment Income, Net
OnNovember 26, 2019 , we made a five-year,$275.0 million mezzanine loan to a partnership owningParkmerced Apartments , located in southwestSan Francisco . The loan is junior to a$1.5 billion first mortgage position and bears interest at a 10% annual rate, accruing if not paid from property operations. AtMarch 31, 2021 , the total receivable including accrued and unpaid interest was$314.8 million . During the three months endedMarch 31, 2021 and 2020, we recognized$0.7 million and$0.7 million , respectively, of income in connection with the mezzanine loan.
The loan is subject to certain risks, including, but not limited to, those
resulting from the severe downturn in
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situation which may result in all or a portion of the loan not being repaid. In
the event we determine that a portion of the
Unrealized Gains on Interest Rate Options
We are required to adjust our interest rate options to fair value on a quarterly basis. As a result of the mark to market adjustment we recorded an unrealized gain in the amount of$25.3 million .
Other Expenses, Net
Other expenses, net, includes costs associated with our risk management activities, partnership administration expenses and certain non-recurring items. For the three months endedMarch 31, 2021 , compared to 2020, other expenses, net decreased by$0.8 million . Income Tax Benefit
Certain of our operations, including our Development and Redevelopment
activities, are conducted through taxable REIT subsidiaries, or TRS entities.
Additionally, our TRS entities hold investments in one of our apartment
communities and
Our income tax benefit calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities. Income taxes, as well as changes in valuation allowance and incremental deferred tax items in conjunction with intercompany asset transfers and internal restructurings (if applicable), are included in income tax benefit in our condensed consolidated statements of operations. Consolidated GAAP income or loss subject to tax consists of pretax income or loss of our taxable entities and gains retained by the REIT. For the three months endedMarch 31, 2021 and 2020, we had consolidated net loss subject to tax of$9.5 million and$4.4 million , respectively. For three months endedMarch 31, 2021 , we recognized income tax benefit of$5.1 million , compared to$2.0 million during the same period in 2020. The change is due primarily to income tax benefit associated with internal restructuring completed in the first quarter and changes to our effective state rate expected to apply to the reversal of our existing deferred items.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions. We believe that the critical accounting policies that involve our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements relate to the impairment of long-lived assets and capitalized costs. Our critical accounting policies are described in more detail in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, of Aimco's andAimco Operating Partnership's combined Annual Report on Form 10-K for the year endedDecember 31, 2020 . There have been no significant changes in our critical accounting policies from those reported in our Form 10-K and we believe that the related judgments and assessments have been consistently applied and produce financial information that fairly depicts the financial condition, results of operations, and cash flows for all periods presented. Non-GAAP Measures We use EBITDAre and Adjusted EBITDAre in managing our business and in evaluating our financial condition and operating performance. These key financial indicators are non-GAAP measures and are defined and described below. We provide reconciliations of the non-GAAP financial measures to the most comparable financial measure computed in accordance with GAAP.
Earnings Before Interest Expense, Income Taxes, Depreciation and Amortization for Real Estate (EBITDAre)
EBITDAre and Adjusted EBITDAre are non-GAAP measures, which we believe are
useful to investors, creditors, and rating agencies as a supplemental measure of
our ability to incur and service debt because they are recognized measures of
performance by the real estate industry and allow for comparison of our credit
strength to different companies. EBITDAre and Adjusted EBITDAre should not be
considered alternatives to net income (loss) as determined in accordance with
GAAP as indicators of liquidity. There can be no assurance that our method of
calculating EBITDAre and Adjusted EBITDAre is comparable with that
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of other real estate investment trusts. Nareit defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, depreciation, and amortization expense, further adjusted for:
• gains and losses on the dispositions of depreciated property; • impairment write-downs of depreciated property;
• impairment write-downs of investments in unconsolidated partnerships caused
by a decrease in the value of the depreciated property in such partnerships;
and
• adjustments to reflect Aimco's share of EBITDAre of investments in
unconsolidated entities.
EBITDAre is defined by Nareit and provides for an additional performance measure
independent of capital structure for greater comparability between real estate
investment trusts. We define Adjusted EBITDAre as EBITDAre adjusted to exclude
the effect of net income attributable to noncontrolling interests in
consolidated real estate partnerships and EBITDAre adjustments attributable to
noncontrolling interests, and unrealized gain on interest rate options to allow
investors to compare a measure of our earnings before the effects of our capital
structure and indebtedness with that of other companies in the real estate
industry. Additionally, we exclude interest income recognized on our Mezzanine
Investment that was accrued but not paid during the three months ended March 31,
2021 .
The reconciliation of net income to EBITDAre and Adjusted EBITDAre for the three
months ended
Three months ended Three months ended
March 31, 2021 March 31, 2020
Net income $ 21,434 $ 4,555
Adjustments:
Interest expense 12,677 5,651
Income tax benefit (5,100 ) (2,023 )
Depreciation and amortization 20,717 19,347
Adjustment related to EBITDAre of unconsolidated
partnerships 215 211
EBITDAre $ 49,943 $ 27,741
Net loss attributable to noncontrolling
interests in consolidated real
estate partnerships (291 ) 5
Net income attributable to redeemable
noncontrolling interest consolidated real estate
partnership 152 103
EBITDAre adjustments attributable to
noncontrolling interests (270 ) (241 )
Interest income received on Mezzanine Investment (7,467 ) (6,747 )
Unrealized gains on interest rate options (25,347 ) -
Adjusted EBITDAre $ 16,720 $ 20,861
Liquidity and Capital Resources
Liquidity
Liquidity is the ability to meet present and future financial obligations. Our primary sources of liquidity are cash flows from operations and borrowing capacity under our loan agreements.
As of
As of
•
•
security deposits and escrows held by lenders for capital additions,
property taxes, and insurance; and
•
credit facility.
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Table of Contents Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital expenditures, and future investments. We use our cash and cash equivalents, including that provided by operating activities, to meet short-term liquidity needs. In the event that our cash and cash equivalents, revolving secured credit facility, and cash provided by operating activities are not sufficient to cover our liquidity needs, we have the means to generate additional liquidity, such as property financing activity and proceeds from apartment community sales. We expect to meet our long-term liquidity requirements, such as debt maturities, development and redevelopment spending, and future investment activity, primarily through property financing activity and cash generated from operations. Our revolving secured credit facility matures inDecember 2023 , prior to consideration of its two one-year extension options.
Leverage and Capital Resources
The availability of credit and its related effect on the overall economy may affect our liquidity and future financing activities, both through changes in interest rates and access to financing. Currently, interest rates are low compared to historical levels, and financing is readily available. Any adverse changes in the lending environment could negatively affect our liquidity. We believe we have mitigated much of this exposure by reducing repricing risks. However, if property or development financing options become unavailable for our future debt needs, we may consider alternative sources of liquidity, such as reductions in capital spending or proceeds from apartment community dispositions. As ofMarch 31, 2021 , approximately 45% of our leverage consisted of property-level, non-recourse, long-dated, amortizing debt. Approximately 87% of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates, and inflation. The weighted-average remaining term to maturity of our property-level debt was 5.6 years and a weighted-average interest rate of 3.09%. While our primary source of leverage is property-level debt which includes construction loans, we also have a credit facility with a syndicate of financial institutions. As ofMarch 31, 2021 , we had no outstanding borrowings under our revolving secured credit facility, swingline loan sub-facility and letter of credit sub-facility and had capacity to borrow up to$150.0 million .
As of
Under our revolving secured credit facility, we have agreed to maintain a fixed charge coverage ratio of 1.25x, minimum tangible net worth of$625 million , and maximum leverage of 60% as defined in the credit agreement. We are currently in compliance and expect to remain in compliance with these covenants.
Changes in Cash, Cash Equivalents, and Restricted Cash
The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash due to operating, investing and financing activities, which are presented in our condensed consolidated statements of cash flows in Item 1 of this report.
Operating Activities
For the three months endedMarch 31, 2021 , net cash provided by operating activities was$2.3 million . Our operating cash flow is affected primarily by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment communities. Cash provided by operating activities for the three months endedMarch 31, 2021 , decreased by$13.2 million compared to the same period ended in 2020. The decrease was due to lower contribution from ourOperating Properties and Development and Redevelopment communities, which were negatively impacted by the pandemic and governmental lockdown.
Investing Activities
For the three months endedMarch 31, 2021 , our net cash used in investing activities of$37.9 million consisted primarily of capital expenditures and cash used in the purchase ofBenson Hotel and construction costs on our development properties. Total capital additions totaled$31.7 million and$6.7 million during the three months endedMarch 31, 2021 and 2020, respectively. We have generally funded capital additions with available cash and cash provided by operating activities. We exclude the amounts of capital spending related to commercial spaces and to apartment communities sold or classified as held for sale at the end of the period from the foregoing measures. We have also excluded from these measures indirect capitalized costs, which are not yet allocated to communities with capital additions, and their related capital spending categories. 32
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For further details regarding our development and redevelopment activities, including apartment communities constructed and delivered refer to the Executive Overview section above.
Financing Activities
Net cash used in financing activities for the three months ended
Future Capital Needs
We expect to fund any future acquisitions, redevelopment, development, and other capital spending principally with proceeds from operating cash flows, short-term borrowings, debt and equity financing. Our near-term business plan does not contemplate the issuance of equity. We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for 2021 and beyond.
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