Analyst Note| Kevin Brown |
Apartment Income REIT's first quarter as a separate entity was slightly disappointing, as fourth-quarter results were below our expectations. However, we don't see anything at this point that would cause a material change to our $55.72 fair value estimate for the no-moat company. Same-store occupancy increased 90 basis points sequentially to 94.4%, far better than our estimate of a 50-basis-point decline. However, the higher occupancy was achieved with higher rent concessions, reducing average rent growth to a 4.6% decline, and from restrictions on evicting tenants that increased uncollectible rents, which further reduced same-store revenue to fall 7.4% in the fourth quarter. Combined with same-store expenses rising 7.6%, well above our estimate of expenses growing 1.5%, same-store net operating income fell 12.5% in the fourth quarter, worse than our estimate of a 9.6% decline. Lower portfolio fundamentals caused pro forma funds from operations to come in at $0.38 per share for the fourth quarter.