Leveraged Breakdowns

Public REIT Valuation, Part Two: Getting to Know the Filings

Introduction

This post continues our series on public REIT valuation. The first post introduced our target, AIMCO (NYSE: AIV) and emphasized that the best place to start is by reading the filings. If you haven’t yet, go back and read through that first post. You should have at least skimmed through each of the filings we pointed to before starting this post. Note, reading filings is a real estate private equity skill that comes more naturally after repetition, so don’t worry if it’s difficult the first time through. The more you practice, the easier it gets until it’s like reading any other article in the news.

SEC Filings – 10K and 10Q

Public companies must publish their audited 10-K once per year at the end of each fiscal year. The 10-K always includes the mandatory accounting statements such as the Balance Sheet, Income Statement, and Cash Flow Statement, among a few others. Additionally, you’ll find management’s discussion and analysis and plenty of other reconciling schedules with additional detail that help you flesh out your idea of the company. The 10-K is an authoritative source for many types of real estate private equity jobs, and is often a great place to start for public REPE M&A work. Although you can easily get the 10-K through the SEC’s Edgar database, the company has also shared it on their website at the link above.

The major drawback of a 10-K is that it is only published annually. Fortunately, there is a similar filing called a 10-Q that is published more frequently, once per quarter (excluding the fiscal year end, when the company publishes the more detailed 10-K). 10-Qs are generally a bit less detailed and are also not audited, unlike a 10-K which is audited. But since 10-Qs contain the latest financials, you should try to get all of your data there first before resorting to the more stale data in a 10-K (unless of course you’re pulling data at the fiscal year end, at which point the 10-K would be the latest).

Investor Presentations

It looks like AIV has posted two investor presentations (IPs) to its website. These IPs are non-standard presentations that the company might give for whatever reason. Although there is no particular form or standardization as you would see with a 10K or a 10Q, the SEC requires public companies to disclose any information they share with all investors. So if AIV gives a conference presentation hosted by some fancy global bank, it has to also share that information with everybody else. That’s why we have access to these investor presentations via the AIV website.

With most public companies, you’ll typically notice the IP’s information typically overlaps with other filings, particularly the Supplemental. Nevertheless, IPs often contain a point of data or two that you wouldn’t otherwise find. So it’s always worth checking the IP when you’re doing your first cut of due diligence on a public name. One more thing – IPs aren’t issued on standardized dates. So where a 10Q is issued regularly every quarter, IPs may be issued randomly as the company happens to make these presentations once, twice, or however many times per year (or not at all). When I save down IPs, I often use the file-naming convention of “Ticker Month Year Conference_Name IP.” But feel free to do whatever works with you.

Other helpful Data Sources

The financial supplement is a staple in real estate private equity underwriting. The company often shares charts and information tables not found in their 10-K’s or 10-Q’s. Earnings releases can be helpful too, but usually just recap information that you’d otherwise find in the 10-K or 10-Q. Also, it looks like AIV gave us an Excel list of all their apartments, which is nice of them. Most companies don’t offer Excel files of their buildings, so it’s convenient we have this to start our own listing of their 124 properties.

Next Steps

The next post will dive into our own analysis of these filings. But while you’re waiting for that second installment, why not learn some other core real estate private equity skills from all we have to offer? We are investors with megafund real estate private equity jobs here to teach you exactly what you need to break into this exclusive industry. With Leveraged Breakdowns, you get it straight from the horse’s mouth!

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