Morningstar DBRS Confirms AIMCo Realty Investors LP Credit Rating at AA (low), Stable

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating and Senior Unsecured Debt rating of AIMCo Realty Investors LP (AIMCo Realty or the Company) at AA (low) with Stable trends. The credit ratings consider (1) the stand-alone credit assessment of AIMCo Realty, (2) the low level of secured debt in its capital structure, and (3) Morningstar DBRS' view of implicit support from Alberta Investment Management Corporation (AIMCo).

KEY CREDIT RATING CONSIDERATIONS
The confirmation of the ratings is supported by the Company's high-quality, well-diversified portfolio of income-producing real estate assets, strategic capital recycling through divesting noncore assets and focusing development on high-demand sectors, particularly the multifamily and industrial sectors and expectations of an improving financial profile in the near term. Furthermore, Morningstar DBRS has revised its assessment of the Company's business risk assessment (BRA) factor, namely Lease Maturity and Tenant Quality, modestly higher. This revision reflects the Company's increasing proportion of revenue now derived from higher credit-worthy tenants. Morningstar DBRS has also modestly improved its assessment of the Company's Financial Risk Assessment (FRA) factors, namely Total Debt-to-EBITDA and EBITDA interest coverage. Morningstar DBRS has revised total debt to EBITDA from BB (high) to BBB (low) and its EBITDA interest coverage from A (high) to AA (low) on expectations of an improving financial profile primarily driven by the Company's proactive deleveraging initiatives through well-advanced strategic noncore asset sales in the near term and recent developments transitioning to stabilized, income-producing assets. Taken together, these BRA and FRA revisions are modestly credit positive in nature and provide a higher tolerance for leverage (i.e., total debt-to-EBITDA) for a given credit rating. Morningstar DBRS also continues to attribute rating benefit through an additional modestly positive overlay factor in consideration of other revenues received through distributions and realized gains to AIMCo Realty's holdings in various closed-end funds and public equities. Morningstar DBRS also notes that the recent governance changes at AIMCo's parent level and the departure of some senior leaders have not affected AIMCo Realty's strategy or investment management process, and AIMCo Realty continues to operate with AIMCo's full support. As such, Morningstar DBRS has kept its assessment of the AIMCo Realty's Governance and implicit support derived from AIMCo unchanged.

CREDIT RATING DRIVERS
All else equal, a positive credit rating action could result if AIMCo Realty's total debt-to-EBITDA remained below 6.6x, and EBITDA interest coverage improved above 4.33 times (x) on a sustained basis. All else equal, a negative credit rating action could result if either (1) AIMCo Realty's total debt-to-EBITDA exceeded 8.6x, and EBITDA interest coverage fell less than 3.3x on a sustained basis; (2) the secured debt-to-total debt ratio remained more than 40% on a sustained basis; or (3) Morningstar DBRS changed its view on the level of implicit support provided by AIMCo.

FINANCIAL OUTLOOK
Morningstar DBRS anticipates that AIMCo's total debt-to-EBITDA will improve toward the high 7x range in the near-to-medium term due to steady EBITDA growth from development deliveries and modest organic growth supported by a continued strategy of proactive disposition of nonstrategic encumbered assets for deleveraging purposes partially offset by periodic increase in its leverage buildup in the near to intermediate term to opportunistically pursue additional development projects or other growth initiatives. Similarly, Morningstar DBRS expects AIMCo Realty's EBITDA interest coverage (including capitalized interest) to improve further and fluctuate in the high 3x range in the near to medium term driven by the Company's deleveraging initiatives, strategic noncore asset dispositions, modestly lower floating rates, and stabilized EBITDA from new developments and opportunistic acquisitions.

CREDIT RATING RATIONALE
The credit ratings continue to be supported by (1) the underlying cash flow stability of its high-quality real estate portfolio and strong market position in key Canadian markets; (2) Morningstar DBRS' expectation that the Company's secured debt-to-total-debt ratio (the Company's secured debt-to-total-debt ratio was 37.7% as at year-end 2024) will remain less than the 40% threshold; (3) Morningstar DBRS' expectation that the Company will continue to maintain the large pool of unencumbered assets that had an estimated value of approximately $14.3 billion at December 31, 2024, which could be pledged as security for loans, if needed; (4) Morningstar DBRS' view of implicit support from AIMCo.; and (5) a well-diversified tenant base with low counterparty risk.

The credit ratings continue to be constrained by (1) AIMCo Realty's high property and geographic concentration and (2) modest execution risks stemming from the Company's capital recycling initiatives and capital-intensive development pipeline that will require ample funding and continued support from AIMCo.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

BRA AND FRA
(A) Weighting of BRA Factors
In the analysis of AIMCo Realty, the BRA factors were considered in the order of importance contemplated in the methodology.

(B) Weighting of FRA Factors
In the analysis of AIMCo Realty, the FRA factors were considered in the order of importance contemplated in the methodology.

(C) Weighting of the BRA and the FRA
In the analysis of AIMCo Realty, the BRA carries greater weight than the FRA.

Notes:
All figures are in Canadian dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Entities in the Real Estate Industry (April 15, 2024) https://dbrs.morningstar.com/research/431170

Morningstar DBRS credit ratings may use of one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025 https://dbrs.morningstar.com/research/447186), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following criteria has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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