



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
~~_______________________________________~~___________________________________________________________________________
Form 10-Q
(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, ~~2017~~2018
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to
Commission File Number 1-13232 (Apartment Investment and Management Company)
Commission File Number 0-24497 (AIMCO Properties, L.P.)

Apartment Investment and Management Company
AIMCO Properties, L.P.
(Exact name of registrant as specified in its charter)



Maryland (Apartment Investment and Management Company)		84-1259577
Delaware (AIMCO Properties, L.P.)		84-1275621
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4582 South Ulster Street, Suite 1100
Denver, Colorado		80237
(Address of principal executive offices)		(Zip Code)
(303) 757-8101
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Apartment Investment and Management Company: Yes x No o	AIMCO Properties, L.P.: Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Apartment Investment and Management Company: Yes x No o	AIMCO Properties, L.P.: Yes x No o



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Apartment Investment and Management Company:
Large accelerated filer	x		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o
			Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the exchange act. o
AIMCO Properties, L.P.:
Large accelerated filer	o		Accelerated filer	x
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o
			Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the exchange act.



Apartment Investment and Management Companyo:	o	AIMCO Properties, L.P.:	o



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Apartment Investment and Management Company: Yes	o	No	x	AIMCO Properties, L.P.: Yes	o	No	x

~~_______________________________________________________~~_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

The number of shares of Apartment Investment and Management Company

Class A Common Stock outstanding as of August ~~1, 2017: 157,022,720~~3, 2018: 157,351,428

The number of AIMCO Properties, L.P. Partnership Common Units outstanding as of August ~~1, 2017: 164,473,992~~3, 2018: 166,397,751

EXPLANATORY NOTE

This filing combines the reports on Form 10-Q for the quarterly period ended June 30, ~~2017,~~2018, of Apartment Investment and Management Company, or Aimco, and AIMCO Properties, L.P., or the Aimco Operating Partnership. Where it is important to distinguish between the two entities, we refer to them specifically. Otherwise, references to “we,” “us” or “our” mean, collectively, Aimco, the Aimco Operating Partnership and their consolidated entities.

Aimco, a Maryland corporation, is a self-administered and self-managed real estate investment trust, or REIT. Aimco, through wholly-owned subsidiaries, is the general and special limited partner of, and as of June 30, ~~2017,~~2018, owned a ~~95.5%~~94.6% ownership interest in the common partnership units of, the Aimco Operating Partnership. The remaining ~~4.5%~~5.4% interest is owned by limited partners. As the sole general partner of the Aimco Operating Partnership, Aimco has exclusive control of the Aimco Operating Partnership’s day-to-day management.

The Aimco Operating Partnership holds all of Aimco’s assets and manages the daily operations of Aimco’s business. Pursuant to the Aimco Operating Partnership agreement, Aimco is required to contribute to the Aimco Operating Partnership any assets, which it may acquire including all proceeds from the offerings of its securities. In exchange for the contribution of these assets, Aimco receives additional interests in the Aimco Operating Partnership with similar terms (e.g., if Aimco contributes proceeds of a stock offering, Aimco receives partnership units with terms substantially similar to the stock issued by Aimco).

We believe combining the periodic reports of Aimco and the Aimco Operating Partnership into this single report provides the following benefits:

We present our business as a whole, in the same manner our management views and operates the business;

We eliminate duplicative disclosure and provide a more streamlined and readable presentation because a substantial portion of the disclosures apply to both Aimco and the Aimco Operating Partnership; and

We save time and cost through the preparation of a single combined report rather than two separate reports.

We operate Aimco and the Aimco Operating Partnership as one enterprise, the management of Aimco directs the management and operations of the Aimco Operating Partnership, and the members of the Board of Directors of Aimco are identical to those of the Aimco Operating Partnership.

We believe it is important to understand the few differences between Aimco and the Aimco Operating Partnership in the context of how Aimco and the Aimco Operating Partnership operate as a consolidated company. Aimco has no assets or liabilities other than its investment in the Aimco Operating Partnership. Also, Aimco is a corporation that issues publicly traded equity from time to time, whereas the Aimco Operating Partnership is a partnership that has no publicly traded equity. Except for the net proceeds from stock offerings by Aimco, which are contributed to the Aimco Operating Partnership in exchange for additional limited partnership interests (of a similar type and in an amount equal to the shares of stock sold in the offering), the Aimco Operating Partnership generates all remaining capital required by its business. These sources include the Aimco Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facility, the issuance of debt and equity securities, including additional partnership units, and proceeds received from the sale of apartment communities.

Equity, partners’ capital and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of Aimco and those of the Aimco Operating Partnership. Interests in the Aimco Operating Partnership held by entities other than Aimco, which we refer to as OP Units, are classified within partners’ capital in the Aimco Operating Partnership’s financial statements and as noncontrolling interests in Aimco’s financial statements.

To help investors understand the differences between Aimco and the Aimco Operating Partnership, this report provides: separate condensed consolidated financial statements for Aimco and the Aimco Operating Partnership; a single set of condensed consolidated notes to such financial statements that includes separate discussions of each entity’s stockholders’ equity or partners’ capital, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations section that includes discrete information related to each entity, where appropriate.

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for Aimco and the Aimco Operating Partnership in order to establish that the requisite certifications have been made and that Aimco and the Aimco Operating Partnership are both compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. §1350.

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO PROPERTIES, L.P.

TABLE OF CONTENTS

FORM 10-Q



		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Apartment Investment and Management Company:
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	AIMCO Properties, L.P.:
	Condensed Consolidated Balance Sheets (Unaudited)	7
	Condensed Consolidated Statements of Operations (Unaudited)	8
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	9
	Condensed Consolidated Statements of Cash Flows (Unaudited)	10
	Notes to the Condensed Consolidated Financial Statements of Apartment Investment and Management Company and AIMCO Properties, L.P. (Unaudited)	11
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2223
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	4144
ITEM 4.	Controls and Procedures	4244
	PART II. OTHER INFORMATION
ITEM 1A.	Risk Factors	4345
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4345
ITEM 6.	Exhibits	4446
Signatures		4648

PART I. FINANCIAL INFORMATION


ITEM 1.	Financial Statements

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

June 30,
2017 December 31,
2016
ASSETS
Buildings and improvements $ 6,179,005
$ 6,106,298
Land 1,824,672
1,824,819
Total real estate 8,003,677
7,931,117
Accumulated depreciation (2,468,206 ) (2,421,357 )
Net real estate 5,535,471
5,509,760
Cash and cash equivalents 44,869
45,821
Restricted cash 39,331
36,405
Other assets 247,591
293,768
Assets of partnerships served by Asset Management business:
Real estate, net 231,881
245,648
Cash and cash equivalents 18,893
15,423
Restricted cash 30,288
33,501
Other assets 50,878
52,492
Total assets $ 6,199,202
$ 6,232,818

LIABILITIES AND EQUITY
Non-recourse property debt secured by Real Estate communities, net $ 3,617,182
$ 3,630,276
Term loan, net 249,040
—
Revolving credit facility borrowings 245,720
17,930
Total indebtedness associated with Real Estate portfolio 4,111,942
3,648,206
Accrued liabilities and other 203,997
218,937
Liabilities of partnerships served by Asset Management business:
Non-recourse property debt, net 229,631
236,426
Accrued liabilities and other 58,641
62,630
Deferred income 15,355
18,452
Total liabilities 4,619,566
4,184,651
Preferred noncontrolling interests in Aimco Operating Partnership 101,537
103,201
Commitments and contingencies (Note 4)

Equity:
Perpetual Preferred Stock 125,000
125,000
Common Stock, $0.01 par value, 500,787,260 shares authorized, 157,022,720 and 156,888,381 shares issued/outstanding at June 30, 2017 and December 31, 2016, respectively 1,570
1,569
Additional paid-in capital 3,897,621
4,051,722
Accumulated other comprehensive income 896
1,011
Distributions in excess of earnings (2,530,585 ) (2,385,399 )
Total Aimco equity 1,494,502
1,793,903
Noncontrolling interests in consolidated real estate partnerships (2,609 ) 151,121
Common noncontrolling interests in Aimco Operating Partnership (13,794 ) (58 )
Total equity 1,478,099
1,944,966
Total liabilities and equity $ 6,199,202
$ 6,232,818



	June 30, 2018			December 31, 2017
ASSETS
Buildings and improvements	$	6,407,863		$	6,174,149
Land	1,763,788			1,753,604
Total real estate	8,171,651			7,927,753
Accumulated depreciation	(2,452,947		)	(2,522,358		)
Net real estate	5,718,704			5,405,395
Cash and cash equivalents	46,703			60,498
Restricted cash	41,117			34,827
Other assets	365,564			272,739
Assets held for sale	94,314			17,959
Assets of partnerships served by Asset Management business held for sale at June 30, 2018:
Real estate, net	216,875			224,873
Cash and cash equivalents	20,696			16,288
Restricted cash	30,055			30,928
Other assets	10,328			15,533
Total assets	$	6,544,356		$	6,079,040

LIABILITIES AND EQUITY
Non-recourse property debt secured by Real Estate communities, net	$	3,791,238		$	3,545,109
Term loan, net	249,801			249,501
Revolving credit facility borrowings	220,170			67,160
Total indebtedness associated with Real Estate portfolio	4,261,209			3,861,770
Accrued liabilities and other	216,789			213,027
Liabilities related to assets held for sale	68,610			—
Liabilities of partnerships served by Asset Management business held for sale at June 30, 2018:
Non-recourse property debt, net	224,112			227,141
Accrued liabilities and other	17,519			19,812
Total liabilities	4,788,239			4,321,750
Preferred noncontrolling interests in Aimco Operating Partnership	101,332			101,537
Commitments and contingencies (Note 4)
Equity:
Perpetual Preferred Stock	125,000			125,000
Common Stock, $0.01 par value, 500,787,260 shares authorized, 157,351,428 and 157,189,447 shares issued/outstanding at June 30, 2018 and December 31, 2017, respectively	1,574			1,572
Additional paid-in capital	3,887,260			3,900,042
Accumulated other comprehensive income	3,208			3,603
Distributions in excess of earnings	(2,402,101		)	(2,367,073		)
Total Aimco equity	1,614,941			1,663,144
Noncontrolling interests in consolidated real estate partnerships	(2,984		)	(1,716		)
Common noncontrolling interests in Aimco Operating Partnership	42,828			(5,675		)
Total equity	1,654,785			1,655,753
Total liabilities and equity	$	6,544,356		$	6,079,040

See notes to condensed consolidated financial statements.

Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
REVENUES
Rental and other property revenues attributable to Real Estate	$	227,703		$	223,741		$	452,931		$	446,332		$	231,130		$	227,703		$	456,523		$	452,931
Rental and other property revenues of partnerships served by Asset Management business	18,533			19,130			37,095			38,020			19,000			18,533			37,808			37,095
Tax credit and transaction revenues	2,856			8,347			5,547			13,105			57			2,856			3,576			5,547
Total revenues	249,092			251,218			495,573			497,457			250,187			249,092			497,907			495,573

OPERATING EXPENSES
Property operating expenses attributable to Real Estate	79,014			79,708			158,640			159,180			76,031			79,082			154,318			158,708
Property operating expenses of partnerships served by Asset Management business	8,382			9,252			17,579			18,789			9,062			8,391			18,257			17,587
Depreciation and amortization	89,155			80,680			176,323			160,508			97,485			89,155			190,033			176,323
General and administrative expenses	10,108			11,616			21,071			23,914			13,882			10,108			25,237			21,071
Other expenses, net	2,727			5,526			4,465			7,096			4,366			2,650			7,324			4,389
Total operating expenses	189,386			186,782			378,078			369,487			200,826			189,386			395,169			378,078
Operating income	59,706			64,436			117,495			127,970			49,361			59,706			102,738			117,495
Interest income	2,012			1,843			4,204			3,678			2,884			2,012			5,056			4,204
Interest expense	(46,858		)	(48,894		)	(94,740		)	(96,528		)	(49,906		)	(46,858		)	(97,701		)	(94,740		)
Other, net	200			4,906			665			4,983			200			200			424			665
Income before income taxes and gain on dispositions	15,060			22,291			27,624			40,103			2,539			15,060			10,517			27,624
Income tax benefit	5,023			7,121			10,008			13,007			4,395			5,023			41,783			10,008
Income before gain on dispositions	20,083			29,412			37,632			53,110			6,934			20,083			52,300			37,632
Gain on dispositions of real estate, net of tax	1,508			216,541			1,114			222,728
Gain on dispositions of real estate, inclusive of related income tax													222			1,508			50,546			1,114
Net income	21,591			245,953			38,746			275,838			7,156			21,591			102,846			38,746
Noncontrolling interests:
Net income attributable to noncontrolling interests in consolidated real estate partnerships	(813		)	(8,677		)	(1,764		)	(9,607		)	(45		)	(813		)	(6,251		)	(1,764		)
Net income attributable to preferred noncontrolling interests in Aimco Operating Partnership	(1,939		)	(1,708		)	(3,888		)	(3,434		)	(1,934		)	(1,939		)	(3,871		)	(3,888		)
Net income attributable to common noncontrolling interests in Aimco Operating Partnership	(787		)	(11,135		)	(1,344		)	(12,307		)	(140		)	(787		)	(3,895		)	(1,344		)
Net income attributable to noncontrolling interests	(3,539		)	(21,520		)	(6,996		)	(25,348		)	(2,119		)	(3,539		)	(14,017		)	(6,996		)
Net income attributable to Aimco	18,052			224,433			31,750			250,490			5,037			18,052			88,829			31,750
Net income attributable to Aimco preferred stockholders	(2,149		)	(2,758		)	(4,297		)	(5,515		)	(2,149		)	(2,149		)	(4,297		)	(4,297		)
Net income attributable to participating securities	(60		)	(293		)	(119		)	(370		)	(71		)	(60		)	(190		)	(119		)
Net income attributable to Aimco common stockholders	$	15,843		$	221,382		$	27,334		$	244,605		$	2,817		$	15,843		$	84,342		$	27,334

Net income attributable to Aimco per common share – basic	$	0.10		$	1.42		$	0.17		$	1.57
Net income attributable to Aimco per common share – diluted	$	0.10		$	1.41		$	0.17		$	1.57
Net income attributable to Aimco per common share – basic and diluted													$	0.02		$	0.10		$	0.54		$	0.17
Dividends declared per common share	$	0.36		$	0.33		$	0.72		$	0.66		$	0.38		$	0.36		$	0.76		$	0.72

Weighted average common shares outstanding – basic	156,305			156,375			156,282			155,876			156,703			156,305			156,656			156,282
Weighted average common shares outstanding – diluted	156,715			156,793			156,735			156,248			156,833			156,715			156,786			156,735

See notes to condensed consolidated financial statements.

Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Net income	$	21,591		$	245,953		$	38,746		$	275,838		$	7,156		$	21,591		$	102,846		$	38,746
Other comprehensive income (loss):
Unrealized losses on interest rate swaps	(345		)	(411		)	(355		)	(1,085		)
Other comprehensive loss:
Unrealized (losses) gains on interest rate swaps													(4		)	(345		)	415			(355		)
Losses on interest rate swaps reclassified into interest expense from accumulated other comprehensive loss	369			398			755			818			100			369			219			755
Unrealized gains (losses) on investments in debt securities classified as available-for-sale	1,080			(232		)	(421		)	5,951
Other comprehensive income (loss)	1,104			(245		)	(21		)	5,684
Unrealized (losses) gains on available for sale debt securities													(451		)	1,080			(1,051		)	(421		)
Other comprehensive (loss) gain													(355		)	1,104			(417		)	(21		)
Comprehensive income	22,695			245,708			38,725			281,522			6,801			22,695			102,429			38,725
Comprehensive income attributable to noncontrolling interests	(3,630		)	(21,554		)	(7,090		)	(25,702		)	(2,100		)	(3,630		)	(13,995		)	(7,090		)
Comprehensive income attributable to Aimco	$	19,065		$	224,154		$	31,635		$	255,820		$	4,701		$	19,065		$	88,434		$	31,635

See notes to condensed consolidated financial statements.

Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended
June 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 38,746
$ 275,838
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 176,323
160,508
Gain on dispositions of real estate, net of tax (1,114 ) (222,728 )
Other adjustments (5,302 ) (10,380 )
Net changes in operating assets and operating liabilities (32,640 ) (26,473 )
Net cash provided by operating activities 176,013
176,765
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of real estate (8,189 ) (6,119 )
Capital expenditures (176,388 ) (166,030 )
Proceeds from dispositions of real estate 10,915
298,691
Purchases of corporate assets (6,005 ) (4,425 )
Change in restricted cash 1,780
(286,841 )
Other investing activities 733
10,013
Net cash used in investing activities (177,154 ) (154,711 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from non-recourse property debt 68,535
38,261
Principal repayments on non-recourse property debt (91,420 ) (59,267 )
Proceeds from term loan 250,000
—
Net borrowings on revolving credit facility 227,790
133,540
Payment of dividends to holders of Preferred Stock (4,297 ) (5,515 )
Payment of dividends to holders of Common Stock (112,661 ) (103,050 )
Payment of distributions to noncontrolling interests (11,176 ) (11,898 )
Purchases and redemptions of noncontrolling interests (323,165 ) (3,980 )
Other financing activities 53
(5,709 )
Net cash provided by (used in) financing activities 3,659
(17,618 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,518
4,436
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 61,244
50,789
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 63,762
$ 55,225



	Six Months Ended
	June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	102,846		$	38,746
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	190,033			176,323
Gain on dispositions of real estate, inclusive of related income tax	(50,546		)	(1,114		)
Income tax benefit	(41,783		)	(10,008		)
Other adjustments	2,307			4,706
Net changes in operating assets and operating liabilities	(17,231		)	(31,147		)
Net cash provided by operating activities	185,626			177,506
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate and deposits related to purchases of real estate	(205,318		)	(8,189		)
Capital expenditures	(164,116		)	(176,388		)
Proceeds from dispositions of real estate	76,317			10,915
Purchases of corporate assets	(2,649		)	(6,005		)
Other investing activities	2,079			733
Net cash used in investing activities	(293,687		)	(178,934		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt	360,613			68,535
Principal repayments on non-recourse property debt	(257,144		)	(91,420		)
Proceeds from term loan	—			250,000
Net borrowings on revolving credit facility	153,010			227,790
Payment of dividends to holders of Preferred Stock	(4,297		)	(4,297		)
Payment of dividends to holders of Common Stock	(119,288		)	(112,661		)
Payment of distributions to noncontrolling interests	(16,998		)	(11,176		)
Purchases and redemptions of noncontrolling interests	(11,395		)	(323,165		)
Other financing activities	(41		)	53
Net cash provided by financing activities	104,460			3,659
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(3,601		)	2,231
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD	142,541			131,150
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	138,940		$	133,381

See notes to condensed consolidated financial statements.

Table of Contents

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


	June 30, 2017			December 31, 2016			June 30, 2018			December 31, 2017
ASSETS
Buildings and improvements	$	6,179,005		$	6,106,298		$	6,407,863		$	6,174,149
Land	1,824,672			1,824,819			1,763,788			1,753,604
Total real estate	8,003,677			7,931,117			8,171,651			7,927,753
Accumulated depreciation	(2,468,206		)	(2,421,357		)	(2,452,947		)	(2,522,358		)
Net real estate	5,535,471			5,509,760			5,718,704			5,405,395
Cash and cash equivalents	44,869			45,821			46,703			60,498
Restricted cash	39,331			36,405			41,117			34,827
Other assets	247,591			293,768			365,564			272,739
Assets of partnerships served by Asset Management business:
Assets held for sale							94,314			17,959
Assets of partnerships served by Asset Management business held for sale at June 30, 2018:
Real estate, net	231,881			245,648			216,875			224,873
Cash and cash equivalents	18,893			15,423			20,696			16,288
Restricted cash	30,288			33,501			30,055			30,928
Other assets	50,878			52,492			10,328			15,533
Total assets	$	6,199,202		$	6,232,818		$	6,544,356		$	6,079,040

LIABILITIES AND EQUITY
Non-recourse property debt secured by Real Estate communities, net	$	3,617,182		$	3,630,276		$	3,791,238		$	3,545,109
Term loan, net	249,040			—			249,801			249,501
Revolving credit facility borrowings	245,720			17,930			220,170			67,160
Total indebtedness associated with Real Estate portfolio	4,111,942			3,648,206			4,261,209			3,861,770
Accrued liabilities and other	203,997			218,937			216,789			213,027
Liabilities of partnerships served by Asset Management business:
Liabilities related to assets held for sale							68,610			—
Liabilities of partnerships served by Asset Management business held for sale at June 30, 2018:
Non-recourse property debt, net	229,631			236,426			224,112			227,141
Accrued liabilities and other	58,641			62,630			17,519			19,812
Deferred income	15,355			18,452
Total liabilities	4,619,566			4,184,651			4,788,239			4,321,750
Redeemable preferred units	101,537			103,201			101,332			101,537
Commitments and contingencies (Note 4)
Partners’ capital:
Preferred units	125,000			125,000			125,000			125,000
General Partner and Special Limited Partner	1,369,502			1,668,903			1,489,941			1,538,144
Limited Partners	(13,794		)	(58		)	42,828			(5,675		)
Partners’ capital attributable to the Aimco Operating Partnership	1,480,708			1,793,845			1,657,769			1,657,469
Noncontrolling interests in consolidated real estate partnerships	(2,609		)	151,121			(2,984		)	(1,716		)
Total partners’ capital	1,478,099			1,944,966			1,654,785			1,655,753
Total liabilities and partners’ capital	$	6,199,202		$	6,232,818		$	6,544,356		$	6,079,040

See notes to condensed consolidated financial statements.

Table of Contents

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
REVENUES
Rental and other property revenues attributable to Real Estate	$	227,703		$	223,741		$	452,931		$	446,332		$	231,130		$	227,703		$	456,523		$	452,931
Rental and other property revenues of partnerships served by Asset Management business	18,533			19,130			37,095			38,020			19,000			18,533			37,808			37,095
Tax credit and transaction revenues	2,856			8,347			5,547			13,105			57			2,856			3,576			5,547
Total revenues	249,092			251,218			495,573			497,457			250,187			249,092			497,907			495,573

OPERATING EXPENSES
Property operating expenses attributable to Real Estate	79,014			79,708			158,640			159,180			76,031			79,082			154,318			158,694
Property operating expenses of partnerships served by Asset Management business	8,382			9,252			17,579			18,789			9,062			8,391			18,257			17,601
Depreciation and amortization	89,155			80,680			176,323			160,508			97,485			89,155			190,033			176,323
General and administrative expenses	10,108			11,616			21,071			23,914			13,882			10,108			25,237			21,071
Other expenses, net	2,727			5,526			4,465			7,096			4,366			2,650			7,324			4,389
Total operating expenses	189,386			186,782			378,078			369,487			200,826			189,386			395,169			378,078
Operating income	59,706			64,436			117,495			127,970			49,361			59,706			102,738			117,495
Interest income	2,012			1,843			4,204			3,678			2,884			2,012			5,056			4,204
Interest expense	(46,858		)	(48,894		)	(94,740		)	(96,528		)	(49,906		)	(46,858		)	(97,701		)	(94,740		)
Other, net	200			4,906			665			4,983			200			200			424			665
Income before income taxes and gain on dispositions	15,060			22,291			27,624			40,103			2,539			15,060			10,517			27,624
Income tax benefit	5,023			7,121			10,008			13,007			4,395			5,023			41,783			10,008
Income before gain on dispositions	20,083			29,412			37,632			53,110			6,934			20,083			52,300			37,632
Gain on dispositions of real estate, net of tax	1,508			216,541			1,114			222,728
Gain on dispositions of real estate, inclusive of related income tax													222			1,508			50,546			1,114
Net income	21,591			245,953			38,746			275,838			7,156			21,591			102,846			38,746
Net income attributable to noncontrolling interests in consolidated real estate partnerships	(813		)	(8,677		)	(1,764		)	(9,607		)	(45		)	(813		)	(6,251		)	(1,764		)
Net income attributable to the Aimco Operating Partnership	20,778			237,276			36,982			266,231			7,111			20,778			96,595			36,982
Net income attributable to the Aimco Operating Partnership’s preferred unitholders	(4,088		)	(4,466		)	(8,185		)	(8,949		)	(4,083		)	(4,088		)	(8,168		)	(8,185		)
Net income attributable to participating securities	(63		)	(293		)	(123		)	(370		)	(79		)	(63		)	(204		)	(123		)
Net income attributable to the Aimco Operating Partnership’s common unitholders	$	16,627		$	232,517		$	28,674		$	256,912		$	2,949		$	16,627		$	88,223		$	28,674

Net income attributable to the Aimco Operating Partnership per common unit – basic	$	0.10		$	1.42		$	0.18		$	1.57		$	0.02		$	0.10		$	0.54		$	0.18
Net income attributable to the Aimco Operating Partnership per common unit – diluted	$	0.10		$	1.41		$	0.17		$	1.57		$	0.02		$	0.10		$	0.54		$	0.17
Distributions declared per common unit	$	0.36		$	0.33		$	0.72		$	0.66		$	0.38		$	0.36		$	0.76		$	0.72

Weighted average common units outstanding – basic	163,740			164,188			163,777			163,707			164,685			163,740			164,138			163,777
Weighted average common units outstanding – diluted	164,150			164,606			164,230			164,079			164,815			164,150			164,268			164,230

See notes to condensed consolidated financial statements.

Table of Contents

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Net income	$	21,591		$	245,953		$	38,746		$	275,838		$	7,156		$	21,591		$	102,846		$	38,746
Other comprehensive income (loss):
Unrealized losses on interest rate swaps	(345		)	(411		)	(355		)	(1,085		)
Other comprehensive loss:
Unrealized (losses) gains on interest rate swaps													(4		)	(345		)	415			(355		)
Losses on interest rate swaps reclassified into interest expense from accumulated other comprehensive loss	369			398			755			818			100			369			219			755
Unrealized gains (losses) on investments in debt securities classified as available-for-sale	1,080			(232		)	(421		)	5,951
Other comprehensive income (loss)	1,104			(245		)	(21		)	5,684
Unrealized (losses) gains on available for sale debt securities													(451		)	1,080			(1,051		)	(421		)
Other comprehensive (loss) gain													(355		)	1,104			(417		)	(21		)
Comprehensive income	22,695			245,708			38,725			281,522			6,801			22,695			102,429			38,725
Comprehensive income attributable to noncontrolling interests	(856		)	(8,725		)	(1,865		)	(9,694		)	(45		)	(856		)	(6,251		)	(1,865		)
Comprehensive income attributable to the Aimco Operating Partnership	$	21,839		$	236,983		$	36,860		$	271,828		$	6,756		$	21,839		$	96,178		$	36,860

See notes to condensed consolidated financial statements.

Table of Contents

AIMCO PROPERTIES, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended
June 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 38,746
$ 275,838
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 176,323
160,508
Gain on dispositions of real estate, net of tax (1,114 ) (222,728 )
Other adjustments (5,302 ) (10,380 )
Net changes in operating assets and operating liabilities (32,640 ) (26,473 )
Net cash provided by operating activities 176,013
176,765
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of real estate (8,189 ) (6,119 )
Capital expenditures (176,388 ) (166,030 )
Proceeds from dispositions of real estate 10,915
298,691
Purchases of corporate assets (6,005 ) (4,425 )
Change in restricted cash 1,780
(286,841 )
Other investing activities 733
10,013
Net cash used in investing activities (177,154 ) (154,711 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from non-recourse property debt 68,535
38,261
Principal repayments on non-recourse property debt (91,420 ) (59,267 )
Proceeds from term loan 250,000
—
Net borrowings on revolving credit facility 227,790
133,540
Payment of distributions to holders of Preferred Units (8,185 ) (8,949 )
Payment of distributions to General Partner and Special Limited Partner (112,661 ) (103,050 )
Payment of distributions to Limited Partners (5,408 ) (5,169 )
Payment of distributions to noncontrolling interests (1,880 ) (3,295 )
Purchases of noncontrolling interests in consolidated real estate partnerships (311,055 ) —
Other financing activities (12,057 ) (9,689 )
Net cash provided by (used in) financing activities 3,659
(17,618 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,518
4,436
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 61,244
50,789
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 63,762
$ 55,225



	Six Months Ended
	June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	102,846		$	38,746
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	190,033			176,323
Gain on dispositions of real estate, inclusive of related income tax	(50,546		)	(1,114		)
Income tax benefit	(41,783		)	(10,008		)
Other adjustments	2,307			4,706
Net changes in operating assets and operating liabilities	(17,231		)	(31,147		)
Net cash provided by operating activities	185,626			177,506
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate and deposits related to purchases of real estate	(205,318		)	(8,189		)
Capital expenditures	(164,116		)	(176,388		)
Proceeds from dispositions of real estate	76,317			10,915
Purchases of corporate assets	(2,649		)	(6,005		)
Other investing activities	2,079			733
Net cash used in investing activities	(293,687		)	(178,934		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt	360,613			68,535
Principal repayments on non-recourse property debt	(257,144		)	(91,420		)
Proceeds from term loan	—			250,000
Net borrowings on revolving credit facility	153,010			227,790
Payment of distributions to holders of Preferred Units	(8,168		)	(8,185		)
Payment of distributions to General Partner and Special Limited Partner	(119,288		)	(112,661		)
Payment of distributions to Limited Partners	(5,625		)	(5,408		)
Payment of distributions to noncontrolling interests	(7,502		)	(1,880		)
Purchases of noncontrolling interests in consolidated real estate partnerships	(3,581		)	(311,055		)
Other financing activities	(7,855		)	(12,057		)
Net cash provided by financing activities	104,460			3,659
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(3,601		)	2,231
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD	142,541			131,150
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	138,940		$	133,381

See notes to condensed consolidated financial statements.

Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

AIMCO PROPERTIES, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2017~~2018

(Unaudited)

Note 1 — Organization

Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-administered and self-managed real estate investment trust, or REIT. AIMCO Properties, L.P., or the Aimco Operating Partnership, is a Delaware limited partnership formed on May 16, 1994, to conduct our business, which is focused on the ownership, management, redevelopment and limited development of quality apartment communities located in several of the largest markets in the United States.

Aimco, through its wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, owns a majority of the ownership interests in the Aimco Operating Partnership. Aimco conducts all of its business and owns all of its assets through the Aimco Operating Partnership. Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are referred to as OP Units. OP Units include common partnership units, ~~and high performance partnership units,~~ which we refer to as common OP Units, as well as partnership preferred units, which we refer to as preferred OP Units. As of June 30, ~~2017,~~2018, after eliminations for units held by consolidated subsidiaries, the Aimco Operating Partnership had ~~164,483,596~~166,403,852 common partnership units ~~and equivalents~~ outstanding. As of June 30, ~~2017,~~2018, Aimco owned ~~157,022,720~~157,351,428 of the common partnership units ~~(95.5%~~(94.6% of the common partnership ~~units and equivalents)~~units) of the Aimco Operating Partnership and Aimco had outstanding an equal number of shares of its Class A Common Stock, which we refer to as Common Stock.

Except as the context otherwise requires, “we,” “our” and “us” refer to Aimco, the Aimco Operating Partnership and their consolidated subsidiaries, collectively.

As of June 30, ~~2017,~~2018, we owned an equity interest in ~~141~~138 apartment communities with ~~39,187~~37,897 apartment homes in our ~~real estate~~Real Estate portfolio. Our Real Estate portfolio ~~which comprises our reportable segment,~~ is diversified by both price point and geography and consists primarily of market rate apartment communities in which we own a substantial interest. We consolidated ~~137~~134 of these apartment communities with ~~39,045~~37,755 apartment ~~homes.~~homes and these communities comprise our reportable segment.

As of June 30, ~~2017,~~2018, we also ~~owned~~held nominal ownership positions in partnerships ~~holding~~that own 46 low-income housing tax credit apartment communities with 6,898 apartment homes. We provide services to these partnerships and receive fees and other payments in return. Our relationship with these partnerships is different than real estate ownership and is better described as an asset management business, or Asset Management. In accordance with accounting principles generally accepted in the United States of America, or GAAP, we are required to consolidate ~~in our financial statements~~ partnerships owning an aggregate of 39 apartment communities with 6,211 apartment homes. We completed the sale of our Asset Management business on July 25, 2018.

Note 2 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, ~~2017,~~2018, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2018.

The balance sheets of Aimco and the Aimco Operating Partnership at December 31, ~~2016,~~2017, have been derived from their respective audited financial statements at that date, but do not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in Aimco’s and the Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017. Except where indicated, the footnotes refer to both Aimco and the Aimco Operating Partnership.

Effective in 2017, we modified our condensed consolidated balance sheets to present the assets and liabilities of consolidated partnerships served by our Asset Management business separately from those amounts relating to our Real Estate portfolio. We have similarly modified our condensed consolidated statements of operations to present separately the rental and other property

revenues and property operating expenses of consolidated partnerships served by our Asset Management business. We have reclassified these items in the condensed consolidated balance sheets as of December 31, 2016, and in the condensed consolidated statements of operations for the three and six months ended June 30, 2016, to conform to the current presentation. These reclassifications had no effect on previously reported total assets, total liabilities or net income amounts.

Principles of Consolidation

Aimco’s accompanying condensed consolidated financial statements include the accounts of Aimco, the Aimco Operating Partnership, and their consolidated subsidiaries. The Aimco Operating Partnership’s condensed consolidated financial statements

include the accounts of the Aimco Operating Partnership and its consolidated subsidiaries, including partnerships served by our Asset Management business (see ~~note~~ Note 8). All significant intercompany balances and transactions have been eliminated in consolidation.

Interests in the Aimco Operating Partnership that are held by limited partners other than Aimco are reflected in Aimco’s accompanying condensed consolidated balance sheets as noncontrolling interests in the Aimco Operating Partnership. Interests in partnerships consolidated by the Aimco Operating Partnership that are held by third parties are reflected in our accompanying condensed consolidated balance sheets as noncontrolling interests in consolidated real estate partnerships.

Temporary Equity and Partners’ Capital

The following table presents a reconciliation of the Aimco Operating Partnership’s ~~Preferred~~preferred OP Units from December 31, ~~2016~~2017 to June 30, ~~2017.~~2018. The ~~Preferred~~preferred OP Units may be redeemed at the holders’ option (as further discussed in Note 5), and are therefore ~~are~~ presented within temporary equity in Aimco’s condensed consolidated balance sheets and within temporary capital in the Aimco Operating Partnership’s condensed consolidated balance sheets (in thousands).

Balance, December 31, 2016 $ 103,201
Distributions to preferred unitholders (3,888 )
Redemption of preferred units and other (1,664 )
Net income 3,888
Balance, June 30, 2017 $ 101,537



Balance, December 31, 2017	$	101,537
Distributions to holders of preferred OP Units	(3,871		)
Redemption of preferred OP Units and other	(205		)
Net income attributable to preferred OP Units	3,871
Balance, June 30, 2018	$	101,332

Aimco Equity (including Noncontrolling Interests)

The following table presents a reconciliation of Aimco’s consolidated permanent equity accounts from December 31, ~~2016~~2017 to June 30, ~~2017~~2018 (in thousands):

Aimco
Equity

Noncontrolling
interests in
consolidated real estate
partnerships

Common
noncontrolling
interests in
Aimco Operating
Partnership

Total
Equity
Balance, December 31, 2016 $ 1,793,903
$ 151,121
$ (58 ) $ 1,944,966
Contributions —
3,341
—
3,341
Dividends on Preferred Stock (4,297 ) —
—
(4,297 )
Dividends and distributions on Common Stock and common OP Units (113,054 ) (1,880 ) (5,408 ) (120,342 )
Redemptions of common OP Units —
—
(10,448 ) (10,448 )
Amortization of stock-based compensation cost 4,824
—
306
5,130
Effect of changes in ownership for consolidated entities (159,025 ) (157,056 ) 3,358
(312,723 )
Cumulative effect of a change in accounting principle (59,586 ) —
(2,881 ) (62,467 )
Change in accumulated other comprehensive loss (115 ) 101
(7 ) (21 )
Other 102
—
—
102
Net income 31,750
1,764
1,344
34,858
Balance, June 30, 2017 $ 1,494,502
$ (2,609 ) $ (13,794 ) $ 1,478,099

~~On June 30, 2017, we acquired the 47% noncontrolling limited partner interest in the Palazzo joint venture, as further discussed in~~ ~~Note 3. As a result of this transaction we recorded the consideration paid in excess of the noncontrolling interest in the~~



	Aimco Equity			Noncontrolling interests in consolidated real estate partnerships			Common noncontrolling interests in Aimco Operating Partnership			Total Equity
Balance, December 31, 2017	$	1,663,144		$	(1,716	)	$	(5,675	)	$	1,655,753
Contributions	—			(20		)	—			(20		)
Issuance of common OP Units	—			—			50,151			50,151
Dividends on Preferred Stock	(4,297		)	—			—			(4,297		)
Dividends and distributions on Common Stock and common OP Units	(119,558		)	(7,499		)	(5,973		)	(133,030		)
Redemptions of common OP Units	—			—			(7,611		)	(7,611		)
Amortization of stock-based compensation cost	4,481			—			780			5,261
Effect of changes in ownership for consolidated entities	(17,385		)	—			7,283			(10,102		)
Change in accumulated other comprehensive loss	(395		)	—			(22		)	(417		)
Other	122			—			—			122
Net income	88,829			6,251			3,895			98,975
Balance, June 30, 2018	$	1,614,941		$	(2,984	)	$	42,828		$	1,654,785

~~consolidated real estate partnership of $155.6 million as a reduction of Aimco’s additional paid-in capital and the Aimco Operating Partnership’s partners capital.~~

~~Please refer to the Accounting Pronouncements Adopted in the Current Year heading below, for further discussion of the cumulative effect of a change in accounting principle.~~

Partners’ Capital attributable to the Aimco Operating Partnership

The following table presents a reconciliation of the consolidated partners’ capital balances in permanent capital that are attributable to the Aimco Operating Partnership from December 31, ~~2016~~2017 to June 30, ~~2017~~2018 (in thousands):


	Partners’ capital attributable to the Aimco Operating Partnership			Partners’ capital attributable to the Aimco Operating Partnership
Balance, December 31, 2016	$	1,793,845
Balance, December 31, 2017				$	1,657,469
Issuance of common OP Units				50,151
Distributions to preferred units held by Aimco	(4,297		)	(4,297		)
Distributions to common units held by Aimco	(113,054		)	(119,558		)
Distributions to common units held by Limited Partners	(5,408		)	(5,973		)
Redemption of common OP Units	(10,448		)	(7,611		)
Amortization of Aimco stock-based compensation cost	5,130			5,261
Effect of changes in ownership for consolidated entities	(155,667		)	(10,102		)
Cumulative effect of a change in accounting principle	(62,467		)
Change in accumulated other comprehensive loss	(122		)	(417		)
Other	102			122
Net income	33,094			92,724
Balance, June 30, 2017	$	1,480,708
Balance, June 30, 2018				$	1,657,769

A separate reconciliation of noncontrolling interests in consolidated real estate partnerships and total partners’ capital for the Aimco Operating Partnership is not presented as these amounts are identical to the corresponding noncontrolling interests in consolidated real estate partnerships and total equity for Aimco, which are presented above.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts included in the financial statements and accompanying notes thereto. Actual results could differ from those estimates.

Reclassifications

Certain items included in the 2017 financial statements have been reclassified to conform to the current presentation.

Income Taxes

As discussed in Note 9 to the consolidated financial statements in Item 8 of our Form 10-K for the year ended December 31, 2017, we have not completed our accounting for the tax effects of the enactment of the Tax Cuts and Jobs Act in late December 2017. During the six months ended June 30, 2018, we recognized a measurement period adjustment to reduce by $11.3 million an estimated valuation allowance recognized as of December 31, 2017. During the six months ended June 30, 2018, we also recognized an offsetting valuation allowance resulting from an intercompany transfer of assets related to our Asset Management business. These adjustments had no net effect on our results of operations or effective tax rate.

Accounting Pronouncements Adopted in the Current Year

Effective April 1, 2017, we elected to adopt early the new accounting standard that revised the GAAP definition of a business. Under the new standard we expect that apartment communities will no longer be considered businesses in most acquisitions and dispositions. Under the new standard, transaction costs incurred related to the acquisition of real estate operations will be capitalized as a cost of the acquisition. Additionally, we will no longer allocate goodwill to apartment communities for purposes of calculating gains or losses upon sale. We have applied the new standard prospectively to transactions occurring after April 1, 2017. This standard did not have a significant effect on our financial condition or results of operations.

~~Effective~~ January 1, ~~2017,~~2018, we adopted a new standard issued by the Financial Accounting Standards Board, or FASB, that ~~simplifies the~~affects accounting for revenue. Under this new standard, revenue is generally recognized when an entity has transferred control of goods or services to a customer for an amount reflecting the consideration to which the entity expects to be entitled for such exchange. In evaluating the contracts we enter into in the ordinary course of business, substantially all of our revenue is generated by lease agreements, which will continue to be subject to existing GAAP until 2019, when we will adopt the new lease accounting standard.

The new revenue standard also introduced new guidance for accounting for other income, ~~tax consequences of intercompany transfers of assets. Previously, the recognition within the statement of operations of income tax expense~~including how we measure gains or ~~benefit resulting from an intercompany transfer of assets did not occur until the assets affect GAAP income or loss, for example, through depreciation, impairment or upon~~losses on the sale of ~~the asset to a third-party. Under~~real estate. We adopted the new standard ~~an entity recognizes~~using the ~~income tax expense or benefit from an intercompany transfer of assets when the transfer occurs. We have applied this change on a~~ modified retrospective basis and recorded a cumulative effect adjustment to retained earnings of $62.5 million as of January 1, 2017, representing accumulated unrecognized tax expense from intercompany transfers between the Aimco Operating Partnership and TRS entities. Such amounts were included in other assets within our consolidated balance sheets at December 31, 2016.

~~Also~~transition method effective January 1, ~~2017,~~2018, with no effect on our results of operations or financial position.

Effective January 1, 2018, we also adopted ~~guidance~~new standards issued by the FASB that ~~simplifies~~affect the ~~accounting for share-based compensation. Under prior practice, tax benefits in excess~~presentation and disclosure of ~~those associated with compensation cost recognized in accordance with GAAP, or windfalls, were recorded in equity~~the statements of cash flows. We are now required to present combined inflows and ~~tax deficiencies were recorded in equity until previous windfalls had been recouped~~outflows of cash, cash equivalents, and ~~then recognized~~

restricted cash in ~~earnings. Under~~ the ~~new guidance, all~~consolidated statement of cash flows. Previously our consolidated statements of cash flows presented transfers between restricted and unrestricted cash accounts as operating, financing, and investing cash activities depending upon the tax effects related to share-based compensation are recognized through earnings. This guidance is applied to all windfalls and tax deficiencies resulting from settlements occurring after January 1, 2017.required or intended purpose for the restricted funds. The new guidance also requires ~~windfalls~~debt prepayment and other extinguishment related payments to be ~~recorded~~classified as financing activities. We previously classified such payments as operating activities. We have revised our condensed consolidated statements of cash flows for the six months ended June 30, 2017 to conform to this presentation, and the effect of the revisions to net cash flows from operating and investing activities as previously reported for the six months ended June 30, 2017 are summarized in the ~~period~~following table (in thousands):



	As Previously Reported			Adjustments			As Revised
Net cash flows from operating activities	$	176,013		$	1,493		$	177,506
Net cash flows from investing activities	(177,154		)	(1,780		)	(178,934		)

As of June 30, 2018, in addition to the ~~related transaction triggering tax consequences, such~~balances presented as ~~an exercise of stock options or vesting of~~cash, cash equivalents and restricted ~~shares, occurs. This change in timing of recognition has been applied on a modified retrospective basis. We did not record a cumulative effect adjustment to opening retained earnings~~cash on the ~~date~~condensed consolidated balance sheets, there is $0.4 million of ~~adoption as there were no accumulated windfalls recorded~~cash, cash equivalents and restricted cash included in equity. Compared to prior periods, we may experience incremental volatility in income tax benefit or expense resulting from the recognition in earnings of windfall benefits or deficiencies upon the exercise of stock options and vesting of restricted shares.assets held for sale.

Note 3 — Significant Transactions, Dispositions of Apartment Communities and Assets Held for Sale

~~On June 30, 2017, we reacquired for $451.5 million, the 47% noncontrolling limited partner interest in the Palazzo joint venture, which owns three communities with a total~~Acquisition of 1,382 apartment homes located in Los Angeles, California. We assumed $140.5 million of the noncontrolling interest partner’s share of existing non-recourse property-level debt and paid $311.0 million in cash consideration, which was funded by short-term borrowings we expect to repay using proceeds from apartment community sales. We now own all of the interests in the Palazzo joint venture and its underlying apartment communities. Prior to the transaction, we consolidated in our financial statements the joint venture and underlying apartment communities, therefore this transaction has been accounted for as an equity transaction. In accordance with GAAP, we recognized the $155.6 million of consideration paid in excess of the noncontrolling interest balance as a reduction of additional paid-in capital within Aimco’s equity and the Aimco Operating Partnership’s partners capital.

Also on June 30, 2017, we entered into a second amended and restated senior secured credit agreement, or the Credit Agreement. The Credit Agreement continues our existing $600.0 million revolving loan facility with consistent terms and provides for a $250.0 million term loan, which we used to fund a portion of the Palazzo acquisition. The term loan matures on June 30, 2018, includes a one-year extension option, subject to the satisfaction of customary conditions, and currently bears interest at 30-day LIBOR plus 1.35%. We paid lender and other fees of $1.0 million in connection with the term loan, which have been deferred and will be recognized as additional interest over the duration of the term loan.Apartment Communities

During the six months ended June 30, ~~2017, partnerships served by~~2018, we purchased for $160.0 million Bent Tree Apartments, a 748-apartment home community in Fairfax County, Virginia. The purchase price, plus $1.0 million of capitalized transaction costs, was allocated as follows: $47.0 million to land; $113.0 million to buildings and improvements; and $1.0 million to other items.

During the ~~Asset Management business~~six months ended June 30, 2018, we agreed to acquire six apartment communities in the Philadelphia area for a stated purchase price of $445.0 million. The portfolio includes 1,006 existing apartment homes, 110 apartment homes under construction, and 185,000 square feet of office and retail space. On May 1, 2018, we purchased four of the six apartment communities, including 665 apartment homes and 153,000 square feet of office and retail space. The gross purchase price consisted of $208.9 million of assumed property-level debt and the issuance of 1.2 million OP Units. In accordance with GAAP, the OP Units were valued at $41.08 per unit, the closing price of Aimco’s common share on May 1, 2018. Total consideration, plus $6.4 million of capitalized transaction costs, was allocated as follows: $14.1 million to land; $282.5 million to buildings and improvements; $6.3 million to intangible assets; and $3.1 millionto intangible liabilities. The purchase of the fifth apartment community is conditioned upon the City of Camden’s approval of the transfer of the existing PILOT tax agreement, which has not yet been received. The purchase of the sixth apartment community is expected upon completion of the construction in the first half of 2019.

Dispositions of Apartment Communities and Assets Held for Sale

During the six months ended June 30, 2018, we sold ~~two~~three apartment communities with ~~a total of 252~~513 apartment homes for a gain on disposition of $50.6 million, net of income tax, and gross proceeds of $71.9 million resulting in ~~gains~~$64.6 million in net proceeds to us. Two of ~~$2.6~~these communities are located in southern Virginia and one is located in suburban Maryland.

During the six months ended June 30, 2018, we sold our interests in the entities owning the La Jolla Cove property in settlement of legal actions filed in 2014 by a group of disappointed buyers who had hoped to acquire the property. We provided seller financing with a stated value of $48.6 million and ~~related tax expense~~received net cash proceeds of ~~$0.9 million.~~approximately $5.0 million in the sale.

~~We are currently~~In addition to the apartment communities we sold during the periods presented, from time to time we may be marketing for sale certain apartment communities that are inconsistent with our long-term investment strategy. ~~Additionally, the consolidated partnerships served by our Asset Management business periodically evaluates for sale certain of their apartment communities.~~ At the end of each reporting period, we evaluate whether ~~any consolidated apartment~~such communities meet the criteria to be classified as held for sale. As

On July 25, 2018, we sold for $590.0 million our Asset Management business and our four affordable apartment communities located in Hunters Point. After payment of ~~June 30, 2017, no~~transaction costs and repayment of property-level debt encumbering the Hunters Point apartment communities, net proceeds were approximately $512.0 million. The related assets and liabilities were classified as held for ~~sale.~~sale as of June 30, 2018.

As of June 30, 2018, we also classified Chestnut Hill Village, an 821-apartment home community located in north Philadelphia, as held for sale. On July 27, 2018, we sold this community for gross proceeds of $170.4 million, resulting in $165.5 million of net proceeds to us.

Note 4 — Commitments and Contingencies

Commitments

In connection with our redevelopment, development and capital improvement activities, we have entered into various construction-related contracts and we have made commitments to complete redevelopment of certain apartment communities, pursuant to financing or other arrangements. As of June 30, ~~2017,~~2018, our commitments related to these capital activities totaled approximately ~~$80.8~~$118.0 million, most of which we expect to incur during the next 12 months.

We enter into certain commitments for future purchases of goods and services in connection with the operations of our apartment communities. Those commitments generally have terms of one year or less and reflect expenditure levels comparable to our historical expenditures.

Tax Credit Arrangements

For various consolidated partnerships served by our Asset Management business, we are required to manage the partnerships and related apartment communities in compliance with various laws, regulations and contractual provisions that apply to historic and low-income housing tax credit syndication arrangements. In some instances, noncompliance with applicable requirements could result in projected tax benefits not being realized by the limited partners in these partnerships and would require a refund or reduction of investor capital contributions, which are reported as deferred income in our condensed consolidated balance sheets, until such time as our obligation to deliver tax benefits is relieved. The remaining compliance periods for the tax credit syndication arrangements range from less than one year to eight years. We do not anticipate that any material refunds or reductions of investor capital contributions will be required inIn connection with ~~these arrangements.~~

the July 25, 2018, sale of our Asset Management business, the performance obligation related to continuing compliance was assumed by the purchaser.

Income Taxes

In 2014, the Internal Revenue Service initiated an audit of the Aimco Operating Partnership’s 2011 and 2012 tax years. We do not believe the audit will have any material effect on our unrecognized tax benefits, financial condition or results of operations.

Legal Matters

In addition to the matters described below, we are a party to various legal actions and administrative proceedings arising in the ordinary course of business, some of which are covered by our general liability insurance program, and none of which we expect to ~~have a material adverse effect on our consolidated financial condition, results of operations or cash flows.~~

~~Limited Partnerships~~

In connection with our acquisitions of interests in real estate partnerships, we are sometimes subject to legal actions, including allegations that such activities may involve breaches of fiduciary duties to the partners of such real estate partnerships or violations of the relevant partnership agreements. We may incur costs in connection with the defense or settlement of such litigation. We believe that we comply with our fiduciary obligations and relevant partnership agreements. Although the outcome of any litigation is uncertain, we do not expect any such legal actions to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

~~La Jolla Cove Litigation~~

We are a defendant in a lawsuit filed by a group of disappointed buyers that contend we interfered with their allegedly superior right to acquire the La Jolla Cove property. The case, pending in state court in California, is in fact discovery at this stage. The disappointed buyers have filed a motion for summary adjudication, which requests that the judge issue declaratory relief and award the property to them. The motion is presently set for hearing in August. The case is set for jury trial in February 2018. Although the outcome of this litigation is uncertain, we do not believe its resolution will have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

Environmental

Various federal, state and local laws subject apartment community owners or operators to liability for management, and the costs of removal or remediation, of certain potentially hazardous materials that may be present in the land or buildings of an apartment community. Such laws often impose liability without regard to fault or whether the owner or operator knew of, or was responsible for, the presence of such materials. The presence of, or the failure to manage or remediate properly, these materials may adversely affect occupancy at such apartment communities as well as the ability to sell or finance such apartment communities. In addition, governmental agencies may bring claims for costs associated with investigation and remediation actions. Moreover, private plaintiffs may potentially make claims for investigation and remediation costs they incur or for personal injury, disease, disability or other infirmities related to the alleged presence of hazardous materials. In addition to potential environmental liabilities or costs associated with our current apartment communities, we may also be responsible for such liabilities or costs associated with communities we acquire or manage in the future, or apartment communities we no longer own or operate.

We are engaged in discussions with the Environmental Protection Agency, or EPA, and the Indiana Department of Environmental Management, or IDEM, regarding contaminated groundwater in a residential area in the vicinity of an Indiana apartment community that has not been owned by us since 2008. The contamination allegedly derives from a dry cleaner that operated on our former property, prior to our ownership. We have undertaken a voluntary remediation of the dry cleaner contamination under IDEM’s oversight, and in previous years accrued our share of the ~~then estimated~~then-estimated cleanup and abatement costs. In ~~September~~ 2016, EPA listed our former community and a number of residential communities in the vicinity on the National Priorities List, or NPL (i.e. as a Superfund site),. In May 2018, we prevailed on our federal judicial appeal vacating the Superfund listing. We continue to work with EPA and IDEM ~~has formally sought~~ to ~~terminate us from the voluntary remediation program. We have filed a formal appeal~~identify options for clean-up of the ~~EPA listing and the IDEM termination of us from the voluntary remediation program.~~site. Although the outcome of these processes are uncertain, we do not expect their resolution to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

We also have been contacted by regulators and the current owner of a property in Lake Tahoe, California, regarding environmental issues allegedly stemming from the historic operation of a dry cleaner. An entity owned by us was the former general partner of a now-dissolved ~~company~~partnership that previously owned a site that was used for dry cleaning. That entity and the current property owner have been remediating the dry cleaner site since 2009, under the oversight of the Lahontan Regional Water Quality Control Board, or Lahontan. In ~~2016,~~May 2017, Lahontan ~~sent us, the current property owner and~~issued a ~~former operator of the dry cleaner drafts of a proposed~~final cleanup and abatement order that ~~if entered as drafted, would have required all three~~names four potentially-

responsible parties, acknowledges that there may be additional responsible parties, and requires the named parties to perform additional groundwater investigation and corrective actions with respect to onsite and offsite contamination. ~~After review of comments from us, Lahontan issued a final order in May 2017. The final order adds one more potentially-responsible party, acknowledges that there may be~~

~~additional responsible parties, and narrows (as compared to earlier drafts) the scope of work.~~ We ~~filed an appeal of~~are appealing the final order ~~in June 2017.~~while simultaneously complying with it. Although the outcome of this process is uncertain, we do not expect its resolution to have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

We have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement obligations, as defined in GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or apartment community casualty, we believe that the fair value of our asset retirement obligations cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. Asset retirement obligations that are reasonably estimable as of June 30, ~~2017,~~2018, are immaterial to our consolidated financial condition, results of operations and cash flows.

Note 5 — Earnings per Share and Unit

Aimco and the Aimco Operating Partnership calculate basic earnings per common share and basic earnings per common unit based on the weighted average number of shares of Common Stock and common partnership units and participating securities outstanding, and calculate diluted earnings per share and diluted earnings per unit taking into consideration dilutive common stock and common partnership unit equivalents and dilutive convertible securities outstanding during the period.

Our common stock and common partnership unit equivalents include options to purchase shares of Common Stock, which, if exercised, would result in Aimco’s issuance of additional shares and the Aimco Operating Partnership’s issuance to Aimco of additional common partnership units equal to the number of shares purchased under the options. These equivalents also include unvested total ~~shareholder return-based~~stockholder return, or TSR, restricted stock ~~and unit~~ awards that do not meet the definition of participating securities, which would result in an increase in the number of common shares and common partnership units outstanding equal to the number of shares that vest. The effect of 0.1 million and 0.4 million of these securities was dilutive for the three months ended June 30, 2018 and 2017, respectively. The effect of 0.1 million and 0.5 million of these securities was dilutive for the six months ended June 30, 2018 and 2017, ~~and 2016, and accordingly has been~~respectively. Securities with dilutive effect are included in the denominator for calculating diluted earnings per share and unit during these periods. There were 0.2 million potential shares and 0.2 million potential units not dilutive and excluded from the denominator for calculating diluted earnings per share and per unit, respectively, for both the three and six months ended June 30, 2018 and 2017.

Our time-based restricted stock awards receive dividends similar to shares of Common Stock and common partnership units prior to vesting and our TSR long-term incentive partnership units receive a percentage of the distributions paid to common partnership units prior to vesting. These dividends and distributions are not forfeited inif the ~~event that the restricted stock does not~~awards fail to vest. Therefore, the unvested shares and units related to these awards are participating securities. The effect of participating securities is included in basic and diluted earnings per share and unit computations using the two-class method of allocating distributed and undistributed ~~earnings.~~earnings when the two-class method is more dilutive than the treasury method. There were 0.3 million and 0.2 million unvested participating ~~shares and units at~~securities as of June 30, 2018 and 2017, ~~and 2016.~~respectively.

The Aimco Operating Partnership has various classes of preferred OP Units, which may be redeemed at the holders’ option. The Aimco Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of June 30, ~~2017,~~2018, these preferred OP Units were potentially redeemable for approximately 2.4 million shares of Common Stock (based on the period end market price), or cash. The Aimco Operating Partnership has a redemption policy that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. Accordingly, we have excluded these securities from earnings per share and unit computations and we expect to exclude them in future periods.

Note 6 — Fair Value Measurements

Recurring Fair Value Measurements

We measure at fair value on a recurring basis our investments in the securitization trust that holds certain of our property debt, which we classify as available for sale, or AFS, debt securities, and our interest rate swaps, both of which are classified within Level 2 of the GAAP fair value hierarchy.

Our investments in debt securities classified as AFS are presented within other assets in the accompanying condensed consolidated balance sheets. We hold several positions in the securitization trust that pay interest currently and we also hold the first loss position in the securitization trust, which accrues interest over the term of the investment. We are accreting the discount to the $100.9 million face value of the investments into interest income using the effective interest method over the remaining term of the investments, which, as of June 30, ~~2017,~~2018, was approximately ~~3.9~~2.9 years. Our amortized cost basis for these investments, which represents the original cost adjusted for interest accretion less interest payments received, was ~~$75.1~~$80.6 million and ~~$72.5~~ $77.7

million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. We estimated the fair value of these investments to be ~~$78.2~~$84.6 million and ~~$76.1~~$82.8 million at June 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

We estimate the fair value of these investments using an income and market approach with primarily ~~with~~ observable inputs, including yields and other information regarding similar types of investments, and adjusted for certain unobservable inputs specific to these investments. The fair value of the positions that pay interest currently typically moves in an inverse relationship with movements in interest rates. The fair value of the first loss position is primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities.

Certain consolidated partnerships served by our Asset Management business ~~have~~ entered into interest rate swap agreements, which ~~limit~~limited exposure to interest rate ~~fluctuations~~risk on the partnerships’ ~~variable-rate~~ debt by effectively converting the interest ~~on variable-rate debt~~from a variable rate to a fixed rate. We ~~estimate~~estimated the fair value of interest rate swaps using an income approach with primarily observable inputs, including information regarding the hedged variable cash flows and forward yield curves relating to the variable interest rates on which the hedged cash flows are based.

The following table sets forth a summary of the changes in fair value of these interest rate swaps (in thousands):


	Six Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2018			2017
Beginning balance	$	(3,175	)	$	(4,938	)	$	(1,795	)	$	(3,175	)
Unrealized losses included in interest expense	(23		)	(22		)	—			(23		)
Losses on interest rate swaps reclassified into interest expense from accumulated other comprehensive loss	755			818			219			755
Unrealized losses included in equity and partners’ capital	(355		)	(1,085		)
Unrealized gains (losses) included in equity and partners’ capital							415			(355		)
Ending balance	$	(2,798	)	$	(5,227	)	$	(1,161	)	$	(2,798	)

As of June 30, ~~2017~~2018 and December 31, ~~2016, these~~2017, the interest rate swaps had aggregate notional amounts of ~~$49.3~~$21.7 million and ~~$49.6~~$22.0 million, respectively. ~~As of June 30, 2017, these swaps had a weighted average remaining term of 3.5 years.~~ We ~~have~~ designated these interest rate swaps as cash flow hedges. ~~The~~As of June 30, 2018, the fair value of these swaps is presented within ~~accrued~~ liabilities ~~and other~~held for sale in our condensed consolidated balance sheets, and we ~~recognize~~recognized any changes in the fair value as an adjustment of accumulated other comprehensive loss within equity and partners’ capital to the extent of their effectiveness.

If Effective July 25, 2018, in connection with the ~~forward rates at June 30, 2017 remain constant, we estimate that during the next 12 months, we would reclassify approximately $1.2 million~~sale of ~~the unrealized losses in accumulated other comprehensive loss into earnings. If market interest rates increase above the 3.44% weighted average fixed rate under~~our Asset Management business, these ~~interest rate swaps the consolidated partnerships will benefit from net cash payments due from the counterparties to the interest rate swaps.~~obligations were derecognized.

Fair Value Disclosures

We believe that the ~~aggregate fair value~~carrying values of the consolidated amounts of cash and cash equivalents, receivables and payables ~~approximates~~approximate their ~~aggregate carrying amounts~~fair values at June 30, ~~2017~~2018, and December 31, ~~2016,~~2017, due to their relatively short-term nature and high probability of realization. The estimated ~~aggregate~~ fair value of ~~consolidated~~the total indebtedness associated with our Real Estate portfolio ~~and the non-recourse property debt of the consolidated partnerships served by our Asset Management~~ was approximately ~~$4.5 billion and $4.0~~$4.2 billion at June 30, ~~2017 and December 31, 2016, respectively,~~2018, as compared to ~~aggregate~~a carrying ~~amounts~~amount of $4.3 billion ~~and $3.9 billion, respectively.~~at June 30, 2018. The carrying value of the total indebtedness associated with our Real Estate portfolio approximated its estimated fair value at December 31, 2017. We estimate the fair value of our consolidated debt using an income and market approach, including comparison of the contractual terms to observable and unobservable inputs such as market interest rate risk spreads, contractual interest rates, remaining periods to maturity, collateral quality and loan to value ratios on similarly encumbered ~~assets~~apartment communities within our portfolio. We classify the fair value of debt within Level 3 of the GAAP valuation hierarchy based on the significance of certain of the unobservable inputs used to estimate ~~their~~its fair ~~values.~~value.

Note 7 — Business Segments

~~In 2017, we revised the information regularly reviewed by our~~Our chief executive officer, who is our chief operating decision maker, to assess our operating performance. Apartment communities are classified as either part of our Real Estate portfolio or those owned through partnerships served by our Asset Management business.

Our Real Estate portfolio consisted of 141 apartment communities with 39,187 apartment homes at June 30, 2017. This portfolio is diversified by both price point and geography and consists primarily of market rate apartment communities.

~~Our~~ chief operating decision maker, uses proportionate property net operating income to assess the operating performance of our apartment communities. Proportionate property net operating income ~~reflects~~is defined as our share of rental and other property ~~revenues~~revenue less ~~direct~~our share of property operating expenses, including real estate taxes, for consolidated apartment communities we own and manage. Beginning in 2018, we exclude from rental and other property revenues the amount of utilities cost reimbursed by residents and reflect such amount as a reduction of the related utility expense within property operating expenses in our evaluation of segment results. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues, in accordance with GAAP. The tables below have been revised to conform to this presentation.

Apartment communities are classified as either part of our Real Estate portfolio or those owned through partnerships served by our Asset Management business. As of June 30, ~~2017,~~2018, for segment performance evaluation, our Real Estate segment included ~~137~~134 consolidated apartment communities with ~~39,045~~37,755 apartment homes and excluded four apartment communities with 142 apartment homes that we neither manage nor consolidate.

As ~~discussed in~~ ~~Note 1, as~~ of June 30, ~~2017,~~2018, through our Asset Management business we also ~~owned~~held nominal ownership positions in consolidated partnerships ~~for which we provide asset management services. These partnerships~~that own 4639 low-income housing tax credit apartment communities with ~~6,898~~6,211 apartment homes. Neither the results of operations nor the assets of these

partnerships and apartment communities are quantitatively material; therefore, we have one reportable segment, Real Estate. The results of operations for the three and six months ended June 30, 2016, and the segment assets as of December 31, 2016, shown below have been revised to reflect the change in our reportable segments.

The following tables present the revenues, net operating income and income before gain on dispositions of our Real Estate segment on a proportionate basis ~~(excluding~~and excluding amounts related to apartment communities ~~sold)~~sold or held for sale as of June 30, 2018 for the three and six months ended June 30, ~~2017~~2018 and ~~2016~~2017 (in thousands):

Real Estate
Proportionate
Adjustments (1)

Corporate and
Amounts Not
Allocated to Reportable
Segment (2)
Consolidated
Three Months Ended June 30, 2017
Rental and other property revenues attributable to Real Estate $ 219,137
$ 7,199
$ 1,367
$ 227,703
Rental and other property revenues of partnerships served by Asset Management business —
—
18,533
18,533
Tax credit and transaction revenues —
—
2,856
2,856
Total revenues 219,137
7,199
22,756
249,092
Property operating expenses attributable to Real Estate 68,387
2,265
8,362
79,014
Property operating expenses of partnerships served by Asset Management business

8,382
8,382
Other operating expenses not allocated to reportable segment (3) —
—
101,990
101,990
Total operating expenses 68,387
2,265
118,734
189,386
Net operating income 150,750
4,934
(95,978 ) 59,706
Other items included in income before gain on
dispositions (4)
—
—
(39,623 ) (39,623 )
Income before gain on dispositions $ 150,750
$ 4,934
$ (135,601 ) $ 20,083


	Real Estate		Proportionate Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated			Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Three Months Ended June 30, 2016
Three months ended June 30, 2018:
Rental and other property revenues attributable to Real Estate	$	205,283	$	7,429	$	11,029		$	223,741		$	214,478	$	8,192	$	8,460		$	231,130
Rental and other property revenues of partnerships served by Asset Management business	—		—		19,130			19,130			—		—		19,000			19,000
Tax credit and transaction revenues	—		—		8,347			8,347			—		—		57			57
Total revenues	205,283		7,429		38,506			251,218			214,478		8,192		27,517			250,187
Property operating expenses attributable to Real Estate	66,694		2,279		10,735			79,708			60,930		7,655		7,446			76,031
Property operating expenses of partnerships served by Asset Management business	—		—		9,252			9,252			—		—		9,062			9,062
Other operating expenses not allocated to reportable segment (3)	—		—		97,822			97,822			—		—		115,733			115,733
Total operating expenses	66,694		2,279		117,809			186,782			60,930		7,655		132,241			200,826
Net operating income	138,589		5,150		(79,303		)	64,436
Operating income											153,548		537		(104,724		)	49,361
Other items included in income before gain on dispositions (4)	—		—		(35,024		)	(35,024		)	—		—		(42,427		)	(42,427		)
Income before gain on dispositions	$	138,589	$	5,150	$	(114,327	)	$	29,412		$	153,548	$	537	$	(147,151	)	$	6,934


	Real Estate		Proportionate Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated			Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Six Months Ended June 30, 2017
Three months ended June 30, 2017:
Rental and other property revenues attributable to Real Estate	$	436,112	$	14,496	$	2,323		$	452,931		$	193,908	$	13,547	$	20,248		$	227,703
Rental and other property revenues of partnerships served by Asset Management business	—		—		37,095			37,095			—		—		18,533			18,533
Tax credit and transaction revenues	—		—		5,547			5,547			—		—		2,856			2,856
Total revenues	436,112		14,496		44,965			495,573			193,908		13,547		41,637			249,092
Property operating expenses attributable to Real Estate	137,851		4,568		16,221			158,640			55,559		8,870		14,653			79,082
Property operating expenses of partnerships served by Asset Management business					17,579			17,579			—		—		8,391			8,391
Other operating expenses not allocated to reportable segment (3)	—		—		201,859			201,859			—		—		101,913			101,913
Total operating expenses	137,851		4,568		235,659			378,078			55,559		8,870		124,957			189,386
Net operating income	298,261		9,928		(190,694		)	117,495
Operating income											138,349		4,677		(83,320		)	59,706
Other items included in income before gain on dispositions (4)	—		—		(79,863		)	(79,863		)	—		—		(39,623		)	(39,623		)
Income before gain on dispositions	$	298,261	$	9,928	$	(270,557	)	$	37,632		$	138,349	$	4,677	$	(122,943	)	$	20,083


	Real Estate		Proportionate Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated			Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Six Months Ended June 30, 2016
Six months ended June 30, 2018:
Rental and other property revenues attributable to Real Estate	$	407,347	$	15,022	$	23,963		$	446,332		$	420,800	$	16,978	$	18,745		$	456,523
Rental and other property revenues of partnerships served by Asset Management business	—		—		38,020			38,020			—		—		37,808			37,808
Tax credit and transaction revenues	—		—		13,105			13,105			—		—		3,576			3,576
Total revenues	407,347		15,022		75,088			497,457			420,800		16,978		60,129			497,907
Property operating expenses attributable to Real Estate	131,941		4,224		23,015			159,180			120,273		15,914		18,131			154,318
Property operating expenses of partnerships served by Asset Management business					18,789			18,789			—		—		18,257			18,257
Other operating expenses not allocated to reportable segment (3)	—		—		191,518			191,518			—		—		222,594			222,594
Total operating expenses	131,941		4,224		233,322			369,487			120,273		15,914		258,982			395,169
Net operating income	275,406		10,798		(158,234		)	127,970
Operating income											300,527		1,064		(198,853		)	102,738
Other items included in income before gain on dispositions (4)	—		—		(74,860		)	(74,860		)	—		—		(50,438		)	(50,438		)
Income before gain on dispositions	$	275,406	$	10,798	$	(233,094	)	$	53,110		$	300,527	$	1,064	$	(249,291	)	$	52,300



	Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Six months ended June 30, 2017:
Rental and other property revenues attributable to Real Estate	$	385,414	$	27,388	$	40,129		$	452,931
Rental and other property revenues of partnerships served by Asset Management business	—		—		37,095			37,095
Tax credit and transaction revenues	—		—		5,547			5,547
Total revenues	385,414		27,388		82,771			495,573
Property operating expenses attributable to Real Estate	111,734		17,880		29,094			158,708
Property operating expenses of partnerships served by Asset Management business	—		—		17,587			17,587
Other operating expenses not allocated to reportable segment (3)	—		—		201,783			201,783
Total operating expenses	111,734		17,880		248,464			378,078
Operating income	273,680		9,508		(165,693		)	117,495
Other items included in income before gain on dispositions (4)	—		—		(79,863		)	(79,863		)
Income before gain on dispositions	$	273,680	$	9,508	$	(245,556	)	$	37,632

(1)

Represents adjustments for the noncontrolling interests in consolidated real estate partnerships’ share of the results of consolidated apartment communities in our Real Estate segment, which are included in the related consolidated amounts, but excluded from proportionate property net operating income for our segment evaluation. Also includes the reclassification of utility reimbursements from revenues to property operating expenses for the purpose of evaluating segment results. Utility reimbursements are included in rental and other property revenues in our condensed consolidated statements of operations prepared in accordance with GAAP.

(2)

Includes the operating results of apartment communities sold during ~~2017~~the periods shown or ~~2016,~~held for sale at the end of the period, if any, and the operating results of apartment communities owned by consolidated partnerships served by our Asset Management business. Corporate and Amounts Not Allocated to Reportable Segment also includes property management ~~revenues (which are included in consolidated rental and other property revenues), property management~~ expenses and casualty gains and losses, ~~(which~~which are included in consolidated property operating ~~expenses)~~expenses and ~~depreciation and amortization, which~~ are not part of our segment performance measure.


(3)	Other operating expenses not allocated to reportable segment ~~consist~~consists of depreciation and amortization, general and administrative expenses and other operating expenses, which are not included in our measure of segment performance.


(4)	Other items included in income before gain on dispositions primarily ~~consist~~consists of interest ~~expense~~ and income tax benefit.

~~For the six months ended June 30, 2017 and 2016, capital additions related to our Real Estate segment totaled $172.3 million and $163.1 million, respectively.~~

The assets of our reportable segment and the consolidated assets not allocated to our segment are as follows (in thousands):


	June 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Real Estate	$	5,583,603	$	5,545,693	$	5,853,287	$	5,391,816
Corporate and other assets (1)	615,599		687,125		691,069		687,224
Total consolidated assets	$	6,199,202	$	6,232,818	$	6,544,356	$	6,079,040


(1)	Includes the assets not allocated to our reportable segment, primarily the assets of consolidated partnerships served by ~~the~~our Asset Management business and apartment communities sold or held for sale as of June 30, ~~2017.~~2018.

For the six months ended June 30, 2018 and 2017, capital additions related to our Real Estate segment totaled $158.4 million and $163.2 million, respectively.

Note 8 — Variable Interest Entities

~~Aimco consolidates the Aimco Operating Partnership, which is~~Generally, a variable interest entity, or ~~VIE, for which Aimco is the primary beneficiary. Aimco, through the Aimco Operating Partnership, consolidates all VIEs for which we are the primary beneficiary. Generally, a~~ VIE, is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: which activities most

significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; and the similarity with and significance to our business activities and the business activities of the other investors. Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

Aimco consolidates the Aimco Operating Partnership, which is a VIE for which Aimco is the primary beneficiary. Aimco, through the Aimco Operating Partnership, consolidates all VIEs for which the Aimco Operating Partnership is the primary beneficiary.

All of the VIEs we consolidate own interests in one or more apartment communities. VIEs that own apartment communities we classify as part of our Real Estate segment are typically structured to generate a return for their partners through the operation and ultimate sale of the communities. We are the primary beneficiary in the limited partnerships in which we are the sole decision maker and have a substantial economic interest.

~~All of the~~Certain partnerships served by our Asset Management business own interests in low-income housing tax credit apartment communities that are structured to provide for the pass-through of tax credits and tax deductions to their partners and are VIEs. We ~~hold~~held a nominal ownership position in these partnerships, generally one percent or less. As general partner in these partnerships, we ~~are~~were the sole decision maker and we ~~receive~~received fees and other payments in return for the asset management and other services we ~~provide~~provided and thus ~~share~~shared in the economics of the partnerships, and as such, we ~~are~~were the primary beneficiary of these partnerships. On July 25, 2018, we completed the sale of our Asset Management business. The table below summarizes information regarding VIEs consolidated by the Aimco Operating Partnership:

June 30, 2017 December 31, 2016
Real Estate portfolio:
VIEs with interests in apartment communities 12
13
Apartment communities held by VIEs 16
19
Apartment homes in communities held by VIEs 4,728
6,110
Consolidated partnerships served by the Asset Management business:
VIEs with interests in apartment communities 53
54
Apartment communities held by VIEs 37
38
Apartment homes in communities held by VIEs 5,893
6,093



	June 30, 2018	December 31, 2017
Real Estate portfolio:
VIEs with interests in apartment communities	13	14
Apartment communities owned by VIEs	13	14
Apartment homes in communities owned by VIEs	4,196	4,321
Consolidated partnerships served by Asset Management business:
VIEs with interests in apartment communities	41	49
Apartment communities owned by VIEs	31	37
Apartment homes in communities owned by VIEs	4,879	5,893

Assets of the Aimco Operating Partnership’s consolidated VIEs must first be used to settle the liabilities of such consolidated VIEs. These consolidated VIEs’ creditors do not have recourse to the general credit of the Aimco Operating Partnership. Assets and liabilities of consolidated VIEs are summarized in the table below (in thousands):


	June 30, 2017		December 31, 2016		June 30, 2018		December 31, 2017
Real Estate portfolio:
Assets
Net real estate	$	563,106	$	897,510	$	478,774	$	529,898
Cash and cash equivalents	15,259		15,877		13,776		16,111
Restricted cash	6,882		7,981		6,302		4,798
Assets held for sale					57,596		—
Liabilities
Non-recourse property debt secured by Real Estate communities, net	420,043		725,061		340,874		412,205
Accrued liabilities and other	13,832		14,270		12,204		10,623
Consolidated partnerships served by the Asset Management business:
Assets
Liabilities related to assets held for sale					68,443		—
Consolidated partnerships served by Asset Management business:
Assets held for sale at June 30, 2018
Real estate, net	222,409		235,920		171,281		215,580
Cash and cash equivalents	17,350		14,926		14,366		15,931
Restricted cash	29,311		32,542		22,691		30,107
Liabilities
Liabilities related to assets held for sale at June 30, 2018
Non-recourse property debt	222,779		229,509		183,188		220,356
Accrued liabilities and other	15,545		16,934		15,118		20,241


ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding: our ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, redevelopments and developments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our redevelopment and development investments; expectations regarding sales of our apartment communities and the use of proceeds thereof; and our ability to comply with debt covenants, including financial coverage ratios.

Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond our control, including, without limitation:

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 of acquisitions, dispositions, redevelopments and developments; and changes in operating costs, including energy costs;

Financing risks, including the availability and cost of capital ~~markets financing and~~markets’ financing; the risk that our cash flows from operations may be insufficient to meet required payments of principal and ~~interest~~interest; and the risk that our earnings may not be sufficient to maintain compliance with debt covenants;

Insurance risks, including the cost of insurance, ~~and~~ natural disasters and severe weather such as hurricanes; and

Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of governmental regulations that affect us and interpretations of those regulations; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by us.

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 and depends on our ability to meet the various requirements imposed by the Internal Revenue 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 the section entitled “Risk Factors” described in Item 1A of Apartment Investment and Management Company’s and AIMCO Properties, L.P.’s combined Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, and the other documents we file from time to time with the Securities and Exchange Commission.

As used herein and except as the context otherwise requires, “we,” “our” and “us” refer to Apartment Investment and Management Company (which we refer to as Aimco), AIMCO Properties, L.P. (which we refer to as the Aimco Operating Partnership) and their consolidated entities, collectively.

Certain financial and operating measures found herein and used by management are not defined under accounting principles generally accepted in the United States, or GAAP. These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading and include: Funds From Operations, Pro forma Funds From Operations, Adjusted Funds From Operations, Free Cash Flow, Economic Income, and the measures used to compute our leverage ratios.

Executive Overview

~~Aimco and the Aimco Operating Partnership~~

We are focused on the ownership, management, redevelopment and limited development of quality apartment communities located in several of the largest markets in the United States. Our business activities are defined by a commitment to our core values of integrity, respect, collaboration, performance and a focus on our customers. These values and our corporate mission, “to consistently provide quality apartment homes in a respectful environment delivered by a team of people who care,” shape our culture. In all our interactions with residents, team members, business partners, lenders and equity holders, we aim to be the best owner and operator of apartment communities and an outstanding corporate citizen.

Our principal financial objective is to provide predictable and attractive returns to our equity holders. We measure our ~~total return using growth in Economic Income and our~~ current return using Adjusted Funds From Operations, ~~(each~~or AFFO, and our long-term total return using Economic Income. We also use Pro forma Funds From Operations, or Pro forma FFO, as a measure of ~~which are defined under the Non-GAAP Measures heading below).~~operational performance. Our business plan to achieve this principal financial objective is to:

operate our portfolio of desirable apartment homes with ~~valued amenities, with~~ a high level of focus on customer selection and customer satisfaction and in an efficient manner that ~~realizes the benefits of our corporate systems~~produces predictable and ~~local management expertise;~~growing Free Cash Flow;

improve our portfolio of apartment communities, which is diversified both by geography and price point ~~and which averages “B/B+” in quality (defined under the~~ ~~Portfolio Management~~ ~~heading below)~~ by selling apartment communities with lower projected ~~free cash flow returns~~Free Cash Flow internal rates of return and investing the proceeds from such sales ~~in prospects with higher projected free cash flow returns than expected from the communities sold, such as property upgrades,~~through capital enhancements, redevelopment, development, and ~~selective acquisitions;~~

acquisitions with greater land value, higher expected rent growth, and projected Free Cash Flow internal rates of return in excess of those expected from communities sold;

use low levels of financial leverage, primarily in the form of non-recourse, long-dated, fixed-rate property debt and perpetual preferred equity, a combination which reduces our refunding and re-pricing risk and which provides a hedge against increases in interest rates; and

~~emphasize~~focus intentionally on a collaborative ~~respectful,~~ and ~~performance-oriented~~productive culture ~~with high team engagement.~~based on respect for others and personal responsibility.

Our business is organized around ~~our strategic~~ five areas of strategic focus: ~~property operations; redevelopment and development;~~operational excellence; redevelopment; portfolio management; balance sheet; and team and culture.

~~Our~~The results from the execution of our business plan during the three months ended June 30, 2018, are further described below.

Net income attributable to common stockholders per common share decreased by $0.08 during the three months ended June 30, 2018 compared to 2017, due to higher depreciation from redevelopments placed into service and from apartment communities acquired during 2018 and to lower gains on sale of real estate.

Pro forma FFO per share was flat for the three months ended June 30, ~~2017, included a number of factors that demonstrate our plan is working,~~2018, as ~~demonstrated by~~compared to the same period in 2017. The following ~~highlights:~~items contributed to Pro forma FFO:

~~property operations were on track, with~~$0.02 from Same Store property net operating income ~~up 4.9% year-over-year, contributing an incremental $0.03 per share~~growth of ~~proportionate~~3.2%, driven by a 3.2% increase in revenue offset by a 3.3% increase in expenses; and

$0.03 from leasing activity related to renovated homes at Redevelopment communities, 2018 acquisitions and the second quarter 2017 reacquisition of a 47% interest in the Palazzo communities, offset in part by lower property net operating income from apartment communities sold in 2017 and 2018.

As compared to 2017, this increase of $0.05 to Pro forma FFO per share was offset primarily by increased interest expense on corporate borrowings, primarily related to acquisitions, increased personnel costs, primarily due to the timing of incentive compensation costs, and lower tax benefits.

AFFO per share increased 6% during the three months ended June 30, ~~2017~~2018, as compared to the same period in ~~2016;~~

2017, as a result of of lower Capital Replacement spending. Approximately one-third of the decrease in Capital Replacement spending was due to our ~~portfolio outside~~paired trade activity, including the sale of ~~Same Store contributed incremental proportionate property~~2,300 apartment homes in 2017 and an additional 513 apartment homes through June 30, 2018, and the remaining decrease is due to the timing of 2018 capital spending. As we concentrate our investment capital in higher quality, higher price point communities, Free Cash Flow margin is increasing as Capital Replacements decline as a percentage of net operating ~~income of $0.04 per share during the three months ended June 30, 2017, as compared to the same period in 2016… and our Redevelopment and lease-up projects are on plan;~~income.

our portfolio continues to improve, boosted during the three months ended June 30, 2017 by the purchase of our partner’s 47% interest in the Palazzo communities, three high-quality properties that we know well and have operated since their construction (the acquisition is discussed further under the Portfolio Management heading below); andOperational Excellence

~~Aimco was recognized once again as one of Colorado’s Top Workplaces, one of only dozen or so to earn this recognition for a fifth consecutive year among the hundreds considered.~~

These activities and their results lead to an increase in FFO and Pro forma FFO per share of $0.02, or 3.4%, for the three months ended June 30, 2017, as compared to the same period in 2016. The primary drivers of the increase in FFO and Pro forma FFO per share were:

~~$0.07 from growth in the property net operating income of our Same Store portfolio and our portfolio outside of Same Store; and~~

~~$0.04 from lower interest expense, lower general and administrative costs and lower other expenses.~~

~~These increases of $0.11 in FFO and Pro forma FFO per share for the three months ended June 30, 2017 as compared to 2016 were offset by reductions of $0.09, consisting of:~~

~~$0.04 from the planned reductions in earnings from the Asset Management business;~~

~~$0.02 from lower tax benefits; and~~

~~$0.03 from the loss of income from apartment communities sold in 2016.~~

For the same period, the increase in FFO and Pro forma FFO per share was partially offset by planned increases in capital replacement spending, resulting in a $0.01, or 2.0%, increase in AFFO per share.

~~Property Operations~~

We own and operate a portfolio of market rate apartment communities, diversified by both geography and price ~~point.~~point, which we refer to as our Real Estate portfolio. At June 30, ~~2017,~~2018, our Real Estate portfolio ~~include~~d ~~141 predominantly market rate~~ included 138 apartment communities with ~~39,187~~37,897 apartment homes in which we held an average ownership of approximately 99%. This portfolio was divided about two thirds by value to our “Same Store” portfolio of stabilized apartment communities and about one third by value to “Other Real Estate,” which includes recently acquired communities and communities under redevelopment or development whose long-term financial contribution is not yet stabilized.

Our property operations team ~~delivered~~produced solid results for our Real Estate portfolio for the three months ended June 30, ~~2017.~~2018. Highlights ~~for the quarter~~ include:

Same Store net operating income ~~increased year-over-year by 4.9%, consisting of revenue~~ growth of ~~3.4% and expense reduction of 0.3%;~~

3.2% for the three months ended June 30, 2018 compared to 2017;

Same Store rent increases on renewals and new leases averaged ~~of 4.6%~~4.8% and ~~1.0%~~1.9%, respectively, for a weighted average increase of ~~2.7%~~3.4%; and

~~We completed~~Average daily occupancy of 96.3%, 40 basis points higher than the ~~lease-up at Indigo,~~same period in ~~Redwood City, California, with 95.5%~~2017.

Redevelopment

Our second line of ~~the apartment homes leased at June 30, 2017.~~

~~Redevelopment and Development~~

~~Within our Real Estate portfolio, we invest in~~business is the redevelopment of ~~certain~~ apartment communities, ~~in superior locations when~~where we ~~believe the investment will yield risk-adjusted returns in excess of the cost of equity used to fund the equity component of the redevelopment. We~~ expect to create value ~~equal to~~of at least 25% to 35% of our incremental investment ~~in redevelopment.~~

by repositioning communities within our portfolio. We ~~have undertaken a range~~measure the rate and quality of ~~redevelopments, including those in which buildings or exteriors are renovated without the need to vacate apartment homes; those in which significant renovation~~financial returns by net asset value creation, an important component of ~~apartment homes may be accomplished upon lease expiration and turnover; and those in which an entire building or community is vacated.~~Economic Income, our primary measure of long-term financial performance. We ~~execute our redevelopments using a phased approach, in which we renovate portions of an apartment community in stages, which allows additional flexibility in the timing and amount of our~~also undertake ground-up development when warranted by risk-adjusted investment and the ability to tailor our product offerings to customer response and rent achievement. Redevelopment and development work may include seeking entitlements from local governments, which, for redevelopments, enhance the value of our existing portfolio by increasing density, that is, the right to add apartment homes to a site.

~~In addition, we undertake development,~~returns, either directly in connection with the redevelopment of an existing apartment community or, on a more limited basis, at a new location. ~~In such cases,~~When warranted, we ~~may~~ rely on the expertise and credit of a third-party developer familiar with ~~expertise in~~ the local market ~~and with contracts that~~to limit our exposure to construction risk.

We invest to earn risk-adjusted returns in excess of those expected from the apartment communities sold in paired trades to fund the redevelopment or development. Of these two activities, we favor redevelopment because it permits adjustment to the scope and timing of spending to align with changing market conditions and customer preferences.

During the three months ended June 30, ~~2017,~~2018, we invested ~~$47.4~~$42.2 million in ~~ongoing~~ redevelopment and development. In Center City, Philadelphia, we continued construction on the fourth and final tower of Park Towne Place; lease-up is underway. At June 30, 2018, 90% of the redeveloped apartment homes in the community were leased and 28 of the 136 homes still under renovation were pre-leased.

During the three months ended June 30, 2018, we invested $9.8 million in the development ~~projects~~of our Parc Mosaic community in Boulder, Colorado. We expect completion of construction in late 2019 and ~~expanded our redevelopment pipeline by $37.7 million. The~~initial occupancy in the summer of 2019.

Our total ~~estimated~~potential net investment ~~for these redevelopment~~in our current redevelopments and ~~development communities~~developments is ~~$553.7~~$519.8 million with a projected weighted average net operating income yield on these investments of 6.1%.

~~At Park Towne Place,~~, assuming untrended rents. Of this total, $313.6 million has been funded. Our funding needs for 2018 for our remaining redevelopment and development investment will be satisfied through a ~~mixed-use residential~~combination of leverage and community sales, including proceeds from the July 25, 2018 sale of our Asset Management business and our four affordable communities located in Center City, Philadelphia, we are redeveloping the four towers, one at a time. We have substantially completed redevelopment and lease-up of the first two towers. Construction of the third tower is underway and on schedule for completion later this year. We have already leased 57% of the apartment homes being redevelopedHunters Point included in ~~the third tower. Based on the success of the first three towers, we are evaluating the optimal timing to redevelop the fourth tower.~~our Real Estate portfolio, discussed below.

During the three months ended June 30, ~~2017,~~2018, we ~~commenced a $28.0 million phased redevelopment of Palazzo East at Park La Brea, a 611 apartment home community located in Los Angeles, California. The redevelopment plan includes the renovation of the~~leased 181 apartment homes ~~as well as common areas. The~~at our redevelopment will enable us to differentiate this community from our three nearby apartment communities (Palazzo at Park La Brea, Broadcast Center and Villas at Park La Brea) to serve distinct market segments. Approvalcommunities. As of ~~the second phase is expected next year.~~

~~During the three months ended~~ June 30, ~~2017, we also began an initial phase of~~2018, our exposure to lease-up at active redevelopment ~~for the Flamingo South Beach, a 1,294 apartment home community in Miami, Florida. This initial phase includes the full upgrade to property-wide security systems~~ and ~~elevators, as well as upgrades to common areas. Approval of the second phase is expected later in 2017 and is expected to include renovation of the~~development projects was approximately 419 apartment homes, ~~within~~of which 108 were in the ~~community.~~

~~We currently have nine communities under redevelopment, with an expected increase in average monthly revenue~~fourth tower of ~~$409 per apartment home. Leasing activities during the three months ended June 30, 2017 included 541 apartment homes, primarily at~~ Park Towne Place and ~~The Sterling,~~215 were being constructed at Parc Mosaic and 96 were located in ~~Center City Philadelphia. Rent achievement at these~~three active redevelopments.

During the third quarter, we expect to exercise our option to acquire approximately two ~~communities averaged 138%~~acres of ~~pre-redevelopment rents and contributed~~land adjacent to ~~incremental redevelopment related revenues~~our 21 Fitzsimons apartment community, located on the University of ~~$1.2~~Colorado Anschutz Medical Campus, for the development of an apartment community. Over the next two years, we expect to invest approximately $87.0 million ~~compared~~ to ~~the three months ended June 30, 2016.~~

Additionally during the three months ended June 30, 2017, we completed the lease-up of Indigo in Redwood City, California. When combined with activity at One Canal in Boston, a total of 135 leases were transacted during the three months ended June 30, 2017, contributing to $7.4 million of incremental revenue compared to the three months ended June 30, 2016.

~~At June 30, 2017, our lease-up exposure is primarily limited to Park Towne Place, where there are approximately 150~~construct 253 apartment homes ~~to rent once construction is completed~~and 4,600 square feet of retail space. We anticipate a stabilized net operating income yield in the ~~third tower.~~low 6% range, driven by an 80% net operating income margin due to operational efficiencies from owning the adjacent property, and a Free Cash Flow internal rate of return greater than 10% resulting in value creation of at least 35%. Upon completion of the project, we will own and operate 853 apartment homes on the campus. Employment on the campus has grown by 9% annually from 2015 to 2017, and exceeds 25,000 jobs today. This number is expected to grow to 46,000 jobs over the next 12 years. We have multi-year options to acquire the balance of the land on the campus that is zoned for multifamily, enough for an additional 600 apartment homes.

~~See~~Please see below under the Liquidity and Capital Resources – Redevelopment and Development heading for additional information regarding our ~~redevelopments~~redevelopment and ~~developments~~development investment during the six months ended June 30, ~~2017.~~2018.

Portfolio Management

Our portfolio ~~strategy seeks predictable rent growth from a portfolio~~ of apartment communities ~~that~~ is diversified across “A,” ~~“B”~~“B,” and “C+” price points, averaging “B/B+” in quality, and ~~that~~ is also diversified across several of the largest markets in the United States. We measure the quality of apartment communities in our Real Estate portfolio based on average rents of our apartment homes compared to local market average rents as reported by a third-party provider of commercial real estate performance and analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of the local market ~~average,~~average; as “B” quality apartment communities those earning rents between 90% and 125% of the local market average; as “C+” quality apartment communities ~~are~~ those earning rents greater than $1,100 per month, but lower than 90% of the local market average; and as “C” quality apartment communities ~~are~~ those earning rents less than $1,100 per month and lower than 90% of the local market average. We classify as “B/B+” quality a portfolio that on average earns rents between 100% and 125% of the local market average rents where the portfolio is located. Although some companies and analysts within the multifamily real estate industry use apartment community quality ratings of “A,” “B” and “C,” some of which are tied to the local market rent averages, the metrics used to classify apartment community quality as well as the ~~timing~~period for which the local market rents are calculated may vary from company to company. Accordingly,

our rating system for measuring apartment community quality is neither broadly nor consistently used in the multifamily real estate industry.

As part of our portfolio strategy, we seek to sell ~~each year~~ up to 10% of ~~the apartment communities in~~ our portfolio annually and ~~invest~~to reinvest the proceeds from such sales in ~~prospects with higher projected free cash flow returns than those expected from communities sold,~~accretive uses such as ~~property upgrades, redevelopment of communities in our current portfolio,~~capital enhancements, redevelopments, occasional development, ~~of new communities~~ and selective acquisitions with projected Free Cash Flow internal rates of ~~apartment communities. We execute our strategy through leverage neutral paired trades when~~return higher than expected from the ~~investment will yield risk-adjusted returns in excess of those of the apartment community sold and when portfolio quality is enhanced.~~communities being sold. Through this disciplined approach to capital recycling, ~~which~~since 2011, we ~~refer to as “paired trades”,~~have sold $4.2 billion in lower-rated apartment communities and we have significantly increased the quality and expected growth rate of our ~~Real Estate portfolio as evidenced by increased~~portfolio.



	Three Months Ended
	June 30,
	2018			2017
Average revenue per Aimco apartment home (1)	$	2,090		$	1,950
Portfolio average rents as a percentage of local market average rents	112		%	113		%
Percentage A (2Q 2018 average revenue per Aimco apartment home $2,770)	50		%	53		%
Percentage B (2Q 2018 average revenue per Aimco apartment home $1,839)	35		%	33		%
Percentage C+ (2Q 2018 average revenue per Aimco apartment home $1,669)	15		%	14		%
(1) Represents average monthly rental and other property revenues (excluding resident reimbursement of utility cost) divided by the number of occupied apartment homes as of the end of the current period.

Our average revenue per ~~Aimco~~ apartment home was $2,090 for ~~the portfolio and higher average rents compared to local market rents.~~

Three Months Ended
June 30,
2017 2016
Average revenue per Aimco apartment home (1) $ 2,038
$ 1,908
Portfolio average rents as a percentage of local market average rents 113 % 113 %
Percentage A (2Q 2017 average revenue per Aimco apartment home $2,658) 53 % 50 %
Percentage B (2Q 2017 average revenue per Aimco apartment home $1,752) 33 % 37 %
Percentage C+ (2Q 2017 average revenue per Aimco apartment home $1,693) 14 % 13 %
(1) Represents average monthly rental and other property revenues divided by the number of occupied apartment homes multiplied by our ownership interest in the apartment community as of the end of the current period. Average revenue per Aimco apartment home for the three months ended June 30, 2017 has been increased by $24, which represents the effect of the Palazzo acquisition on average revenue as if the transaction had closed on April 1, 2017.

On June 30, 2017, we reacquired for $451.5 million the 47% limited partner interest in the Palazzo joint venture. We once again own 100% of the three Palazzo apartment communities: Palazzo at Park La Brea, a 521 apartment home community; Palazzo East at Park La Brea, a 611 apartment home community; and Villas at Park La Brea, a 250 apartment home community. The communities are located in the Mid-Wilshire district of Los Angeles, California. We contracted for the communities’ construction 15 years ago and have operated the communities since their completion. The acquisition is expected to be leverage neutral once short-term borrowings are refunded by sales of lower-rated apartment communities.This transaction shifts capital from submarkets with lower revenue growth to a submarket with 30% higher rent growth and 21% higher free cash flow margins.

~~During the~~ three months ended June 30, ~~2017, adjusting for the Palazzo transaction, average revenue per Aimco apartment home for our Real Estate portfolio was $2,038,~~2018, a 7% increase compared to ~~three months ended June 30, 2016. The~~2017. This increase ~~was partially~~is due to year-over-year growth in Same Store ~~average~~ revenue ~~per Aimco apartment home~~as well as our acquisition activities, lease-up of ~~3.4%. The~~redevelopment and acquisition properties, and the sale of ~~apartment~~ communities ~~in 2016,~~ with average monthly revenues per ~~Aimco~~ apartment home ~~substantially~~ lower than those of the retained portfolio and our reinvestment of the sales proceeds through redevelopment, development and acquisition of apartment communities with higher rents and better free cash flow return prospects also contributed to the growth in average revenue per Aimco apartment home.portfolio.

As we execute our portfolio strategy, we expect to increase average revenue per Aimco apartment home ~~for our Real Estate portfolio~~ at a rate greater than market rent growth; to increase ~~free cash flow~~Free Cash Flow margins; and to maintain sufficient geographic and price point diversification to limit volatility and concentration risk.

~~Balance Sheet and Liquidity~~Apartment Community Acquisitions

We ~~target net leverage of $3.8 billion.~~ evaluate potential acquisitions with an eye for unique and opportunistic investments and fund acquisitions pursuant to our strict paired trade discipline.

During the three months ended June 30, ~~2017,~~2018, we ~~increased our leverage above this target~~agreed to acquire ~~the 47% limited partner interest~~six communities in the ~~Palazzo joint venture.~~Philadelphia area. On May 1, 2018, we purchased four communities including 665 apartment homes and 153,000 square feet of office and retail space for $307.9 million. The ~~increase~~purchase of the fifth apartment community is conditioned upon the City of Camden’s approval of the transfer of the existing PILOT tax agreement, which has not yet been received. The purchase of the sixth apartment community is expected upon completion of construction in ~~leverage included~~the first half of 2019. We anticipate our ~~assumption~~operation of ~~$140.5~~the five operating communities will generate a year one net operating income yield of 5.3%, and for all six communities, average revenue per apartment home of $2,200 and a ten-year expected free cash flow internal rate of return of about 8%.

During the six months ended June 30, 2018, we purchased for $160 million Bent Tree Apartments, a 748-apartment home community in ~~existing non-recourse property~~Fairfax County, Virginia. This community is expected to achieve a 5.6% year one net operating income capitalization rate. Since acquisition, results have exceeded underwriting, with new lease rates increasing by 8% overall and 5% before taking into consideration rate increases following capital investments. Occupancy has increased by approximately 300 basis points from the date of acquisition, to 97%.

Dispositions

On July 25, 2018, we sold for $590 million our Asset Management business and our four affordable apartment communities located in Hunters Point. After payment of transaction costs and repayment of property-level debt ~~$250.0~~encumbering the Hunters Point apartment communities, net proceeds to us were approximately $512 million.

On July 27, 2018, we sold for $170 million Chestnut Hill Village, an 821-apartment home community located in north Philadelphia.

We used the proceeds from the two sales to fund 2018 acquisitions, completing the paired trades. The sale of Chestnut Hill Village rebalanced our capital allocation to Philadelphia from a ~~new term loan,~~lower-rated apartment community in north Philadelphia to

communities in the more desirable Center City and ~~$60.8 million~~University City submarkets. We used the proceeds from these sales to repay in ~~borrowings against the~~full our our revolving credit ~~facility.~~facility and our term loan. We plan to ~~sell apartment communities~~use the remaining proceeds to reduce property-level borrowings and to fund an expected increase in ~~Rhode Island, Virginia, Maryland, and New Jersey to repay the term loan and reduce leverage to our $3.8 billion target.~~2018 redevelopment activity.

Balance Sheet

Our leverage includes our share of long-term, non-recourse property debt ~~secured by~~encumbering apartment communities in our Real Estate portfolio, ~~our one-year term loan,~~ outstanding borrowings under our revolving credit facility and term loan, and outstanding preferred equity. In our calculation of leverage, we exclude the non-recourse property debt obligations of consolidated partnerships served by our Asset Management business, as these ~~are~~were not our obligations and they ~~have~~had a limited effect on the amount of fees and other amounts we ~~expect~~expected to receive in our role as asset manager for these partnerships. These obligations were derecognized in connection with the sale of our Asset Management business on July 25, 2018.

Our leverage strategy seeks to increase financial returns while using leverage with appropriate caution. We limit risk through balance sheet structure, employing low leverage, primarily non-recourse and long-dated property debt; build financial flexibility by maintaining ample unused and available credit as well as holding properties with substantial value unencumbered by property debt; and use partners’ capital when it enhances financial returns or reduces investment risk.

We target the ratio of Proportionate Debt and Preferred Equity to Adjusted EBITDA to be below 7.0x and we target the ratio of Adjusted EBITDA to Adjusted Interest Expense and Preferred Dividends to be greater than 2.5x. ~~We also focus on~~Our leverage ratios for the ~~ratios of Proportionate Debt to Adjusted EBITDA and Adjusted EBITDA to Adjusted Interest Expense.~~three months ended June 30, 2018, are presented below:



Proportionate Debt to Pro forma EBITDA (1)	6.5x
Proportionate Debt and Preferred Equity to Pro forma EBITDA (1)	6.9x
Adjusted EBITDA to Adjusted Interest Expense	3.4x
Adjusted EBITDA to Adjusted Interest Expense and Preferred Dividends	3.1x

(1)

Our Proportionate Debt to Pro forma EBITDA and Proportionate Debt and Preferred Equity to Pro forma EBITDA ratios have been calculated on a pro forma basis to reflect the impact of the July 2018 dispositions of our Asset Management business, our four affordable apartment communities located in Hunters Point and Chestnut Hill Village, described above. Pro forma EBITDA has also been adjusted to reflect our acquisition of the four Philadelphia apartment communities as if the transaction had closed on April 1, 2018. These adjustments reduced the ratios of Proportionate Debt to Adjusted EBITDA and Proportionate Debt and Preferred Equity to Adjusted EBITDA by 0.7x.

We calculate Pro forma EBITDA, Adjusted EBITDA and Adjusted Interest Expense as used in ~~these~~our leverage ratios ~~are non-GAAP financial measures, which are further discussed and reconciled under~~based on the ~~Non-GAAP Measures~~ – ~~Leverage Ratios heading.~~most recent three month amounts, annualized. As used in the ratios above, Preferred Equity represents Aimco’s preferred stock and the Aimco Operating Partnership’s preferred OP Units. ~~Our leverage ratios for the three months ended June 30, 2017 are presented below:~~



	~~Three Months Ended June 30, 2017~~
~~Proportionate Debt to Adjusted EBITDA~~	~~6.8x~~
~~Proportionate Debt and Preferred Equity to Adjusted EBITDA~~	~~7.2x~~
~~Adjusted EBITDA to Adjusted Interest Expense~~	~~3.7x~~
~~Adjusted EBITDA to Adjusted Interest Expense and Preferred Dividends~~	~~3.3x~~

Due to the lease-up of apartment communities recently acquired, developed or redeveloped, computation of our leverage ratios using trailing 12-month Adjusted EBITDA is not reflective of current period operating results, nor of material transactions that may have occurred during the trailing 12-month period. These deficiencies led us to revise our calculation of leverage ratios to be based on the current quarter results, annualized, and adjusted further to reflect material transactions during the quarter. As applied to the three months ended June 30, 2017, we calculated our leverage ratios as though we acquired the limited partner interests in the Palazzo joint venture on April 1, 2017.

Changing from trailing 12-months to annualized second quarter results lowered our Proportionate Debt to Adjusted EBITDA and Proportionate Debt and Preferred Equity to Adjusted EBITDA by 0.2x, primarily due to the increased contribution from the lease-up of apartment communities discussed above. The consideration of the Palazzo acquisition lowered the same ratios by another 0.2x.

We expect improvement in leverage metrics from earnings growth, primarily due to increasing contribution from redevelopment and lease-up apartment communities and reduction in debt balances due to regularly scheduled debt amortization and apartment community sales, partially offset by the loss of earnings from sold communities. We expect that these activities will reduce our Proportionate Debt to Adjusted EBITDA and Proportionate Debt and Preferred Equity to Adjusted EBITDA ratios ~~by year-end~~ to ~~approximately 6.2x~~decrease to 6.3x and ~~6.6x, respectively.~~6.7x, respectively, before year-end.

Our liquidity consists of cash balances and available capacity on our revolving line of credit. As of June 30, ~~2017,~~2018, we had on hand $455.3 million in cash and restricted cash plus available capacity on our revolving line of credit. After the completion of the July dispositions, we used the proceeds to repay the term loan and outstanding borrowings on our revolving line of credit. On a pro forma basis, we would have had the capacity to borrow $592.9 million under our revolving line of credit and additional cash of approximately $207 million.

We also manage our financial flexibility by maintaining an investment grade rating and holding apartment communities that are unencumbered by property debt. At June 30, 2018, we held unencumbered apartment communities with an estimated fair value of approximately ~~$1.8~~$2.0 billion.

Two credit rating agencies rate our creditworthiness using different methodologies and ratios for assessing our credit, and both have rated our credit and outlook as BBB- (stable), an investment grade rating. Although some of the ratios they use are similar to those we use to measure our leverage, there are differences in our methods of calculation and therefore our leverage ratios disclosed above may not be indicative of the ratios that may be calculated by these agencies.

~~During~~For additional information regarding our leverage, please see the ~~three months ended June 30, 2017, we priced seven loans totaling $79.4 million. These loans have a weighted average interest rate of 3.46%, a spread of 129 basis points over~~discussion under the ~~corresponding treasury rates at the time of pricing.~~Liquidity and Capital Resources heading.

Team and Culture

Our team and culture ~~is the key~~are keys to our success. Our ~~emphasis~~intentional focus on a collaborative ~~respectful,~~ and ~~performance-oriented~~productive culture based on respect for others and personal responsibility is ~~what enables~~reinforced by a preference for promotion from within. We focus on succession planning and talent development to produce a strong, stable team that is the ~~continuing transformation~~enduring foundation of ~~the Aimco business.~~our success. In ~~April 2017, Aimco was~~2018, we were recognized by the Denver Post as a Top Work ~~Place. We are one of~~Place for the sixth consecutive year, an accomplishment shared with only ~~a dozen Colorado~~seven other companies ~~of all sizes who have earned this designation for five consecutive years.~~in Colorado.

Key Financial Indicators

The key financial indicators ~~that~~ we use in managing our business and in evaluating our operating performance are Economic Income, our measure of long-term total return, and Adjusted Funds From Operations, our measure of current return. In addition to these indicators, we evaluate our operating performance and financial condition using: Pro forma ~~Funds From Operations;~~FFO; Free Cash ~~Flow, or FCF, capitalization rate; net operating income, or NOI, capitalization rate;~~Flow; same store property net operating ~~results;~~income; proportionate property net operating income; average revenue per ~~Aimco~~effective apartment home; ~~financial coverage~~leverage ratios; and net leverage. Certain of these financial indicators are non-GAAP financial measures, which are defined, further described, and for certain of the measures, reconciled to comparable GAAP-based measures, under the Non-GAAP Measures heading.

Results of Operations

Because our operating results depend primarily on income from our apartment communities, the supply of and demand for apartments influences our operating results. Additionally, the level of expenses required to operate and maintain our apartment communities and the pace and price at which we redevelop, acquire and dispose of our apartment communities affect our operating results.

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.

Three and Six Months Ended June 30, ~~2017~~2018 compared to June 30, ~~2016~~2017

Net income attributable to Aimco decreased by ~~$206.4~~$13.0 million and ~~$218.7~~increased by $57.1 million, respectively, during the three and six months ended June 30, ~~2017, respectively,~~2018 as compared to ~~the June 30, 2016 comparable periods.~~2017. Net income attributable to the Aimco Operating Partnership decreased by ~~$216.5~~$13.7 million and ~~$229.2~~increased by $59.6 million, respectively, during the three and six months ended June 30, ~~2017, respectively,~~2018 as compared to 2017. The following discussion describes the ~~June 30, 2016 comparable periods. The decreases~~primary drivers of the changes in the net income ~~for~~attributable to Aimco and the Aimco Operating Partnership ~~were primarily due~~for the three and six months ended June 30, 2018 compared to ~~lower gains on disposition of real estate and higher depreciation and amortization from developments and redevelopments placed into service and our acquisition of Indigo during 2016.~~

~~The following paragraphs discuss these and other items affecting the results of operations of Aimco and the Aimco Operating Partnership in more detail.~~2017.

Property Operations

As described under the preceding Executive Overview heading, our Real Estate ~~segment~~portfolio consists primarily of market rate apartment communities in which we hold a substantial equity ownership interest.

We use proportionate property net operating income to assess the operating performance of our ~~apartment communities.~~Real Estate Portfolio. Proportionate property net operating income reflects our share of rental and other property revenues less direct property operating expenses, including real estate taxes, for consolidated apartment communities we manage. Accordingly, the results of operations of our Real Estate segment discussed below are presented on a proportionate basis and exclude the results of four apartment communities with 142 apartment homes that we neither manage nor consolidate.

Additionally, we evaluate the revenue and expense performance of our segment as adjusted for utility reimbursements. Nearly two-thirds of our utility costs are reimbursed by residents. These reimbursements are included in rental and other property revenues in our condensed consolidated statements of operations prepared in accordance with GAAP, but beginning in 2018, our segment results below reflect utility reimbursements as a reduction of the corresponding expense. We have revised the 2017 amounts to conform to this presentation.

We do not include ~~property management revenues,~~ offsite costs associated with property management or casualty-related amounts in our assessment of segment performance. Accordingly, these items are not allocated to our segment results discussed below.

Refer to Note 7 ofin the condensed consolidated financial statements in Item 1 for further discussion regarding our reportable ~~segment,~~segments including a reconciliation of these proportionate amounts to the corresponding amounts in our condensed consolidated statements of operations.

Real Estate Proportionate Property Net Operating Income

We classify apartment communities within our Real Estate segment as Same Store and ~~Non-Same Store.~~Other Real Estate. Same Store ~~apartment~~ communities are those that have reached a stabilized level of operations as of ~~January 1, 2016~~the beginning of a two-year comparable period and maintained it throughout the current and comparable prior periods, and are not expected to be sold within 12 months. ~~Non-Same Store~~Other Real

Estate includes apartment communities that do not meet the Same Store definition, including, but not limited to: redevelopment and development apartment communities, which are those currently under construction that have not achieved a stabilized level of operations and those that have been

completed in recent years that ~~had~~have not achieved and maintained stabilized operations for both the current and comparable prior year; acquisition apartment communities, which are those we have acquired since the beginning of a ~~two year~~two-year comparable period; and communities that we expect to sell within ~~twelve~~12 months but do not yet meet the criteria to be classified as held for sale.

As of June 30, ~~2017, as defined by our segment performance metrics,~~2018, our Real Estate ~~portfolio~~segment consisted of 9295 Same Store apartment communities with ~~26,386~~26,367 apartment homes and ~~45 Non-Same Store apartment~~34 Other Real Estate communities with ~~12,659~~9,963 apartment homes.

From December 31, ~~2016~~2017 to June 30, ~~2017,~~2018, on a net basis, our Same Store portfolio ~~decreased~~increased by ~~nine~~three apartment communities and ~~4,507~~decreased by 19 apartment homes. These changes consisted of:

the addition of ~~three~~one developed apartment community with 91 apartment homes and one redeveloped apartment ~~communities~~community with ~~974~~104 apartment homes that were classified as Same Store upon maintaining stabilized operations for the entirety of ~~both~~the periods presented;

the addition of one acquired apartment community with 94115 apartment homes that was classified as Same Store because we have now owned it for the entirety of both periods presented;

the ~~reduction~~addition of ~~five~~one apartment ~~communities~~community with ~~2,460 apartment~~492 apartments homes ~~at which~~that we ~~commenced redevelopment or development activities during the period;~~no longer expect to sell within 12 months; and

the reduction of ~~eight~~one apartment ~~communities~~community with ~~3,115~~821 apartment homes, which ~~are expected to be sold within 12 months, but do not yet meet the criteria to be~~was classified as held for ~~sale.~~sale as of June 30, 2018.

As of June 30, ~~2017,~~2018, our ~~Non-Same Store apartment communities comprised approximately one-third of our~~Other Real Estate ~~portfolio, and~~communities included:

1513 apartment communities with ~~6,211~~6,284 apartment homes in redevelopment or development;

26 apartment communities with ~~578~~1,876 apartment homes recently acquired; and

415 apartment communities with ~~604 apartment homes owned that receive forms of government rental assistance;~~

~~14 apartment communities with 1,556~~1,803 apartment homes that do not meet the definition of Same Store because they are either subject to agreements that limit the amount by which we may increase rents or have not reached or maintained a stabilized level of occupancy as of the beginning of a ~~two year~~two-year comparable period, often due to a casualty ~~event; and~~

~~10 apartment communities with 3,710 apartment homes we expect to sell in the next twelve months but that do not yet meet the criteria to be classified as held for sale.~~

Prior to 2017, seven of the communities in our Non-Same Store portfolio were classified as part of our prior Affordable segment. The results of operations for these communities are reflected in both 2017 and 2016 comparable periods in the tables below.event.

Our Real Estate segment results for the three ~~and six~~ months ended June 30, ~~2017~~2018 and ~~2016,~~2017, as presented below, are based on the apartment community populations as of June 30, ~~2017.~~2018.

Three Months Ended June 30,
(in thousands) 2017 2016 $ Change % Change
Rental and other property revenues:
Same Store $ 145,861
$ 141,133
$ 4,728
3.4 %
Non-Same Store 73,276
64,150
9,126
14.2 %
Total 219,137
205,283
13,854
6.7 %
Property operating expenses:
Same Store 41,725
41,860
(135 ) (0.3 )%
Non-Same Store 26,662
24,834
1,828
7.4 %
Total 68,387
66,694
1,693
2.5 %
Proportionate property net operating income:
Same Store 104,136
99,273
4,863
4.9 %
Non-Same Store 46,614
39,316
7,298
18.6 %
Total $ 150,750
$ 138,589
$ 12,161
8.8 %



	Three Months Ended June 30,
(in thousands)	2018		2017		$ Change		% Change
Rental and other property revenues before utility reimbursements:
Same Store communities	$	146,950	$	142,372	$	4,578	3.2	%
Other Real Estate Communities	67,528		51,536		15,992		31.0	%
Total	214,478		193,908		20,570		10.6	%
Property operating expenses, net of utility reimbursements:
Same Store communities	38,496		37,261		1,235		3.3	%
Other Real Estate Communities	22,434		18,298		4,136		22.6	%
Total	60,930		55,559		5,371		9.7	%
Proportionate property net operating income:
Same Store communities	108,454		105,111		3,343		3.2	%
Other Real Estate Communities	45,094		33,238		11,856		35.7	%
Total	$	153,548	$	138,349	$	15,199	11.0	%

For the three months ended June 30, ~~2017, as~~2018 compared to ~~the three months ended June 30, 2016,~~2017, our Real Estate segment’s proportionate property net operating income increased ~~$12.2~~$15.2 million, or ~~8.8%~~11.0%.

Same Store proportionate property net operating income increased by ~~$4.9~~$3.3 million, or ~~4.9%~~3.2%. This increase was primarily attributable to a ~~$4.7~~$4.6 million, or 3.4%, increase in rental and other property revenues due to higher average monthly revenues (approximately $64 per Aimco apartment home), comprised primarily of increases in rental rates and partially offset by a 10 basis point decrease in average daily occupancy. Rental rates on renewals transacted during the three months ended June 30, 2017, were 4.6% higher than expiring lease rates, and new lease rates were 1.0% higher than expiring lease rates, resulting in a weighted average increase of 2.7%.

Our Non-Same Store proportionate property net operating income increased by $7.3 million, or 18.6%, a higher rate of growth than our Same Store portfolio due to our Portfolio Management and Redevelopment and Development activities. Our Non-Same Store proportionate property net operating income grew due to our August 2016 acquisition of Indigo and subsequent lease up of this community, and due to the lease-up of apartment homes placed into service following completion of development and redevelopment activities at our One Canal, The Sterling and Park Towne Place communities, partially offset by the lower income from the commencement of redevelopment activities at Palazzo at Park La Brea and the North Tower of Park Towne Place.

We completed the lease-up of Indigo during the three months ended June 30, 2017, and when combined with activity at One Canal, a total of 135 leases were transacted during the three months ended June 30, 2017, contributing to $7.4 million of incremental revenue compared to the three months ended June 30, 2016. Redevelopment leasing activities during the three months ended June 30, 2017 also included 541 apartment homes, primarily at Park Towne Place and The Sterling. Rent achievement at these two communities averaged 138% of pre-redevelopment rents and contributed to incremental redevelopment related revenues of $1.2 million for the three months ended June 30, 2017, as compared to the three months ended June 30, 2016.

Six Months Ended June 30,
(in thousands) 2017 2016 $ Change % Change
Rental and other property revenues:
Same Store $ 290,906
$ 281,002
$ 9,904
3.5 %
Non-Same Store 145,206
126,345
18,861
14.9 %
Total 436,112
407,347
28,765
7.1 %
Property operating expenses:
Same Store 84,637
83,757
880
1.1 %
Non-Same Store 53,214
48,184
5,030
10.4 %
Total 137,851
131,941
5,910
4.5 %
Proportionate property net operating income:
Same Store 206,269
197,245
9,024
4.6 %
Non-Same Store 91,992
78,161
13,831
17.7 %
Total $ 298,261
$ 275,406
$ 22,855
8.3 %

~~For the six months ended June 30, 2017, as compared to the six months ended June 30, 2016, our Real Estate segment’s proportionate property net operating income increased $22.9 million, or 8.3%~~

~~Same Store proportionate property net operating income increased by $9.0 million, or 4.6%. This increase was primarily attributable to a $9.9 million, or 3.5%~~3.2%, increase in rental and other property revenues due to higher average revenues ~~(approximately $68~~of $53 per ~~effective home),~~Aimco apartment home comprised ~~primarily~~ of increases in rental rates ~~partially offset by~~and a 2040 basis point ~~decrease~~increase in average daily occupancy. ~~Rental rates on renewals transacted during~~Renewal

rents, which is the ~~six~~rent paid by an existing resident who renewed her lease compared to the rent she previously paid, were up 4.8% for the three months ended June 30, ~~2017 were 4.8% higher than expiring lease rates,~~2018, and new lease ~~rates~~rents, which is the rent paid by a new resident compared to the rent paid by the previous resident of the same apartment home, were ~~0.5% higher than expiring lease rates,~~up 1.9%, resulting in a weighted average increase of ~~2.5%~~3.4%. The increase in Same Store rental and other property revenues was partially offset by a ~~$0.9~~$1.2 million, or ~~1.1%~~3.3%, increase in property operating expenses primarily due to ~~increases in real estate taxes and~~ repairs and maintenance ~~partially offset by lower administrative expenses.~~costs and increases in insurance and real estate taxes. During the ~~six~~three months ended June 30, ~~2017, as~~2018 compared to ~~2016,~~2017, controllable operating expenses, which exclude utility costs, real estate taxes and insurance, ~~decreased~~increased by ~~$0.4~~$0.5 million, or ~~1.0%~~2.6%.

~~Our Non-Same~~The proportionate property net operating income of Other Real Estate communities increased by $11.9 million, or 35.7%, for the three months ended June 30, 2018 compared to 2017 due to:

a $5.4 million increase in property net operating income due to the 2018 acquisition of Bent Tree Apartments and the four Philadelphia properties as well as the lease-up of Indigo located in Redwood City, California;

a $0.9 million increase in property net operating income due to leasing activities at redevelopment and development communities, partially offset by decreases due to apartment homes taken out of service for development; and

higher property net operating income of $5.6 million from other communities, primarily the effect of our increased ownership interest in the Palazzo communities from our June 2017 reacquisition of a 47% limited partner interest in the related joint venture.



	Six Months Ended June 30,
(in thousands)	2018		2017		$ Change		% Change
Rental and other property revenues before utility reimbursements:
Same Store communities	$	291,804	$	283,582	$	8,222	2.9	%
Other Real Estate Communities	128,996		101,832		27,164		26.7	%
Total	420,800		385,414		35,386		9.2	%
Property operating expenses, net of utility reimbursements:
Same Store communities	77,419		75,375		2,044		2.7	%
Other Real Estate Communities	42,854		36,359		6,495		17.9	%
Total	120,273		111,734		8,539		7.6	%
Proportionate property net operating income:
Same Store communities	214,385		208,207		6,178		3.0	%
Other Real Estate Communities	86,142		65,473		20,669		31.6	%
Total	$	300,527	$	273,680	$	26,847	9.8	%

For the six months ended June 30, 2018 compared to 2017, our Real Estate segment’s proportionate property net operating income increased $26.8 million, or 9.8%.

Same Store proportionate property net operating income increased by ~~$13.8~~$6.2 million, or ~~17.7%~~3.0%. ~~Similar~~This increase was primarily attributable to an $8.2 million, or 2.9%, increase in rental and other property revenues due to higher average revenues of approximately $48 per effective home, comprised primarily of increases in rental rates and a 40 basis point increase in average daily occupancy. Renewal rents, which is the rent paid by an existing resident who renewed her lease compared to the ~~three month results discussed above, our Non-Same~~rent she previously paid, were up 4.8% for the six months ended June 30, 2018, and new lease rents, which is the rent paid by a new resident compared to the rent paid by the previous resident of the same apartment home, were up 1.3%, resulting in a weighted average increase of 3.1%. The increase in Same Store rental and other property revenues was partially offset by a $2.0 million, or 2.7%, increase in property operating expenses, primarily due to increase in real estate taxes, repairs and maintenance costs and insurance. During the six months ended June 30, 2018 compared to 2017, controllable operating expenses, which exclude utility costs, real estate taxes and insurance, increased by $0.8 million, or 2.0%.

The proportionate property net operating income ~~grew at~~ of our Other Real Estate communities increased by $20.7 million, or 31.6% for the six months ended June 30, 2018 compared to 2017, due to:

a ~~higher rate than did our Same Store~~$7.9 million increase in property net operating income due to ~~our Portfolio Management~~the 2018 acquisition of Bent Tree Apartments and ~~Redevelopment and Development activities.~~

~~Our completion of~~the four Philadelphia properties as well as the lease-up of ~~Indigo~~Indigo;

a $2.8 million increase in property net operating income due to leasing activities at redevelopment and One Canal during the six months ended June 30, 2017 contributed to $14.2 million of incremental revenue compared to the six months ended June 30, 2016. Our lease-up of recently completed homes in our redevelopmentdevelopment communities, ~~primarily at Park Towne Place and The Sterling,~~ partially offset by decreases due to apartment homes taken out of service for redevelopment; and

higher property net operating income of $10.0 million from other communities, primarily the ~~commencement~~effect of ~~redevelopment activities at~~our increased ownership interest in the Palazzo ~~at Park La Brea, Palazzo East at Park La Brea, Saybrook Pointe, Bay Parc Plaza and~~communities from our June 2017 reacquisition of a 47% limited partner interest in the ~~Flamingo South Beach, contributed to incremental redevelopment~~ related ~~revenues of $2.3 million during the six months ended June 30, 2017, as compared to the six months ended June 30, 2016.~~joint venture.

Non-Segment Real Estate Operations

Operating income amounts not attributed to our Real Estate segment include offsite costs associated with property management, casualty losses, and the results of apartment communities sold, reported in consolidated amounts, which we do not allocate to our Real Estate segment for purposes of evaluating segment performance (see Note 7 to the condensed consolidated financial statements in Item 1).

For the three months ended June 30, 2018, casualty losses totaled $0.6 million and included a large claim due to storm damage. For the three months ended June 30, 2017, casualty losses totaled $2.4 million and included several large claims primarily related to fire damage.

For the ~~three~~six months ended June 30, ~~2016,~~2018, casualty losses totaled ~~$0.7 million.~~

$1.6 million and included several large claims primarily related to winter storm damage, partially offset by recovery from insurance carriers for insured losses in excess of policy limits. For the six months ended June 30, 2017, casualty losses totaled $4.3 million and included several large claims primarily related to fire damage. ~~For~~

Net operating income decreased for the three and six months ended June 30, ~~2016, casualty losses totaled $2.7~~2018 compared to 2017, by $6.9 million and ~~included several large claims primarily related~~$13.5 million, respectively, due to ~~water damage resulting from broken pipes.~~

~~Apartment~~apartment communities previously in our Real Estate portfolio that were sold ~~by December 31, 2016, generated net operating income~~as of ~~$5.5 million and $13.2 million, during the three and six months ended~~ June 30, ~~2016, respectively.~~2018.

Asset Management Results

We ~~hold a nominal ownership position in~~provided asset management and other services to certain consolidated partnerships ~~that own~~owning apartment communities that qualify for low-income housing tax credits and are structured to provide for the pass-through of tax credits and tax deductions to their partners. In ~~this role,~~July 2018, we ~~provide asset management and other services to these partnerships and receive fees and other payments~~completed the sale of our Asset Management business.

Contribution from Asset Management included in ~~return.~~

In accordance with GAAP, we consolidate most of these partnerships and their underlying apartment communities. Our share of the partnerships’ net operating income, less interest expense and other amounts, was approximately 95% ~~(inclusive of unconsolidated communities) at June 30, 2017, and represents income generated by the partnerships that is currently available to pay~~our condensed consolidated financial statements included: fees and other amounts ~~due~~paid to us ~~under~~from the ~~contractual agreements.~~

~~The~~net operating ~~results~~income of ~~the~~ partnerships served by our Asset Management business, less interest expense incurred on non-recourse property debt obligations of the partnerships; income associated with delivery of tax credits to the third-party investors in the partnerships, which included amounts received during the period and ~~their underlying apartment communities were comparable~~amounts received in previous periods; and transactional revenue and other income less asset management expenses, which included certain allocated offsite costs related to the operation of this business.

The contribution from Asset Management for the three and six months ended June 30, ~~2017, as~~2018 compared to 2017, is presented in the ~~three and six months ended June 30, 2016.~~table below.

We are also generally responsible for ensuring the underlying apartment communities comply with the requirements to earn low-income housing tax credits. We recognize income associated with the delivery of tax credits and tax deductions delivered to the partners.



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2018			2017			2018			2017
Net operating income of partnerships served by Asset Management business	$	10,783		$	11,040		$	21,201		$	21,240
Interest expense on non-recourse property debt of partnerships	(3,241		)	(3,280		)	(6,527		)	(6,511		)
Amount available for payment of Asset Management fees	7,542			7,760			14,674			14,729
Tax credit income, net	(32		)	2,516			1,785			5,029
Asset management expenses	(961		)	(1,005		)	(1,983		)	(2,026		)
Transactional revenue and other income	42			420			1,688			882
Contribution from Asset Management business	$	6,591		$	9,691		$	16,164		$	18,614

For the ~~three and six months ended June 30, 2017, as compared~~periods presented above, the contribution from the Asset Management business decreased primarily due to ~~the three and six months ended June 30, 2016, tax credit and transaction revenues decreased by $5.5 million and $7.6 million, respectively. We recognized lower~~a decrease in tax credit income, ~~the majority of which was due to~~net, following our ~~2016~~early 2018 acquisition of an investor limited partner’s interest in ~~one~~two of the tax credit partnerships (and their rights to undelivered tax credits) prior to the end of the tax credit delivery period. Following the purchase, we generate tax benefits in our results of operations, which largely offsets the tax credit income we otherwise would have recognized. The remainder of the decrease in tax credit income is due to the delivery of the final tax credits for various apartment communities during 2016. Transaction revenues decreased due to a $3.6 million fee earned during the three months ended June 30, 2016 for assisting a third party property owner with respect to a property we previously owned.

We expect the contribution to our net income from asset management activities to decline in future years as we continue to deliver the final tax credits for these communities and, as part of our plan to exit the Asset Management business, the partnerships sell the underlying apartment communities.

Depreciation and Amortization

For the three and six months ended June 30, ~~2017,~~2018 compared to ~~the three and six months ended June 30, 2016,~~2017, depreciation and amortization increased ~~$8.5~~$8.3 million, or ~~10.5%~~9.3%, and ~~$15.8~~$13.7 million, or ~~9.9%~~7.8%, respectively, primarily due to ~~amounts~~renovated apartment homes placed in service after ~~the~~their completion, ~~of apartment homes in our Park Towne Place and The Sterling redevelopments, the completion of our One Canal development, our acquisition of Indigo and other capital additions,~~ partially offset by decreases associated with apartment communities sold.

General and Administrative Expenses

For the three and six months ended June 30, ~~2017,~~2018, compared to the ~~three and six months ended June 30, 2016,~~2017, general and administrative expenses ~~decreased $1.5~~increased $3.8 million, or ~~13.0%~~37.3%, and ~~$2.8~~$4.2 million, or ~~11.9%~~19.8%, respectively, primarily due to ~~lower~~the timing of incentive compensation ~~costs, as well as lower technology, recruiting, personnel and travel~~ costs.

Other Expenses, net

Other expenses, net includes franchise taxes, costs associated with our risk management activities, partnership administration expenses and certain non-recurring items.

For the three and six months ended June 30, ~~2017,~~2018 compared to ~~the three and six months ended June 30, 2016,~~2017, other expenses ~~decreased~~increased by ~~$2.8~~$1.7 million and ~~$2.6~~$2.9 million, respectively, primarily due to ~~the 2016 recognition of estimated environmental clean-up and abatement~~higher legal costs associated with ~~a matter further discussed~~our ongoing litigation against Airbnb to protect our property right to select our residents and their neighbors and severance costs incurred during the three months ended June 30, 2018, in ~~Note 4 to~~connection with the ~~condensed consolidated financial statements in Item 1,~~July 25, 2018 sale of our Asset Management business, partially offset by ~~higher~~a reduction in other legal ~~costs in 2017.~~costs.

Interest Expense

For the three and six months ended June 30, ~~2017, as~~2018 compared to ~~the three and six months ended June 30, 2016,~~2017, interest expense, which includes the amortization of debt issuance costs, ~~decreased~~increased by ~~$2.0~~$3.0 million, or ~~4.2%~~6.5%, and $~~1.8~~3.0 million, or ~~1.9%~~3.1%, ~~respectively.~~respectively. The ~~decrease was attributed to lower average outstanding balances on non-recourse property debt for our Real Estate apartment communities,~~increases were primarily due to ~~principal amortization and balance repayments, refinancing property loans at lower rates and an increase~~assumption of ~~capitalized interest~~debt associated with ~~our redevelopment~~the 2018 acquisition of four properties in Philadelphia and ~~development activities,~~higher amounts outstanding on corporate borrowings used to fund the 2018 acquisition of Bent Tree Apartments, partially offset by properties refinanced with lower interest ~~associated with a loan placed on our Indigo community late in 2016.~~rates.

~~Other, net~~

Other, net includes our equity in the income or loss of unconsolidated real estate partnerships, and the results of operations related to our legacy asset management business, which we account for under the profit sharing method.

For the three and six months ended June 30, 2017, as compared to the three and six months ended June 30, 2016, net income of our legacy asset management business decreased by $4.9 million and $4.6 million, respectively. The decrease was primarily due to a gain on derecognition of the majority of the net liabilities of this business during the three months ended June 30, 2016.

Income Tax Benefit

Certain of our operations, ~~or a portion thereof,~~ including property management and risk management, are conducted through TRS entities. Additionally, some of our apartment communities ~~including redevelopment communities~~ are owned through TRS entities.

Our income tax benefit calculated in accordance with GAAP includes: (a) income taxes associated with the income or loss of our TRS entities, for which the tax consequences have been realized or will be realized in future periods; (b) low income housing tax credits that offset REIT taxable income, primarily from retained capital gains; and (c) historic tax credits that offset income tax obligations of our TRS entities. Income taxes related to ~~the results of operations of our TRS entities~~these items (before gains on dispositions) are included in income tax benefit in our condensed consolidated statements of operations.

For the three and six months ended June 30, ~~2017,~~2018 compared to ~~the three and six months ended June 30, 2016,~~2017, income tax benefit decreased by ~~$2.1~~$0.6 million and ~~$3.0~~increased $31.8 million, respectively. Income tax benefit decreased during the three months ended primarily due to lower historic tax credits ~~associated with~~generated through the redevelopment of certain apartment ~~communities resulting from the timing of final certification on one redevelopment in 2016.~~communities. Income tax benefit ~~also decreased in part~~increased during the six months ended June 30, 2018 primarily due to a tax benefit recognized in connection with an intercompany transfer of assets related to our Asset Management business, offset slightly by lower ~~net losses recognized by our TRS entities, partially offset by higher tax benefits associated with low-income~~historic tax credits ~~from our acquisition in late 2016 of the investor limited partner’s interest in a tax credit partnership.~~generated.

Gain on Dispositions of Real Estate, ~~Net~~Inclusive of Related Income Tax

Real Estate

~~During the three months ended June 30, 2016, we sold two~~We did not sell any apartment communities from our Real Estate portfolio ~~for gross proceeds of $291.9 million, resulting in net proceeds of $289.4 million and a net gain of $216.5 million.~~during the three months ended June 30, 2018. During the six months ended June 30, ~~2016,~~2018, we sold three apartment communities with 513 apartment homes for a gain of $50.6 million, net of income tax, and gross proceeds of ~~$301.9~~$71.9 million, resulting in $64.6 million in net proceeds ~~of $299.0 million and net gain on dispositions of real estate of $222.7 million.~~ to us.

We did not sell any apartment communities from our Real Estate portfolio during the three and six months ended June 30, 2017, though we sold a commercial property resulting in a small gain.

Asset Management

During the three months ended June 30, 2017, a consolidated partnership served by our Asset Management business sold an apartment community for gross proceeds of $8.5 million, resulting in a gain on disposition of real estate of $1.9 million and related tax expense of $0.4 million. During the six months ended June 30, 2017, consolidated partnerships sold two apartment communities for gross proceeds of $10.9 million, resulting in a gain on disposition of real estate of $2.6 million and related tax expense of $0.9 million. Consolidated partnerships served by our Asset Management business did not sell any apartment communities during the three and six months ended June 30, ~~2016.~~2018.

During the three months ended June 30, 2017, a consolidated partnership served by our Asset Management business sold an apartment community with 200 apartment homes for a gain of $1.9 million and gross proceeds of $8.5 million, resulting in $4.5 million in net proceeds to us. During the six months ended June 30, 2017, consolidated partnerships served by our Asset Management business sold two apartment communities with 252 apartment homes for a gain of $2.6 million and gross proceeds of $10.9 million, resulting in $5.0 million in net proceeds to us.

Noncontrolling Interests in Consolidated Real Estate Partnerships

Noncontrolling interests in consolidated real estate partnerships reflects the results of our consolidated real estate partnerships allocated to the owners who are not affiliated with Aimco. The amounts of income or loss of our consolidated real estate partnerships that we allocate to ~~the~~ owners not affiliated with Aimco include their share of property management fees, interest on notes and other amounts that we charge to these partnerships.

The amount of net income allocated to noncontrolling interests was driven by two primary factors: the operations of the consolidated apartment communities and gains on the sale of apartment communities with noncontrolling interest holders, as further discussed below.

For the three months ended June 30, ~~2017~~2018, we allocated nominal net income and ~~2016,~~for the three months ended June 30, 2017, we allocated net income of $0.8 million to noncontrolling interests in consolidated real estate partnerships resulting from operations of the consolidated apartment communities.

For the six months ended June 30, 2018 and ~~$8.7~~2017, we allocated net income of $6.3 million and $1.8 million, respectively, to noncontrolling interests in consolidated real estate ~~partnerships, representing a decrease~~partnerships.

The amount of ~~$7.9 million. For~~net income allocated to noncontrolling interests resulting from operations of the consolidated apartment communities was $0.1 million and $1.8 million for the six months ended June 30, 2018 and 2017, ~~and 2016, we allocated net income~~respectively. The decrease was primarily due to the 2017 reacquisition of ~~$1.8 million and $9.6 million, respectively, to noncontrolling~~our limited partner’s interests in ~~consolidated real estate partnerships, representing a decrease of $7.8 million.~~the Palazzo joint venture.

~~As part of our ongoing plan to simplify our business, during 2012 we sold Napico, a legacy asset management business. In 2016, we received final payment of~~Gains on the ~~seller financing and we met the requirements to recognize~~ sale of ~~the majority of that business. The amounts of net income we~~apartment communities allocated to noncontrolling interests ~~in 2017 decreased primarily due to our 2016 deconsolidation of Napico, as well as a decrease in~~totaled $6.2 million for the ~~amount of gains we recognized on dispositions of real estate~~six months ended June 30, 2018, and ~~a related decrease in~~there was no such allocation for the ~~allocation of gains to noncontrolling interests.~~six months ended June 30, 2017.

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 and the Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017. 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 results of operations for all periods presented.

Non-GAAP Measures

Various of the key financial indicators we use in managing our business and in evaluating our financial condition and operating performance are non-GAAP measures. Key non-GAAP measures we use are defined and described below, and for those non-GAAP measures used or disclosed within this quarterly report, reconciliations of the non-GAAP measures to the most comparable financial measure computed in accordance with GAAP are provided.

Funds ~~from~~From Operations, or FFO, Pro forma ~~Funds From Operations~~FFO and ~~Adjusted Funds From Operations~~AFFO are non-GAAP financial measures, which are defined and further described below under the Funds From Operations, Pro forma Funds From Operations and Adjusted Funds From Operations heading.

Free Cash Flow, ~~or FCF,~~ as calculated for our retained portfolio, represents an apartment community’s property net operating income, or NOI, less spending for capital replacements, which represents our estimation of the capital additions made to replace capital assets consumed during our ownership period (further discussed under the Funds From Operations, Pro forma Funds From Operations and Adjusted Funds From Operations heading and the Liquidity and Capital Resources ~~headings)~~heading). ~~FCF~~Free Cash Flow margin represents an apartment community’s ~~net operating income~~NOI less $1,200 per apartment home of assumed annual capital replacement spending, as a percentage of the apartment community’s rental and other property revenues. Capital replacement spending represents a measure of the cost of capital asset usage during the period; therefore, we believe that ~~FCF~~Free Cash Flow is useful to investors as a supplemental measure of apartment community performance because it takes into consideration costs incurred during the period to replace capital assets that have been consumed during our ownership.

~~We use Economic Income as our measure of total return.~~ Economic Income represents stockholder value creation as measured by the change in estimated net asset value per share plus cash dividends per share. We believe Economic Income is important to investors as it represents a measure of the total return we have earned for our stockholders. We report and reconcile ~~our~~ Economic Income annually. ~~Readers should~~Please refer to the section entitled

~~section entitled “Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations described in Item 7A7 of our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2017, for more information about Economic Income.

Funds From Operations, Pro Forma Funds From Operations and Adjusted Funds From Operations

~~Funds From Operations, or~~ FFO is a non-GAAP financial measure that we believe, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate generally appreciates over time or maintains residual value to a much greater extent than do other depreciable assets such as machinery, computers or other personal property. The National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income or loss computed in accordance with GAAP, excluding gains from sales of, and impairment losses recognized with respect to, depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine FFO. We calculate FFO attributable to Aimco common stockholders (diluted) by subtracting ~~if dilutive, redemption or repurchase related preferred stock issuance costs and~~ dividends on preferred stock and ~~adding back dividends/distributions on dilutive preferred securities and premiums or discounts on preferred stock redemptions or repurchases.~~amounts allocated to participating securities.

In addition to FFO, we compute Pro forma FFO and ~~Adjusted FFO, or~~ AFFO, which are also non-GAAP financial measures that we believe are helpful to investors in understanding our performance. Pro forma FFO represents FFO attributable to Aimco common stockholders (diluted), excluding preferred equity redemption-related amounts ~~(adjusted for noncontrolling interests).~~and certain litigation costs. Preferred equity redemption-related amounts (gains or losses) are items that periodically affect our operating results and we exclude these items from our calculation of Pro forma FFO because such amounts are not representative of our operating performance. We are engaged in litigation with Airbnb to protect our property right to select our residents and their neighbors. Due to the unpredictable nature of these cases and associated legal costs, we exclude such costs from Pro forma FFO. In connection with the sale of our Asset Management business, we incurred severance costs during the three months ended June 30, 2018. We believe these costs incurred are clearly and closely related to the sale of the business and exclude such costs from Pro forma FFO.

AFFO represents Pro forma FFO reduced by Capital Replacements, ~~(also adjusted for noncontrolling interests),~~ which represents our estimation of the capital additions made to replace capital assets consumed during our ownership period. When we make capital additions at an apartment community, we evaluate whether the additions ~~enhance~~extend the ~~value, profitability or~~ useful life of an asset as compared to its condition at the time we purchased the apartment community. We classify as Capital Improvements those capital additions that meet these criteria and we classify as Capital Replacements those that do not. AFFO is a key financial indicator that we use to evaluate our operational performance and measure our current return. AFFO is one of the factors that we use to determine the amounts of our dividend payments.

FFO, Pro forma FFO and AFFO should not be considered alternatives to net income, as determined in accordance with GAAP, as indications of our performance. Although we use these non-GAAP measures for comparability in assessing our performance compared to other REITs, not all REITs compute these same measures, and those who do may not compute them in the same manner. Additionally, our computation of AFFO is subject to our definition of Capital Replacement spending. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other REITs.

For the three and six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, Aimco’s FFO, Pro forma FFO and AFFO are calculated as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Net income attributable to Aimco common stockholders (1)	$	15,843		$	221,382		$	27,334		$	244,605		$	2,817		$	15,843		$	84,342		$	27,334
Adjustments:
Real estate depreciation and amortization, net of noncontrolling partners’ interest	84,649			76,200			167,530			151,496			95,238			84,649			185,632			167,530
Gain on dispositions and other, net noncontrolling partners’ interest	(1,741		)	(213,835		)	(2,180		)	(219,885		)	(217		)	(1,741		)	(47,240		)	(2,180		)
Income tax provision related to gain on disposition of real estate	410			2,266			1,442			2,461
Income tax adjustments related to gain on dispositions and other items (2)													85			410			(30,635		)	1,442
Common noncontrolling interests in Aimco Operating Partnership’s share of above adjustments	(3,783		)	6,481			(7,633		)	3,154			(4,610		)	(3,783		)	(5,167		)	(7,633		)
Amounts allocable to participating securities	(41		)	154			(79		)	96			(82		)	(41		)	(97		)	(79		)
FFO / Pro forma FFO Attributable to Aimco common stockholders – Diluted	$	95,337		$	92,648		$	186,414		$	181,927
FFO attributable to Aimco common stockholders – diluted													$	93,231		$	95,337		$	186,835		$	186,414
Litigation costs, net of common noncontrolling interests in Aimco Operating Partnership and participating securities (3)													1,557			—			1,906			—
Severance costs, net of common noncontrolling interests in Aimco OP and participating securities (4)													1,215			—			1,215			—
Pro forma FFO attributable to Aimco common stockholders – diluted													$	96,003		$	95,337		$	189,956		$	186,414
Capital Replacements, net of common noncontrolling interests in Aimco Operating Partnership and participating securities	(15,360		)	(14,335		)	(26,306		)	(24,721		)	(11,710		)	(15,360		)	(21,477		)	(26,306		)
AFFO attributable to Aimco common stockholders – Diluted	$	79,977		$	78,313		$	160,108		$	157,206
AFFO attributable to Aimco common stockholders – diluted													$	84,293		$	79,977		$	168,479		$	160,108

Weighted average common shares outstanding – diluted (2)	156,715			156,793			156,735			156,248
Weighted average common shares outstanding – diluted (FFO, Pro forma FFO and AFFO) (5)													156,833			156,715			156,786			156,735

Net income attributable to Aimco per common share – diluted	$	0.10		$	1.41		$	0.17		$	1.57		$	0.02		$	0.10		$	0.54		$	0.17
FFO / Pro forma FFO per share – diluted	$	0.61		$	0.59		$	1.19		$	1.16
FFO per share – diluted													$	0.59		$	0.61		$	1.19		$	1.19
Pro forma FFO per share – diluted													$	0.61		$	0.61		$	1.21		$	1.19
AFFO per share – diluted	$	0.51		$	0.50		$	1.02		$	1.01		$	0.54		$	0.51		$	1.07		$	1.02


(1)	Represents the numerator for calculating Aimco’s earnings per common share in accordance with GAAP.

(2)

Income tax adjustments related to gain on dispositions and other items for the six months ended June 30, 2018 includes a $33.6 million tax benefit related to an intercompany transfer of assets related to our Asset Management business. On July 25, 2018, we completed the sale of this business. In subsequent periods, the related taxes will be reflected within our statement of operations within gain on dispositions of real estate, inclusive of related income tax. Accordingly, we have excluded the benefit related to the reorganization from FFO.


(3)	We are engaged in litigation with Airbnb to protect our property right to select our residents and their neighbors. Due to the unpredictable nature of these cases and associated legal costs, we exclude such costs from Pro forma FFO and AFFO.


(4)	In connection with the sale of our Asset Management business, we incurred severance costs of $1.2 million during the three months ended June 30, 2018. We believe these costs are closely related to the sale of the business and have excluded such costs from Pro forma FFO and AFFO.


(5)	Represents the denominator for Aimco’s earnings per common share – diluted, calculated in accordance with GAAP.

Refer to the Executive Overview for discussion of our ~~FFO,~~ Pro forma FFO and AFFO results asfor 2018 compared to ~~their comparable periods in 2016.~~2017.

Refer to the Liquidity and Capital Resources section for further information regarding our capital investing activities, including Capital Replacements.

The Aimco Operating Partnership does not separately compute or report FFO, Pro forma FFO or AFFO. However, based on Aimco’s method for allocation of such amounts to noncontrolling interests in the Aimco Operating Partnership, as well as limited differences between the amounts of net income attributable to Aimco’s common stockholders and the Aimco Operating Partnership’s unit holders during the periods presented, FFO, Pro forma FFO and AFFO amounts on a per unit basis for the Aimco Operating Partnership would be expected to be substantially the same as the corresponding per share amounts for Aimco.

Leverage Ratios

~~As discussed under the Balance Sheet and Liquidity heading, as part of our leverage strategy, we~~We target the ratio of Proportionate Debt and Preferred Equity to Adjusted EBITDA to be below 7.0x and we target the ratio of Adjusted EBITDA to Adjusted Interest Expense and Preferred Dividends to be greater than 2.5x. We believe these ratios are important measures as they are commonly used by investors and analysts to assess the relative financial risk associated with balance sheets of companies within the same industry, and they are believed to be similar to measures used by rating agencies to assess entity credit quality.

We calculate Adjusted EBITDA, Pro forma EBITDA and Adjusted Interest used in our leverage ratios based on the most recent three month amounts, annualized.

Proportionate Debt, as used in our leverage ratios, is a non-GAAP measure and includes our share of the long-term, non-recourse property debt secured by apartment communities in the Real Estate portfolio ~~our one-year term loan,~~ and outstanding borrowings under our revolving credit facility and term loan, reduced by our share of the cash and restricted cash of our consolidated and unconsolidated partnerships owning communities in our Real Estate portfolio, and also by our investment in the subordinate tranches of a securitization trust that holds certain of our property debt, ~~(essentially, our~~which is essentially an investment in our own non-recourse property ~~loans).~~

We exclude from our leverage the non-recourse property debt obligations of consolidated partnerships served by our Asset Management business. The non-recourse property debt obligations of these partnerships are not our obligations and have limited effect on the amount of fees and other payments we expect to receive.loans.

In our Proportionate Debt computation, we increase our recorded debt by unamortized debt issue costs because these amounts represent cash expended in earlier periods and do not reduce our contractual obligations, and we reduce our recorded debt by the

amounts of cash and restricted cash on-hand ~~(such restricted cash amounts being~~which are primarily restricted under the terms of our property debt ~~agreements),~~agreements, assuming these amounts would be used to reduce our outstanding leverage. We further reduce our recorded debt by the value of our investment in a securitization trust that holds certain of our property debt, as our payments of principal and interest associated with such property debt will ultimately repay our investments in the trust. We exclude from our leverage the non-recourse property debt obligations of consolidated partnerships served by our Asset Management business, as these were not our obligations and they had a limited effect on the amount of fees and other amounts we expected to receive in our role as asset manager for these partnerships. These obligations were derecognized in connection with the sale of our Asset Management business on July 25, 2018.

We believe Proportionate Debt is useful to investors as it is a measure of our net exposure to debt obligations. Proportionate Debt, as used in our leverage ratios, is calculated as set forth in the table below.

Preferred Equity, as used in our leverage ratios, represents the redemption amounts for Aimco’s preferred stock and the Aimco Operating Partnership’s preferred OP Units. Preferred Equity, although perpetual in nature, is another component of our overall leverage.

Adjusted EBITDA is a non-GAAP ~~performance~~ measure. We believe Adjusted EBITDA provides investors relevant and useful information because it allows investors to view income from our operations on an unleveraged basis, before the effects of taxes, depreciation and amortization, gains or losses on sales of and impairment losses related to real estate, and various other items described below.

Adjusted EBITDA represents Aimco’s share of the consolidated amount of our net income, adjusted to exclude the effect of the following items for the reasons set forth below:

Adjusted Interest Expense, defined below, to allow investors to compare a measure of our earnings before the effects of our indebtedness with that of other companies in the real estate industry;

preferred dividends, to allow investors to compare a measure of our performance before the effects of our capital structure (including indebtedness) with that of other companies in the real estate industry;

income taxes, to allow investors to measure our performance independent of income taxes, which may vary significantly from other companies within our industry due to leverage and tax planning strategies, among other ~~considerations;~~factors;

depreciation and amortization, gains or losses on dispositions and impairment losses related to real estate, for similar reasons to those set forth in our discussion of FFO, Pro forma FFO and AFFO in the preceding section; and

other items, including gains on dispositions of non-depreciable assets, as these are items that periodically affect our operations but that are not necessarily representative of our ability to service our debt ~~obligation.~~obligations.

In addition to Adjusted EBITDA, from time to time, we compute Pro forma EBITDA, which is also a non-GAAP financial measure that we believe is helpful to investors because it allows investors to view income from our operations after adjustment for significant acquisitions that have occurred during the quarter or dispositions that occurred subsequent to the quarter but for which the proceeds have been reflected in Proportionate Debt, as described above.

While Adjusted EBITDA ~~is a~~and Pro forma EBITDA are relevant ~~measure~~measures of performance and isare commonly used in leverage ratios, ~~it does~~they do not represent net income as defined by GAAP, and should not be considered as ~~an alternative~~alternatives to net income in evaluating our performance. Further, our definition and computation of Adjusted EBITDA and Pro forma EBITDA may not be comparable to similar measures reported by other companies.

Adjusted Interest Expense, as calculated in our leverage ratios, is a non-GAAP measure that we believe is meaningful for investors and analysts as it presents our share of current recurring interest requirements associated with leverage. ~~Our calculation of Adjusted Interest Expense is set forth in the table below.~~ Adjusted Interest Expense represents our proportionate share of interest expense on non-recourse property debt encumbering apartment communities in the Real Estate portfolio and interest expense on our term loan and revolving credit facility borrowings. We exclude from our calculation of Adjusted Interest Expense:

debt prepayment penalties, which are items that, from time to time, affect our operating results but are not representative of our scheduled interest obligations;

the amortization of debt issue costs, as these amounts have been expended in previous periods and are not representative of our current or prospective debt service requirements; and

the income we receive on our investment in the securitization trust that holds certain of our property debt, as this income is being generated indirectly from interest we pay with respect to property debt held by the trust.

Preferred Dividends represents the preferred dividends paid on Aimco’s preferred stock and the preferred distributions paid on the Aimco Operating Partnership’s preferred OP Units, exclusive of preferred equity redemption related amounts. We add Preferred Dividends to Adjusted Interest Expense for a more complete picture of the interest and dividend requirements of our leverage, inclusive of perpetual preferred equity.

As further discussed under the Balance Sheet and Liquidity heading within the Executive Overview, we revised our method of calculating leverage ratios to use the most recent quarter’s results, annualized. Additionally, we further adjusted our three months ended June 30, 2017 leverage ratios to reflect the Palazzo acquisition as if it had closed on April 1, 2017.

Reconciliations of the most closely related GAAP measures to our calculations of Proportionate Debt, Preferred Equity, Adjusted EBITDA, Pro forma EBITDA, Adjusted Interest Expense and Preferred Dividends, as used in our leverage ratios, are as follows (in thousands):

June 30, 2017
Total indebtedness associated with Real Estate portfolio $ 4,111,942
Adjustments:
Debt issue costs related to non-recourse property debt 17,154
Debt issue costs related to term loan 960
Proportionate share adjustments related to debt obligations of consolidated and unconsolidated partnerships (10,116 )
Cash and restricted cash (84,200 )
Proportionate share adjustments related to cash and restricted cash held by consolidated and unconsolidated partnerships 1,095
Securitization trust investment and other (78,186 )
Proportionate Debt $ 3,958,649

Preferred stock 125,000
Preferred OP Units 101,537
Preferred Equity 226,537
Proportionate Debt and Preferred Equity $ 4,185,186

Three Months Ended June 30, 2017
Net income attributable to Aimco Common Stockholders $ 15,843
Adjustments:
Adjusted Interest Expense 39,254
Income tax benefit (5,023 )
Depreciation and amortization, net of noncontrolling interest 87,193
Gains on disposition and other, net of income taxes and noncontrolling partners’ interests (1,331 )
Preferred stock dividends 2,149
Net income attributable to noncontrolling interests in Aimco Operating Partnership 2,786
Other items, net (179 )
Pro Forma adjustment (described above) 3,876
Adjusted EBITDA $ 144,568

Annualized Adjusted EBITDA $ 578,272



	June 30, 2018
Total indebtedness associated with Real Estate portfolio	$	4,261,209
Adjustments:
Debt issue costs related to non-recourse property debt	19,586
Debt issue costs related to term loan	199
Proportionate share adjustments related to debt obligations of consolidated and unconsolidated partnerships	(9,554		)
Cash and restricted cash	(87,820		)
Proportionate share adjustments related to cash and restricted cash held by consolidated and unconsolidated partnerships	1,085
Securitization trust investment and other	(84,565		)
Pro forma adjustment	(745,000		)
Pro forma Proportionate Debt (1)	$	3,355,140

Preferred stock	$	125,000
Preferred OP Units	101,332
Preferred Equity	226,332
Pro forma Proportionate Debt and Preferred Equity (1)	$	3,581,472

(1) Amounts have been adjusted to reflect proceeds, net of transaction costs, from the July 2018 sales of our Asset Management business, our four affordable apartment communities located in Hunters Point and Chestnut Hill Village.

Three Months Ended June 30, 2017
Interest expense $ 46,858
Interest expense related to non-recourse property debt obligations of consolidated partnerships served by our Asset Management business (3,480 )
Interest expense attributable to Real Estate portfolio 43,378
Adjustments:
Proportionate share adjustments related to interest of consolidated and unconsolidated partnerships (1,167 )
Debt prepayment penalties and other non-interest items (60 )
Amortization of debt issue costs (1,153 )
Interest income earned on securitization trust investment (1,744 )
Adjusted Interest Expense $ 39,254

Preferred stock dividends 2,149
Preferred OP Unit distributions 1,939
Preferred Dividends 4,088
Adjusted Interest Expense and Preferred Dividends $ 43,342

Annualized Adjusted Interest Expense $ 157,016
Annualized Adjusted Interest Expense and Preferred Dividends $ 173,368



	Three Months Ended June 30, 2018
Net income attributable to Aimco Common Stockholders	$	2,817
Adjustments:
Adjusted Interest Expense	42,425
Income tax benefit	(4,395		)
Depreciation and amortization, net of noncontrolling interest	97,561
Gain on disposition and other, inclusive of related income taxes and net of noncontrolling partners’ interests	(132		)
Preferred stock dividends	2,149
Net income attributable to noncontrolling interests in Aimco Operating Partnership	2,145
Adjusted EBITDA	$	142,570
Pro forma adjustment	(11,517		)
Pro forma EBITDA (1)	$	131,053

Annualized Adjusted EBITDA	$	570,280
Annualized Pro forma EBITDA	$	524,212

(1) Pro forma EBITDA has been adjusted to reflect the impact of the July 2018 dispositions of our Asset Management business, our four affordable apartment communities located in Hunters Point and Chestnut Hill Village. Pro forma EBITDA has also been adjusted to reflect the acquisition of the four Philadelphia apartment communities as if the transaction had closed on April 1, 2018.



	Three Months Ended June 30, 2018
Interest expense	$	49,906
Interest expense related to non-recourse property debt obligations of consolidated partnerships served by our Asset Management business	(3,241		)
Interest expense attributable to Real Estate portfolio	46,665
Adjustments:
Proportionate share adjustments related to interest of consolidated and unconsolidated partnerships	(101		)
Debt prepayment penalties and other non-interest items	(590		)
Amortization of debt issue costs	(1,664		)
Interest income earned on securitization trust investment	(1,885		)
Adjusted Interest Expense	$	42,425

Preferred stock dividends	2,149
Preferred OP Unit distributions	1,934
Preferred Dividends	4,083
Adjusted Interest Expense and Preferred Dividends	$	46,508

Annualized Adjusted Interest Expense	$	169,700
Annualized Adjusted Interest Expense and Preferred Dividends	$	186,032

Liquidity and Capital Resources

Liquidity

Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flow from our operations. Additional sources are proceeds from sales of apartment communities, proceeds from refinancings of existing property debt, borrowings under new property debt, borrowings under our Credit Agreement, as defined below, including our revolving credit facility and proceeds from equity offerings.

Our principal uses for liquidity include normal operating activities, payments of principal and interest on outstanding property debt, capital expenditures, dividends paid to stockholders, distributions paid to noncontrolling interest partners and acquisitions of apartment communities. We use our cash and cash equivalents and our cash provided by operating activities to meet short-term liquidity needs. In the event that our cash and cash equivalents and cash provided by operating activities are not sufficient to cover

our short-term liquidity needs, we have additional means, such as short-term borrowing availability and proceeds from apartment community sales and refinancings. We may use our revolving credit facility for working capital and other short-term purposes, such as funding investments on an interim basis. We expect to meet our long-term liquidity requirements, such as debt maturities, redevelopment spending and apartment community acquisitions, through primarily non-recourse, long-term borrowings, ~~(primarily non-recourse),~~ the issuance of equity securities (including OP Units), the sale of apartment communities and cash generated from operations.

As of June 30, ~~2017,~~2018, our primary sources of liquidity were as follows:

$~~44.9~~46.7 million in cash and cash equivalents;

$~~39.3~~41.1 million of restricted cash, which consists primarily of escrows related to resident security deposits and reserves and escrows held by lenders for capital additions, property taxes and insurance; and

$~~343.4~~367.5 million of ~~available~~ capacity to borrow under our revolving credit facility ~~(which is more fully described below),~~ after consideration of outstanding borrowings of ~~$245.7~~$220.2 million and ~~$10.9~~$12.3 million of letters of credit backed by the facility. After the completion of the sale of our Asset Management business, our four affordable apartment communities located in Hunters Point and Chestnut Hill Village in July 2018, we used the proceeds to repay the outstanding borrowings on our revolving credit facility. On a pro forma basis, giving effect to the application of such proceeds, we would have had the capacity to borrow $592.9 million under our revolving credit facility and additional cash of approximately $207 million.

At June 30, ~~2017,~~2018, we also held unencumbered apartment communities with an estimated fair market value of approximately ~~$1.8~~$2.0 billion. Each of the amounts presented above exclude amounts attributable to partnerships served by our Asset Management ~~business.~~

business, which was sold on July 25, 2018.

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 many lenders are active in the market. However, any adverse changes in the lending environment could negatively affect our liquidity. We believe we have mitigated much of this exposure by reducing our short and intermediate term maturity risk through refinancing such loans with long-dated, fixed-rate property debt. However, if property financing options become unavailable for our further debt needs, we may consider alternative sources of liquidity, such as reductions in capital spending or proceeds from apartment community dispositions.

Two credit rating agencies rate our creditworthiness and both have rated our credit and outlook as BBB- (stable), an investment grade rating. Our investment grade rating would be useful in accessing capital through the sale of bonds in private or public transactions. However, our intention and historical practice has been to raise debt capital in the form of property-level, non-recourse, long-dated, fixed-rate, amortizing debt, the cost of which is generally less than that of recourse debt and the terms of which also provide for greater balance sheet safety.

As of June 30, ~~2017,~~2018, approximately ~~83.4%~~84.7% of our leverage consisted of property-level, non-recourse, long-dated, amortizing debt. Approximately ~~97.7%~~96.5% of this property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates and inflation. The weighted average maturity of our property-level debt was ~~7.1~~7.0 years.

For property-level debt encumbering the communities in our Real Estate portfolio, ~~$217.9~~$6.6 million of our unpaid principal balances mature during the remainder of ~~2017,~~2018, and on average, ~~9.2%~~12.8% of our unpaid principal balance will mature each year from ~~2018~~2019 through ~~2020.~~2021.

While our primary source of leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt, we also have a Senior Secured Credit Agreement with a syndicate of financial institutions, which we refer to as our Credit Agreement. Our Credit Agreement provides for $600.0 million of revolving loan commitments. As of June 30, ~~2017,~~2018, we had ~~$245.7~~$220.2 million of outstanding borrowings under our revolving loan commitments, representing 4.8% of our total leverage, which we repaid with proceeds from the ~~Credit Agreement~~.sale of our Asset Management business on July 25, 2018. The Credit Agreement provides us with an option to expand the aggregate loan commitments, subject to customary conditions, by up to $200.0 million.

~~On June 30, 2017, we amended the~~The Credit Agreement ~~to provide~~also provided for a $250.0 million term loan, ~~to fund partially~~which represented 5.5% of our ~~acquisition~~total leverage as of ~~limited partner interests in the Palazzo joint venture. The term loan matures on~~ June 30, 2018 ~~has a one-year extension option~~ and ~~bears interest at 30-day LIBOR plus 135 basis points.~~was extended to mature on September 30, 2018. Subsequent to the completion of the sale of our Asset Management business, we utilized proceeds from the sale to repay the term loan.

As of June 30, ~~2017,~~2018, our outstanding perpetual preferred equity represented approximately ~~5.2%~~5.0% of our total leverage. Our preferred securities are perpetual in nature; however, for illustrative purposes, we compute the weighted average maturity of our total leverage assuming a 40-year maturity for our preferred securities.

The combination of non-recourse property-level debt, borrowings under our Credit Agreement and perpetual preferred equity that comprises ~~the majority of~~ our total leverage, reduces our refunding and re-pricing risk. The weighted average maturity for our total leverage described above was ~~8.3~~8.2 years as of June 30, ~~2017.~~2018. We used these proceeds, net of transaction costs from the sales of our Asset Management business, our four affordable apartment communities located in Hunters Point and Chestnut Hill Village to repay outstanding borrowings on the revolving credit facility and the term loan in July 2018, after giving effect to these repayments, on a pro forma basis, the weighted average maturity of our total leverage would be 8.9 years.

Under the Credit Agreement, we have agreed to maintain a Fixed Charge Coverage ratio of 1.40x, as well as comply with other covenants customary for similar revolving credit arrangements. For the trailing twelve month period ended June 30, ~~2017,~~2018, our Fixed Charge Coverage ratio was ~~1.97x,~~2.00x, compared to a ratio of ~~1.94x~~1.97x for the trailing twelve month period ended June 30, ~~2016.~~2017. We expect to remain in compliance with this covenant during the next 12 months.

Changes in Cash, ~~and~~ Cash Equivalents and Restricted Cash

The following discussion relates to changes in consolidated cash, ~~and~~ cash equivalents and restricted cash due to operating, investing and financing activities, which are presented in our condensed consolidated statements of cash flows included in Item 1 of this report.

Operating Activities

For the six months ended June 30, ~~2017,~~2018, net cash provided by operating activities was ~~$176.0~~$185.6 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 six months ended June 30, ~~2017, decreased~~2018, increased by ~~$0.8~~$8.1 million as compared to ~~the six months ended June 30, 2016,~~2017, due to a decrease in net operating income associated with apartment communities we sold during 2016, and the amount and timing of payments of real estate taxes and other items in 2017 as compared to 2016. These decreases in cash from operating activities were largely offset by improved operating results of our Same Store communities and increased contribution from our redevelopment and lease-up communities, ~~and~~partially offset by lower ~~cash paid for interest.~~

net operating income associated with apartment communities sold in 2017.

Investing Activities

For the six months ended June 30, ~~2017,~~2018, net cash used in investing activities of ~~$177.2~~$293.7 million consisted primarily of the acquisitions of Bent Tree Apartments and four apartment communities in Philadelphia and capital ~~expenditures.~~expenditures, partially offset by proceeds from the disposition of apartment communities. Capital expenditures totaled ~~$176.4~~$164.1 million and ~~$166.0~~$176.4 million during the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. We generally fund capital expenditures with cash provided by operating activities and cash proceeds from apartment community sales.

Further information about the acquisitions of Bent Tree Apartments and the four apartment communities in Philadelphia, and sales of the three apartment communities completed during the six months ended June 30, 2018, is included in Note 3 to the condensed consolidated financial statements in Item 1.

Capital additions for our Real Estate segment totaled $158.4 million and $163.2 million during the six months ended June 30, 2018 and 2017, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of apartment communities.

We categorize capital spending for communities in our Real Estate portfolio broadly into six primary categories:

capital replacements, which represent capital additions made to replace the ~~consumed~~ portion of acquired ~~capital assets;~~apartment communities consumed during our period of ownership;

capital improvements, which ~~are non-redevelopment~~represent capital additions ~~that are~~ made to ~~enhance~~replace the ~~value, profitability or useful life~~portion of anacquired apartment ~~community from its original purchase condition;~~communities consumed prior to our period of ownership;

~~property upgrades,~~capital enhancements, which may include kitchen and bath remodeling, energy conservation projects and investments in longer-lived materials designed to reduce turnover costs and maintenance, all of which are generally lesser in scope than redevelopment additions and do not significantly disrupt property operations;

redevelopment additions, which represent capital additions intended to enhance the value of anthe apartment community through the ability to generate higher average rental ~~revenues,~~rates, and may include costs related to entitlement, which enhance the value of a community through increased density, and costs related to renovation of exteriors, common areas or apartment homes;

development additions, which represent construction and related capitalized costs associated with development of apartment communities; and

casualty capital additions, which represent construction and related capitalized costs incurred in connection with the restoration of an ~~asset~~apartment community after a casualty event such as a severe snow storm, hurricane, tornado, flood or fire.

We exclude from these measures the amounts of capital spending related to apartment communities sold or classified as held for sale at the end of the period, as well as amounts expended by consolidated partnerships served by our Asset Management business as such amounts ~~generally do~~did not affect the amount of ~~cash flow~~proceeds we ~~expect to receive~~received from the ~~operation and ultimate disposition~~sale of ~~these communities.~~our Asset Management business in July 2018. We have also excluded from these measures indirect capitalized costs, which are allocated later in the year to apartment communities with capital additions, and their related capital spending categories.

A summary of the capital spending for these categories, along with a reconciliation of the total for these categories to the capital expenditures reported in the accompanying condensed consolidated statements of cash ~~flow~~flows for the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, are presented below ~~(dollars in~~(in thousands):


	Six Months Ended June 30,					Six Months Ended June 30,
	2017		2016			2018			2017
Real Estate
Capital replacements	$	21,544	$	18,008		$	14,569		$	19,363
Capital improvements	8,144		6,517			5,600			7,985
Property upgrades	50,777		32,178
Capital enhancements						45,927			44,481
Redevelopment additions	84,825		74,082			70,692			84,665
Development additions	3,137		29,073			17,416			3,137
Casualty replacements	3,837		3,261
Casualty capital additions						4,149			3,566
Real Estate capital additions	172,264		163,119			158,353			163,197
Plus: additions related to apartment communities sold or held for sale and unallocated indirect capitalized costs	237		2,711			7,412			12,149
Plus: additions related to consolidated asset managed communities	3,659		3,057			1,720			814
Consolidated capital additions	176,160		168,887			167,485			176,160
Plus: net change in accrued capital spending	228		(2,857		)	(3,369		)	228
Capital expenditures per consolidated statement of cash flows	$	176,388	$	166,030
Capital expenditures per condensed consolidated statement of cash flows						$	164,116		$	176,388

For the six months ended June 30, ~~2017~~2018 and ~~2016,~~2017, we capitalized ~~$4.2~~$3.9 million and ~~$5.7~~$4.2 million of interest costs, respectively, and ~~$17.4~~$17.7 million and ~~$15.2~~$17.4 million of other direct and indirect costs, respectively.

We invested ~~$50.8~~$45.9 million in ~~property upgrades~~capital enhancements during the six months ended June 30, ~~2017,~~2018, and we anticipate a full year investment ranging from ~~$85~~$80 million to ~~$95~~$100 million.

Redevelopment and Development

~~Information regarding our redevelopment and development communities~~We execute redevelopments using a range of approaches. We prefer to limit risk by executing redevelopments using a phased approach, in which we renovate an apartment community in stages. Smaller phases provide us the flexibility to maintain current earnings while aligning the timing of the completed apartment homes with market demand. The following table summarizes value-creating investments related to redevelopments of this nature at June 30, ~~2017, is presented below~~2018 (dollars in millions):

Location Apartment Homes Approved for Redevelopment or Development Estimated Net Investment Inception-to-Date Net Investment Expected Stabilized Occupancy Expected Net Operating Income Stabilization
Under Redevelopment
Bay Parc Plaza Miami, FL (1) $ 16.0
$ 4.5
(1) (1)
Calhoun Beach Club Minneapolis, MN 275
28.7
1.9
1Q 2020 2Q 2021
Flamingo South Beach Miami, FL (2) 9.7
0.1
(2) (2)
Palazzo at Park La Brea Los Angeles, CA 389
24.5
15.1
1Q 2019 2Q 2020
Palazzo East at Park La Brea Los Angeles, CA 611
28.0
0.6
1Q 2020 2Q 2021
Park Towne Place Philadelphia, PA 701
136.3
130.6
1Q 2018 2Q 2019
Saybrook Pointe San Jose, CA 324
18.3
10.8
1Q 2019 2Q 2020
Yorktown Lombard, IL 292
25.7
13.4
3Q 2018 4Q 2019
In Lease-up
The Sterling Philadelphia, PA 534
71.5
69.8
3Q 2017 4Q 2018
Lease-up complete, NOI stabilization period
One Canal Boston, MA 310
195.0
193.4
1Q 2017 2Q 2018
Total 3,436
$ 553.7
$ 440.2



	Location	Apartment Homes Approved for Redevelopment	Estimated/Potential Net Investment		Inception-to-Date Net Investment
Bay Parc	Miami, FL	15	$	20.0	$	19.4
Calhoun Beach Club	Minneapolis, MN	275	28.7		10.5
Flamingo South Beach	Miami, FL	—	9.7		8.8
Palazzo West at The Grove	Los Angeles, CA	389	24.5		18.3
Saybrook Pointe	San Jose, CA	324	18.3		16.5
Yorktown	Lombard, IL	292	25.7		19.4
Other	Various	92	12.9		10.5
Total		1,387	$	139.8	$	103.4


~~(1)~~	This phase of the redevelopment project encompasses common area and other amenity improvements and the creation of a new retail space. Approval of a second phase of redevelopment, which will include upgrades to all of the apartment homes within the community, is expected during 2017.


~~(2)~~	This phase of the redevelopment encompasses common areas and security system upgrades. Approval of a second phase of redevelopment, which will include upgrades to all of the apartment homes within the community is expected during 2017.

We also undertake ground-up development when warranted by risk-adjusted investment returns, either directly or in connection with the redevelopment of an existing apartment community or, on a more limited basis, at a new location. When smaller redevelopment phases are not possible, we may engage in redevelopment activities where an entire building or community is vacated. The following table summarizes our value-creating investments related to these developments and redevelopments at June 30, 2018 (dollars in millions):



	Location	Apartment Homes Approved for Redevelopment or Development	Estimated/Potential Net Investment		Inception-to-Date Net Investment		Stabilized Occupancy	NOI Stabilization
Anschutz Expansion	Aurora, CO	253	$	87.0	$	3.2	3Q 2021	4Q 2022
Parc Mosaic	Boulder, CO	226	117.0		39.8		4Q 2020	1Q 2022
Park Towne Place	Philadelphia, PA	940	176.0		167.2		1Q 2019	2Q 2020
Total		1,419	$	380.0	$	210.2

Net investment represents the total actual or estimated investment, net of tax and other credits earned as a direct result of our redevelopment or development of the community. For phased redevelopments, potential net investment relates to the current phase of the redevelopment.

~~Net Operating Income~~Stabilized Occupancy represents the period in which we expect to achieve stabilized occupancy, generally greater than 90%.

NOI Stabilization represents the period in which we expect the communities to achieve stabilized rents and operating costs, generally five quarters after occupancy stabilization.

During the six months ended June 30, ~~2017,~~2018, we invested ~~$88.0~~$88.1 million in ~~ongoing~~redevelopment and development. In Center City, Philadelphia, we continued construction on the fourth and final tower of Park Towne Place; lease-up is underway. At June 30, 2018, 90% of the redeveloped homes in the community were leased and 28 of the 136 homes still under renovation were pre-leased.

During the six months ended June 30, 2018, we invested $12.8 million in the development of our Parc Mosaic community in Boulder, Colorado. We expect completion of construction in late 2019 and initial occupancy in the summer of 2019.

Our total estimated or potential net investment in redevelopment and development ~~projects and expanded our redevelopment pipeline by $66.4 million The total estimated net investment for these redevelopment and development communities~~ is ~~$553.7~~$519.8 million with a projected weighted average net operating income yield on these investments of 6.1%.

~~Our~~, assuming untrended rents. Of this total, $313.6 million has been funded. We expect to fund the remaining redevelopment and development ~~activities during~~investment through a combination of leverage and community sales, including the ~~three~~proceeds from the July 25, 2018 sale of our Asset Management business and our four affordable apartment communities located in Hunters Point.

During the six months ended June 30, ~~2017 are discussed in further detail under the Redevelopment and Development heading within the Executive Overview. Additional progress from the three months ended March 31, 2017 is discussed below.~~

~~We completed redevelopment of the 534~~2018, we leased 181 apartment homes at ~~The Sterling during the three months ended March 31, 2017. At~~our redevelopment communities. As of June 30, ~~2017, 90%~~2018, our exposure to lease-up at active redevelopment and development projects was approximately 419 apartment homes, of which 108 were in the ~~homes~~fourth tower of Park Towne Place and 215 were ~~leased. We substantially completed the reconfiguration of the second floor commercial space during the~~being constructed at Parc Mosaic and 96 were located in three months ended June 30, 2017 to attract a full floor tenant, and we commenced upgrades to the third and fourth floor commercial space in order to attract higher quality tenants. We also commenced additional upgrades to residential common areas. We expect to complete the third and fourth floor commercial space and common area upgrades in September 2017.other active redevelopments.

During the ~~three months ended March 31, 2017,~~third quarter, we ~~commenced a phased redevelopment~~expect to exercise our option to acquire approximately two acres of ~~Calhoun Beach Club, a mixed-use residential~~land adjacent to our 21 Fitzsimons apartment community, located ~~in Minneapolis, Minnesota. The redevelopment program, in which we anticipate investing $28.7 million over~~on the University of Colorado Anschutz Medical Campus, for the development of an apartment community. Over the next ~~few~~two years, ~~includes the planned renovation of 275~~we expect to invest approximately $87 million to construct 253 apartment homes ~~as well as common areas.~~and 4,600 square feet of retail space. Upon completion, we will own and operate 853 apartment homes on the campus.

We expect our total development and redevelopment spending to range from ~~$160~~$120 million to $200 million for the year ending December 31, ~~2017.~~

2018.

Financing Activities

For the six months ended June 30, ~~2017,~~2018, net cash provided by financing activities of ~~$3.7~~$104.5 million was primarily attributed to proceeds from ~~the term loan,~~non-recourse property debt and net borrowings on our revolving credit facility, ~~and proceeds from non-recourse property debt, mostly~~partially offset by ~~our acquisition of the limited partner interests in the Palazzo joint venture,~~principal payments on property loans, dividends paid to common security holders, and distributions paid to noncontrolling ~~interests and principal payments on property loans.~~interests.

Net borrowings on our revolving credit facility primarily relate to the timing of apartment community acquisitions and dispositions and of property debt financing ~~activities and apartment community dispositions planned during 2017, as well as the timing of our acquisition of the limited partner interests in the Palazzo joint venture.~~ activities.

Proceeds from non-recourse property debt borrowings during the period consisted of the closing of two fixed-rate, amortizing, non-recourse property loans ~~with~~totaling $242.0 million. These loans have 10-year terms ~~with a total principal balance of $64.9 million. The loans have~~and a weighted average interest rate of ~~3.7%~~3.48%, ~~which represented an average spread of 134~~126 basis points ~~over~~more than the ~~10-year~~corresponding Treasury rate at the time of pricing. The net effect of 2018 fixed-rate property debt refinancing activities has been to lower our weighted average fixed interest rate by 12 basis points since December 31, 2017, to 4.52%, reducing prospective interest expense by more than $4.3 million.

Proceeds from non-recourse property debt borrowing during the period also included the closing of two non-recourse, variable-rate property loans totaling $118.6 million. These loans each have a five-year term and bear interest at 30-day LIBOR plus 1.25%. The five-year terms fill a hole in our laddered maturities and, taken together with the planned repayment of the variable term loan, reduce our exposure to increasing short-term interest rates to less than 8% of our leverage.

We like the discipline of financing our investments in real estate through the use of fixed-rate, amortizing, non-recourse property debt, as the amortization gradually reduces our leverage and reduces our refunding risk, and the fixed-rate provides a hedge against increases in interest ~~rates.~~rates, and the non-recourse feature avoids entity risk.

Principal payments on property loans during the period totaled ~~$91.4~~$257.1 million, consisting of scheduled principal amortization of ~~$43.2~~$42.1 million and repayments of ~~$48.2~~$215.0 million.

Net cash used in financing activities also includes ~~$128.1~~$140.6 million of payments to equity holders, as further detailed in the table below.

Equity and Partners’ Capital Transactions

The following table presents the Aimco Operating Partnership’s distribution activity (including distributions paid to Aimco) during the six months ended June 30, ~~2017~~2018 (in thousands):


Cash distributions paid by the Aimco Operating Partnership to holders of noncontrolling interests in consolidated real estate partnerships	$	1,880	$	7,502
Cash distributions paid by the Aimco Operating Partnership to preferred unitholders (1)	8,185		8,168
Cash distributions paid by the Aimco Operating Partnership to common unitholders (2)	118,069		124,913
Total cash distributions paid by the Aimco Operating Partnership	$	128,134	$	140,583


(1)	$4.3 million represented distributions to Aimco, and $3.9 million represented distributions paid to holders of OP Units.


(2)	$~~112.7~~119.3 million represented distributions to Aimco, and ~~$5.4~~$5.6 million represented distributions paid to holders of OP Units.

The following table presents Aimco’s dividend activity during the six months ended June 30, ~~2017~~2018 (in thousands):


Cash distributions paid by Aimco to holders of noncontrolling interests in consolidated real estate partnerships	$	1,880	$	7,502
Cash distributions paid by Aimco to holders of OP Units	9,296		9,496
Cash dividends paid by Aimco to preferred stockholders	4,297		4,297
Cash dividends paid by Aimco to common stockholders	112,661		119,288
Total cash dividends and distributions paid by Aimco	$	128,134	$	140,583

During the six months ended June 30, 2018, we repurchased $7.6 million of OP Units at an average discount of 20% to our published net asset value.

Future Capital Needs

We expect to fund any future acquisitions, redevelopment, development, and other capital spending principally with proceeds from apartment community sales, short-term borrowings, debt and equity financing and operating cash flows. Our near term business plan does not contemplate the issuance of equity.


ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk

As of June 30, ~~2017,~~2018, on a consolidated basis, we had approximately ~~$83.1~~$133.1 million of variable-rate property debt outstanding, and ~~$495.7~~$470.2 million of variable-rate borrowings under our Credit ~~Agreement.~~Agreement, including a $250.0 million term loan. We estimate that ~~an increase~~a change in 30-day LIBOR of 100 basis points with constant credit risk spreads would ~~result in our net income, the amount of~~reduce or increase net income attributable to Aimco common stockholders and the ~~amount of net income attributable to the~~ Aimco Operating Partnership’s common unitholders ~~being reduced~~ by approximately ~~$5.6~~$3.5 million on an annual basis. ~~We estimate that a decrease~~The term loan was excluded from this estimation as it was repaid in ~~30-day LIBOR of 100 basis points would increase the amounts of our net income by a similar amount.~~

July 2018.

At June 30, ~~2017, we~~2018, our Real Estate segment had approximately ~~$133.4~~$87.8 million in cash and cash equivalents and restricted cash, a portion of which ~~bear~~bears interest at variable rates, ~~and~~which may ~~partially mitigate the effect of an increase~~offset somewhat a change in ~~variable~~ rates on our variable-rate debt discussed above.

We estimate the fair value for debt instruments as described in Note 6 to the condensed consolidated financial statements in Item 1. The estimated ~~aggregate~~ fair value of ~~consolidated debt~~total indebtedness associated with the Real Estate portfolio was approximately ~~$4.5~~$4.2 billion at June 30, ~~2017,~~2018, inclusive of a ~~$93.8~~$68.2 million mark-to-market ~~liability (an increase of $31 million as compared to the~~asset. The mark-to-market liability at December 31, ~~2016).~~2017 was $55.1 million.

If market rates for consolidated fixed-rate debt in our Real Estate segment were higher by 100 basis points with constant credit risk spreads, the estimated fair value of consolidated debt discussed above would decrease from ~~$4.5~~$4.3 billion in the aggregate to ~~$4.3~~$4.2 billion. If market rates for consolidated debt discussed above were lower by 100 basis points with constant credit risk spreads, the estimated fair value of consolidated fixed-rate debt would increase from ~~$4.5~~$4.3 billion in the aggregate to ~~$4.6~~$4.4 billion.


ITEM 4.	Controls and Procedures

Aimco

Disclosure Controls and Procedures

Aimco’s management, with the participation of Aimco’s chief executive officer and chief financial officer, has evaluated the effectiveness of Aimco’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, Aimco’s chief executive officer and chief financial officer have concluded that, as of the end of such period, Aimco’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There has been no change in Aimco’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the second quarter of ~~2017~~2018 that has materially affected, or is reasonably likely to materially affect, Aimco’s internal control over financial reporting.

The Aimco Operating Partnership

Disclosure Controls and Procedures

The Aimco Operating Partnership’s management, with the participation of the chief executive officer and chief financial officer of both Aimco and AIMCO-GP, Inc., the Aimco Operating Partnership’s general partner, has evaluated the effectiveness of the Aimco Operating Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange) as of the end of the period covered by this report. Based on such evaluation, the chief executive officer and chief financial officer of AIMCO-GP, Inc. have concluded that, as of the end of such period, the Aimco Operating Partnership’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There has been no change in the Aimco Operating Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the second quarter of ~~2017~~2018 that has materially affected, or is reasonably likely to materially affect, the Aimco Operating Partnership’s internal control over financial reporting.

PART II. OTHER INFORMATION


ITEM 1A.	Risk Factors

As of the date of this report, there have been no material changes from the risk factors in Aimco’s and the Aimco Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.


ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Aimco

(a) Unregistered Sales of Equity Securities. Aimco did not issue any unregistered shares of Common Stock during the ~~six~~three months ended June 30, ~~2017.~~2018.

(c) Repurchases of Equity Securities. There were no repurchases by Aimco of its common equity securities during the ~~six~~three months ended June 30, ~~2017.~~2018. Aimco’s Board of Directors has, from time to time, authorized Aimco to repurchase shares of its outstanding capital stock. As of June 30, ~~2017,~~2018, Aimco was authorized to repurchase approximately 19.3 million additional shares. This authorization has no expiration date. These repurchases may be made from time to time in the open market or in privately negotiated transactions.

The Aimco Operating Partnership

(a) Unregistered Sales of Equity Securities. ~~The~~On May 1, 2018, the Aimco Operating Partnership ~~did not issue any unregistered~~issued 1.2 million OP Units ~~during~~as partial consideration for the ~~six months ended June 30, 2017.~~acquisition of four apartment communities in the Philadelphia area. Such OP Units were issued in private placement transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

(c) Repurchases of Equity Securities. The Aimco Operating Partnership’s Partnership Agreement generally provides that after holding the common OP Units for one year, limited partners have the right to redeem their common OP Units for cash, subject to the Aimco Operating Partnership’s prior right to cause Aimco to acquire some or all of the common OP Units tendered for redemption in exchange for shares of Common Stock. Common OP Units redeemed for Common Stock are exchanged on a one-for-one basis (subject to antidilution adjustments). During the three months ended June 30, ~~2017,~~2018, no common OP Units were redeemed in exchange for shares of Common Stock. The following table summarizes repurchases, ~~(redemptions~~or redemptions in exchange for ~~cash)~~cash, of the Aimco Operating Partnership’s equity securities for the three months ended June 30, ~~2017.~~2018.

Period
Total
Number
of Units
Purchased

Average
Price
Paid
per Unit

Total Number of
Units Purchased
as Part of
Publicly
Announced
Plans or
Programs (1)

Maximum Number
of Units that
May Yet Be
Purchased Under the Plans or Programs (1)
April 1 - April 30, 2017 114,000
$ 44.52
N/A N/A
May 1 - May 31, 2017 41,991
43.30
N/A N/A
June 1 - June 30, 2017 11,481
43.09
N/A N/A
Total 167,472
$ 44.11



Period	Total Number of Units Purchased	Average Price Paid per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (1)
April 1 - April 30, 2018	4,185	$	39.89	N/A	N/A
May 1 - May 31, 2018	1,951	40.56		N/A	N/A
June 1 - June 30, 2018	10,150	39.62		N/A	N/A
Total	16,286	$	39.80

(1)

The terms of the Aimco Operating Partnership’s Partnership Agreement do not provide for a maximum number of units that may be repurchased, and other than the express terms of its Partnership Agreement, the Aimco Operating Partnership has no publicly announced plans or programs of repurchase. However, ~~whenever~~for Aimco ~~repurchases~~to repurchase shares of its Common Stock, ~~it is expected that Aimco will fund the repurchase with proceeds from a concurrent repurchase by~~ the Aimco Operating Partnership must make a concurrent repurchase of its common partnership units held by Aimco at a price per unit that is equal to the price per share ~~paid~~Aimco pays for its Common Stock.

Aimco and the Aimco Operating Partnership

Dividend and Distribution Payments. Our Credit Agreement includes customary covenants, including a restriction on dividends and distributions and other restricted payments, but permits dividends and distributions during any 12-month period in an aggregate amount of up to 95% of Aimco’s Funds From Operations, subject to certain non-cash adjustments, for such period or such amount as may be necessary for Aimco to maintain its REIT status.


ITEM 6.	Exhibits

The following exhibits are filed with this report:



EXHIBIT NO. (1)	DESCRIPTION
3.1		Charter ~~(Exhibit 3.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015, is incorporated herein by this reference)~~
3.2		Amended and Restated Bylaws (Exhibit 3.1 to Aimco’s Current Report on Form 8-K dated January 26, 2016, is incorporated herein by this reference)
10.1		Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of July 29, 1994, as amended and restated as of February 28, 2007 (Exhibit 10.1 to Aimco’s Annual Report on Form 10-K for the year ended December 31, 2006, is incorporated herein by this reference)
10.2		First Amendment to Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of December 31, 2007 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 31, 2007, is incorporated herein by this reference)
10.3		Second Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of July 30, 2009 (Exhibit 10.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, is incorporated herein by this reference)
10.4		Third Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of September 2, 2010 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated September 1,3, 2010, is incorporated herein by this reference)
10.5		Fourth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of July 26, 2011 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated July 26, 2011, is incorporated herein by this reference)
10.6		Fifth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of August 24, 2011 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated August 24, 2011, is incorporated herein by this reference)
10.7		Sixth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of December 31, 2011 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 31, 2011, is incorporated herein by this reference)
10.8		Seventh Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of May 13, 2014 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated May 13, 2014, is incorporated herein by this reference)
10.9		Eighth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of October 31, 2014 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated ~~October 31,~~November 4, 2014, is incorporated herein by this reference)
10.10		Ninth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of the Aimco Operating Partnership, dated as of August 16, 2016 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated August 16, 2016, is incorporated herein by this reference)
10.11		Tenth Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of ~~AIMCO Properties, L.P.,~~the Aimco Operating Partnership, dated as of January 31, 2017 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated January 31, 2017, is incorporated herein by this reference)
10.12		Second Amended and Restated Senior Secured Credit Agreement, dated as of June 30, 2017, among ~~Apartment Investment and Management Company, AIMCO Properties, L.P.,~~Aimco, the Aimco Operating Partnership, AIMCO/Bethesda Holdings, Inc., the lenders party thereto and KeyBank N. A., as administrative agent, swing line lender and letter of credit issuer. (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated June 30, 2017, is incorporated herein by this reference)
~~31.1~~ 10.13	Aimco Executive Severance Policy (Exhibit 10.1 to Aimco’s Current Report on Form 8-K dated February 22, 2018, is incorporated herein by this reference)*
10.14	Aimco Second Amended and Restated 2015 Stock Award and Incentive Plan (as amended and restated effective February 22, 2018) (Exhibit A to Aimco’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on March 8, 2018 is incorporated herein by this reference)*
10.15	Form of Performance Vesting LTIP II Unit Agreement (2015 Stock Award and Incentive Plan) (Exhibit 10.15 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018, is incorporated herein by this reference)*
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Aimco
31.2		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – Aimco
31.3		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – ~~The~~the Aimco Operating Partnership
31.4		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – ~~The~~the Aimco Operating Partnership

~~32.1~~

EXHIBIT NO. (1)	DESCRIPTION
32.1	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Aimco
32.2		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – ~~The~~the Aimco Operating Partnership



~~EXHIBIT NO. (1)~~		~~DESCRIPTION~~
99.1		Agreement Regarding Disclosure of Long-Term Debt Instruments – Aimco
99.2		Agreement Regarding Disclosure of Long-Term Debt Instruments – ~~The~~the Aimco Operating Partnership
101		XBRL (Extensible Business Reporting Language). The following materials from Aimco’s and the Aimco Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended June 30, ~~2017,~~2018, tagged in XBRL: (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of comprehensive income; (iv) condensed consolidated statements of cash flows; and (v) notes to condensed consolidated financial statements.

(1)	Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request.
*	Management contract or compensatory plan or arrangement

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	APARTMENT INVESTMENT AND MANAGEMENT COMPANY

	By:	/s/ PAUL BELDIN
		Paul Beldin
		Executive Vice President and Chief Financial Officer
		(duly authorized officer and
		principal financial officer)

~~By:~~	~~/s/ ANDREW HIGDON~~
	~~Andrew Higdon~~
	~~Senior Vice President and~~
	~~Chief Accounting Officer~~



	AIMCO PROPERTIES, L.P.

	By:	AIMCO-GP, Inc., its general partner

	By:	/s/ PAUL BELDIN
		Paul Beldin
		Executive Vice President and Chief Financial Officer
		(duly authorized officer and
		principal financial officer)

~~By:~~	~~/s/ ANDREW HIGDON~~
	~~Andrew Higdon~~
	~~Senior Vice President and~~
	~~Chief Accounting Officer~~

Date: August ~~2, 2017~~6, 2018

4648



Balance, December 31, 2016	$	103,201
Distributions to preferred unitholders	(3,888		)
Redemption of preferred units and other	(1,664		)
Net income	3,888
Balance, June 30, 2017	$	101,537



	Three Months Ended June 30, 2017
Net income attributable to Aimco Common Stockholders	$	15,843
Adjustments:
Adjusted Interest Expense	39,254
Income tax benefit	(5,023		)
Depreciation and amortization, net of noncontrolling interest	87,193
Gains on disposition and other, net of income taxes and noncontrolling partners’ interests	(1,331		)
Preferred stock dividends	2,149
Net income attributable to noncontrolling interests in Aimco Operating Partnership	2,786
Other items, net	(179		)
Pro Forma adjustment (described above)	3,876
Adjusted EBITDA	$	144,568

Annualized Adjusted EBITDA	$	578,272



	Three Months Ended June 30, 2017
Interest expense	$	46,858
Interest expense related to non-recourse property debt obligations of consolidated partnerships served by our Asset Management business	(3,480		)
Interest expense attributable to Real Estate portfolio	43,378
Adjustments:
Proportionate share adjustments related to interest of consolidated and unconsolidated partnerships	(1,167		)
Debt prepayment penalties and other non-interest items	(60		)
Amortization of debt issue costs	(1,153		)
Interest income earned on securitization trust investment	(1,744		)
Adjusted Interest Expense	$	39,254

Preferred stock dividends	2,149
Preferred OP Unit distributions	1,939
Preferred Dividends	4,088
Adjusted Interest Expense and Preferred Dividends	$	43,342

Annualized Adjusted Interest Expense	$	157,016
Annualized Adjusted Interest Expense and Preferred Dividends	$	173,368



	Location	Apartment Homes Approved for Redevelopment or Development	Estimated Net Investment		Inception-to-Date Net Investment		Expected Stabilized Occupancy	Expected Net Operating Income Stabilization
Under Redevelopment
Bay Parc Plaza	Miami, FL	(1)	$	16.0	$	4.5	(1)	(1)
Calhoun Beach Club	Minneapolis, MN	275	28.7		1.9		1Q 2020	2Q 2021
Flamingo South Beach	Miami, FL	(2)	9.7		0.1		(2)	(2)
Palazzo at Park La Brea	Los Angeles, CA	389	24.5		15.1		1Q 2019	2Q 2020
Palazzo East at Park La Brea	Los Angeles, CA	611	28.0		0.6		1Q 2020	2Q 2021
Park Towne Place	Philadelphia, PA	701	136.3		130.6		1Q 2018	2Q 2019
Saybrook Pointe	San Jose, CA	324	18.3		10.8		1Q 2019	2Q 2020
Yorktown	Lombard, IL	292	25.7		13.4		3Q 2018	4Q 2019
In Lease-up
The Sterling	Philadelphia, PA	534	71.5		69.8		3Q 2017	4Q 2018
Lease-up complete, NOI stabilization period
One Canal	Boston, MA	310	195.0		193.4		1Q 2017	2Q 2018
Total		3,436	$	553.7	$	440.2