Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________________________________________________________________
Form 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20172018
OR
oTRANSITION 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 filerx Accelerated filero
Non-accelerated filero(Do not check if a smaller reporting company)Smaller reporting companyo
   Emerging growth companyo
     
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 filero Accelerated filerx
Non-accelerated filero(Do not check if a smaller reporting company)Smaller reporting companyo
   Emerging growth companyo
     
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
oNox
AIMCO Properties, L.P.: Yes
oNox 
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
The number of shares of Apartment Investment and Management Company
Class A Common Stock outstanding as of October 31, 2017: 157,023,314November 1, 2018: 155,644,246
The number of AIMCO Properties, L.P. Partnership Common Units outstanding as of October 31, 2017: 164,458,302November 1, 2018: 164,665,715
 

EXPLANATORY NOTE
This filing combines the reports on Form 10-Q for the quarterly period ended September 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 September 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
2322
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
43
ITEM 4.
Controls and Procedures
43
 
PART II. OTHER INFORMATION
 
ITEM 1A.
Risk Factors
44
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
44
ITEM 6.
Exhibits
45
Signatures
.
47


PART I. FINANCIAL INFORMATION

ITEM 1.Financial Statements

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

 September 30,
2017		 December 31,
2016
ASSETS   
Buildings and improvements$6,264,146
 $6,106,298
Land1,827,748
 1,824,819
Total real estate8,091,894
 7,931,117
Accumulated depreciation(2,549,197) (2,421,357)
Net real estate5,542,697
 5,509,760
Cash and cash equivalents38,780
 45,821
Restricted cash47,565
 36,405
Other assets247,722
 293,768
Assets of partnerships served by Asset Management business:   
Real estate, net228,830
 245,648
Cash and cash equivalents16,901
 15,423
Restricted cash30,350
 33,501
Other assets16,493
 52,492
Total assets$6,169,338
 $6,232,818
    
LIABILITIES AND EQUITY   
Non-recourse property debt secured by Real Estate communities, net$3,556,668
 $3,630,276
Term loan, net249,252
 —
Revolving credit facility borrowings356,220
 17,930
Total indebtedness associated with Real Estate portfolio4,162,140
 3,648,206
Accrued liabilities and other207,533
 218,937
Liabilities of partnerships served by Asset Management business:   
Non-recourse property debt, net228,382
 236,426
Accrued liabilities and other20,135
 62,630
Deferred income13,922
 18,452
Total liabilities4,632,112
 4,184,651
Preferred noncontrolling interests in Aimco Operating Partnership101,537
 103,201
Commitments and contingencies (Note 4)
 
Equity:   
Perpetual Preferred Stock125,000
 125,000
Common Stock, $0.01 par value, 500,787,260 shares authorized, 157,023,314 and 156,888,381 shares issued/outstanding at September 30, 2017 and December 31, 2016, respectively1,570
 1,569
Additional paid-in capital3,898,441
 4,051,722
Accumulated other comprehensive income1,898
 1,011
Distributions in excess of earnings(2,572,723) (2,385,399)
Total Aimco equity1,454,186
 1,793,903
Noncontrolling interests in consolidated real estate partnerships(2,955) 151,121
Common noncontrolling interests in Aimco Operating Partnership(15,542) (58)
Total equity1,435,689
 1,944,966
Total liabilities and equity$6,169,338
 $6,232,818

 September 30,
2018		 December 31,
2017
ASSETS   
Buildings and improvements$6,503,956
 $6,174,149
Land1,765,678
 1,753,604
Total real estate8,269,634
 7,927,753
Accumulated depreciation(2,538,979) (2,522,358)
Net real estate5,730,655
 5,405,395
Cash and cash equivalents58,032
 60,498
Restricted cash46,267
 34,827
Other assets350,067
 272,739
Assets held for sale—
 17,959
Assets of partnerships served by Asset Management business:   
Real estate, net—
 224,873
Cash and cash equivalents—
 16,288
Restricted cash—
 30,928
Other assets—
 15,533
Total assets$6,185,021
 $6,079,040
    
LIABILITIES AND EQUITY   
Non-recourse property debt secured by Real Estate communities, net$3,646,789
 $3,545,109
Term loan, net—
 249,501
Revolving credit facility borrowings—
 67,160
Total indebtedness associated with Real Estate portfolio3,646,789
 3,861,770
Accrued liabilities and other242,782
 213,027
Liabilities of partnerships served by Asset Management business:   
Non-recourse property debt, net—
 227,141
Accrued liabilities and other—
 19,812
Total liabilities3,889,571
 4,321,750
Preferred noncontrolling interests in Aimco Operating Partnership101,320
 101,537
Commitments and contingencies (Note 4)
 
Equity:   
Perpetual Preferred Stock125,000
 125,000
Common Stock, $0.01 par value, 500,787,260 shares authorized, 157,352,109 and 157,189,447 shares issued/outstanding at September 30, 2018 and December 31, 2017, respectively1,574
 1,572
Additional paid-in capital3,888,312
 3,900,042
Accumulated other comprehensive income4,850
 3,603
Distributions in excess of earnings(1,894,054) (2,367,073)
Total Aimco equity2,125,682
 1,663,144
Noncontrolling interests in consolidated real estate partnerships(1,605) (1,716)
Common noncontrolling interests in Aimco Operating Partnership70,053
 (5,675)
Total equity2,194,130
 1,655,753
Total liabilities and equity$6,185,021
 $6,079,040

See notes to condensed consolidated financial statements.

3
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
2017 2016 2017 20162018 2017 2018 2017
REVENUES              
Rental and other property revenues attributable to Real Estate$233,708
 $225,902
 $686,639
 $672,234
$234,048
 $233,708
 $690,571
 $686,639
Rental and other property revenues of partnerships served by Asset Management business18,232
 18,213
 55,327
 56,233
5,022
 18,232
 42,830
 55,327
Tax credit and transaction revenues2,695
 4,789
 8,242
 17,894
3,411
 2,695
 6,987
 8,242
Total revenues254,635
 248,904
 750,208
 746,361
242,481
 254,635
 740,388
 750,208
              
OPERATING EXPENSES              
Property operating expenses attributable to Real Estate81,179
 82,756
 239,819
 241,936
78,254
 81,244
 232,572
 239,954
Property operating expenses of partnerships served by Asset Management business8,865
 9,410
 26,445
 28,199
2,608
 8,872
 20,865
 26,458
Depreciation and amortization92,513
 84,848
 268,836
 245,356
96,406
 92,513
 286,439
 268,836
General and administrative expenses10,529
 11,615
 31,599
 35,529
12,479
 10,529
 37,196
 31,599
Other expenses, net2,344
 1,543
 6,809
 8,639
5,780
 2,272
 13,624
 6,661
Total operating expenses195,430
 190,172
 573,508
 559,659
195,527
 195,430
 590,696
 573,508
Operating income59,205
 58,732
 176,700
 186,702
46,954
 59,205
 149,692
 176,700
Interest income2,047
 2,163
 6,251
 5,841
2,712
 2,047
 7,768
 6,251
Interest expense(50,682) (49,377) (145,422) (145,905)(45,492) (50,682) (143,193) (145,422)
Other, net6,937
 558
 7,602
 5,541
(283) 6,937
 141
 7,602
Income before income taxes and gain on dispositions17,507
 12,076
 45,131
 52,179
Income before income taxes and gain (loss) on dispositions3,891
 17,507
 14,408
 45,131
Income tax benefit4,870
 3,462
 14,878
 16,469
27,941
 4,870
 69,724
 14,878
Income before gain on dispositions22,377
 15,538
 60,009
 68,648
Gain (loss) on dispositions of real estate, inclusive of tax(233) 14,498
 881
 237,226
Income before gain (loss) on dispositions31,832
 22,377
 84,132
 60,009
Gain (loss) on dispositions of real estate and the Asset Management business, inclusive of related income tax572,085
 (233) 622,631
 881
Net income22,144
 30,036
 60,890
 305,874
603,917
 22,144
 706,763
 60,890
Noncontrolling interests:              
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships249
 (12,489) (1,515) (22,096)
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships(1,794) 249
 (8,045) (1,515)
Net income attributable to preferred noncontrolling interests in Aimco Operating Partnership(1,938) (1,842) (5,826) (5,276)(1,934) (1,938) (5,805) (5,826)
Net income attributable to common noncontrolling interests in Aimco Operating Partnership(820) (192) (2,164) (12,499)(30,198) (820) (34,093) (2,164)
Net income attributable to noncontrolling interests(2,509) (14,523) (9,505) (39,871)(33,926) (2,509) (47,943) (9,505)
Net income attributable to Aimco19,635
 15,513
 51,385
 266,003
569,991
 19,635
 658,820
 51,385
Net income attributable to Aimco preferred stockholders(2,148) (4,323) (6,445) (9,838)(2,148) (2,148) (6,445) (6,445)
Net income attributable to participating securities(57) (14) (176) (384)(814) (57) (1,004) (176)
Net income attributable to Aimco common stockholders$17,430
 $11,176
 $44,764
 $255,781
$567,029
 $17,430
 $651,371
 $44,764
              
Net income attributable to Aimco per common share – basic and diluted$0.11
 $0.07
 $0.29
 $1.64
Net income attributable to Aimco per common share – basic$3.62
 $0.11
 $4.16
 $0.29
Net income attributable to Aimco per common share – diluted$3.61
 $0.11
 $4.15
 $0.29
Dividends declared per common share$0.36
 $0.33
 $1.08
 $0.99
$0.38
 $0.36
 $1.14
 $1.08
              
Weighted average common shares outstanding – basic156,306
 156,079
 156,290
 155,944
156,711
 156,306
 156,674
 156,290
Weighted average common shares outstanding – diluted156,835
 156,527
 156,768
 156,341
156,938
 156,835
 156,836
 156,768

See notes to condensed consolidated financial statements.

4
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
2017 2016 2017 20162018 2017 2018 2017
Net income$22,144
 $30,036
 $60,890
 $305,874
$603,917
 $22,144
 $706,763
 $60,890
Other comprehensive income (loss):       
Unrealized gains (losses) on interest rate swaps75
 337
 (280) (748)
Other comprehensive gain:       
Realized and unrealized gains (losses) on interest rate swaps—
 75
 —
 (280)
Losses on interest rate swaps reclassified into earnings from accumulated other comprehensive loss594
 390
 1,349
 1,208
757
 594
 1,391
 1,349
Unrealized gains (losses) on investments in debt securities classified as available-for-sale381
 (336) (40) 5,615
Other comprehensive income1,050
 391
 1,029
 6,075
Unrealized gains (losses) on available for sale debt securities979
 381
 (72) (40)
Other comprehensive gain1,736
 1,050
 1,319
 1,029
Comprehensive income23,194
 30,427
 61,919
 311,949
605,653
 23,194
 708,082
 61,919
Comprehensive income attributable to noncontrolling interests(2,557) (14,639) (9,647) (40,341)(34,020) (2,557) (48,015) (9,647)
Comprehensive income attributable to Aimco$20,637
 $15,788
 $52,272
 $271,608
$571,633
 $20,637
 $660,067
 $52,272


See notes to condensed consolidated financial statements.

5
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 Nine Months Ended
 September 30,
 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$60,890
 $305,874
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization268,836
 245,356
Gain on dispositions of real estate, net of tax(881) (237,226)
Other adjustments(14,482) (10,530)
Net changes in operating assets and operating liabilities(29,338) (27,018)
Net cash provided by operating activities285,025
 276,456
CASH FLOWS FROM INVESTING ACTIVITIES   
Purchases of real estate(11,706) (287,952)
Capital expenditures(266,623) (259,323)
Proceeds from dispositions of real estate11,027
 325,344
Purchases of corporate assets(7,358) (6,472)
Change in restricted cash1,607
 (15,992)
Other investing activities(1,086) 10,134
Net cash used in investing activities(274,139) (234,261)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from non-recourse property debt165,785
 190,714
Principal repayments on non-recourse property debt(250,674) (253,328)
Proceeds from term loan250,000
 —
Net borrowings on revolving credit facility338,290
 267,780
Redemption of Preferred Stock—
 (34,791)
Payment of dividends to holders of Preferred Stock(6,445) (7,866)
Payment of dividends to holders of Common Stock(168,987) (154,661)
Payment of distributions to noncontrolling interests(15,829) (29,026)
Purchases and redemptions of noncontrolling interests(324,265) (23,051)
Other financing activities(4,324) (847)
Net cash used in financing activities(16,449) (45,076)
NET DECREASE IN CASH AND CASH EQUIVALENTS(5,563) (2,881)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD61,244
 50,789
CASH AND CASH EQUIVALENTS AT END OF PERIOD$55,681
 $47,908




 Nine Months Ended
 September 30,
 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$706,763
 $60,890
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization286,439
 268,836
Gain on dispositions of real estate and the Asset Management business, inclusive of related income tax(622,631) (881)
Income tax benefit(69,724) (14,878)
Other adjustments11,762
 398
Net changes in operating assets and operating liabilities(9,683) (19,216)
Net cash provided by operating activities302,926
 295,149
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of real estate and deposits related to purchases of real estate(212,358) (11,706)
Capital expenditures(253,149) (266,623)
Proceeds from dispositions of real estate708,464
 10,888
Purchases of corporate assets(5,530) (7,358)
Other investing activities1,695
 (1,086)
Net cash provided by (used in) investing activities239,122
 (275,885)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Proceeds from non-recourse property debt360,613
 165,785
Principal repayments of non-recourse property debt(403,141) (250,674)
(Repayment of) proceeds from term loan(250,000) 250,000
Net (repayments of) borrowings on revolving credit facility(67,160) 338,290
Payment of dividends to holders of Preferred Stock(6,445) (6,445)
Payment of dividends to holders of Common Stock(178,937) (168,987)
Payment of distributions to noncontrolling interests(22,549) (15,829)
Purchases and redemptions of noncontrolling interests(12,256) (324,265)
Other financing activities(415) (4,693)
Net cash used in financing activities(580,290) (16,818)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(38,242) 2,446
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD142,541
 131,150
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD$104,299
 $133,596

See notes to condensed consolidated financial statements.

6
Table of Contents


AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)

September 30,
2017		 December 31,
2016		September 30,
2018		 December 31,
2017
ASSETS      
Buildings and improvements$6,264,146
 $6,106,298
$6,503,956
 $6,174,149
Land1,827,748
 1,824,819
1,765,678
 1,753,604
Total real estate8,091,894
 7,931,117
8,269,634
 7,927,753
Accumulated depreciation(2,549,197) (2,421,357)(2,538,979) (2,522,358)
Net real estate5,542,697
 5,509,760
5,730,655
 5,405,395
Cash and cash equivalents38,780
 45,821
58,032
 60,498
Restricted cash47,565
 36,405
46,267
 34,827
Other assets247,722
 293,768
350,067
 272,739
Assets held for sale—
 17,959
Assets of partnerships served by Asset Management business:      
Real estate, net228,830
 245,648
—
 224,873
Cash and cash equivalents16,901
 15,423
—
 16,288
Restricted cash30,350
 33,501
—
 30,928
Other assets16,493
 52,492
—
 15,533
Total assets$6,169,338
 $6,232,818
$6,185,021
 $6,079,040
      
LIABILITIES AND EQUITY      
Non-recourse property debt secured by Real Estate communities, net$3,556,668
 $3,630,276
$3,646,789
 $3,545,109
Term loan, net249,252
 —
—
 249,501
Revolving credit facility borrowings356,220
 17,930
—
 67,160
Total indebtedness associated with Real Estate portfolio4,162,140
 3,648,206
3,646,789
 3,861,770
Accrued liabilities and other207,533
 218,937
242,782
 213,027
Liabilities of partnerships served by Asset Management business:      
Non-recourse property debt, net228,382
 236,426
—
 227,141
Accrued liabilities and other20,135
 62,630
—
 19,812
Deferred income13,922
 18,452
Total liabilities4,632,112
 4,184,651
3,889,571
 4,321,750
Redeemable preferred units101,537
 103,201
101,320
 101,537
Commitments and contingencies (Note 4)
 

 
Partners’ capital:      
Preferred units125,000
 125,000
125,000
 125,000
General Partner and Special Limited Partner1,329,186
 1,668,903
2,000,682
 1,538,144
Limited Partners(15,542) (58)70,053
 (5,675)
Partners’ capital attributable to the Aimco Operating Partnership1,438,644
 1,793,845
2,195,735
 1,657,469
Noncontrolling interests in consolidated real estate partnerships(2,955) 151,121
(1,605) (1,716)
Total partners’ capital1,435,689
 1,944,966
2,194,130
 1,655,753
Total liabilities and partners’ capital$6,169,338
 $6,232,818
$6,185,021
 $6,079,040

See notes to condensed consolidated financial statements.

7
Table of Contents

AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)

Three Months Ended Nine Months EndedThree Months Ended Nine Months Ended
September 30, September 30,September 30, September 30,
2017 2016 2017 20162018 2017 2018 2017
REVENUES              
Rental and other property revenues attributable to Real Estate$233,708
 $225,902
 $686,639
 $672,234
$234,048
 $233,708
 $690,571
 $686,639
Rental and other property revenues of partnerships served by Asset Management business18,232
 18,213
 55,327
 56,233
5,022
 18,232
 42,830
 55,327
Tax credit and transaction revenues2,695
 4,789
 8,242
 17,894
3,411
 2,695
 6,987
 8,242
Total revenues254,635
 248,904
 750,208
 746,361
242,481
 254,635
 740,388
 750,208
              
OPERATING EXPENSES              
Property operating expenses attributable to Real Estate81,179
 82,756
 239,819
 241,936
78,254
 81,244
 232,572
 239,954
Property operating expenses of partnerships served by Asset Management business8,865
 9,410
 26,445
 28,199
2,608
 8,872
 20,865
 26,458
Depreciation and amortization92,513
 84,848
 268,836
 245,356
96,406
 92,513
 286,439
 268,836
General and administrative expenses10,529
 11,615
 31,599
 35,529
12,479
 10,529
 37,196
 31,599
Other expenses, net2,344
 1,543
 6,809
 8,639
5,780
 2,272
 13,624
 6,661
Total operating expenses195,430
 190,172
 573,508
 559,659
195,527
 195,430
 590,696
 573,508
Operating income59,205
 58,732
 176,700
 186,702
46,954
 59,205
 149,692
 176,700
Interest income2,047
 2,163
 6,251
 5,841
2,712
 2,047
 7,768
 6,251
Interest expense(50,682) (49,377) (145,422) (145,905)(45,492) (50,682) (143,193) (145,422)
Other, net6,937
 558
 7,602
 5,541
(283) 6,937
 141
 7,602
Income before income taxes and gain on dispositions17,507
 12,076
 45,131
 52,179
Income before income taxes and gain (loss) on dispositions3,891
 17,507
 14,408
 45,131
Income tax benefit4,870
 3,462
 14,878
 16,469
27,941
 4,870
 69,724
 14,878
Income before gain on dispositions22,377
 15,538
 60,009
 68,648
Gain (loss) on dispositions of real estate, inclusive of tax(233) 14,498
 881
 237,226
Income before gain (loss) on dispositions31,832
 22,377
 84,132
 60,009
Gain (loss) on dispositions of real estate and the Asset Management business, inclusive of related income tax572,085
 (233) 622,631
 881
Net income22,144
 30,036
 60,890
 305,874
603,917
 22,144
 706,763
 60,890
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships249
 (12,489) (1,515) (22,096)
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships(1,794) 249
 (8,045) (1,515)
Net income attributable to the Aimco Operating Partnership22,393
 17,547
 59,375
 283,778
602,123
 22,393
 698,718
 59,375
Net income attributable to the Aimco Operating Partnership’s preferred unitholders(4,086) (6,165) (12,271) (15,114)(4,082) (4,086) (12,250) (12,271)
Net income attributable to participating securities(61) (14) (184) (384)(941) (61) (1,145) (184)
Net income attributable to the Aimco Operating Partnership’s common unitholders$18,246
 $11,368
 $46,920
 $268,280
$597,100
 $18,246
 $685,323
 $46,920
              
Net income attributable to the Aimco Operating Partnership per common unit – basic$0.11
 $0.07
 $0.29
 $1.64
$3.62
 $0.11
 $4.17
 $0.29
Net income attributable to the Aimco Operating Partnership per common unit – diluted$0.11
 $0.07
 $0.29
 $1.63
$3.61
 $0.11
 $4.16
 $0.29
Distributions declared per common unit$0.36
 $0.33
 $1.08
 $0.99
$0.38
 $0.36
 $1.14
 $1.08
              
Weighted average common units outstanding – basic163,664
 163,832
 163,739
 163,749
165,081
 163,664
 164,493
 163,739
Weighted average common units outstanding – diluted164,194
 164,280
 164,218
 164,146
165,326
 164,194
 164,654
 164,218
 

See notes to condensed consolidated financial statements.

8
Table of Contents

AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Net income$22,144
 $30,036
 $60,890
 $305,874
Other comprehensive income (loss):       
Unrealized gains (losses) on interest rate swaps75
 337
 (280) (748)
Losses on interest rate swaps reclassified into earnings from accumulated other comprehensive loss594
 390
 1,349
 1,208
Unrealized gains (losses) on investments in debt securities classified as available-for-sale381
 (336) (40) 5,615
Other comprehensive income1,050
 391
 1,029
 6,075
Comprehensive income23,194
 30,427
 61,919
 311,949
Comprehensive loss (income) attributable to noncontrolling interests249
 (12,591) (1,616) (22,285)
Comprehensive income attributable to the Aimco Operating Partnership$23,443
 $17,836
 $60,303
 $289,664
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2018 2017 2018 2017
Net income$603,917
 $22,144
 $706,763
 $60,890
Other comprehensive gain:       
Realized and unrealized gains (losses) on interest rate swaps—
 75
 —
 (280)
Losses on interest rate swaps reclassified into earnings from accumulated other comprehensive loss757
 594
 1,391
 1,349
Unrealized gains (losses) on available for sale debt securities979
 381
 (72) (40)
Other comprehensive gain1,736
 1,050
 1,319
 1,029
Comprehensive income605,653
 23,194
 708,082
 61,919
Comprehensive (income) loss attributable to noncontrolling interests(1,794) 249
 (8,045) (1,616)
Comprehensive income attributable to the Aimco Operating Partnership$603,859
 $23,443
 $700,037
 $60,303


See notes to condensed consolidated financial statements.

9
Table of Contents

AIMCO PROPERTIES, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 Nine Months Ended
 September 30,
 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES   
Net income$60,890
 $305,874
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization268,836
 245,356
Gain on dispositions of real estate, net of tax(881) (237,226)
Other adjustments(14,482) (10,530)
Net changes in operating assets and operating liabilities(29,338) (27,018)
Net cash provided by operating activities285,025
 276,456
CASH FLOWS FROM INVESTING ACTIVITIES   
Purchases of real estate(11,706) (287,952)
Capital expenditures(266,623) (259,323)
Proceeds from dispositions of real estate11,027
 325,344
Purchases of corporate assets(7,358) (6,472)
Change in restricted cash1,607
 (15,992)
Other investing activities(1,086) 10,134
Net cash used in investing activities(274,139) (234,261)
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds from non-recourse property debt165,785
 190,714
Principal repayments on non-recourse property debt(250,674) (253,328)
Proceeds from term loan250,000
 —
Net borrowings on revolving credit facility338,290
 267,780
Redemption of preferred units from Aimco—
 (34,791)
Payment of distributions to holders of Preferred Units(12,271) (13,142)
Payment of distributions to General Partner and Special Limited Partner(168,987) (154,661)
Payment of distributions to Limited Partners(8,026) (7,693)
Payment of distributions to noncontrolling interests(1,977) (16,057)
Purchases of noncontrolling interests in consolidated real estate partnerships(311,079) (11,869)
Other financing activities(17,510) (12,029)
Net cash used in financing activities(16,449) (45,076)
NET DECREASE IN CASH AND CASH EQUIVALENTS(5,563) (2,881)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD61,244
 50,789
CASH AND CASH EQUIVALENTS AT END OF PERIOD$55,681
 $47,908



 Nine Months Ended
 September 30,
 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$706,763
 $60,890
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization286,439
 268,836
Gain on dispositions of real estate and the Asset Management business, inclusive of related income tax(622,631) (881)
Income tax benefit(69,724) (14,878)
Other adjustments11,762
 398
Net changes in operating assets and operating liabilities(9,683) (19,216)
Net cash provided by operating activities302,926
 295,149
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of real estate and deposits related to purchases of real estate(212,358) (11,706)
Capital expenditures(253,149) (266,623)
Proceeds from dispositions of real estate708,464
 10,888
Purchases of corporate assets(5,530) (7,358)
Other investing activities1,695
 (1,086)
Net cash provided by (used in) investing activities239,122
 (275,885)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Proceeds from non-recourse property debt360,613
 165,785
Principal repayments of non-recourse property debt(403,141) (250,674)
(Repayment of) proceeds from term loan(250,000) 250,000
Net (repayments of) borrowings on revolving credit facility(67,160) 338,290
Payment of distributions to holders of Preferred Units(12,250) (12,271)
Payment of distributions to General Partner and Special Limited Partner(178,937) (168,987)
Payment of distributions to Limited Partners(8,810) (8,026)
Payment of distributions to noncontrolling interests(7,934) (1,977)
Purchases of noncontrolling interests in consolidated real estate partnerships(3,581) (311,079)
Purchases and redemptions of noncontrolling interests in the Aimco Operating Partnership(8,675) (13,187)
Other financing activities(415) (4,692)
Net cash used in financing activities(580,290) (16,818)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(38,242) 2,446
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD142,541
 131,150
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD$104,299
 $133,596

See notes to condensed consolidated financial statements.

10
Table of Contents

APARTMENT INVESTMENT AND MANAGEMENT COMPANY
AIMCO PROPERTIES, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 20172018
(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 September 30, 2017,2018, after eliminations for units held by consolidated subsidiaries, the Aimco Operating Partnership had 164,459,517166,384,727 common partnership units and equivalents outstanding. As of September 30, 2017,2018, Aimco owned 157,023,314157,352,109 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 September 30, 2017,2018, we owned an equity interest in 141133 apartment communitiescommunities with 39,18436,481 apartment homes in our real estateReal 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 137129 of these apartment communities with 39,04236,339 apartment homes.
As of September 30, 2017, we also owned nominal ownership positions in partnerships holding 46 low-income housing tax credit apartmenthomes and these 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 partnerships owning an aggregate of 39 apartment communities with 6,211 apartment homes.comprise our reportable segment.
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 nine months ended September 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 nine months ended September 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 Preferredpreferred OP Units from December 31, 20162017 to September 30, 2017.2018. The Preferredpreferred 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(5,826)
Redemption of preferred units and other(1,664)
Net income5,826
Balance, September 30, 2017$101,537
Balance, December 31, 2017$101,537
Distributions to holders of preferred OP Units(5,805)
Redemption of preferred OP Units and other(217)
Net income attributable to preferred OP Units5,805
Balance, September 30, 2018$101,320
Aimco Equity (including Noncontrolling Interests)
The following table presents a reconciliation of Aimco’s consolidated permanent equity accounts from December 31, 20162017 to September 30, 20172018 (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(6,445) —
 —
 (6,445)
Dividends and distributions on Common Stock and common OP Units(169,582) (1,977) (8,094) (179,653)
Redemptions of common OP Units—
 —
 (11,524) (11,524)
Amortization of stock-based compensation cost6,780
 —
 460
 7,240
Effect of changes in ownership for consolidated entities(160,187) (157,056) 4,497
 (312,746)
Cumulative effect of a change in accounting principle(62,682) —
 (3,028) (65,710)
Change in accumulated other comprehensive loss887
 101
 41
 1,029
Other127
 —
 —
 127
Net income51,385
 1,515
 2,164
 55,064
Balance, September 30, 2017$1,454,186
 $(2,955) $(15,542) $1,435,689
On June 30, 2017, we reacquired 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
 
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
Issuance of common OP Units—
 —
 50,151
 50,151
Dividends on Preferred Stock(6,445) —
 —
 (6,445)
Dividends and distributions on Common Stock and common OP Units(179,351) (7,934) (9,402) (196,687)
Redemptions of common OP Units—
 —
 (8,458) (8,458)
Amortization of stock-based compensation cost6,285
 —
 1,236
 7,521
Effect of changes in ownership for consolidated entities(18,137) —
 8,036
 (10,101)
Change in accumulated other comprehensive loss1,247
 —
 72
 1,319
Other119
 —
 —
 119
Net income658,820
 8,045
 34,093
 700,958
Balance, September 30, 2018$2,125,682
 $(1,605) $70,053
 $2,194,130

the 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, 20162017 to September 30, 20172018 (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 Units50,151
Distributions to preferred units held by Aimco(6,445)(6,445)
Distributions to common units held by Aimco(169,582)(179,351)
Distributions to common units held by Limited Partners(8,094)(9,402)
Redemption of common OP Units(11,524)(8,458)
Amortization of Aimco stock-based compensation cost7,240
7,521
Effect of changes in ownership for consolidated entities(155,690)(10,101)
Cumulative effect of a change in accounting principle(65,710)
Change in accumulated other comprehensive loss928
1,319
Other127
119
Net income53,549
692,913
Balance, September 30, 2017$1,438,644
Balance, September 30, 2018$2,195,735
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.
Accounting Pronouncements AdoptedReclassifications
Certain items included in the Current Year
Effective April 1,year-to-date 2018 and 2017 we electedfinancial statements have been reclassified to adopt early the new accounting standard that revised the GAAP definition of a business. Under the new standard we expect apartment communities will no longer be considered businesses in most acquisitions and dispositions. Under the new standard, transaction costs incurred relatedconform 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.current presentation.
Effective January 1, 2017, we adopted a new standard issued by the Financial Accounting Standards Board, or FASB, that simplifies the accounting for the income tax consequences of intercompany transfers of assets. Previously, the recognition within the statement of operations of income tax expense 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 the sale of the asset to a third party. Under the new standard, an entity recognizes 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 $65.7 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 effective January 1, 2017, we adopted guidance that simplifies the accounting for share-based compensation. Under prior practice, tax benefits in excess of those associated with compensation cost recognized in accordance with GAAP, or windfalls, were recorded in equity and tax deficiencies were recorded in equity until previous windfalls had been recouped and then recognized

in earnings. Under the new guidance, all of 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. The new guidance also requires windfalls to be recorded in the period the related transaction triggering tax consequences, such as an exercise of stock options or vesting of 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 on the date of adoption as there were no accumulated windfalls recorded 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.
Recent Accounting PronouncementsIncome Taxes
As discussed in Note 29 to the consolidated financial statements in Item 8 of our Form 10-K for the year ended December 31, 2016,2017, we have not completed our accounting for the tax effects of the enactment of the Tax Cuts and Jobs Act in late December 2017. Due to the sale of our Asset Management business, discussed further in Note 3, during the nine months ended September 30, 2018, we reversed the remaining valuation allowance recognized as of December 31, 2017, against our deferred tax benefits that we now expect to utilize.
Accounting Pronouncements Adopted in the Current Year
Effective January 1, 2018, we adopted a new standard issued by the Financial Accounting Standards Board, or FASB, that 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, including how we measure gains or losses on the sale of real estate. We adopted the new standard using the modified retrospective transition method effective January 1, 2018, with no effect on our results of operations or financial position.

Effective January 1, 2018, we also adopted new standards issued by the FASB issued new standards that affect accountingthe presentation and disclosure of the statements of cash flows. We are now required to present combined inflows and outflows of cash, cash equivalents, and restricted cash in the 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 required or intended purpose for revenuethe restricted funds. The new guidance also requires debt prepayment and other extinguishment related payments to be classified as financing activities. We previously classified such payments as operating activities. We have revised our condensed consolidated statements of cash flows for the nine months ended September 30, 2017 to conform to this presentation, and the effect of the revisions to net cash flows from contracts with customersoperating, investing, and thatfinancing activities as previously reported for the nine months ended September 30, 2017 are summarized in the following table (in thousands):
 As Previously Reported Adjustments As Revised
Net cash provided by operating activities$285,025
 $10,124
 $295,149
Net cash used in investing activities(274,139) (1,746) (275,885)
Net cash used in financing activities(16,449) (369) (16,818)
Recent Accounting Pronouncements
In 2018, the Securities Exchange Commission, or SEC, amended its rules to eliminate, modify, or integrate into other SEC requirements certain disclosure rules. The amendments are intended to simplify compliance without significantly changing the total mix of information provided to investors and are generally effective for us on January 1,November 5, 2018. The amendments remove the SEC rule that requires REITs to present gain or loss on the sale of real estate, net of income tax, in the statement of operations. Consistent with the SEC’s historical requirements, we present gain or loss on dispositions of real estate below continuing operations and net of tax. Accordingly we will recast our consolidated statements of operations to present gain or loss on dispositions of real estate as a component of income before income taxes beginning in our financial statements for the year ending December 31, 2018. Additionally, SEC rules currently require changes in equity subsequent to the prior year-end as either a separate financial statement or in the notes to interim financial statements. We present changes in equity within a footnote to our interim condensed consolidated financial statements in accordance with the SEC rule. The amendments create a requirement to report changes in equity and dividends per share in interim periods as a separate financial statement or within a footnote on a comparative basis for both quarter-to-date and year-to-date periods presented. This disclosure is required for interim financial statements of quarters beginning after the effective date; therefore, we will present comparative interim statements of stockholders equity beginning in our condensed consolidated financial statements for the three months ending March 31, 2019.
In 2018, the FASB also issued aamended the new standard on lease accounting, which is effective for Aimcous on January 1, 2019, with early2019. The amendment introduced an optional transition method, which allows the recognition of a cumulative-effect adjustment in the period of adoption permitted.and for prior reporting periods to remain as originally presented. Additionally, the amendment introduced a practical expedient for lessors to account for lease and nonlease components as a single component if the timing and pattern of transfer of components are the same, and the lease component would be classified as an operating lease if accounted for separately. We have substantially completed our evaluation of these standardsthe amendment and expect to elect both the transition option and lessor practical expedient concurrent with our adoption of the standard. We do not expect our adoption will have aanticipate significant effect onchanges in the timing or amount of revenue or lease income we recognize on an ongoing basis.from our leases with residents. However, in circumstances where we are a lessee, primarily in a limited population offew ground leases and leases offor corporate office space, we will be required to recognize right of use assets and related lease liabilities withinon our consolidated balance sheets. We expectare in the timing andprocess of determining the amount of expense for these leasesthe right of use assets and related lease liabilities that will remain unchanged unless modified prior to their contractual termination dates.be recognized upon adoption.
Note 3 — Significant Transactions, Acquisitions and Dispositions of Apartment Communities and Assets Held for Sale
Reacquisition of Limited Partner Interest in Palazzo Joint Venture and Term Loan
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 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 into 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.
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 reacquisition. 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.
DispositionsAcquisition of Apartment Communities
During the nine months ended September 30, 2017, partnerships served2018, we acquired 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 nine months ended September 30, 2018, we acquired four apartment communities in the Philadelphia area, 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; $289.7 million to buildings and improvements; $8.3 million to intangible assets; and $12.3 millionto intangible liabilities. In connection with the foregoing, we have also contracted to acquire

an additional apartment community in the Philadelphia area, which is expected to be purchased upon completion of the construction in the first half of 2019.
Dispositions of Apartment Communities and Assets Held for Sale
During the nine months ended September 30, 2018, we sold four apartment communities with 1,334 apartment homes for a gain on disposition of $173.2 million, net of income tax, and gross proceeds of $242.3 million resulting in $230.1 million in net proceeds to us. Two of these communities are located in southern Virginia, one in suburban Maryland, and one in north Philadelphia.
During the nine months ended September 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 received net cash proceeds of approximately $5.0 million in the sale.
During the nine months ended September 30, 2018, we sold for $590.0 million our Asset Management business sold twoand our four affordable apartment communities withlocated in the Hunters Point area of San Francisco. The sale resulted in a totalgain of 252$448.2 million, net of $54.1 million of taxes, and net cash proceeds of $512.2 million after payment of transaction costs and repayment of property-level debt encumbering the Hunters Point apartment homes, resulting in gains of $2.6 million, and related tax expense of $0.9 million.communities.
We are currentlyIn 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 apartmentsuch communities meet the criteria to be classified as held for sale. As of September 30, 2017,2018, no apartment communities were classified as held for sale.
Napico Disposition
In 2012, we sold the Napico business. The transaction was primarily seller-financed, and the associated notes were scheduled to be repaid from the operation and liquidation of the Napico business and were collateralized by the buyer’s interests in the portfolio. In 2016, the buyer paid the two seller-financed notes in full. At that time we maintained continuing involvement related to preexisting guarantees of property-level debt for two communities. In accordance with GAAP, we deferred recognition of the sale of these communities until the guarantees were released. In September 2017, the owner refinanced the final mortgage, resulting

in the release of our remaining guarantee, which allowed us to transfer our nominal general partner interest in the property to the buyer.
Accordingly, we reduced other assets and accrued liabilities and other by $34.5 million and $38.4 million, respectively, and recognized a gain of $7.1 million, net of tax, in other, net on our condensed consolidated statement of operations for the three and nine months ended September 30, 2017.
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 and development of certain apartment communities, pursuant to financing or other arrangements. As of September 30, 2017,2018, our commitments related to these capital activities totaled approximately $96.2$130.6 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 prior to its sale, we arewere 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 infor actions taken during 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 inownership. In 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 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 cleanup and abatement costs. In 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 appealidentify 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 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, andissued a former operator of the dry cleaner drafts of a proposedfinal cleanup and abatement order that if entered as drafted, would have required all threenames 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 are appealing the final order 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 September 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-basedstockholder 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 dilutive effect of these securities was dilutive0.2 million shares or units for the three and nine months ended September 30, 20172018. The dilutive effect of these securities was 0.5 million shares or units for the three and 2016, and accordingly has beennine months ended September 30, 2017. 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 nine months ended September 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 notawards 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 atsecurities as of September 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 September 30, 2017,2018, these preferred OP Units were potentially redeemable for approximately 2.3 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 September 30, 2017,2018, was approximately 3.72.7 years. Our amortized cost basis for these investments, which represents the original cost adjusted for interest accretion less interest payments received, was $76.4$82.1 million and $72.5$77.7 million at September 30, 20172018 and December 31, 2016,2017, respectively. We estimated the fair value of these investments to be $79.9$87.0 million and $76.1$82.8 million at September 30, 20172018 and December 31, 2016,2017, respectively.
We estimate the fair value of these investments using an income and market approach with primarily with observable inputs, including yields and other information regarding similar types of investments, and adjusted for certain unobservable inputs specific to these investments. The fair value of the positions that pay interest currently typically moves in an inverse relationship with movements in interest rates. The fair value of the first loss position is primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities.
CertainPrior to the July 2018 sale of our Asset Management business, we consolidated certain partnerships served by our Asset Management business havebusiness. These partnerships entered into interest rate swap agreements whichto limit exposure to interest rate fluctuationsrisk on the partnerships’ variable-rate debt by effectively converting the interest on variable-rate debtfrom a variable rate to a fixed rate. We estimateestimated the fair value of interest rate swaps as of September 30, 2017, using an income approach with primarily observable inputs, including information regarding the hedged variable cash flows and forward yield curves relating to the variable interest rates on which the hedged cash flows are based. The fair value of these interest rate swaps was classified within Level 2 of the GAAP fair value hierarchy.
The following table sets forth a summary of the changes in fair value of these interest rate swaps (in thousands):
Nine Months Ended September 30,Nine Months Ended September 30,
2017 20162018 2017
Beginning balance$(3,175) $(4,938)$(1,795) $(3,175)
Realized (unrealized) losses included in interest expense73
 (33)
Realized losses on derecognition of interest rate swaps included in earnings273
 —
Realized losses included in interest expense404
 73
Realized losses on derecognition of interest rate swaps1,115
 273
Losses on interest rate swaps reclassified into interest expense from accumulated other comprehensive loss1,076
 1,208
276
 1,076
Unrealized losses included in equity and partners’ capital(280) (748)—
 (280)
Ending balance$(2,033) $(4,511)$—
 $(2,033)
RealizedFor the nine months ended September 30, 2018, realized losses on derecognition of interest rate swaps included in earnings represents previously unrealized losses related to interest rate swaps to which certain partnerships served by our Asset Management business were parties. Upon sale of our Asset Management business, the accumulated other comprehensive income related to the swaps was realized as a component of the gain on disposition. Please refer to Note 3 for further discussion of this transaction.
For the nine months ended September 30, 2017, realized losses on derecognition of interest rate swaps included in earnings represents previously unrealized losses related to an interest rate swap to which the partnership owning the final Napico property was a party. Upon derecognition of the assets and liabilities relatedparty, as described in Note 11 to the final property, we also wrote off the accumulated other comprehensive income related to this swap, which wasour consolidated financial statements included in Aimco’s and the gainAimco Operating Partnership’s combined Annual Report on derecognition included in other, net on our condensed consolidated statement of operations for the three and nine months ended September 30, 2017. Please refer to Note 3 for further discussion.
As of September 30, 2017 and December 31, 2016, the remaining interest rate swaps, exclusive of the derecognized Napico interest rate swap, had aggregate notional amounts of $22.1 million and $22.4 million, respectively. As of September 30, 2017, these swaps had a weighted average remaining term of 6.2 years. We have designated these interest rate swaps as cash flow hedges. The fair value of these swaps is presented within accrued liabilities and other in our condensed consolidated balance sheets, andForm 10-K.

we recognize 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 the forward rates at September 30, 2017 remain constant, we estimate that during the next 12 months, we would reclassify approximately $0.5 million of the unrealized losses in accumulated other comprehensive loss into earnings. If market interest rates increase above the 3.26% weighted average fixed rate under these interest rate swaps the consolidated partnerships will benefit from net cash payments due from the counterparties to the interest rate swaps.
Fair Value Disclosures
We believe that the carrying values of the consolidated amounts of cash and cash equivalents, receivables and payables approximatesapproximate their fair valuevalues at September 30, 20172018, and December 31, 2016,2017, due to their relatively short-term nature and high probability of realization. The estimated faircarrying value of the total indebtedness associated with our Real Estate portfolio was approximately $4.2 billion and $3.7 billion at September 30, 2017 and December 31, 2016, respectively, as compared to carrying amounts of $4.2 billion and $3.6 billion, respectively. The carrying values of the non-recourse property debt of the consolidated partnerships served by our Asset Management business approximated its estimated fair value at September 30, 20172018 and December 31, 2016.2017. 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 assetsapartment 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 theirits fair values.value.
Note 7 — Business Segments
In 2017, we revised the information regularly reviewed by ourOur 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 39,184 apartment homes at September 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 reflectsis defined as our share of rental and other property revenuesrevenue less directour 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, prior to the sale in July 2018, those owned through partnerships served by our Asset Management business. As of September 30, 2017,2018, for segment performance evaluation, our Real Estate segment included 137129 consolidated apartment communities with 39,04236,339 apartment homes and excluded four apartment communities with 142 apartment homes that we neither manage nor consolidate.
As discussed in Note 1, asPrior to the July 2018 sale of September 30, 2017, through our Asset Management business, we also ownedconsolidated certain partnerships in which we held nominal ownership positions in consolidated partnerships for which we provide asset management services.positions. These partnerships own 46 low-income housing tax credit apartment communities with 6,898 apartment homes.communities. Neither the results of operations nor the assets of these partnerships and apartment communities arewere quantitatively material; therefore, we have one reportable segment, Real Estate. The results of operations for the three and nine months ended September 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 (excludingand excluding amounts related to apartment communities sold)sold as of September 30, 2018 for the three and nine months ended September 30, 20172018 and 20162017 (in thousands):
 Real Estate 
Proportionate and Other
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to Reportable
Segment (2)
 Consolidated
Three months ended September 30, 2018:       
Rental and other property revenues attributable to Real Estate$222,856
 $8,926
 $2,266
 $234,048
Rental and other property revenues of partnerships served by Asset Management business—
 —
 5,022
 5,022
Tax credit and transaction revenues—
 —
 3,411
 3,411
Total revenues222,856
 8,926
 10,699
 242,481
Property operating expenses attributable to Real Estate62,863
 8,405
 6,986
 78,254
Property operating expenses of partnerships served by Asset Management business—
 —
 2,608
 2,608
Other operating expenses not allocated to reportable
segment (3)
—
 —
 114,665
 114,665
Total operating expenses62,863
 8,405
 124,259
 195,527
Operating income159,993
 521
 (113,560) 46,954
Other items included in income before gain on
dispositions (4)
—
 —
 (15,122) (15,122)
Income before gain on dispositions$159,993
 $521
 $(128,682) $31,832

Real Estate 
Proportionate
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to Reportable
Segment (2)
 ConsolidatedReal Estate 
Proportionate and Other
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to Reportable
Segment (2)
 Consolidated
Three Months Ended September 30, 2017       
Three months ended September 30, 2017:       
Rental and other property revenues attributable to Real Estate$230,008
 $1,170
 $2,530
 $233,708
$203,935
 $8,155
 $21,618
 $233,708
Rental and other property revenues of partnerships served by Asset Management business—
 —
 18,232
 18,232
—
 —
 18,232
 18,232
Tax credit and transaction revenues—
 —
 2,695
 2,695
—
 —
 2,695
 2,695
Total revenues230,008
 1,170
 23,457
 254,635
203,935
 8,155
 42,545
 254,635
Property operating expenses attributable to Real Estate71,346
 410
 9,423
 81,179
57,592
 7,609
 16,043
 81,244
Property operating expenses of partnerships served by Asset Management business—
 —
 8,865
 8,865
—
 —
 8,872
 8,872
Other operating expenses not allocated to reportable
segment (3)
—
 —
 105,386
 105,386
—
 —
 105,314
 105,314
Total operating expenses71,346
 410
 123,674
 195,430
57,592
 7,609
 130,229
 195,430
Net operating income158,662
 760
 (100,217) 59,205
Operating income146,343
 546
 (87,684) 59,205
Other items included in income before gain on
dispositions (4)
—
 —
 (36,828) (36,828)—
 —
 (36,828) (36,828)
Income before gain on dispositions$158,662
 $760
 $(137,045) $22,377
$146,343
 $546
 $(124,512) $22,377
Real Estate 
Proportionate
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to Reportable
Segment (2)
��ConsolidatedReal Estate 
Proportionate and Other
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to Reportable
Segment (2)
 Consolidated
Three Months Ended September 30, 2016       
Nine months ended September 30, 2018:       
Rental and other property revenues attributable to Real Estate$210,775
 $7,457
 $7,670
 $225,902
$643,656
 $25,903
 $21,012
 $690,571
Rental and other property revenues of partnerships served by Asset Management business—
 —
 18,213
 18,213
—
 —
 42,830
 42,830
Tax credit and transaction revenues—
 —
 4,789
 4,789
—
 —
 6,987
 6,987
Total revenues210,775
 7,457
 30,672
 248,904
643,656
 25,903
 70,829
 740,388
Property operating expenses attributable to Real Estate68,933
 2,307
 11,516
 82,756
183,119
 24,337
 25,116
 232,572
Property operating expenses of partnerships served by Asset Management business—
 —
 9,410
 9,410
—
 —
 20,865
 20,865
Other operating expenses not allocated to reportable
segment (3)
—
 —
 98,006
 98,006
—
 —
 337,259
 337,259
Total operating expenses68,933
 2,307
 118,932
 190,172
183,119
 24,337
 383,240
 590,696
Net operating income141,842
 5,150
 (88,260) 58,732
Operating income460,537
 1,566
 (312,411) 149,692
Other items included in income before gain on
dispositions (4)
—
 —
 (43,194) (43,194)—
 —
 (65,560) (65,560)
Income before gain on dispositions$141,842
 $5,150
 $(131,454) $15,538
$460,537
 $1,566
 $(377,971) $84,132

 Real Estate 
Proportionate
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to Reportable
Segment (2)
 Consolidated
Nine Months Ended September 30, 2017       
Rental and other property revenues attributable to Real Estate$666,120
 $15,666
 $4,853
 $686,639
Rental and other property revenues of partnerships served by Asset Management business—
 —
 55,327
 55,327
Tax credit and transaction revenues—
 —
 8,242
 8,242
Total revenues666,120
 15,666
 68,422
 750,208
Property operating expenses attributable to Real Estate209,197
 4,978
 25,644
 239,819
Property operating expenses of partnerships served by Asset Management business—
 —
 26,445
 26,445
Other operating expenses not allocated to reportable
segment (3)
—
 —
 307,244
 307,244
Total operating expenses209,197
 4,978
 359,333
 573,508
Net operating income456,923
 10,688
 (290,911) 176,700
Other items included in income before gain on
dispositions (4)
—
 —
 (116,691) (116,691)
Income before gain on dispositions$456,923
 $10,688
 $(407,602) $60,009
Real Estate 
Proportionate
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to Reportable
Segment (2)
 ConsolidatedReal Estate 
Proportionate and Other
Adjustments (1)
 
Corporate and
Amounts Not
Allocated to Reportable
Segment (2)
 Consolidated
Nine Months Ended September 30, 2016       
Nine months ended September 30, 2017:       
Rental and other property revenues attributable to Real Estate$618,122
 $22,479
 $31,633
 $672,234
$589,349
 $35,542
 $61,748
 $686,639
Rental and other property revenues of partnerships served by Asset Management business—
 —
 56,233
 56,233
—
 —
 55,327
 55,327
Tax credit and transaction revenues—
 —
 17,894
 17,894
—
 —
 8,242
 8,242
Total revenues618,122
 22,479
 105,760
 746,361
589,349
 35,542
 125,317
 750,208
Property operating expenses attributable to Real Estate200,874
 6,531
 34,531
 241,936
169,311
 25,505
 45,138
 239,954
Property operating expenses of partnerships served by Asset Management business—
 —
 28,199
 28,199
—
 —
 26,458
 26,458
Other operating expenses not allocated to reportable
segment (3)
—
 —
 289,524
 289,524
—
 —
 307,096
 307,096
Total operating expenses200,874
 6,531
 352,254
 559,659
169,311
 25,505
 378,692
 573,508
Net operating income417,248
 15,948
 (246,494) 186,702
Operating income420,038
 10,037
 (253,375) 176,700
Other items included in income before gain on
dispositions (4)
—
 —
 (118,054) (118,054)—
 —
 (116,691) (116,691)
Income before gain on dispositions$417,248
 $15,948
 $(364,548) $68,648
$420,038
 $10,037
 $(370,066) $60,009
(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 the periods shown or 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.business prior to its sale in July 2018. 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, (whichwhich 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 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 consists of interest expense and income tax benefit.

For the nine months ended September 30, 2017 and 2016, capital additions related to our Real Estate segment totaled $258.3 million and $247.5 million, respectively.
The assets of our reportable segment and the consolidated assets not allocated to our segment are as follows (in thousands):
September 30, 2017 December 31, 2016September 30, 2018 December 31, 2017
Real Estate$5,593,795
 $5,545,693
$5,861,647
 $5,391,816
Corporate and other assets (1)575,543
 687,125
323,374
 687,224
Total consolidated assets$6,169,338
 $6,232,818
$6,185,021
 $6,079,040
(1)Includes the assets not allocated to our reportable segment, primarily corporate assets, and as of consolidated partnerships served byDecember 31, 2017, assets of apartment communities and the Asset Management business, and apartment communitieswhich were sold as of September 30, 2017.2018.
For the nine months ended September 30, 2018 and 2017, capital additions related to our Real Estate segment totaled $241.6 million and $243.3 million, respectively.
Note 8 — Variable Interest Entities
Aimco consolidates the Aimco Operating Partnership, which isGenerally, 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 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 a nominal ownership position in these partnerships, generally one percent or less. As general partner in these partnerships, we are the sole decision maker and we receive fees and other payments in return for the asset management and other services we provide and thus share in the economics of the partnerships, and as such, we are the primary beneficiary of these partnerships. The table below summarizes information regarding VIEs consolidated by the Aimco Operating Partnership:
As described in Note 3, we sold our Asset Management business in July 2018, including the nominal ownership interest we held in partnerships served by this business.
 September 30, 2017 December 31, 2016
Real Estate portfolio:   
VIEs with interests in apartment communities12
 13
Apartment communities held by VIEs16
 19
Apartment homes in communities held by VIEs4,728
 6,110
Consolidated partnerships served by the Asset Management business:   
VIEs with interests in apartment communities53
 54
Apartment communities held by VIEs37
 38
Apartment homes in communities held by VIEs5,893
 6,093

 September 30, 2018 December 31, 2017
Real Estate portfolio:   
VIEs with interests in apartment communities9
 14
Apartment communities owned by VIEs9
 14
Apartment homes in communities owned by VIEs3,592
 4,321
Consolidated partnerships served by Asset Management business:   
VIEs with interests in apartment communities—
 49
Apartment communities owned by VIEs—
 37
Apartment homes in communities owned by VIEs—
 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):
September 30, 2017 December 31, 2016September 30, 2018 December 31, 2017
Real Estate portfolio:      
Assets      
Net real estate$567,401
 $897,510
$481,390
 $529,898
Cash and cash equivalents14,155
 15,877
13,193
 16,111
Restricted cash9,256
 7,981
7,295
 4,798
Liabilities      
Non-recourse property debt secured by Real Estate communities, net418,348
 725,061
339,278
 412,205
Accrued liabilities and other16,368
 14,270
17,096
 10,623
Consolidated partnerships served by the Asset Management business:   
Consolidated partnerships served by Asset Management business:   
Assets      
Real estate, net219,410
 235,920
—
 215,580
Cash and cash equivalents15,445
 14,926
—
 15,931
Restricted cash29,573
 32,542
—
 30,107
Liabilities      
Non-recourse property debt221,564
 229,509
—
 220,356
Accrued liabilities and other15,686
 16,934
—
 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 andmarkets’ financing; the risk that our cash flows from operations may be insufficient to meet required payments of principal and interestinterest; 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 long-term total return using growth in Economic Income, defined as Net Asset Value, or NAV, growth plus dividends. NAV is used by many investors because the value of company assets can be readily estimated, even for non-earning assets such as land or properties under development. NAV has the advantage of incorporating the investment decisions of thousands of real estate investors, enhancing comparability among companies that have differences in their accounting, and our current return usingavoiding disparity that can result from application of GAAP to investment properties and various ownership structures. Some investors focus on multiples of Adjusted Funds From Operations, (eachor AFFO, and Funds From Operations, or FFO. Our disclosure of which are defined under the Non-GAAP Measures heading below).AFFO, our measure of current return,

complements our focus on Economic Income. We also use Pro forma Funds From Operations, or Pro forma FFO, as a secondary measure of 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 systemsproduces 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 returnsFree Cash Flow internal rates of return and investing the proceeds from such sales through capital enhancements, redevelopment, limited development, and acquisitions with greater land value, higher expected rent growth, and projected Free Cash Flow internal rates of return in prospects with higher projected free cash flow returns thanexcess of those expected from the communities sold, such as property upgrades, redevelopment, development and selective acquisitions;
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
emphasizefocus intentionally on a collaborative respectful, and performance-orientedproductive 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/development;operational excellence; redevelopment; portfolio management; balance sheet; and team and culture.
The results from the execution of our business plan during the three months ended September 30, 2017,2018, are further described below.
Net income attributable to common stockholders per common share increased by $0.04 in$3.50 during the three months ended September 30, 2018 compared to 2017, primarily due to gains on the sale of apartment communities and the Asset Management business.
AFFO per share increased $0.02 for the three months ended September 30, 2018, as compared to the same period in 2016, primarily due to increased contribution from property net operating income more fully described below, partially offset by higher depreciation expense.
Pro forma FFO per share increased $0.08, or 14.5%, for the three months ended September 30, 2017, as compared2017. Real Estate operations contributed to the same periodincrease in 2016. The primary driver of this increase was property net operating income growth of $0.05, consisting of:AFFO, as follows:
$0.030.02 from Same Store property net operating income growth of 4.5%2.6%, driven primarily by a 2.8%3.1% increase in revenue andoffset by a 1.1% reduction4.5% increase in expenses; and
$0.040.06 from the lease-up over the last 12 months of 930 renovated homes atleasing activity related to redevelopment communities and completion of the lease-up of One Canalrecently acquired communities; offset by
($0.06) in Boston, Massachusetts and Indigo in Redwood City, California; less
$0.02 in property net operating incomeAFFO from apartment communities sold in 2016.the last twelve months.
Lower general and administrative expenses, lower interest rates, higher tax benefits, and various other factors contributed an additional $0.03 to Pro Forma FFO.
The amounts above exclude property net operating income fromFor the reacquisitionthree months ended September 30, 2018, the sale of the 47% limited partner interest in the Palazzo joint venture, which was largely offset by higher interest expense relatedAsset Management business is estimated to temporary borrowings used to fund the purchase.
The $0.08 increase year-over-year in Pro forma FFO per share plus $0.01 in lower capital replacement spending increasedhave reduced AFFO per share by $0.09, or 20.0%.$0.03.
Pro Forma FFO and AFFO are non-GAAP financial measures that are defined and reconciled under the Non-GAAP Measures heading.Operational Excellence
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 September 30, 2017,2018, our Real Estate portfolio included 141 predominantly market rate included 133 apartment communities with 39,18436,481 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 deliveredproduced solid results for our Real Estate portfolio for the three months ended September 30, 2017.2018. Highlights for the quarter include:
Same Store net operating income increased year-over-yeargrowth driven by 4.5%, consisting of revenue growth of 2.8% and expense reduction of 1.1%; andthe factors discussed below;
Same Store rent increases on renewals and new leases averaged 4.5%4.2% and 1.4%2.2%, respectively, for a weighted average increase of 3.0%.3.2%; and
Average daily occupancy of 96.3%, 30 basis points higher than the same period in 2017.

Redevelopment/DevelopmentRedevelopment
Redevelopment/Development is ourOur second line of business. Withinbusiness is the redevelopment and limited development of apartment communities, where we expect to create value by repositioning communities within our Real Estate portfolio, we investportfolio. We measure the rate and quality of financial returns by net asset value creation, an important component of Economic Income, our primary measure of long-term financial performance. We also undertake limited ground-up development when warranted by risk-adjusted investment returns, either directly or in connection with the redevelopment of an existing apartment communities whencommunity. When warranted, we believerely on the investment will yieldexpertise and credit of a third-party developer familiar with the local market 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.
We have undertaken a range of redevelopments, including those in which buildingsredevelopment or exteriors are renovated without the need to vacate apartment homes; those in which significant renovation of apartment homes may be accomplished upon lease expiration and turnover; and those in which an entire building or community is vacated. We execute our redevelopments using a phased approach, in whichdevelopment. Of these two activities, we renovate portions of an apartment community in stages. Redevelopment work may include seeking entitlements from local governments, which enhance the value of our existing portfolio by increasing density, that is, the right to add apartment homes to a site. We expect to create value equal to 25% to 35% of our investment in redevelopment.
We favor redevelopment because it permits adjustment ofto the scope and timing of spending to align with changing market conditions.
We also undertake ground-up development when warranted by risk-adjusted investment 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, we may rely on a third-party developer with expertise in the local marketconditions and with contracts that limit our exposure to construction risk.customer preferences.
During the three months ended September 30, 2017,2018, we invested $33.3$36.7 million primarily in redevelopment and development. In Center City, Philadelphia, we have substantially completed redevelopment of the vacated fourth and final tower of Park Towne Place. During the three months ended September 30, 2018, average daily occupancy at the three completed towers was 89.1%. As of September 30, 2018, the three completed towers were 95% leased and the fourth tower was 71% leased.
We also commenced the next phase of redevelopment at our ongoing redevelopmentsFlamingo community, located in Miami Beach. This $30 million phase includes extensive redevelopment of retail, leasing, and continuedcommon areas, including major enhancements to lease redeveloped apartment homes at a pace consistent with our expectations.the entryway.
During the three months ended September 30, 2017,2018, we completed constructionexercised our option to acquire approximately two acres of land adjacent to our 21 Fitzsimons community, located on the third tower of Park Towne Place in Center City, Philadelphia. As of September 30, 2017, this tower was 74% leased at rates consistent with underwriting. We expect this tower to be more than 90% leased by year-end, as are the first two towers redeveloped at the community.
In the past three years, we have leased more than 1,100 redeveloped apartment homes in Center City, Philadelphia. Based on these results, we decided to proceed with a $40.0 million redevelopment of the fourth and final tower at Park Towne Place. De-leasing is underway and construction is scheduled to commence by year end.
In 2014, we acquired Eastpointe, a “C” property located in Boulder, Colorado. The site is two miles from the new Google campus and is across the street from Ball Aerospace’s Technology Campus and Foothills Hospital. Building in Boulder is highly regulated and new supply is limited, notwithstanding higher enrollment at the University of Colorado Anschutz Medical Campus, and increased employment generally. Overbroke ground on the past two years, we have planned and entitleddevelopment of a new $117.0253-apartment home community. We expect to invest approximately $87.0 million 226 apartment hometo construct the community, which is expected to be known as Parc Mosaic. De-leasingcomplete in the third quarter of Eastpointe is now underway and construction of Parc Mosaic is scheduled to commence by year end.
Inclusive of these two new projects, our total estimated net investment in redevelopment/development is $710.4 million, with2020. We anticipate a projected weighted averagestabilized net operating income yield on these investmentsin the low 6% range, driven by an 80% net operating income margin due to operational efficiencies derived from owning the adjacent 600 apartment homes, and a Free Cash Flow internal rate of 6.1%return greater than 10%, assuming untrended rents. Of this total, $481.4 million has been funded.resulting in value creation (defined as the amount by which the completed property value exceeds the pre-redevelopment value plus redevelopment spend) of more than 35%.
During the three months ended September 30, 2017,2018, we leased 278145 apartment homes at our redevelopment and acquisition communities.
In measuring lease-up exposure related to redevelopment activities, we consider: (a) apartments that have been de-leased in preparation for construction; (b) apartments currently under construction; and (c) apartments for which construction is complete and the apartment home is ready for occupancy. In each case, lease-up exposure is measured as the number of homes to be leased for the apartment community to achieve 95% occupancy.
As of September 30, 2017,2018, our exposure to lease-up exposure at active redevelopment projects includedand development communities was approximately 360341 apartment homes. Of these, 231 related to apartments that have been or will be de-leased for redevelopmenthomes, of which 62 were in the finalfourth tower atof Park Towne Place, 33 related213 were being constructed at Parc Mosaic, and 66 were located in three other communities.
In October 2018, we commenced construction on the development of 58 rental townhomes on approximately four acres of land contiguous to our Elm Creek apartment homes undercommunity in Elmhurst, Illinois. Given the success five years ago of a similar project at the community, we opportunistically purchased an adjacent land parcel in 2017. We expect to achieve a projected stabilized net operating income yield of 7% and a Free Cash Flow internal rate of return of greater than 11% on this $35 million investment. We expect initial occupancy in the first quarter of 2020 and completion of construction and 103 related to homes for which construction is complete andin the homes are available for occupancy.second quarter of 2020.
Please see below under the Liquidity and Capital Resources – Redevelopment /Developmentand Development heading for additional information regarding our redevelopment and development investment during the nine months ended September 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 our 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 timingperiod 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 to reinvest the proceeds from such sales in accretive uses such as property upgrades, redevelopment of communities in its current portfolio,capital enhancements, redevelopments, occasional development, of new communities, and selective acquisitions with projected Free Cash Flow internal rates of apartment communities withreturn higher projected free cash flow returns than expected from the communities sold to fund the activity.being sold. Through this disciplined approach to capital recycling, since 2011, we have sold $4.2 billion in lower-rated apartment communities and we have significantly increased the quality and expected growth rate of itsour portfolio.
 Three Months Ended
 September 30,
 2017 2016
Average revenue per Aimco apartment home (1)$2,075
 $1,954
Portfolio average rents as a percentage of local market average rents112% 113%
Percentage A (3Q 2017 average revenue per Aimco apartment home $2,708)53% 51%
Percentage B (3Q 2017 average revenue per Aimco apartment home $1,776)34% 37%
Percentage C+ (3Q 2017 average revenue per Aimco apartment home $1,725)13% 12%
(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.
 Three Months Ended
 September 30,
 2018 2017
Average revenue per Aimco apartment home (1)$2,131
 $2,005
Portfolio average rents as a percentage of local market average rents113% 112%
Percentage A (3Q 2018 average revenue per Aimco apartment home $2,809)51% 53%
Percentage B (3Q 2018 average revenue per Aimco apartment home $1,854)33% 34%
Percentage C+ (3Q 2018 average revenue per Aimco apartment home $1,702)16% 13%
(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.
DuringOur average revenue per apartment home was $2,131 for the three months ended September 30, 2017, average revenue per Aimco apartment home for our Real Estate portfolio was $2,075,2018, a 6% increase compared to three months ended September 30, 2016. The2017. This increase is due to year-over-year growth in Same Store revenue as well as our reacquisition of the 47% limited partnership interest in the Palazzo joint venture,acquisition activities, lease-up of redevelopment and acquisition apartment communities, and the sale of apartment communities with average monthly revenues per Aimco apartment home lower than those of the retained 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 flowFree Cash Flow margins; and to maintain sufficient geographic and price point diversification to limit volatility and concentration risk.
Balance Sheet and LiquidityApartment Community Acquisitions
We target net leverage of $3.8 billion. Our leverage is currently above this target asevaluate potential acquisitions with an eye for unique and opportunistic investments and fund acquisitions pursuant to our strict paired trade discipline.
During the second quarter reacquisition of the 47% limited partner interest in the Palazzo joint venture was temporarily funded with debt.nine months ended September 30, 2018, we acquired five apartment communities. We are on track with plans to sellacquired for $307.9 million four apartment communities in Virginia, Maryland,the Philadelphia area including 665 apartment homes and 153,000 square feet of office and retail space. We also acquired for $160 million Bent Tree Apartments, a 748-apartment home community in Fairfax County, Virginia.
In April 2018, we agreed to acquire six communities in the Philadelphia area, including the four that have been acquired year-to-date. During the three months ended September 30, 2018, we terminated our agreement to acquire the fifth community, The Victor, in Camden, New Jersey, due to reduce leverage tothe lack of required approvals from the City of Camden. The purchase of the sixth community is expected upon completion of construction in the first half of 2019. The rate of return expected on our $3.8 billion target.investment in the Philadelphia communities are not materially impacted by the removal of The Victor.
Our leverage includesDispositions
During the three months ended September 30, 2018, we sold for $590 million our share of long-term, non-recourse property debt secured byAsset Management business and four affordable apartment communities located in the Hunters Point area of San Francisco. After payment of transaction costs and repayment of property-level debt encumbering the Hunters Point apartment communities, net proceeds to us were $512.2 million.
During the three months ended September 30, 2018, we also sold for $170.4 million Chestnut Hill Village, an 821-apartment home community located in north Philadelphia. Net proceeds to us were $165.5 million.
We used the proceeds from the two sales to fund 2018 acquisitions, effectively completing the paired trades. The sale of Chestnut Hill Village rebalanced our Real Estate portfolio, our one-year term loan, outstanding borrowings undercapital allocation to Philadelphia from a lower-rated apartment community in north Philadelphia to communities in the more desirable Center City and University City submarkets. The acquisition communities have expected Free Cash Flow internal rates of return approximately 400 basis points higher than those of the disposition communities.
We used excess proceeds from the sales to repay in full our revolving credit facility and outstanding preferred equity. In our calculation of leverage, we exclude non-recourse property debt obligations of consolidated partnerships served by our Asset Management business, as these are not our obligationsterm loan, reduce property-level borrowings, and they have limited effect on the amount of fees and other amounts we expect to receive in our role as asset manager for these partnerships.general corporate purposes.

Balance Sheet
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.
Our leverage includes our share of long-term, non-recourse, property debt encumbering apartment communities, outstanding borrowings under our revolving credit facility, and outstanding preferred equity.
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 the ratios of Proportionate Debt to Adjusted EBITDA and Adjusted EBITDA to Adjusted Interest Expense.
Proportionate Debt, Adjusted EBITDA and Adjusted Interest Expense, as used in these ratios, are non-GAAP financial measures, which are further discussed and reconciled under the Non-GAAP Measures – Leverage Ratios heading. Preferred Equity represents

Aimco’s preferred stock and the Aimco Operating Partnership’s preferred OP Units. Our leverage ratios for the three months ended September 30, 20172018, are presented below:
Three Months Ended September 30, 2017
Proportionate Debt to Adjusted EBITDA (1)6.9x6.5x
Proportionate Debt and Preferred Equity to Adjusted EBITDA (1)7.3x6.9x
Adjusted EBITDA to Adjusted Interest Expense3.4x
Adjusted EBITDA to Adjusted Interest Expense and Preferred Dividends3.1x
(1)Adjusted EBITDA has been adjusted on a pro forma basis to reflect our disposition of Chestnut Hill Village, the Asset Management business, and the four Hunters Point communities during the period as if the transactions had been closed on July 1, 2018.
We calculate Adjusted EBITDA and Adjusted Interest Expense used in our leverage ratios based on the 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.
We expect improvement in leverage metrics from earnings growth, primarily due to increasing contribution from redevelopment 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 6.2xdecrease to 6.3x and 6.6x, respectively.6.7x, respectively, before year-end.
As of June 30, 2018, we had $1.6 billion of property-level debt scheduled to mature between 2019 and 2021 and $125 million of 6.875% preferred stock callable in 2019. During the three months ended September 30, 2017,2018, we closed or rate locked fiverepaid $120 million of the property-level debt. We intend to redeem the preferred stock in May 2019. We are addressing the majority of these remaining maturities and have rate-locked $620 million of non-recourse, property loans: $500 million of these loans are fixed-rate property loans totaling $297.3 million. Onwith a weighted average basis,maturity of nine years and a weighted average interest rate of 4.17%, and $120 million of these loans have five-year terms and interest rates floating at a 9.6 year term and an interest rateweighted average of 3.43%, 125115 basis points more thanover 30-day LIBOR. In connection with the corresponding Treasury ratesexpected refinancing activity, we expect to incur approximately $14 million of debt extinguishment costs.
In October 2018, we repurchased 1.7 million shares of our common stock for a total of $75 million, at the time of pricing.
The net effect of 2017 property debt refinancing activities has been to lower oura weighted average fixed interest rates by about 10 basis pointsprice of $43.89 per share, approximately a 20% discount to 4.75%, generating prospective annual interest savingsour March 31, 2018 estimated net asset value per share.
Our liquidity consists of approximately $3.0 million.
cash balances and available capacity on our revolving line of credit. As of September 30, 2017,2018, we had cash and restricted cash of $104.3 million and had the capacity to borrow $592.9 million under our revolving credit facility, after consideration of $7.1 million of letters of credit backed by the facility. We use our credit facility primarily for working capital and other short-term purposes and to secure letters of credit.
We manage our financial flexibility by maintaining an investment grade rating and holding apartment communities that are unencumbered by property debt. At September 30, 2018, we held unencumbered apartment communities with an estimated fair value of approximately $1.8 billion, an increase of approximately12% from December 31, 2016.$2.3 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.
For additional information regarding our leverage, please see the discussion under the Liquidity and Capital Resources heading.

Team and Culture
Our team and culture is the keyare keys to our success. Our emphasisintentional focus on a collaborative respectful, and performance-orientedproductive culture based on respect for others and personal responsibility is what enablesreinforced 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 transformationenduring foundation of the Aimco business.our success. In April 2017, Aimco was2018, we were recognized by the Denver Post as a Top Work Place. We are one ofPlace for the sixth consecutive year, an accomplishment shared with only a dozen Coloradoseven 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 Aimcoeffective apartment home; financial coverageleverage 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 Nine Months Ended September 30, 20172018 compared to September 30, 20162017
Net income attributable to Aimco increased by $4.1$550.4 million and decreasedincreased by $214.6$607.4 million, respectively, during the three and nine months ended September 30, 2017, respectively,2018 as compared to the September 30, 2016 comparable periods.2017. Net income attributable to the Aimco Operating Partnership increased by $4.8$579.7 million and decreased by $224.4$639.3 million, respectively, during the three and nine months ended September 30, 2017, respectively,2018 as compared to 2017. The following discussion describes the September 30, 2016 comparable periods. The increaseprimary drivers of the changes in the net income forattributable to Aimco and the Aimco Operating Partnership for the three months ended was due to a variety of factors, including improved operating results. The decrease in income for Aimco and the Aimco Operating Partnership for the nine months ended was primarily dueSeptember 30, 2018 compared to lower gains on disposition of real estate.
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 segmentportfolio 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 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 those Outside ofOther Real Estate. Same Store. Same Store apartment communities are those that have reached a stabilized level of operations as of January 1, 2016the 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. TheOther Real

Estate includes apartment communities Outside of Same Store are those 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 hadhave 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 yeartwo-year comparable period; and communities that we expect to sell within twelve12 months but do not yet meet the criteria to be classified as held for sale.
As of September 30, 2017, as defined by our segment performance metrics,2018, our Real Estate portfoliosegment consisted of 9295 Same Store apartment communities with 26,38626,367 apartment homes and 4534 Other Real Estate communities Outside of Same Store with 12,6569,972 apartment homes.
From December 31, 20162017 to September 30, 2017,2018, on a net basis, our Same Store portfolio decreasedincreased by ninethree apartment communities and 4,507decreased by 19 apartment homes. These changes consisted of:
the addition of threeone developed apartment community with 91 apartment homes and one redeveloped apartment communitiescommunity with 974104 apartment homes that were classified as Same Store upon maintaining stabilized operations for the entirety of boththe 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 reductionaddition of fiveone apartment communitiescommunity with 2,460 apartment492 apartments homes at whichthat we commenced redevelopment or development activities during the period;no longer expect to sell within 12 months; and
the reduction of eightone apartment communitiescommunity with 3,115821 apartment homes, which are expected to bewas sold within 12 months, but do not yet meet the criteria to be classified as held for sale.of September 30, 2018.
As of September 30, 2017,2018, our communities Outside of Same Store comprised approximately one-third of ourOther Real Estate portfolio, andcommunities included:

1513 apartment communities with 6,3756,293 apartment homes in redevelopment or development;
26 apartment communities with 5781,876 apartment homes recently acquired; and
415 apartment communities with 604 apartment homes owned that receive forms of government rental assistance;
14 apartment communities with 1,3891,803 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 yeartwo-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 Outside of Same Store 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 nine months ended September 30, 20172018 and 2016,2017, as presented below, are based on the apartment community populations as of September 30, 2017.2018.
Three Months Ended September 30,Three Months Ended September 30,    
(in thousands)2017 2016 $ Change % Change2018 2017 $ Change % Change
Rental and other property revenues:       
Rental and other property revenues before utility reimbursements:       
Same Store communities$148,207
 $144,127
 $4,080
 2.8 %$148,877
 $144,441
 $4,436
 3.1%
Communities Outside of Same Store81,801
 66,648
 15,153
 22.7 %
Other Real Estate communities73,979
 59,494
 14,485
 24.3%
Total230,008
 210,775
 19,233
 9.1 %222,856
 203,935
 18,921
 9.3%
Property operating expenses:       
Property operating expenses, net of utility reimbursements:       
Same Store communities42,289
 42,776
 (487) (1.1)%39,034
 37,352
 1,682
 4.5%
Communities Outside of Same Store29,057
 26,157
 2,900
 11.1 %
Other Real Estate communities23,829
 20,240
 3,589
 17.7%
Total71,346
 68,933
 2,413
 3.5 %62,863
 57,592
 5,271
 9.2%
Proportionate property net operating income:              
Same Store communities105,918
 101,351
 4,567
 4.5 %109,843
 107,089
 2,754
 2.6%
Communities Outside of Same Store52,744
 40,491
 12,253
 30.3 %
Other Real Estate communities50,150
 39,254
 10,896
 27.8%
Total$158,662
 $141,842
 $16,820
 11.9 %$159,993
 $146,343
 $13,650
 9.3%
For the three months ended September 30, 2017, as2018 compared to the three months ended September 30, 2016,2017, our Real Estate segment’s proportionate property net operating income increased $16.8$13.7 million, or 11.9%9.3%.
Same Store proportionate property net operating income increased by $4.6$2.8 million, or 4.5%2.6%. This increase was primarily attributable to a $4.1$4.4 million, or 2.8%3.1%, increase in rental and other property revenues due to higher average monthly revenues (approximately $50of $53 per Aimco apartment home),home comprised primarily of increases in rental rates and a 2030 basis point increase in average daily occupancy. Rental rates on renewals transacted duringRenewal

rents, which is the rent paid by an existing resident who renewed a lease compared to the rent paid prior to renewal, were up 4.2% for the three months ended September 30, 2017, were 4.5% higher than expiring lease rates,2018, and new lease ratesrents, which is the rent paid by a new resident compared to the rent paid by the previous resident of the same apartment home, were 1.4% higher than expiring lease rates,up 2.2%, resulting in a weighted average increase of 3.0%3.2%. The increase in Same Store operating expenses decreasedrental and other property revenues was partially offset by $0.5a $1.7 million, or 1.1%4.5%, increase in property operating expenses primarily due to decreases in insurancerepairs and maintenance costs and controllable operating expenses.increases in real estate taxes. During the three months ended September 30, 2017, as2018 compared to 2016,2017, controllable operating expenses, which exclude utility costs, real estate taxes and insurance, decreasedincreased by $0.4$1.1 million, or 2.0%5.6%.
The proportionate property net operating income of Other Real Estate communities Outside of Same Store increased by $12.3$10.9 million, or 30.3%27.8%, due to:
Indigo and One Canal, where our lease-ups were completed earlier in 2017, combined to contribute $5.5 million of incremental property net operating income duringfor the three months ended September 30, 2017,2018 compared to 2017 primarily due to:
an $8.4 million increase in property net operating income due to the same period2018 acquisitions of Bent Tree Apartments and the four Philadelphia communities as well as the stabilization of Indigo located in 2016;Redwood City, California; and
redevelopmenta $2.1 million increase in property net operating income due to leasing activities duringat redevelopment and development communities, partially offset by decreases due to apartment homes taken out of service for redevelopment and development.
 Nine Months Ended September 30,    
(in thousands)2018 2017 $ Change % Change
Rental and other property revenues before utility reimbursements:       
Same Store communities$440,681
 $428,028
 $12,653
 3.0%
Other Real Estate communities202,975
 161,321
 41,654
 25.8%
Total643,656
 589,349
 54,307
 9.2%
Property operating expenses, net of utility reimbursements:       
Same Store communities116,453
 112,725
 3,728
 3.3%
Other Real Estate communities66,666
 56,586
 10,080
 17.8%
Total183,119
 169,311
 13,808
 8.2%
Proportionate property net operating income:       
Same Store communities324,228
 315,303
 8,925
 2.8%
Other Real Estate communities136,309
 104,735
 31,574
 30.1%
Total$460,537
 $420,038
 $40,499
 9.6%
For the threenine months ended September 30, 2018 compared to 2017, our Real Estate segment’s proportionate property net operating income increased $40.5 million, or 9.6%.
Same Store proportionate property net operating income increased by $8.9 million, or 2.8%. This increase was primarily attributable to a $12.7 million, or 3.0%, increase in rental and other property revenues due to higher average revenues of approximately $50 per effective home, comprised primarily of increases in rental rates and a 30 basis point increase in average daily occupancy. Renewal rents, which included 278is the rent paid by an existing resident who renewed a lease compared to the rent paid prior to renewal, were up 4.6% for the nine months ended September 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 homeshome, were up 1.7%, resulting in a weighted average increase of 3.2%. The increase in Same Store rental and helped contributeother property revenues was partially offset by a $3.7 million, or 3.3%, increase in property operating expenses, primarily due to incremental redevelopment relatedincrease in real estate taxes and repairs and maintenance costs. During the nine months ended September 30, 2018 compared to 2017, controllable operating expenses, which exclude utility costs, real estate taxes and insurance, increased by $1.9 million, or 3.2%.
The proportionate property net operating income of $1.7our Other Real Estate communities increased by $31.6 million, asor 30.1% for the nine months ended September 30, 2018 compared to 2017, due to:
a $16.3 million increase in property net operating income due to the same period2018 acquisition of Bent Tree Apartments and the four Philadelphia properties as well as the stabilization of Indigo;
a $6.0 million increase in 2016;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 redevelopment; and

higher property net operating income of $5.1$8.5 million from other communities, Outside of Same Store, includingprimarily the effect of our increased ownership interest in the Palazzo communities from our June 2017 reacquisition of thea 47% limited partner interest in the related joint venture.

 Nine Months Ended September 30,
(in thousands)2017 2016 $ Change % Change
Rental and other property revenues:       
Same Store communities$439,115
 $425,128
 $13,987
 3.3%
Communities Outside of Same Store227,005
 192,994
 34,011
 17.6%
Total666,120
 618,122
 47,998
 7.8%
Property operating expenses:       
Same Store communities126,929
 126,534
 395
 0.3%
Communities Outside of Same Store82,268
 74,340
 7,928
 10.7%
Total209,197
 200,874
 8,323
 4.1%
Proportionate property net operating income:       
Same Store communities312,186
 298,594
 13,592
 4.6%
Communities Outside of Same Store144,737
 118,654
 26,083
 22.0%
Total$456,923
 $417,248
 $39,675
 9.5%
For the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, our Real Estate segment’s proportionate property net operating income increased $39.7 million, or 9.5%
Same Store proportionate property net operating income increased by $13.6 million, or 4.6%. This increase was primarily attributable to a $14.0 million, or 3.3%, increase in rental and other property revenues due to higher average revenues (approximately $62 per effective home), comprised primarily of increases in rental rates, partially offset by a 10 basis point decrease in average daily occupancy. Rental rates on renewals transacted during the nine months ended September 30, 2017 were 4.6% higher than expiring lease rates, and new lease rates were 0.9% higher than expiring lease rates, resulting in a weighted average increase of 2.7%. The increase in Same Store rental and other property revenues was partially offset by a $0.4 million, or 0.3%, increase in property operating expenses, primarily due to increases in real estate taxes, utility costs and repairs and maintenance, partially offset by lower personnel and insurance expenses. During the nine months ended September 30, 2017, as compared to 2016, controllable operating expenses, which exclude utility costs, real estate taxes and insurance, decreased by $0.8 million, or 1.3%.
The proportionate property net operating income of our communities Outside of Same Store increased by $26.1 million, or 22.0%, due to:
our completion of the lease-up of Indigo and One Canal earlier in 2017, which contributed to $15.2 million of incremental property net operating income compared to the same period in 2016;
redevelopment leasing activities during the last 12 months, which included 930 apartment homes and helped contribute to incremental redevelopment related property net operating income of $3.2 million during the nine months ended September 30, 2017 as compared to the same period in 2016; and
higher property net operating income of $7.7 million from other communities Outside of Same Store, including the effect of our increased ownership interest in the Palazzo communities as described above.
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 September 30, 2018, casualty losses totaled $0.8 million and included several minor claims. For the three months ended September 30, 2017, casualty losses totaled $2.8 million and included several large claims primarily related to hurricane damage.
For the threenine months ended September 30, 2016,2018, casualty losses totaled $2.9$2.4 million and included one large claimseveral claims primarily related to firewinter storm damage, and two large claims related to water damage resultingpartially offset by recovery from damaged pipes.
insurance carriers for insured losses in excess of policy limits. For the nine months ended September 30, 2017, casualty losses totaled $7.1 million as comparedand included several large claims primarily related to $5.6 milliondamage from Hurricane Irma.
Net operating income decreased for the three and nine months ended September 30, 2016. The increase was primarily2018 compared to 2017, by $12.4 million and $25.9 million, respectively, due to casualty losses from Hurricane Irma.
Apartmentapartment communities previously in our Real Estate portfolio that were sold by December 31, 2016, generated net operating incomeas of $3.5 million and $16.9 million, during the three and nine months ended September 30, 2016, respectively.2018.

Asset Management Results
We hold a nominal ownership position inPrior to the July 2018 sale of our Asset Management business, we provided asset management and other services to certain consolidated partnerships that ownowning 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, we provide asset management and other services to these partnerships and receive fees and other payments
Contribution from Asset Management 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 September 30, 2017, and represents income generated by the partnerships that is currently available to payour condensed consolidated financial statements included: fees and other amounts duepaid to us underfrom the contractual agreements.
Thenet operating resultsincome of the partnerships served by our Asset Management business, and their underlying apartment communities were comparable forless interest expense incurred on non-recourse property debt obligations of the three and nine months ended September 30, 2017, as compared to the three and nine months ended September 30, 2016.
We are also generally responsible for ensuring the underlying apartment communities comply with the requirements to earn low-income housing tax credits. We recognizepartnerships; income associated with the delivery of tax credits and tax deductions delivered to the partners.third-party investors in the partnerships; and transactional revenue and other income less asset management expenses, which included certain allocated offsite costs related to the operation of this business.
For the three and nine months ended September 30, 2017, as2018 compared to the three and nine months ended September 30, 2016, tax credit and transaction revenues2017, contribution from Asset Management decreased by $2.1 million and $9.7 million, respectively. We recognized lower tax credit income, the majority of which was due to our 2016 acquisition of an investor limited partner’s interest in one 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 nine months ended September 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 partJuly 2018 sale of our plan to exit the Asset Management business, the partnerships sell the underlying apartment communities.business.
Depreciation and Amortization
For the three and nine months ended September 30, 2017,2018 compared to the three and nine months ended September 30, 2016,2017, depreciation and amortization increased $7.7$3.9 million, or 9.0%4.2%, and $23.5$17.6 million, or 9.6%6.5%, respectively, primarily due to amountsapartment homes acquired in 2018 and renovated apartment homes placed in service after thetheir 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 nine months ended September 30, 2017,2018, compared to the three and nine months ended September 30, 2016,2017, general and administrative expenses decreased $1.1increased $2.0 million, or 9.3%18.5%, and $3.9$5.6 million,, or 11.1% 17.7%, respectively, primarily due to lowerthe timing of incentive compensation costs, professional serviceslegal and corporate offsite costs.consulting fees, and travel expenses.
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 nine months ended September 30, 2017,2018 compared to 2017, other expenses increased by $3.5 million and $7.0 million, respectively, primarily due to higher legal costs associated with 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 September 30, 2016,2018, offset by a reduction in other expenses increased by $0.8 million, primarily due to higher legal costs.

Interest Income
For the three and nine months ended September 30, 2017, as2018 compared to the nine months ended September 30, 2016, other expenses decreased by $1.82017, interest income increased $0.7 million and $1.5 million, respectively, primarily due to interest earned on the 2016 recognitionseller financing notes received as consideration in the sale of estimated environmental clean-up and abatement costs associated with a matter further discussed in Note 4 to the condensed consolidated financial statements in Item 1, partially offset by higher legal costs.

La Jolla Cove.
Interest Expense
For the three and nine months ended September 30, 2017, as2018 compared to the three months ended September 30, 2016,2017, interest expense, which includes the amortization of debt issuance costs, increaseddecreased by $1.3$5.2 million, or 2.6%10.2%, and $2.2 million, or 1.5%, respectively. The increase wasdecreases were primarily due to higher amounts outstanding on corporate borrowings (includingthe repayment of our term loan and incremental line borrowings used to fundagainst our credit facility and certain property level debt with proceeds from the reacquisitionsale of the Palazzo limited partner interests),our Asset Management business, partially offset by lower average outstanding balancesinterest on non-recourse property debt for our Real Estate apartment communities, due to principal amortization and balance repayments and refinancing property loans at lower rates.
Forassumed with the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, interest expense decreased $0.5 million, or 0.3%. The decrease was primarily due to lower average outstanding balances on non-recourse property debt for our Real Estate apartment communities, due to principal amortization, balance repayments and refinancing property loans at lower rates, partially offset by loans placed later in 2016 on acquired apartment communities, higher amounts outstanding on corporate borrowings (as described above) and a decrease in capitalized interest associated with our redevelopment and development activities.
Other, net
Other, net includes our equity in the income or loss of unconsolidated real estate partnerships, and the results of operations related to the Napico business, which we accounted for under the profit sharing method until September 2017.
For the three and nine months ended September 30, 2017, as compared to the three and nine months ended September 30, 2016, net income of the Napico business increased by $7.1 million and $2.5 million, respectively. As discussed in Note 3 of the condensed consolidated financial statements in Item 1, in September 2017, we derecognized the assets and liabilities related to this property, resulting in a gain.Philadelphia portfolio acquisition.
Income Tax Benefit
Certain of our operations, including property management and risk management, are conducted through taxable REIT subsidiaries, or TRS entities. Additionally, some of our apartment communities are owned through TRS entities.
Our income tax benefit calculated in accordance with GAAP includes: (a) historic tax credits that offset income tax obligations of our TRS entities; (b) income taxes associated with the income or loss of our TRS entities, for which the taxestax consequences have been realized in earlier periods or will be realized in future periods; and (c)(b) low income housing tax credits generated prior to the sale of our Asset Management business and four Hunters Point apartment communities that offset REIT taxable income, primarily from retained capital gains.gains; and (c) historic tax credits that offset income tax obligations of our TRS entities. Income taxes related to these items (before gains on dispositions), as well as changes in valuation allowance and the establishment of incremental deferred tax items in conjunction with intercompany asset transfers (if applicable), are included in income tax benefit in our condensed consolidated statements of operations.
Income tax benefit for the periods presented also reflects GAAP taxes associated with income and gains related to the Napico business, which was deconsolidated at the end of September 2017.
For the three and nine months ended September 30, 2017,2018 compared to the three months ended September 30, 2016,2017, income tax benefit increased by $1.4 million. In 2017, we had lower historic tax credits associated with the redevelopment of certain apartment communities. Notwithstanding these lower historic tax credits, our income$23.1 million and $54.8 million, respectively. Income tax benefit increased during the three months ended primarily due to higher operating losses recognized by our TRS entities and higher tax benefits associated with low-income tax credits from our September 2016 acquisitionthe release of a previously established valuation allowance as a result of the limited partner interests in a tax credit partnership. Additionally, in 2017 we recognized higher tax expense than in 2016 due to our derecognitionsale of the final community in the NapicoAsset Management business.
For Income tax benefit increased during the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, income tax benefit decreased by $1.6 million. Income tax benefit decreased2018, primarily due to lower historica tax credits associatedbenefit recognized in connection with an intercompany transfer of assets related to our Asset Management business and the redevelopmentrelease of certain apartment communities, including the timing of final certification on one redevelopment in 2016. This was partially offset by higher tax benefits associated with low-income tax credits from the 2016 acquisition described above.valuation allowance.
Gain on Dispositions of Real Estate Netand the Asset Management Business, Inclusive of Related Income Tax
Real Estate
During the three months ended September 30, 2018, we sold for $170 million Chestnut Hill Village, an 821-apartment community located in north Philadelphia for a gain of $122.6 million, net of income tax, and gross proceeds of $170.4 million, resulting in $165.5 million in net proceeds to us. During the nine months ended September 30, 2018, we sold four apartment communities with 1,334 apartment homes for a gain of $173.2 million, net of income tax, and gross proceeds of $242.3 million, resulting in $230.1 million in net proceeds to us.
We did not sell any apartment communities from our Real Estate portfolio during the nine months ended September 30, 2017, though we sold a commercial property resulting in a small gain. 2017.
During the ninethree months ended September 30, 2016,2018, we also sold four affordable communities located in the Hunters Point area of San Francisco in connection with our sale of our Asset Management business described below.
Asset Management
During the three months ended September 30, 2018, we sold threefor $590.0 million our Asset Management business and our four Hunters Point communities for a gain of $448.2 million, net of income tax. After payment of transaction costs and repayment of property-level debt encumbering the Hunters Point apartment communities, for gross proceeds of $301.9 million, resulting in net proceeds of $299.0 million and net gain on dispositions of real estate of $222.7to us were $512.2 million.

Asset Management
Consolidated partnerships served by our Asset Management business did not sell any apartment communities during the three months ended September 30, 2017. During the nine months ended September 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.
During the three and nine months ended September 30, 2016, a consolidated partnership served by our Asset Management business sold an apartment community for gross proceeds of $27.5 million, resulting in net proceeds of $10.3 million after repayment of property-level debt, payment of transaction costs and distribution of proceeds to noncontrolling interests, and net gain on dispositions of $14.5 million.
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 September 30, 20172018 and 2016,2017, we allocated net lossincome of $0.2$1.8 million and net incomeloss of $12.5$0.2 million, respectively, to noncontrolling interests in consolidated real estate partnerships, representing a decreasepartnerships.
The allocation to noncontrolling interests resulting from operations of $12.7 million. the consolidated apartment communities was $0.1 million of income for the three months ended September 30, 2018, and $0.2 million of loss for the three months ended September 30, 2017.
Gains on the sale of apartment communities allocated to noncontrolling interests totaled $1.7 million for the three months ended September 30, 2018 and there were no gains to allocate in the three months ended September 30, 2017.
For the nine months ended September 30, 20172018 and 2016,2017, we allocated net income of $1.5$8.0 million and $22.1$1.5 million, respectively, to noncontrolling interests in consolidated real estate partnerships, representing a decrease of $20.6 million.partnerships.
The amountsamount of net income allocated to noncontrolling interests relatedresulting from operations of the consolidated apartment communities was $0.2 million and $1.5 million for the nine months ended September 30, 2018 and 2017, respectively. The decrease was primarily due to the June 2017 reacquisition of our Real Estate segment and Asset Management businesslimited partner’s interests in the aggregate decreased by $11.9Palazzo joint venture.
Gains on the sale of apartment communities allocated to noncontrolling interests totaled $7.8 million for the nine months ended September 30, 2018, and $12.5 million duringthere were no gains to allocate in the nine months ended September 30, 2017.
Noncontrolling Interests in Aimco Operating Partnership
In Aimco’s consolidated financial statements, noncontrolling interests in the Aimco Operating Partnership reflects the results of the Aimco Operating Partnership that are allocated to the OP Unit holders. For the three and nine months ended September 30, 2017, respectively, primarily due2018 compared to a decrease in the amounts of gain we recognized on dispositions of real estate during these periods.
The amounts of2017, net income allocated to noncontrolling interests related to the Napico business decreased by $0.8 million and $8.1 million during the three and nine months ended September 30, 2017, respectively. As part of our ongoing plan to simplify our business, during 2012 we sold the Napico business. In 2016, we received final payment of the seller financing and we met the requirements to recognize the sale of the majority of that business. In 2017, the current owner of the Napico business refinanced the final property, for which we previously provided a debt guaranty, allowing us to derecognize the assets and liabilities related to this property and resulting in a gain.
Net Income Attributable to Aimco Preferred Stockholders and the Aimco Operating Partnership’s Preferred Unitholders
Net income attributable to Aimco Preferred Stockholders decreased by $2.2Partnership increased $29.4 million and $3.4$31.9 million, during the three and nine months ended September 30, 2017, respectively, as comparedrespectively. Allocations to the same periodsnoncontrolling interests in 2016. Net income attributed to the Aimco Operating Partnership’s Preferred Unitholders decreased by $2.1 million and $2.8 million, respectively, during these periods. The decreases were primarily duePartnership fluctuate in proportion to Aimco’s redemption of its Class Z Preferred Stock on July 29, 2016. In connection with the redemption we wrote off previously deferred issuance costs of $1.3 million. Additionally, the $0.7 million excess of redemption value over the carrying amount, was reflectedvariations in net income, attributableas described above. The allocation of net income to Aimco Preferred Stockholders andnoncontrolling interests in the Aimco Operating Partnership’s Preferred UnitholdersPartnership increased due to the issuance of OP Units as partial consideration for the three and nine months ended September 30, 2016.acquisition of the four Philadelphia properties, discussed further in Note 3 to the condensed consolidated financial statements in Item 1.
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 financial condition, results of operations, and cash flows 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-

GAAPnon-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
Economic Income represents stockholder value creation as measured by the per share change in estimated net asset value plus cash dividends. 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 Economic Income annually. Please refer to the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations Pro forma described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2017, for more information about Economic Income.
Funds From Operations, or FFO, Pro forma FFO and Adjusted Funds From OperationsAFFO 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 herein under the Funds From Operations, Pro forma Funds From Operations and Adjusted Funds From Operations heading and the Liquidity and Capital Resources headings)heading). FCFFree Cash Flow margin, represents an apartment community’s net operating incomeNOI 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 FCFFree 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 the change in estimated net asset value per share plus cash dividends per share. We report and reconcile our Economic Income annually. Readers should refer to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” described in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2016, 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 from FFO 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 nine months ended September 30, 2018. We believe these costs incurred are closely related to the sale of the business and exclude such costs from Pro forma FFO. We also excluded from Pro forma FFO the tax benefit due to the valuation allowance release, net of common noncontrolling interests in Aimco Operating Partnership and participating securities. Due to the sale of the Asset Management business, we expect to realize our deferred tax benefits. As a result, we have determined that a valuation allowance is no longer necessary. We excluded the effect of the establishment of the valuation allowance from Pro forma FFO and, as such, have excluded the benefit from its release.
AFFO represents Pro forma FFO reduced by Capital Replacements, (also adjusted for noncontrolling interests), which represents our estimation of the actual 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 enhanceextend 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 nine months ended September 30, 20172018 and 2016,2017, Aimco’s FFO, Pro forma FFO and AFFO are calculated as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 20162018 2017 2018 2017
Net income attributable to Aimco common stockholders (1)$17,430
 $11,176
 $44,764
 $255,781
$567,029
 $17,430
 $651,371
 $44,764
Adjustments:              
Real estate depreciation and amortization, net of noncontrolling partners’ interest89,879
 80,313
 257,409
 231,809
94,166
 89,879
 279,798
 257,409
Gain on dispositions and other, net noncontrolling partners’ interest(5,772) (5,041) (7,952) (224,925)(624,521) (5,772) (671,761) (7,952)
Income tax provision related to gain on disposition of real estate733
 1,959
 2,175
 4,419
Income tax adjustments related to gain on dispositions and other items (2)54,448
 733
 23,813
 2,175
Common noncontrolling interests in Aimco Operating Partnership’s share of above adjustments(3,814) (3,680) (11,447) (506)24,130
 (3,814) 18,963
 (11,447)
Amounts allocable to participating securities(43) (110) (122) (14)626
 (43) 529
 (122)
FFO Attributable to Aimco common stockholders – Diluted$98,413
 $84,617
 $284,827
 $266,564
Preferred redemption related amounts, net of common noncontrolling interests in Aimco Operating Partnership and participating securities—
 1,877
 —
 1,877
Pro forma FFO Attributable to Aimco common stockholders – Diluted$98,413
 $86,494
 $284,827
 $268,441
FFO attributable to Aimco common stockholders – diluted$115,878
 $98,413
 $302,713
 $284,827
Tax benefit due to valuation allowance release, net of common noncontrolling interests in Aimco Operating Partnership and participating securities (3)(19,349) —
 (19,349) —
Litigation costs, net of common noncontrolling interests in Aimco Operating Partnership and participating securities (4)2,727
 —
 4,633
 —
Severance costs, net of common noncontrolling interests in Aimco Operating Partnership and participating securities (5)67
 —
 1,282
 —
Pro forma FFO attributable to Aimco common stockholders – diluted$99,323
 $98,413
 $289,279
 $284,827
Capital Replacements, net of common noncontrolling interests in Aimco Operating Partnership and participating securities(14,446) (15,351) (40,752) (40,092)(10,768) (14,446) (32,245) (40,752)
AFFO attributable to Aimco common stockholders – Diluted$83,967
 $71,143
 $244,075
 $228,349
AFFO attributable to Aimco common stockholders – diluted$88,555
 $83,967
 $257,034
 $244,075
              
Weighted average common shares outstanding – diluted (2)156,835
 156,527
 156,768
 156,341
Weighted average common shares outstanding – diluted (FFO, Pro forma FFO and AFFO) (6)156,938
 156,835
 156,836
 156,768
              
Net income attributable to Aimco per common share – diluted$0.11
 $0.07
 $0.29
 $1.64
$3.61
 $0.11
 $4.15
 $0.29
FFO per share – diluted$0.63
 $0.54
 $1.82
 $1.71
$0.74
 $0.63
 $1.93
 $1.82
Pro Forma FFO per share – diluted$0.63
 $0.55
 $1.82
 $1.72
Pro forma FFO per share – diluted$0.63
 $0.63
 $1.84
 $1.82
AFFO per share – diluted$0.54
 $0.45
 $1.56
 $1.46
$0.56
 $0.54
 $1.64
 $1.56
(1)Represents the numerator for calculating Aimco’s earnings per common share in accordance with GAAP.
(2)Income taxes related to gain on dispositions and other items for the three months ended September 30, 2018, includes the reversal of a $33.3 million deferred tax asset related to intercompany transfer of assets, which was realized upon the sale of the Asset Management business. The remaining income tax provision of $21.1 million relates to the tax on the gain on the sale. For the nine months ended September 30, 2018, income taxes related to gain on dispositions and other items includes tax on the gain on the sale of the Asset Management business, as well as tax on the gain on the sale of apartment communities during the nine months ended September 30, 2018.
(3)Due to the sale of the Asset Management business, we expect to realize our deferred tax benefits. As a result, we have determined that a valuation allowance is no longer necessary. We excluded the effect of the establishment of the valuation allowance from Pro forma FFO and as such have excluded the benefit from its release.
(4)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.
(5)In connection with the sale of our Asset Management business, we incurred severance costs of $0.1 million and $1.3 million during the three and nine months ended September 30, 2018, respectively. We believe these costs are closely related to the sale of the business and have excluded such costs from Pro forma FFO and AFFO.
(6)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 for 2017, as2018 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, weWe 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 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,which is essentially an investment in our own non-recourse property loans).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 beingwhich 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. 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.
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.
While Adjusted EBITDA is a relevant measure of performance and is commonly used in leverage ratios, it does not represent net income as defined by GAAP, and should not be considered as an alternative to net income in evaluating our performance.  Further, our definition and computation of Adjusted 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.
Reconciliations of the most closely related GAAP measures to our calculations of Proportionate Debt, Preferred Equity, Adjusted EBITDA, Adjusted Interest Expense and Preferred Dividends, as used in our leverage ratios, are as follows (in thousands):
 September 30, 2017
Total indebtedness associated with Real Estate portfolio$4,162,140
Adjustments: 
Debt issue costs related to non-recourse property debt16,944
Debt issue costs related to term loan748
Proportionate share adjustments related to debt obligations of consolidated and unconsolidated partnerships(10,089)
Cash and restricted cash(86,345)
Proportionate share adjustments related to cash and restricted cash held by consolidated and unconsolidated partnerships1,065
Securitization trust investment and other(79,889)
Proportionate Debt$4,004,574
  
Preferred stock125,000
Preferred OP Units101,537
Preferred Equity226,537
Proportionate Debt and Preferred Equity$4,231,111
 Three Months Ended September 30, 2017
Net income attributable to Aimco Common Stockholders$17,430
Adjustments: 
Adjusted Interest Expense43,354
Income tax benefit(4,870)
Depreciation and amortization, net of noncontrolling interest92,569
Gains on disposition and other, net of income taxes and noncontrolling partners’ interests(5,039)
Preferred stock dividends2,148
Net income attributable to noncontrolling interests in Aimco Operating Partnership2,815
Other items, net(2,903)
Adjusted EBITDA$145,504
  
Annualized Adjusted EBITDA$582,016
 September 30, 2018
Total indebtedness associated with Real Estate portfolio$3,646,789
Adjustments: 
Debt issue costs related to non-recourse property debt18,488
Proportionate share adjustments related to debt obligations of consolidated and unconsolidated partnerships(9,550)
Cash and restricted cash(104,299)
Proportionate share adjustments related to cash and restricted cash held by consolidated and unconsolidated partnerships2,380
Securitization trust investment and other(87,011)
Proportionate Debt$3,466,797
  
Preferred stock$125,000
Preferred OP Units101,320
Preferred Equity226,320
Proportionate Debt and Preferred Equity$3,693,117

 Three Months Ended September 30, 2017
Interest expense$50,682
Interest expense related to non-recourse property debt obligations of consolidated partnerships served by our Asset Management business(3,382)
Interest expense attributable to Real Estate portfolio47,300
Adjustments: 
Proportionate share adjustments related to interest of consolidated and unconsolidated partnerships96
Debt prepayment penalties and other non-interest items(869)
Amortization of debt issue costs(1,395)
Interest income earned on securitization trust investment(1,778)
Adjusted Interest Expense$43,354
  
Preferred stock dividends2,148
Preferred OP Unit distributions1,938
Preferred Dividends4,086
Adjusted Interest Expense and Preferred Dividends$47,440
  
Annualized Adjusted Interest Expense$173,416
Annualized Adjusted Interest Expense and Preferred Dividends$189,760
 Three Months Ended September 30, 2018
Net income attributable to Aimco Common Stockholders$567,029
Adjustments: 
Adjusted Interest Expense39,545
Income tax benefit(27,941)
Depreciation and amortization, net of noncontrolling interest96,349
Gain on disposition and other, inclusive of related income taxes and net of noncontrolling partners’ interests(570,384)
Preferred stock dividends2,148
Net income attributable to noncontrolling interests in Aimco Operating Partnership32,946
Pro forma adjustment (1)(6,212)
Adjusted EBITDA$133,480
  
Annualized Adjusted EBITDA$533,920
  
(1) Adjusted EBITDA has been adjusted on a pro forma basis to reflect the dispositions of Chestnut Hill Village, the Asset Management business, and the four Hunters Point communities during the period as if the transactions had been closed on July 1, 2018.
 Three Months Ended September 30, 2018
Interest expense$45,492
Interest expense related to non-recourse property debt obligations of consolidated partnerships served by our Asset Management business(854)
Interest expense attributable to Real Estate portfolio44,638
Adjustments: 
Proportionate share adjustments related to interest of consolidated and unconsolidated partnerships(102)
Debt prepayment penalties and other non-interest items(1,410)
Amortization of debt issue costs(1,658)
Interest income earned on securitization trust investment(1,923)
Adjusted Interest Expense$39,545
  
Preferred stock dividends2,148
Preferred OP Unit distributions1,934
Preferred Dividends4,082
Adjusted Interest Expense and Preferred Dividends$43,627
  
Annualized Adjusted Interest Expense$158,180
Annualized Adjusted Interest Expense and Preferred Dividends$174,508
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, 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 September 30, 2017,2018, our primary sources of liquidity were as follows:
$38.858.0 million in cash and cash equivalents;
$47.646.3 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
$231.8592.9 million of available capacity to borrow under our revolving credit facility (which is more fully described below), after consideration of outstanding borrowings of $356.2 million and $12.0$7.1 million of letters of credit backed by the facility.
At September 30, 2017,2018, we also held unencumbered apartment communities with an estimated fair market value of approximately $1.8 billion, an increase of approximately 12% from December 31, 2016. Each of the amounts presented above exclude amounts attributable to partnerships served by our Asset Management business.


$2.3 billion.
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 September 30, 2017,2018, approximately 81.1%94.2% of our leverage consisted of property-level, non-recourse, long-dated, amortizing debt. Approximately 97.7%96.4% 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 years.
For property-level debt encumbering the communities in our Real Estate portfolio, $116.5 million of ourwas 7.0 years. There are no unpaid principal balances maturematuring during the remainder of 2017,2018, and on average, 9.3%12.2% of our unpaid principal balance will mature each year from 20182019 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 Agreementcredit facility with a syndicate of financial institutions, which we refer to as our Credit Agreement.institutions. Our Credit Agreementcredit facility provides for $600.0 million of revolving loan commitments. As of September 30, 2017,2018, we had $356.2 million ofno outstanding borrowings under the Credit Agreementour revolving credit facility. The revolving credit facility . The Credit Agreement provides us with an option to expand the aggregate loan commitments, subject to customary conditions, by up toto $200.0 million.
On June 30, 2017, we amended the Credit Agreement to provide The credit facility also provided for a $250.0 million term loan, to fund partially our reacquisition of limited partner interestswhich we repaid in full during the Palazzo joint venture. The term loan matures on Junethree months ended September 30, 2018, has a one-year extension option and bears interest at 30-day LIBOR plus 135 basis points.2018.
As of September 30, 2017,2018, our outstanding perpetual preferred equity represented approximately 5.2%5.8% 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 revolving credit facility 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 8.28.9 years as of September 30, 2017.2018.
Under the Credit Agreement,revolving credit facility, 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 September 30, 2017,2018, our Fixed Charge Coverage ratio was 1.99x,2.01x, compared to a ratio of 1.96x1.99x for the trailing twelve month period ended September 30, 2016.2017. We expect to remain in compliance with this covenant during the next 12 months.

As of June 30, 2018, we had $1.6 billion of property-level debt scheduled to mature between 2019 and 2021 and $125 million of 6.875% preferred stock callable in 2019. During the three months ended September 30, 2018, we repaid $120 million of the property-level debt. We intend to redeem the preferred stock in May 2019. We are addressing the majority of these remaining maturities and have rate-locked $620 million of non-recourse, property loans: $500 million of these loans are fixed rate with a weighted average maturity of nine years and a weighted average interest rate of 4.17%, and $120 million of these loans have five-year terms and interest rates floating at a weighted average of 115 basis points over 30-day LIBOR. In connection with the expected refinancing activity, we expect to incur approximately $14 million of debt extinguishment costs. The completion of the refinancing activity will result in reduced refunding risk, lowered interest expense, an improved ladder of maturities, and an increase in the value of our unencumbered pool to over $3 billion, an almost 70% increase from December 31, 2017.
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, and the non-recourse feature avoids entity risk.
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 nine months ended September 30, 2017,2018, net cash provided by operating activities was $285.0$302.9 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 nine months ended September 30, 2017,2018, increased by $8.6$7.8 million as compared to the nine months ended September 30, 2016,2017, due to improved operating results of our Same Store communities and increased contribution from our redevelopment and lease-up communities, partially offset by lower net operating income associated with apartment communities sold in 2016.

the sale of our Asset Management business.
Investing Activities
For the nine months ended September 30, 2017,2018, net cash used inprovided by investing activities of $274.1$239.1 million consisted primarily of proceeds from the disposition of the Asset Management business, four affordable apartment communities located in the Hunters Point area of San Francisco, and four conventional apartment communities, partially offset by the acquisitions of Bent Tree Apartments and four apartment communities in Philadelphia and capital expenditures. Capital expenditures totaled $266.6$253.1 million and $259.3$266.6 million during the nine months ended September 30, 20172018 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 and dispositions completed during the nine months ended September 30, 2018, is included in Note 3 to the condensed consolidated financial statements in Item 1.
Capital additions for our Real Estate segment totaled $241.6 million and $243.3 million during the nine months ended September 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-redevelopmentrepresent capital additions that are made to enhancereplace the value, profitability or useful lifeportion 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 assetapartment 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 not affect the amount of cash flow we expect to receive from the operation and ultimate disposition of these communities.foregoing measures. We have also excluded from these measures indirect capitalized costs, which are not yet 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 flowflows for the nine months ended September 30, 20172018 and 2016,2017, are presented below (dollars in(in thousands):
Nine Months Ended September 30,Nine Months Ended September 30,
2017 20162018 2017
Real Estate      
Capital replacements$32,665
 $30,467
$24,222
 $29,607
Capital improvements12,050
 10,763
9,086
 11,857
Property upgrades85,670
 53,707
Capital enhancements78,516
 75,569
Redevelopment additions115,444
 117,810
94,568
 114,165
Development additions5,783
 30,481
30,229
 5,783
Casualty replacements6,700
 4,280
Casualty capital additions4,992
 6,284
Real Estate capital additions258,312
 247,508
241,613
 243,265
Plus: additions related to consolidated asset managed communities, apartment communities sold or held for sale, and other adjustments3,445
 8,051
Plus: additions related to apartment communities sold or held for sale and unallocated indirect capitalized costs13,470
 17,678
Plus: additions related to consolidated asset managed communities—
 814
Consolidated capital additions261,757
 255,559
255,083
 261,757
Plus: net change in accrued capital spending4,866
 3,764
(1,934) 4,866
Capital expenditures per consolidated statement of cash flows$266,623
 $259,323
Capital expenditures per condensed consolidated statement of cash flows$253,149
 $266,623
For the nine months ended September 30, 20172018 and 2016,2017, we capitalized $5.9$5.7 million and $7.8$5.9 million of interest costs, respectively, and $26.8 million and $24.1$26.8 million of other direct and indirect costs, respectively.
We invested $85.7$78.5 million in property upgradescapital enhancements during the nine months ended September 30, 2017,2018, and we anticipate a full year investment ranging from $95$90 million to $105$100 million.

Redevelopment/Redevelopment and Development
Information regarding our redevelopment and development communitiesWe 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 ongoing redevelopments of this nature at September 30, 2017, is presented below2018 (dollars in millions):
 Location Apartment Homes Approved for Redevelopment or Development Estimated Net Investment Inception-to-Date Net Investment Expected Stabilized Occupancy (1) Expected Net Operating Income Stabilization (1)
Under Redevelopment           
Bay Parc PlazaMiami, FL (2) $16.0
 $9.1
 (2) (2)
Calhoun Beach ClubMinneapolis, MN 275
 28.7
 5.1
 (3) (3)
Flamingo South BeachMiami, FL (4) 9.7
 1.2
 (4) (4)
Palazzo at Park La BreaLos Angeles, CA 389
 24.5
 15.3
 2Q 2020 3Q 2021
Palazzo East at Park La BreaLos Angeles, CA 611
 28.0
 0.6
 4Q 2020 1Q 2022
Parc MosaicBoulder, CO 226
 117.0
 19.2
 4Q 2020 1Q 2022
Park Towne PlacePhiladelphia, PA 943
 176.0
 135.0
 1Q 2019 2Q 2020
Saybrook PointeSan Jose, CA 324
 18.3
 13.7
 1Q 2019 2Q 2020
YorktownLombard, IL 292
 25.7
 16.8
 (3) (3)
            
Lease-up complete, NOI stabilization period          
One CanalBoston, MA 310
 195.0
 194.8
 1Q 2017 2Q 2018
The SterlingPhiladelphia, PA 534
 71.5
 70.6
 3Q 2017 4Q 2018
Total  3,904
 $710.4
 $481.4
    
 Location Apartment Homes Approved for Redevelopment Estimated/Potential Net Investment Inception-to-Date Net Investment
Bay ParcMiami, FL 60
 $24.1
 $19.7
Calhoun Beach ClubMinneapolis, MN 275
 28.7
 10.5
Flamingo South BeachMiami Beach, FL —
 39.7
 12.0
Palazzo West at The GroveLos Angeles, CA 389
 24.5
 18.7
Saybrook PointeSan Jose, CA 324
 18.8
 18.6
YorktownLombard, IL 292
 25.7
 19.9
OtherVarious 92
 12.9
 11.6
Total  1,432
 $174.4
 $111.0
(1)Redevelopments provide us with the flexibility to align the timing of completed apartment homes with market demand. As such, expected occupancy stabilization and expected NOI stabilization dates may change as market conditions evolve.
(2)This phase of redevelopment encompasses common areas, amenity improvements and the creation of a new retail space.
(3)In response to market conditions, we slowed redevelopment activities and extended the estimated time for completion.
(4)This phase of the redevelopment encompasses common areas and security system upgrades.

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. 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 investments related to these developments and redevelopments at September 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 ExpansionAurora, CO 253
 $87.0
 $4.1
  3Q 2021  4Q 2022
 Parc Mosaic Boulder, CO 226
 117.0
 51.2
  4Q 2020  1Q 2022
 Park Towne Place Philadelphia, PA 940
 176.0
 172.3
  1Q 2019  2Q 2020
Total  1,419
 $380.0
 $227.6
    
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 IncomeStabilized 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 nine months ended September 30, 2017, we invested $121.2 millionOur total estimated or potential net investment in ongoing redevelopment and development projects.
During the nine months ended September 30, 2017, we completed construction of the third tower at Park Towne Place in Center City, Philadelphia. As of September 30, 2017 this tower was 74% leased at rates consistent with underwriting. We expect this tower to be more than 90% leased by year-end, as are the first two towers redeveloped at the community.
Also in Center City Philadelphia, during the nine months ended September 30, 2017, we completed redevelopment and the lease-up of the 534 apartment homes at The Sterling and substantially completed the reconfiguration of the second floor commercial space, upgrades to the third and fourth floor commercial space and upgrades to residential common areas.
In the past three years, we have leased more than 1,100 redeveloped apartment homes in Center City, Philadelphia. Based on these results, we decided to proceed with a $40.0 million redevelopment of the fourth and final tower at Park Towne Place. De-leasing of the fourth tower is underway and construction on this tower is scheduled to commence by year end.
In addition to the redevelopments described above, during the nine months ended September 30, 2017 we continued redevelopment of three ongoing projects in Los Angeles and San Jose, California and Lombard, Illinois and commenced redevelopments at four apartment communities in Miami, Minneapolis, and Los Angeles, which are summarized in the table above.
In 2014, we acquired Eastpointe, a “C” property located in Boulder, Colorado. Over the past two years, we have planned and entitled a new $117.0 million, 226 apartment home community to be known as Parc Mosaic. De-leasing of Eastpointe is underway and construction of Parc Mosaic is scheduled to commence by year end.

Inclusive of the redevelopment and development projects discussed above, during the nine months ended September 30, 2017 we expanded our redevelopment and development pipeline by $223.1 million. The total estimated net investment for these redevelopment and development communities is $710.4$554.4 million with a projected weighted average net operating income yield on these investments of 6.1%, assuming untrended rents. Of this total, $481.4$338.6 million has been funded. We expect to fund the remaining redevelopment and development investment through a combination of leverage and proceeds from community sales.
During the nine months ended September 30, 2018, we invested $124.8 million in redevelopment and development. In Center City, Philadelphia, we have substantially completed redevelopment of the vacated fourth and final tower of Park Towne Place. During the three months ended September 30, 2018, average daily occupancy at the three completed towers was 89.1%. As of September 30, 2018, the three completed towers were 95% leased and the fourth tower was 71% leased.
We also commenced the next phase of redevelopment at our Flamingo community, located in Miami Beach. This $30 million phase includes extensive redevelopment of retail, leasing, and common areas, including major enhancements to the entryway.
During the nine months ended September 30, 2018, we exercised our option to acquire approximately two acres of land adjacent to our 21 Fitzsimons apartment community, located on the University of Colorado Anschutz Medical Campus, and broke ground on the development of a 253-apartment home community. We expect to invest approximately $87 million to construct the community, which is expected to be complete in the third quarter of 2020.
During the nine months ended September 30, 2018, we leased 329 apartment homes at our redevelopment communities. As of September 30, 2018, our exposure to lease-up at active redevelopment and development communities was approximately 341 apartment homes, of which 62 were in the fourth tower of Park Towne Place, 213 were being constructed at Parc Mosaic, and 66 were located in three other communities.
We expect our total development and redevelopment spending to range from $150$170 million to $170$190 million for the year ending December 31, 2017.2018.
Financing Activities
For the nine months ended September 30, 2017,2018, net cash used in financing activities of $16.4$580.3 million was primarily attributed to our reacquisitionrepayments on non-recourse property debt, the pay down of the limited partner interests in the Palazzo joint venture,term loan and revolving credit facility, dividends paid to common security holders, distributions paid to noncontrolling interests, and principal payments on property loans, mostlyredemptions of noncontrolling interest, partially offset by proceeds from the term loan, net borrowings on our revolving credit facility and proceeds from non-recourse property debt.
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 reacquisition 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 sixtwo fixed-rate, amortizing, non-recourse property loans totaling $162.2$242.0 million. OnThese loans have 10-year terms and a weighted average basis, these loans have a term of 9.3 years and an interest rate of 3.6%3.48%, 129

126 basis points more than the 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 16 basis points since December 31, 2017, to 4.48%, reducing prospective interest expense by more than $5.7 million.
We like the discipline of financing our investments in real estate through the use of fixed-rate, amortizing,Proceeds from non-recourse property debt asborrowing during the amortization gradually reducesperiod also included the closing of two non-recourse, variable-rate property loans totaling $118.6 million. These loans each have a 5-year term and bear interest at 30-day LIBOR plus 1.25%. The five-year terms fill a hole in our leverageladdered maturities and, reducestaken together with the repayment of the variable term loan, reduce our refunding risk, and the fixed-rate provides a hedge against increases inexposure to increasing short-term interest rates.rates to approximately 3% of our leverage.
Principal payments on property loans during the period totaled $250.7$403.1 million, consisting of scheduled principal amortization of $64.3$63.0 million and repayments of $186.4$340.1 million.
Net cash used in financing activities also includes $191.3$207.9 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 nine months ended September 30, 20172018 (in thousands):
Cash distributions paid by the Aimco Operating Partnership to holders of noncontrolling interests in consolidated real estate partnerships$1,977
Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships$7,934
Cash distributions paid by the Aimco Operating Partnership to preferred unitholders (1)12,271
12,250
Cash distributions paid by the Aimco Operating Partnership to common unitholders (2)177,013
187,747
Total cash distributions paid by the Aimco Operating Partnership$191,261
$207,931
(1)$6.4 million represented distributions to Aimco, and $5.8 million represented distributions paid to holders of OP Units.
(2)$169.0178.9 million represented distributions to Aimco, and $8.0$8.8 million represented distributions paid to holders of OP Units.
The following table presents Aimco’s dividend activity during the nine months ended September 30, 20172018 (in thousands):
Cash distributions paid by Aimco to holders of noncontrolling interests in consolidated real estate partnerships$1,977
Cash distributions paid by Aimco to holders of OP Units13,852
Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships$7,934
Cash distributions paid to holders of OP Units14,615
Cash dividends paid by Aimco to preferred stockholders6,445
6,445
Cash dividends paid by Aimco to common stockholders168,987
178,937
Total cash dividends and distributions paid by Aimco$191,261
$207,931
During the nine months ended September 30, 2018, we repurchased $8.5 million of OP Units at an average discount of approximately 20% to our estimated net asset value per share.
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 September 30, 2017,2018, on a consolidated basis, we had approximately $83.1$133.1 million of variable-rate property debt outstanding, and $606.2 million of variable-rateno borrowings under our Credit Agreement.revolving credit facility. We estimate that an increasea change in 30-day LIBOR of 100 basis points with constant credit risk spreads would result in our net income, the amount ofreduce 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 $6.7$1.3 million on an annual basis. We estimate that a decrease in 30-day LIBOR of 100 basis points would increase the amounts of our net income by a similar amount.
At September 30, 2017, we2018, our Real Estate segment had approximately $133.6$104.3 million in cash and cash equivalents and restricted cash, a portion of which bearbears interest at variable rates, andwhich may partially mitigate the effect of an increaseoffset 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 fair value of total indebtedness associated with the Real Estate portfolio was approximately $4.2$3.6 billion at September 30, 2017,2018, inclusive of a $62.3$64.0 million mark-to-market liability.asset. The carrying value of non-recourse property debt of the partnerships served by our Asset Management business approximated its estimated fair value at September 30, 2017 and December 31, 2016. The mark-to-market liability increased by $4.7 million as compared to 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 $4.4$3.6 billion in the aggregate to $4.3$3.5 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 $4.4$3.6 billion in the aggregate to $4.6$3.7 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 third quarter of 20172018 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 third quarter of 20172018 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 ninethree months ended September 30, 2017.2018.
(c) Repurchases of Equity Securities. There were no repurchases by Aimco of its common equity securities during the three months ended September 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 September 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 Aimco Operating Partnership did not issue any unregistered OP Units during the ninethree months ended September 30, 2017. 2018.
(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 September 30, 2017,2018, no common OP Units were redeemed in exchange for shares of Common Stock. The following table summarizes repurchases, (redemptionsor redemptions in exchange for cash)cash, of the Aimco Operating Partnership’s equity securities for the three months ended September 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)
July 1 - July 31, 20179,601
 $44.03
 N/A N/A
August 1 - August 31, 2017684
 43.09
 N/A N/A
September 1 - September 30, 201714,388
 45.56
 N/A N/A
Total24,673
 $44.89
    




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)
July 1 - July 31, 20185,466
 $41.50
 N/A N/A
August 1 - August 31, 20186,094
 42.69
 N/A N/A
September 1 - September 30, 20188,245
 43.59
 N/A N/A
Total19,805
 $42.74
    
(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, wheneverfor Aimco repurchasesto 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 paidAimco pays for its Common Stock.
Aimco and the Aimco Operating Partnership
Dividend and Distribution Payments. Our Credit Agreementrevolving credit facility 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)
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 – Thethe 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 – Thethe Aimco Operating Partnership


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 – Thethe 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 – Thethe 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 September 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: November 1, 20172, 2018


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