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.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

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.

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

The number of shares of Apartment Income REIT Corp. Class A Common Stock outstanding as of ~~October 27, 2021:~~November 2, 2022: ~~156,985,422~~149,928,321

On December 15, 2020, Apartment Investment and Management Company (“Aimco”) completed the separation of its business into two, separate and distinct, publicly traded companies, Apartment Income REIT Corp. (“AIR”) and Aimco (the “Separation”).

Notwithstanding the legal form of the Separation, for accounting and financial reporting purposes, Aimco is presented as being spun-off from AIR (as it relates to Aimco subsequent to the Separation, the “Spinnee”). This presentation is in accordance with generally accepted accounting principles in the United States, and is due primarily to the relative significance of AIR’s business, as measured in terms of revenue, net income, assets, and other relevant indicators, as compared to Aimco before the Separation. Therefore, AIR is considered the divesting entity and treated as the accounting spinnor, and Aimco is presented as the predecessor (“AIR’s Predecessor”) for AIR’s financial statements. Unless otherwise stated, financial results prior to the Separation on December 15, 2020, include the financial results of AIR’s Predecessor.

~~On July 7, 2021, the operating partnership of AIR (“AIR Operating Partnership”) changed its name from “Aimco Properties, L.P.” to “Apartment Income REIT, L.P.”~~

This filing combines the quarterly reports on Form 10-Q for the quarterly period ended September 30, ~~2021,~~2022, of ~~AIR, the~~ Apartment Income REIT Corp. (“AIR”), Apartment Income REIT, L.P. (“AIR Operating ~~Partnership,~~Partnership”), and their consolidated subsidiaries. The AIR Operating Partnership’s condensed consolidated financial statements include the accounts of the AIR Operating Partnership and its consolidated subsidiaries. Except as the context otherwise requires, “we,” ~~“us,~~“our,” ~~or “our”~~and “us” refer to AIR, the AIR Operating Partnership, and their consolidated subsidiaries, collectively.

AIR, a Maryland corporation, is a self-administered and self-managed real estate investment trust. AIR, through wholly-owned ~~subsidiaries,~~subsidiaries, is the general and special limited partner of the AIR Operating Partnership. As of September 30, ~~2021,~~2022, AIR owned approximately ~~93.3%~~92.1% of the legal interest in the common partnership units of the AIR Operating Partnership (“OP Units”) and ~~95.2%~~93.8% of the economic interest in the AIR Operating Partnership. The remaining ~~6.7% leg~~al7.9% legal interest is owned by third-party limited partners. The legal ownership percentage is based on outstanding common stock and common OP Units, including unvested restricted stock and unvested LTIP units. The economic ownership percentage includes any unvested restricted stock and unvested LTIP units to the extent they are considered participating securities, as defined by accounting principles generally accepted in the United States (“GAAP”). As the sole general partner of the AIR Operating Partnership, AIR has exclusive control of the AIR Operating Partnership’s day-to-day management.

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

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

We operate AIR and the AIR Operating Partnership as one enterprise, the management of AIR directs the management and operations of the AIR Operating Partnership, and the members of the Board of Directors of AIR are identical to those of the AIR Operating Partnership’s general partner.

We believe it is important to understand the few differences between AIR and the AIR Operating Partnership in the context of how AIR and the AIR Operating Partnership operate as a consolidated company. AIR has no assets or liabilities other than its investment in the AIR Operating Partnership, which is held directly and indirectly through certain intermediate holding companies (in which all of the common stock is owned by AIR). Also, AIR is a corporation that issues publicly traded equity from time to time, whereas the AIR Operating Partnership is a partnership that has no publicly traded equity. Except for the net proceeds from stock offerings by AIR, which are contributed to the AIR 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 AIR Operating Partnership generates all remaining capital required by its business. These sources include the AIR 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 AIR and those of the AIR Operating Partnership. Interests in the AIR Operating Partnership held by entities other than

AIR, which we refer to as OP Units, are classified within partners’ capital in the AIR Operating Partnership’s financial statements and as noncontrolling interests in AIR’s financial statements.

To help investors understand the differences between AIR and the AIR Operating Partnership, this report ~~provides:~~provides separate condensed consolidated financial statements for AIR and the AIR 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, and earnings per share or earnings per unit, 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 AIR and the AIR Operating Partnership in order to establish that the requisite certifications have been made and that AIR and the AIR 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.

Note 2 — Summary of Significant Accounting Policies

Principles of Consolidation

We consolidate a variable interest entity (“VIE”), in which we are considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

Redeemable Preferred OP Units

~~As described in Note 5, the~~The AIR Operating Partnership has various classes of preferred OP Units, which may be redeemed at the ~~holder’s~~holders’ option ~~and~~for cash, or at its option, shares of Common Stock. The preferred OP Units are therefore presented within temporary equity in AIR’s condensed consolidated balance sheets and within temporary partners’ capital in the AIR Operating Partnership’s condensed consolidated balance sheets.

The following table presents a rollforward of the AIR Operating Partnership’s preferred OP Units (in thousands):

Balance at December 31, 2020

$
79,449

Preferred distributions

(4,810
)
Redemption of preferred units

(72
)
Net income

4,810

Balance at September 30, 2021

$
79,377


Balance at January 1, 2022	$	79,370
Preferred distributions		(4,823	)
Redemption of preferred units and other		(24	)
Net income allocated to preferred units		4,807
Balance at September 30, 2022	$	79,330

The AIR Operating Partnership has outstanding various classes of redeemable preferred OP Units. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the AIR Operating Partnership had ~~2,935,920~~2,934,063 and ~~2,938,802~~2,935,662 redeemable preferred OP Units, respectively, issued and outstanding. Distributions per annum range from 1.92% to 8.75% per class and $0.48 to $8.00 per unit.

~~Revenue from Leases~~

~~The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents and tenants primarily for utility reimbursements.~~ ~~Our total lease income, included in continuing operations, was comprised of the following amounts for all operating leases (in thousands):~~

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Fixed lease income

$
176,388

$
165,559

$
505,400

$
514,640

Variable lease income

12,953

11,995

34,589

32,829

Straight-line rent write-off (1)

0

0

0

(2,850
)
Total lease income

$
189,341

$
177,554

$
539,989

$
544,619

~~Table of Contents~~

~~(1)~~

~~We monitor the collectability of all unpaid rent amounts. The onset of COVID-19 and the anticipated economic slowdown resulted in a $2.9~~ ~~million write-off of accrued straight-line rent during the nine months ended September 30, 2020.~~

~~Please see Note 9 for discussion of our sales-type leases, which are excluded from the table above.~~

Use of Estimates

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

~~Reclassifications and Revisions~~

As previously stated in Note 1, the financial results for the three and nine months ended September 30, 2020, include the financial results of AIR’s Predecessor, and the financial results attributable to the apartment communities retained by Aimco in the Separation are presented as discontinued operations.

~~Recent Accounting Pronouncements~~16

~~On August 5, 2020, the Financial Accounting Standards Board issued ASU 2020-06, which simplifies the accounting for certain financial instruments with characteristics~~

Table of liabilities and equity, and affects the diluted earnings per share calculation for instruments that may be settled in cash or shares, which is effective for us on January 1, 2022. Adoption of the standard requires changes to be made retrospectively. Our preferred OP Units are subject to the new standard, which will require us to include our preferred OP Units in the calculation of dilutive securities. We have evaluated the impact of this standard and do not anticipate the adoption will have a material impact to our consolidated financial statements.Contents

Note 3 — Significant Transactions

Apartment Community Acquisitions

~~On June 17, 2021,~~During the nine months ended September 30, 2022, we acquired anthree apartment ~~community located~~communities in ~~Pembroke Pines, Florida.~~South Florida and one in the Washington, D.C. area. Summarized information regarding ~~this acquisition~~these acquisitions is set forth in the table below (dollars in thousands):

Number of apartment homes

700

Purchase price
$
222,650

Capitalized transaction costs (1)

2,876

Total consideration
$
225,526

Consideration allocated to land
$
35,184

Consideration allocated to building and improvements

186,823

Consideration allocated to intangible assets (2)

3,644

Consideration allocated to below-market lease liabilities (3)

(125
)
Total consideration
$
225,526


	Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
Number of apartment communities		1			4
Number of apartment homes		350			1,351

Purchase price	$	173,000		$	640,067
Capitalized transaction costs		1,551			7,325
Total consideration	$	174,551		$	647,392
Land	$	14,480		$	54,918
Building and improvements		156,980			577,712
Right-of-use lease asset		—			80,651
Intangible assets (1)		3,465			17,203
Lease liability		—			(80,651	)
Below-market lease liabilities (1)		(103	)		(613	)
Real estate tax liability assumed		(271	)		(1,828	)
Total consideration	$	174,551		$	647,392

(1)

~~Capitalized transaction costs include a broker fee of $2.3~~ ~~million paid to Aimco.~~

~~(2)~~

Intangible assets ~~include in-place leases~~ and ~~leasing costs with~~below-market lease liabilities have a weighted-average term of ~~less than~~ ~~one year~~2.2. years and 1.4 years, respectively.

Apartment Community Dispositions

During the three months ended September 30, 2022, we did not sell any apartment communities. During the nine months ended September 30, 2022, we sold 12 apartment communities with 2,050 homes for gross proceeds of $781.1 million.

From time to time we may be marketing for sale certain communities that are inconsistent with our long-term investment strategy. At the end of each reporting period we evaluate whether such communities meet the criteria to be classified as held for sale. As of September 30, 2022, we had six apartment communities with 1,314 apartment homes that were classified as held for sale.

Lease Cancellation

On September 1, 2022, we canceled existing master leases at four properties owned by AIR and previously leased to Apartment Investment and Management Company (“Aimco”) for the purpose of their development. As part of the cancellation, AIR paid $200 million to Aimco for the improvements added during the development period in accordance with the lease agreement. As AIR accounted for these leases as sales-type leases, we held a $466 million leased real estate asset on the consolidated balance sheet as of August 31, 2022. The total consideration of the added improvement value payment, leased real estate asset, and related costs were allocated to the underlying assets returned to AIR based on the following allocation (dollars in thousands):


Number of apartment communities		4
Number of apartment homes		865

Land	$	133,471
Building and improvements		520,448
Intangible assets (1)		13,470
Below-market lease liabilities (1)		(866	)
Total consideration (2)	$	666,523

~~(3)~~(1)

~~Below-market leases~~Intangible assets and below-market lease liabilities have a weighted-average term of less than a year.

(2)~~one year~~.

Includes the leased real estate asset as of the cancellation date and the added improvement value payment.

~~In October~~17

Table of ~~2021, we acquired a portfolio of~~Contents

Capital Allocation – Share Repurchases

During the three months ended September 30, 2022, AIR repurchased 4 ~~properties located in the Washington, D.C. area, with~~ ~~1,400~~ ~~apartment homes and~~ ~~84,000~~ ~~square feet of office and commercial space, for an expected purchase price of approximately $510~~1.2 million ~~consisting~~shares for $47 million, at an average price of $~~259~~39.07 per share. Subsequent to quarter end and through November 2, 2022 we have purchased an additional 3.1 million shares for $115 million. In aggregate, we have repurchased 7.2 million shares during 2022 at an average price of $39.96. We are authorized by the AIR Board of Directors to repurchase an additional $213 million of ~~existing property debt, an expected issuance~~shares. We consider share buybacks as part of $~~128~~ ~~million in OP Units, and $122~~ ~~million borrowed on the revolving credit facility.~~a balanced investment program.

~~Apartment Community Dispositions~~Note 4 — Leases

Tenant Lessor Arrangements

The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents primarily for utility reimbursements. Our total lease income was comprised of the following amounts for all operating leases (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Fixed lease income	$	184,509	$	176,388	$	522,074	$	505,400
Variable lease income		13,141		12,953		35,165		34,589
Total lease income	$	197,650	$	189,341	$	557,239	$	539,989

Generally, our residential leases do not provide extension options and, as of September 30, 2022, have an average remaining term of 10.5 months. In general, our commercial leases have options to extend for a certain period of time at the tenant’s option. Future minimum annual rental payments we are contractually obligated to receive under residential and commercial leases, excluding such extension options, are as follows as of September 30, 2022 (in thousands):


2022 (remaining)	$	184,873
2023		440,389
2024		85,643
2025		11,264
2026		9,572
Thereafter		42,923
Total	$	774,664

Lessor Arrangements

During the three and nine months ended September 30, ~~2021,~~2022, we ~~sold~~ 1 ~~apartment community with~~ 58 ~~homes for a gain on disposition~~recognized income of $~~7.1~~4.4 ~~million.~~million and $17.3

million, respectively, related to sales-type leases, compared to $6.5 million and $19.4 million, respectively, during the same periods in 2021, which is reflected in interest income in our condensed consolidated statements of operations. During the three months ended September 30, ~~2020,~~2022, we ~~sold~~ 0 ~~apartment communities. During~~canceled the ~~nine months ended September 30, 2020,~~existing sales-type leases, as described in Note 3. Accordingly, we ~~sold one apartment community~~will not receive any lease payments associated with ~~219~~ ~~apartment homes for a gain on disposition of $47.2~~ ~~million.~~these sales-type leases going forward.

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Note 5 — Debt

~~Subsequent to~~The following table summarizes debt as of September 30, 2022 and December 31, 2021 (in thousands):


	Outstanding Balance
	September 30, 2022			December 31, 2021
Secured debt:
Fixed-rate property debt due December 2022 to June 2032 (1)	$	1,940,158		$	2,217,256
Variable-rate property debt due October 2024 (2)		88,500			88,500
Total non-recourse property debt		2,028,658			2,305,756
Debt issuance costs, net of accumulated amortization		(9,241	)		(11,017	)
Total non-recourse property debt, net	$	2,019,417		$	2,294,739

Unsecured debt:
Term loans due December 2023 to April 2026 (2) (3)		800,000			1,150,000
Revolving credit facility borrowings due April 2025 (4)		479,000			304,000
4.58% Notes payable due June 2027 (5)		100,000			—
4.77% Notes payable due June 2029 (5)		100,000			—
4.84% Notes payable due June 2032 (5)		200,000			—
Total unsecured debt		1,679,000			1,454,000
Debt issuance costs, net of accumulated amortization		(6,249	)		(5,453	)
Total unsecured debt, net	$	1,672,751		$	1,448,547
Total indebtedness	$	3,692,168		$	3,743,286

(1)

The stated rates on our fixed-rate property debt are 2.4% to 4.2%.

(2)

During the second quarter of 2022, we ~~received~~hedged $~~32.2~~ ~~million in non-refundable deposits on~~ 15 ~~communities expected to be sold for approximately $470~~ ~~million in the fourth quarter.~~

~~In October 2021, we entered into a joint venture with an affiliate of Blackstone to sell, for approximately $408~~ ~~million, an expected~~ 80~~% interest in three multi-family properties with~~ ~~1,748~~ ~~units located in Virginia. AIR is the general partner with an expected~~ 20~~% ownership, and earns various fees for providing property management and corporate services.~~

~~New Credit Facility~~

~~On April 14, 2021, we obtained a $1.4~~ ~~billion unsecured credit facility (the “Credit Facility”), replacing the previous $950~~ ~~million facility. The facility is comprised of a revolving credit facility of $600~~ ~~million and variable rate term loans of $800~~ ~~million.~~

~~The revolving credit facility currently bears interest at a~~ ~~30-day LIBOR plus~~ ~~0.90~~% ~~and allows for an additional one basis point margin reduction if certain environmental, social, and governance targets are achieved. The term of the revolving credit facility ends on~~ ~~April 14, 2025, with~~ ~~two six-month extension~~ ~~options.~~

~~Proceeds from the term loans were used to repay our previous $350~~ ~~million term loan; to repay $213~~830 million of ~~property debt; and~~our floating rate debt through placement of floating to ~~reduce borrowings on our revolving credit facility.~~ fixed rate swaps, which have been designated as cash flow hedges. These hedges lock $830 million of floating rate debt at an all in cost of 4.2%.

(3)

The term loans bear interest at a 1-month Term Secured Overnight Financing Rate (“SOFR”) plus ~~30-day LIBOR plus 1.00%, with a LIBOR floor of~~ ~~0.00~~1.00%~~. The effective~~ and a SOFR adjustment of 10 basis points, based on our current credit rating. As of September 30, 2022, the weighted-average interest ~~on outstanding borrowings on~~rate for our term loans, which is fixed via interest rate swaps beginning with the second quarter of 2022, was ~~1.6~~4.1%.

(4)

~~The term loans mature~~On May 2, 2022, we exercised the accordion feature on our revolving credit facility, increasing the ~~following schedule:~~



revolving credit facility by $~~150~~400 million ~~maturing~~to $1.0 billion. As of September 30, 2022, we had capacity to borrow up to $509.9 million under our revolving credit facility after consideration of undrawn letters of credit. The revolving credit facility bears interest at a 1-month Term SOFR plus 0.89%, based on our current credit rating, and a SOFR adjustment of 10 basis points. As of September 30, 2022, the weighted-average interest rate for our revolving credit facility was ~~December 15, 2023~~4.1~~, with~~ ~~two one-year extension~~ ~~options;~~%.

(5)

During the second quarter of 2022, we issued three tranches of guaranteed, senior unsecured notes, totaling $~~300~~400 ~~million maturing on~~million. As of September 30, 2022, the weighted-average interest rate for senior unsecured notes was ~~December 15, 2024~~4.3~~, with a~~% ~~one-year extension~~ ~~option;~~



$~~150~~ ~~million maturing on~~ ~~December 15, 2025; and~~



$~~200~~ ~~million maturing on~~ ~~April 14, 2026~~.

Under our unsecured notes payable and revolving credit facility, we have agreed to maintain certain financial covenants, as well as other covenants customary for similar credit arrangements. ~~We believe~~The financial covenants we are required to maintain include a Maximum Leverage ratio of no greater than 0.60 to 1.00; a Fixed Charge Coverage Ratio of greater than 1.5x, a Maximum Secured Indebtedness to Total Assets ratio of no greater than 0.45 to 1.00 through March 31, 2023, and 0.40 to 1.00 thereafter, a Maximum Unsecured Leverage ratio no greater than 0.60 to 1.00, and a Minimum Unsecured Interest Coverage Ratio no less than 1.50 to 1.00. We were in compliance with these covenants as of September 30, ~~2021.~~

~~As of September 30, 2021, we had $78.2~~ ~~million of outstanding borrowings under our revolving credit facility~~2022 and ~~had capacity~~expect to ~~borrow up to $517.8~~ ~~million after consideration of undrawn letters of credit backed by~~remain in compliance during the ~~facility. The effective interest on our outstanding borrowings was~~ ~~1.5% as of September 30, 2021.~~

~~Equity Issuance~~

~~On April 23, 2021, we issued and sold~~ ~~7.825~~ ~~million shares of our Class A Common Stock for $43.766~~ ~~per share in a private placement to a large global real estate-focused investment firm and received cash proceeds of $342.2~~ ~~million, net of fees. Proceeds raised were used to repay $318.4~~ ~~million of property debt with a weighted-average interest rate of~~ ~~4.6%. Prepayment penalties incurred in connection with the debt repayment totaled $33.8~~ ~~million and are included in interest expense on our condensed consolidated statements of operations.~~

~~July Term Loan~~

~~On July 15, 2021, we secured a new $350.0~~ ~~million term loan. The loan matures on~~ ~~July 14, 2022, includes a~~ ~~six month extension~~ ~~option, and currently bears interest at a~~ ~~30-day LIBOR plus 0.95%~~ ~~with a~~ ~~0.00% LIBOR floor. Proceeds from the loan were used to repay borrowings on our revolving credit facility.~~next 12 months.

Note 46 — Commitments and Contingencies

~~During the three months ended September 30, 2021, we incurred casualty losses due to Hurricane Ida induced flooding in downtown Philadelphia causing damage to our Park Towne Place apartment community.~~ ~~The loss is currently estimated to be $5.1~~ ~~million and is included in property operating expenses in our condensed consolidated statements of operations. We anticipate this loss will be covered by our third-party insurance coverage.~~

~~Table of Contents~~

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.

~~For claims arising from matters that occurred prior to the Separation, Aimco is responsible for the first $17.5~~ ~~million of cumulative legal and environmental liabilities incurred and the AIR Operating Partnership is responsible for any such liabilities in excess of $17.5~~ ~~million. As of September 30, 2021, we have a receivable from Aimco related to the indemnification of approximately $~~7 ~~million.~~

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

Table of Contents

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 have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement obligations (“AROs”), as defined by 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 AROs cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. AROs that are reasonably estimable as of September 30, ~~2021,~~2022, are immaterial to our condensed consolidated financial statements.

Note 57 — Earnings and Dividends per Share and ~~Unit~~

~~AIR and the AIR Operating Partnership calculate basic earnings (loss)~~ per common share and basic earnings (loss) per common unit based on the weighted-average number of shares of Common Stock and common partnership units outstanding. We calculate diluted earnings (loss) per share and diluted earnings (loss) 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 AIR’s issuance of additional shares and the AIR Operating Partnership’s issuance to AIR of additional common partnership units equal to the number of shares purchased under the options. These equivalents also include unvested total shareholder return (“TSR”) restricted stock awards that do not meet the definition of participating securities, which would result in an increase in the number of shares of Common Stock and common partnership units outstanding equal to the number of the shares that vest. Common partnership unit equivalents also include unvested long-term incentive partnership units. We include in the denominator securities with dilutive effect in calculating diluted earnings (loss) per share and per unit during these periods.

Our restricted stock awards that are subject to time-based vesting receive non-forfeitable dividends similar to shares of Common Stock and common partnership units prior to vesting, and our TSR long-term incentive partnership units receive non-forfeitable distributions based on specified percentages of the distributions paid to common partnership units prior to vesting and conversion. The unvested restricted shares and units related to these awards are participating securities. We include the effect of participating securities in basic and diluted earnings (loss) per share and unit computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method.

In our condensed consolidated statements of operations, noncontrolling interest in consolidated real estate partnerships is related to both continuing and discontinued operations. For purposes of our earnings (loss) per share calculation, we have appropriately allocated the noncontrolling interest in consolidated real estate partnerships for the three and nine months ended September 30, 2020. Please see Note 9 for detail of noncontrolling interest in consolidated real estate partnerships associated with discontinued operations.

~~Table of Contents~~

Unit

Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings ~~(loss)~~ per share and per unit are as follows (in thousands, except per share and per unit data):

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Income (Numerator)

Shares (Denominator)

Per Share Amount

Income (Numerator)

Shares (Denominator)

Per Share Amount

Basic earnings (loss) per share:

Net income (loss) attributable to AIR common stockholders
$
9,289

156,646

$
0.06

$
74,455

153,289

$
0.49

Diluted earnings (loss) per share:

Effect of dilutive securities

0

396

0

0

361

(0.01
)
Net income (loss) attributable to AIR common stockholders
$
9,289

157,042

$
0.06

$
74,455

153,650

$
0.48

Non-dilutive share equivalents outstanding

7,958

8,093

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Income (Numerator)

Shares (Denominator)

Per Share Amount

Income (Numerator)

Shares (Denominator)

Per Share Amount

Basic earnings (loss) per share:

Income from continuing operations attributable to AIR
$
(27,746
)

119,967

$
(0.23
)

$
10,735

119,957

$
0.09

Income from discontinued operations attributable to AIR

2,700

119,967

0.02

10,110

119,957

0.08

Net income attributable to AIR common stockholders
$
(25,046
)

119,967

$
(0.21
)

$
20,845

119,957

$
0.17

Diluted earnings (loss) per share:

Effect of dilutive securities

0

0

0

0

78

0

Net income (loss) attributable to AIR common stockholders
$
(25,046
)

119,967

$
(0.21
)

$
20,845

120,035

$
0.17

Non-dilutive share equivalents outstanding

9,007

8,337

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Income (Numerator)

Units (Denominator)

Per Unit Amount

Income (Numerator)

Units (Denominator)

Per Unit Amount

Basic earnings (loss) per unit:

Net income (loss) attributable to the AIR Operating Partnership's common unitholders
$
9,764

164,603

$
0.06

$
78,421

161,336

$
0.49

Diluted earnings (loss) per unit:

Effect of dilutive securities

0

396

—

0

361

(0.01
)
Net income (loss) attributable to the AIR Operating Partnership's common unitholders
$
9,764

164,999

$
0.06

$
78,421

161,697

$
0.48

Non-dilutive partnership unit equivalents outstanding

45

615

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

Income (Numerator)

Units (Denominator)

Per Unit Amount

Income (Numerator)

Units (Denominator)

Per Unit Amount

Basic earnings (loss) per unit:

Income from continuing operations attributable to the AIR Operating Partnership
$
(29,087
)

126,399

$
(0.23
)

$
11,869

126,440

$
0.09

Income from discontinued operations attributable to the AIR Operating Partnership

2,700

126,399

0.02

10,110

126,440

0.08

Net income attributable to the AIR Operating Partnership's common unitholders
$
(26,387
)

126,399

$
(0.21
)

$
21,979

126,440

$
0.17

Diluted earnings (loss) per unit:

Effect of dilutive securities

0

0

0

0

107

0

Net income (loss) attributable to the AIR Operating Partnership's common unitholders
$
(26,387
)

126,399

$
(0.21
)

$
21,979

126,547

$
0.17

Non-dilutive partnership unit equivalents outstanding

2,220

1,596

~~Table of Contents~~


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Earnings per share
Numerator:
Basic net income attributable to AIR common stockholders	$	1,760	$	9,289	$	574,363	$	74,455
Effect of dilutive instruments		—		—		4,807		—
Dilutive net income attributable to AIR common stockholders	$	1,760	$	9,289	$	579,170	$	74,455

Denominator – shares:
Basic weighted-average common shares outstanding		153,811		156,646		155,488		153,289
Dilutive common share equivalents outstanding		246		396		1,952		361
Dilutive weighted-average common shares outstanding		154,057		157,042		157,440		153,650

Earnings per share – basic	$	0.01	$	0.06	$	3.69	$	0.49
Earnings per share – diluted	$	0.01	$	0.06	$	3.68	$	0.48

Earnings per unit
Numerator:
Basic net income attributable to the AIR Operating Partnership's common unitholders	$	1,897	$	9,764	$	611,416	$	78,421
Effect of dilutive instruments		—		—		4,935		—
Basic and dilutive net income attributable to the AIR Operating Partnership's common unitholders	$	1,897	$	9,764	$	616,351	$	78,421

Denominator – units:
Basic weighted-average common units outstanding		163,866		164,603		165,578		161,336
Dilutive common unit equivalents outstanding		246		396		1,951		361
Dilutive weighted-average common units outstanding		164,112		164,999		167,529		161,697

Earnings per unit – basic	$	0.01	$	0.06	$	3.69	$	0.49
Earnings per unit – diluted	$	0.01	$	0.06	$	3.68	$	0.48

~~The AIR Operating Partnership has various classes of preferred OP Units, which may be redeemed at~~For the ~~holders’ option. The AIR Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of~~three and nine months ended September 30, 2022 and 2021, ~~these preferred OP Units were potentially redeemable for approximately~~ ~~1.6~~million shares of Common Stock (based on the period end market price) or cash. The AIR 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 for the periods presented above.

~~Dividends~~dividends and distributions paid per share of Common Stock and per common unit were ~~as follows:~~$0.45 and $1.35, respectively, and $0.44 and $1.30, respectively.

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Dividends and distributions paid

$
0.44

$
0.41

$
1.30

$
1.23

The number of common share equivalent securities excluded from the diluted earnings per share calculation were approximately 1.9 million, 1.6 million, and 1.7 million for the three months ended September 30, 2022 and 2021, and the nine months ended September 30, 2021, respectively. These securities, which include preferred OP Units redeemable for Common Stock, were excluded from the diluted earnings per share calculations as they are anti-dilutive. These securities were dilutive for the nine months ended September 30, 2022 and were included in the calculation of diluted earnings per share.

Table of Contents

Note 68 — Fair Value Measurements

Recurring Fair Value Measurements

~~We measured at~~During 2022, we entered into floating to fixed interest rate swaps for $830 million notional principal value of debt. These swaps have been designated as cash flow hedges of expected future variable interest payments. Changes in the fair value are recognized as unrealized gains (losses) on derivative instruments in other comprehensive income. Amounts reported in accumulated other comprehensive income will be reclassified into interest expense as interest payments are made on our variable-rate debt. We estimate that during the next twelve months, we will reclassify into earnings approximately $13.3 million of the unrealized gains in accumulated other comprehensive income.

Additionally, in connection with our issuance of senior unsecured notes, we entered into a ~~recurring basis our investments~~$400 million treasury hedge, locking the interest rate of the ten-year treasury at 2.43%. During the second quarter of 2022, we received $15.9 million for the settlement of this hedge, which was designated as a cash flow hedge. The settlement value of the treasury hedge is included in ~~the securitization trust that held certain of our property debt, which we classified~~unrealized gains (losses) on derivative instruments in other comprehensive income (loss) and will be reclassified into earnings as available for sale (“AFS”) debt securities. These investments were presented within other assets in the condensed consolidated balance sheets. We held several positions in the securitization trust that paida decrease to interest ~~and we also held the first loss position in the securitization trust, which accrued interest~~expense over the term of the ~~investment. These investments were acquired at a discount to face value and accreted to the $100.9~~ million face value of the investments through interest income using the effective interest method over the term of the investments. During the second quarter of 2021, these investments were settled in cash at the face value. Our amortized cost basis for these investments, which represented the original cost adjusted for interest accretion less interest payments received, was $~~97.1~~ ~~million as of December 31, 2020.~~senior unsecured notes issued.

~~Our investments in AFS debt securities were classified within Level 2 of~~Prior to the GAAP fair value hierarchy. We estimated the fair value of these investments using an income and market approach with primarily 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 paid interest typically moved in an inverse relationship with movements in interest rates. The fair value of the first loss position was primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities.

~~During~~December 15, 2020, weseparation (the “Separation”), Aimco paid an upfront premium of $12.1 million for the option to enter into an interest rate swap at a future date. ~~This interest rate option, or swaption, provides partial protection against our refinancing interest rate risk and is intended to mitigate interest rate increases between now and 2024.~~ ~~We receive a cash settlement in the future if the prevailing interest rate is higher than the~~ ~~1.68% strike price. The amount of future cash settlement is limited if the prevailing interest rate exceeds~~ ~~2.78%. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement.~~In connection with the Separation, ~~AIR assigned~~ all of the risks and rewards of ownership related to this swap were assigned to post-Separation Aimco, with an offsetting and equal asset orand liability recognized for the amount of gain or ~~loss recognized.~~loss.

We measure at fair value on a recurring basis our interest rate option, which is presented in other assets in our condensed consolidated balance sheets. Our interest rate option is classified within Level 2 ofestimate the ~~GAAP fair value hierarchy, and we estimate its~~ fair value using pricing models that rely on observable market information, including contractual terms, market prices, and interest rate yield curves. ~~The~~These investments are measured at fair value ~~adjustment is included in earnings~~on a recurring basis and presented in other ~~expense,~~assets, net, and accrued liabilities and other in our condensed consolidated statements of operations. Changes in fair value are reflected as a non-cash transaction in adjustments to arrive at cash flows from operations, and the upfront premium is reflected in other financing in our condensed consolidated statements of cash flows.balance sheets.

The following table summarizes fair value for our ~~AFS debt securities and our~~ interest rate option and swaps (in thousands):

As of September 30, 2021

As of December 31, 2020

Total Fair Value

Level 1

Level 2

Level 3

Total Fair Value

Level 1

Level 2

Level 3

AFS debt securities
$
0

$
0

$
0

$
0

$
100,151

$
0

$
100,151

$
0

Interest rate option
$
25,617

$
0

$
25,617

$
0

$
13,177

$
0

$
13,177

$
0

~~Table of Contents~~


	As of September 30, 2022								As of December 31, 2021
	Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3
Interest rate option	$	53,989	$	—	$	53,989	$	—	$	21,699	$	—	$	21,699	$	—
Interest rate swap asset	$	34,543	$	—	$	34,543	$	—	$	—	$	—	$	—	$	—

~~Nonrecurring Fair Value Measurements~~

As of December 31, 2020, assets measured at fair value on a nonrecurring basis in our condensed consolidated balance sheets consist of a real estate asset that was written down to its estimated fair value for impairment purposes during the year ended December 31, 2020. Our estimate of fair value was determined using valuations performed by third-party specialists, as well as various estimates and assumptions, the most significant being market rental rates, operating expense assumptions, and capitalization rate. These unobservable inputs are classified as Level 3 within the GAAP fair value hierarchy. As of December 31, 2020, the fair value of the real estate asset measured on a nonrecurring basis was $~~34.4~~ ~~million.~~

Financial Assets and Liabilities Not Measured at Fair Value

We believe that the carrying value of the consolidated amounts of cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximated their estimated fair value as of September 30, ~~2021,~~2022 and December 31, ~~2020,~~2021, due to their relatively short-term nature and high probability of realization. The carrying ~~amounts~~value of our unsecured notes ~~receivable from Aimco, the term loans, and the~~payable, revolving credit facility ~~borrowings also~~and term loans, which we classify as Level 2 in the GAAP fair value hierarchy, approximated their estimated fair value as of September 30, ~~2021,~~2022 and December 31, 2020. We estimate the fair value of our non-recourse property 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 apartment communities within our portfolio. 2021.

We classify the fair value of our non-recourse property debt within Level 2 of the GAAP fair value ~~hierarchy based on the significance of certain of the unobservable inputs used to estimate its fair value.~~hierarchy.

The following table summarizes carrying value and fair value ~~for~~of our non-recourse property debt, excluding debt issuance costs (in thousands):

As of September 30, 2021

As of December 31, 2020

Carrying Value

Fair Value

Carrying Value

Fair Value

Non-recourse property debt
$
3,027,991

$
3,128,441

$
3,646,093

$
3,730,621


	As of September 30, 2022				As of December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Non-recourse property debt	$	2,028,658	$	1,785,851	$	2,305,756	$	2,367,713

Note 79 — Variable Interest Entities

Consolidated Entities

AIR consolidates the AIR Operating Partnership, a ~~variable interest entity (“VIE”)~~VIE of which AIR is the primary beneficiary. AIR, through the AIR Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Substantially all of the assets and liabilities of AIR are that of the AIR Operating Partnership.

The AIR Operating Partnership consolidates (i) five VIEs that own ~~interest~~interests in one or more apartment communities and are typically structured to generate a return for their partners through the operation and ultimate sale of the communities and (ii) ~~five VIEs~~one VIE related to a lessor ~~entities~~entity that ~~own~~owns an interest in ~~the properties~~a property leased to ~~Aimco. The assets and liabilities of the VIEs associated with the leased properties consists of our net investment in the leases.~~a third party. The AIR Operating Partnership is the primary beneficiary in the limited partnerships in which it is the sole decision maker and has a substantial economic interest.

Table of Contents

The table below summarizes apartment community information regarding VIEs consolidated by the AIR Operating Partnership:

September 30, 2021

December 31, 2020

VIEs with interests in apartment communities

5

5

Apartment communities owned by VIEs

16

16

Apartment homes in communities owned by VIEs

5,369

5,369

~~Table of Contents~~


	September 30, 2022		December 31, 2021
VIEs with interests in apartment communities		5		5
Apartment communities owned by VIEs		16		16
Apartment homes in communities owned by VIEs		5,369		5,369

Assets of the AIR 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 AIR Operating Partnership. Assets and liabilities of VIEs, excluding those of the AIR Operating Partnership, are summarized in the table below (in thousands):


	September 30, 2021		December 31, 2020		September 30, 2022		December 31, 2021
ASSETS:
Net real estate	$	1,103,337	$	1,125,315	$	1,075,327	$	1,096,039
Cash and cash equivalents		30,354		10,548		51,199		29,863
Restricted cash		2,184		8,818		2,329		2,380
Other assets		22,927		23,870
Other assets, net						21,873		21,745
LIABILITIES:
Non-recourse property debt secured by AIR communities, net	$	1,231,083	$	1,278,318
Non-recourse property debt					$	1,215,933	$	1,227,345
Accrued liabilities and other		38,768		34,038		40,814		34,659

Unconsolidated Entities

During 2021, we formed a joint venture with an affiliate of Blackstone by selling an 80% interest in three multi-family properties with 1,748 units located in Virginia. Our 20% interest in the venture meets the definition of a VIE, however, we are not the primary beneficiary and do not consolidate these communities. As of September 30, 2022 and December 31, 2021, the carrying value of the investment of $21.3 million and $26.0 million, respectively, is included in other assets, net, in our condensed consolidated balance sheets. AIR’s exposure to the obligations of the VIE is limited to the carrying value of the limited partnership interests and 20% of Blackstone's guarantor liabilities, which were $79.0 million as of September 30, 2022.

We have an interest in a partnership that owns Parkmerced Apartments, which meets the definition of a VIE. However, we are not the primary beneficiary and do not consolidate this partnership. ~~In connection with~~As of September 30, 2022, and December 31, 2021, the ~~Separation, Aimco was allocated economic ownership~~investment balance of ~~the~~ $~~275.0~~362.8 million ~~mezzanine loan investment~~ and ~~option to acquire a~~ $30~~% equity interest in the partnership. The investment accrues interest at~~ 10~~% per annum with a~~ ~~five-year~~337.8 ~~term and the right to extend for a second~~ ~~five-year~~ ~~term.~~million, respectively, is included in other assets, net, in our condensed consolidated balance sheets. Subsequent to the Separation, all risks and rewards of ownership are ~~Aimco’s. As of September 30, 2021, and December 31, 2020, the investment balance of $355.7~~ ~~million and $307.4~~ ~~million, respectively, primarily consisting of notes receivable, is included in other assets in AIR’s condensed consolidated balance sheets,~~Aimco’s, however, as legal transfer ishas not ~~complete. Since AIR has legally assigned all risks and rewards of ownership to Aimco,~~occurred, there is an equal and offsetting liability included in accrued liabilities and other in ~~AIR’s~~our condensed consolidated balance sheets. Accordingly, there is no net effect on AIR’s ~~shareholders’ equity. During~~stockholders’ equity or the ~~three and nine months ended September 30, 2020, we recognized $6.9~~ ~~million and~~$~~20.6~~ million, respectively, of income in connection with the mezzanine loan. The mezzanine investment income was entirely offset by an expense to recognize the requirement that this income be contributed to Aimco.AIR Operating Partnership's partners' capital.

Note 810 — Business Segments

We have 2two segments: Same Store and Other Real Estate. Our Same Store segment includes communities ~~that: (i)~~that are owned and managed by AIR and ~~(ii)~~ had reached a stabilized level of operations. Our Other Real Estate segment includes five properties acquired in 2021, four properties acquired in 2022, four properties previously leased to Aimco, and three communities ~~that~~we expect to sell or lease to a third party, but do not yet meet the criteria to be classified as ~~Same Store. Communities included in discontinued operations are excluded from our evaluation of segment performance, as they are no longer included in information used by our~~held for sale

Our chief operating decision maker (“CODM”).

~~Our CODM~~ uses proportionate property net operating income (“NOI”) to assess the operating performance of our communities. Proportionate property ~~net operating income~~NOI reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility ~~reimbursements, for consolidated communities.~~reimbursements. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues in accordance with GAAP.

As of September 30, ~~2021,~~2022, our Same Store segment included 9258 apartment communities with ~~25,427~~20,730 apartment homes and our Other Real Estate segment included 316 apartment communities with ~~937~~4,556 apartment homes. As of September 30, 2022, we had six apartment communities with 1,314 homes that were classified as held for sale.

The following tables present the total revenues, property operating expenses, proportionate property net operating income (loss), and income (loss) ~~from continuing operations~~ before income tax (expense) benefit ~~(expense)~~ of our segments on a proportionate ~~basis, excluding amounts related to communities sold or communities included in discontinued operations (in thousands):~~basis.

Same Store

Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Three months ended September 30, 2021:

Total revenues
$
162,535

$
5,456

$
21,647

$
2,139

$
191,777

Property operating expenses

44,901

2,920

11,643

14,461

73,925

Other operating expenses not allocated to segments (3)

0

0

0

90,812

90,812

Total operating expenses

44,901

2,920

11,643

105,273

164,737

Proportionate property net operating income (loss)

117,634

2,536

10,004

(103,134
)

27,040

Other items included in income before income tax benefit (expense) (4)

0

0

0

(16,644
)

(16,644
)
Income (loss) from continuing operations before income tax benefit (expense)
$
117,634

$
2,536

$
10,004

$
(119,778
)

$
10,396

To reflect how the CODM evaluates the

2422

Table of Contents

business, prior period segment information has been recast to conform with our reportable segment composition as of September 30, 2022 (in thousands):


	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Three months ended September 30, 2022:
Total revenues	$	139,107	$	30,258	$	20,725	$	10,781		$	200,871
Property operating expenses		35,632		10,606		10,562		14,450			71,250
Other operating expenses not allocated to segments (3)		—		—		—		103,049			103,049
Total operating expenses		35,632		10,606		10,562		117,499			174,299
Proportionate property net operating income (loss)		103,475		19,652		10,163		(106,718	)		26,572
Other items included in income before income tax expense (4)		—		—		—		(23,130	)		(23,130	)
Income (loss) before income tax expense	$	103,475	$	19,652	$	10,163	$	(129,848	)	$	3,442


	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated			Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Nine months ended September 30, 2021:
Nine months ended September 30, 2022:
Total revenues	$	469,686	$	8,255	$	61,787	$	6,795		$	546,523		$	402,756	$	62,371	$	60,153	$	40,569		$	565,849
Property operating expenses		133,983		5,191		32,974		31,152			203,300			105,570		23,486		30,064		39,153			198,273
Other operating expenses not allocated to segments (3)		0		0		0		256,909			256,909			—		—		—		279,126			279,126
Total operating expenses		133,983		5,191		32,974		288,061			460,209			105,570		23,486		30,064		318,279			477,399
Proportionate property net operating income (loss)		335,703		3,064		28,813		(281,266	)		86,314			297,186		38,885		30,089		(277,710	)		88,450
Other items included in income before income tax benefit (expense) (4)		0		0		0		(5,445	)		(5,445	)
Income (loss) from continuing operations before income tax benefit (expense)	$	335,703	$	3,064	$	28,813	$	(286,711	)	$	80,869
Other items included in income before income tax expense (4)														—		—		—		528,955			528,955
Income before income tax expense													$	297,186	$	38,885	$	30,089	$	251,245		$	617,405


	Same Store		Other Real Estate			Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated			Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Three months ended September 30, 2020:
Three months ended September 30, 2021:
Total revenues	$	163,003	$	1,106		$	11,026	$	2,988		$	178,123		$	134,102	$	5,558	$	20,608	$	31,509		$	191,777
Property operating expenses		47,732		1,242			8,311		8,134			65,419			36,883		2,963		10,604		23,475			73,925
Other operating expenses not allocated to segments (3)		0		0			0		104,432			104,432			—		—		—		90,812			90,812
Total operating expenses		47,732		1,242			8,311		112,566			169,851			36,883		2,963		10,604		114,287			164,737
Proportionate property net operating income (loss)		115,271		(136	)		2,715		(109,578	)		8,272			97,219		2,595		10,004		(82,778	)		27,040
Other items included in income before income tax benefit (expense) (4)		0		0			0		(35,246	)		(35,246	)
Income (loss) from continuing operations before income tax benefit (expense)	$	115,271	$	(136	)	$	2,715	$	(144,824	)	$	(26,974	)
Other items included in income (loss) before income tax benefit (4)															—		—		—		(16,644	)		(16,644	)
Income (loss) before income tax benefit														$	97,219	$	2,595	$	10,004	$	(99,422	)	$	10,396


	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated			Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Nine months ended September 30, 2020:
Nine months ended September 30, 2021:
Total revenues	$	510,151	$	4,274	$	24,986	$	6,398		$	545,809		$	386,998	$	8,562	$	58,904	$	92,059		$	546,523
Property operating expenses		140,115		3,400		21,302		30,523			195,340			109,299		5,351		30,091		58,559			203,300
Other operating expenses not allocated to segments (3)		0		0		0		285,529			285,529			—		—		—		256,909			256,909
Total operating expenses		140,115		3,400		21,302		316,052			480,869			109,299		5,351		30,091		315,468			460,209
Proportionate property net operating income (loss)		370,036		874		3,684		(309,654	)		64,940			277,699		3,211		28,813		(223,409	)		86,314
Other items included in income before income tax benefit (expense) (4)		0		0		0		(49,021	)		(49,021	)
Income (loss) from continuing operations before income tax benefit (expense)	$	370,036	$	874	$	3,684	$	(358,675	)	$	15,919
Other items included in income (loss) before income tax expense (4)														—		—		—		(5,445	)		(5,445	)
Income (loss) before income tax expense													$	277,699	$	3,211	$	28,813	$	(228,854	)	$	80,869

(1)

Represents adjustments for third-party share of unconsolidated apartment communities and the noncontrolling interests in consolidated real estate partnerships’ share of the results of ~~consolidated~~ communities in our segments, which are included in the related consolidated amounts but excluded from proportionate property ~~net operating income~~NOI 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. Effective in 2022, corporate and amounts not allocated to segments includes the depreciation of capitalized costs of non-real estate assets.

(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. Also includes property management revenues, which are not part of our segment performance measure and property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure. The write-off of straight-line rent receivables, recognized due to the impact of COVID-19 and the resulting economic impact on our commercial tenants, are included in consolidated rental and property revenues and are not included in our measurement of segment performance for the three and nine months ended September 30, 2020.

(3)

Includes depreciation and amortization, general and administrative expenses, and other ~~operating~~ expenses, ~~which~~net, and may also include provision for real estate impairment loss and write-offs of deferred leasing commissions, which are not included in our measure of segment performance.

~~(4)~~

~~Includes gain on derecognition of leased properties and dispositions of real estate, interest income, including interest income related to the properties leased to Aimco, and interest expense.~~

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(4)

Includes gain on dispositions of real estate and derecognition of leased properties, interest income, interest expense, loss from unconsolidated real estate partnerships, and loss on extinguishment of debt.

The assets of our segments and the consolidated assets not allocated to our segments were as follows (in thousands):


	September 30, 2021		December 31, 2020		September 30, 2022		December 31, 2021
Same Store	$	4,630,357	$	4,664,291	$	3,861,337	$	3,824,277
Other Real Estate		285,298		82,010		2,077,214		787,534
Corporate and other assets (1)		1,518,854		1,482,977		783,902		1,828,549
Total consolidated assets	$	6,434,509	$	6,229,278	$	6,722,453	$	6,440,360

(1)

Includes the assets not allocated to our segments including: (i) corporate assets; (ii) ~~our notes receivable from Aimco; (iii) our~~the mezzanine loan ~~investment;~~investment where the rights and ~~(iv) assets~~obligations of ~~apartment communities which were leased~~ownership have been assigned to ~~Aimco,~~Aimco; and (iii) sold properties, or properties classified as held for sale as of September 30, ~~2021.~~

2022. Corporate and other assets as of December 31, 2021, also includes the note receivable from Aimco, which was repaid in 2022, and the lease receivable related to properties leased to Aimco, which was canceled during the third quarter of 2022.

~~Capital~~For the nine months ended September 30, 2022 and 2021, capital additions related to our segments were as follows (in thousands):

Nine Months Ended September 30,

2021

2020

Same Store
$
116,745

$
90,838

Other Real Estate (1)

9,583

135,389

Total capital additions
$
126,328

$
226,227

~~(1)~~

~~For the nine months ended September 30, 2021, Other Real Estate does not include capital additions related to properties leased to Aimco for redevelopment and development.~~


	2022		2021
Same Store	$	114,679	$	97,294
Other Real Estate		30,459		13,588
Total capital additions	$	145,138	$	110,882

~~Note 9 – Discontinued Operations~~

The financial results attributable to apartment communities retained by the Spinnee for the prior year comparative period have been classified as discontinued operations within the condensed consolidated financial statements.

~~Summarized results of discontinued operations are shown below (in thousands):~~

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2020

REVENUES

Rental and other property revenues

$
37,331

$
113,005

OPERATING EXPENSES

Property operating expenses

12,770

39,506

Depreciation and amortization

18,985

56,755

Other expenses, net

78

403

   Total operating expenses

31,833

96,664

Interest income

548

1,622

Interest expense

(5,911
)

(15,004
)
Income from unconsolidated real estate partnerships

277

629

   Income before income tax benefit

412

3,588

Income tax benefit

2,166

6,181

   Income from discontinued operations, net of tax

2,578

9,769

Net loss attributable to noncontrolling interests in consolidated real estate partnerships

122

341

   Net income from discontinued operations attributable to Spinnee

$
2,700

$
10,110

We entered into various separation and transition services agreements with the Spinnee that provide for a framework of our relationship with the Spinnee after the Separation, including: (i) a separation agreement setting forth the mechanics of the Separation, the key provisions relating to the Separation of our assets and liabilities from those of the Spinnee, and certain organizational matters and conditions; (ii) an employee matters agreement to allocate liabilities and responsibilities relating to employment matters, teammate compensation, and benefits plans and programs, and other related matters; (iii) Property Management Agreements pursuant to which we provide property management and related services at a majority of the properties owned or leased by the Spinnee in exchange for a fee based on an agreed percentage of revenue collected; (iv) Master Services Agreement pursuant to which we provide the Spinnee with customary administrative and support services on an ongoing basis in exchange for payment for the fully-burdened costs (including internal allocated costs); and (v) a Master Leasing Agreement pursuant to which the Spinnee may enter into leases with us pursuant to which the Spinnee, at its option, may redevelop, develop, or lease-up apartment communities. The Property Management Agreement, the Master Services Agreement, and the Master Leasing Agreement may be terminated in accordance with the respective agreements.

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~~During the three and nine months ended September 30, 2021, we recognized revenue of $1.7~~ ~~million and $5.0~~ million, respectively, from the Property Management Agreements and Master Services Agreement, all of which is reflected in other revenue in our condensed consolidated statement of operations. In addition, we recognized a reduction to general and administrative expense of $~~1.1~~ ~~million and $4.0~~ ~~million, respectively, from services provided under the Employee Matters Agreement.~~

~~The Master Leasing Agreement governs any future leasing arrangements between us and the Spinnee. The initial term of the Master Leasing Agreement is~~ ~~18 months~~, with automatic annual extensions (subject to each party’s right to terminate upon notice prior to the end of any such extension term). Each leased property has a separate lease agreement with specified terms. The initial annual rent for any leased property is based on a calculation derived from the then-current fair market value of the subject property and market net operating income cap rates, subject to certain adjustments, and is further subject to periodic escalation as set forth in the applicable lease, and the other terms thereof, including the initial term and extensions on an arm’s-length basis, as determined by and pursuant to the Master Leasing Agreement. The Spinnee has the right to terminate any such lease prior to the end of its term once the leased property is stabilized. In connection with an early termination, we have an option to pay the Spinnee an amount equal to the difference between the then-current fair market value of such property and the initial fair market value of such property at the time of the lease inception, at a small discount. If we do not exercise an option, the Spinnee will have the right to sell the property to a third party with us guaranteed to receive an amount equal to the fair market value of the property at the time of the lease inception, or the Spinnee may elect to purchase the property at a purchase price equal to the fair market value thereof at the time of lease inception (and may subsequently sell the property to a third party, subject to our right of first refusal during the first year following the Spinnee’s acquisition).

During 2021, we leased certain properties to Aimco. In accordance with ASC 842, certain of these leases were accounted for as sales-type leases and we recorded a net investment in the leases, equal to the sum of the lease receivable and residual asset, discounted at the rate implicit to the leases. During the nine months ended September 30, 2021, we recognized a gain of $~~87.1~~ million, which is equal to the difference in the net investment values and the carrying values of the underlying properties immediately prior to the commencement of each lease. During the three and nine months ended September 30, 2021, we recognized income of $~~6.5~~ ~~million and $19.4~~ million, respectively, on an effective interest basis at a constant rate of return over the term of the applicable leases, which is reflected in interest income in our condensed consolidated statement of operations. Cash income from the leasing agreements was $~~6.7~~ ~~million and $19.9~~ ~~million, respectively, during the three and nine months ended September 30, 2021.~~

~~The initial term of each of the leases range from~~ 10 to ~~25 years. All of the lease payments are triple net basis to the tenant and~~ ~~we have rights in accordance with the individual lease agreements to protect the value of our leased properties.~~ ~~As of September 30, 2021, the aggregate minimum lease payments owed to us for each of the five succeeding years under the sales-type leases is as follows:~~

2021 (remaining)

$
6,270

2022

25,262

2023

25,262

2024

25,262

2025

25,373

Thereafter

730,233

Total lease receivable (1) (2)

$
837,662

Add: Unguaranteed residual value

131,580

Less: Discount

(502,794
)
Total leased real estate assets

$
466,448

~~(1)~~

~~As of September 30, 2021, this amount includes $244.7~~ ~~million of guaranteed residual value and $593.0~~ ~~million of remaining cash lease payments.~~

~~(2)~~

The total future minimum lease payments assume that no early termination option is elected after the leased property is stabilized, which is currently expected between January 1, 2024 and January 1, 2025.

~~In connection with the Separation, we acquired $534~~ million in notes receivable pledged by a subsidiary of the Spinnee that has an interest in a portfolio of assets. Our notes receivable are subordinate to senior debt outstanding on the portfolio of assets. The notes receivable mature on ~~January 31, 2024, and bear interest at a rate of~~ ~~5.2% per annum, payable~~ ~~quarterly~~ on January 1, April 1, July 1, and October 1, commencing on April 1, 2021. The notes receivable contain certain representations, warranties, covenants, and events of default and are secured by a pool of properties owned by Aimco. Notes receivable are reported in our condensed consolidated balance sheet at the outstanding principal balance. Interest receivable related to the unpaid principal is recorded separately from the outstanding balance in other assets in our condensed consolidated balance sheets.~~During the three and nine months ended September 30, 2021, we~~

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~~recognized interest income of $6.9~~ ~~million and $20.8~~ ~~million, respectively, associated with the notes receivable, which is reflected in interest income in our condensed consolidated statement of operations.~~

~~As of September 30, 2021, we have a receivable from Aimco in the amount of approximately $13.5~~ ~~million, which is recognized in other assets, and a payable to Aimco in the amount of approximately $~~3 million, which is recognized in accrued liabilities and other in our condensed consolidated balance sheets. The amount receivable from Aimco primarily includes interest income from our notes receivable which was paid in October.

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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. This Quarterly Report on Form 10-Q contains information that is forward-looking within the meaning of the federal securities laws, including, without limitation, statements regarding: the ~~ongoing relationship between AIR and Aimco following the Separation; the~~ payment of dividends and distributions in the future; the impact of the COVID-19 pandemic, including our ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding consumer demand, growth in revenue and strength of other performance metrics and models; the effect of acquisitions and dispositions; expectations regarding acquisitions as well as sales ~~of our apartment communities~~and joint ventures and the use of proceeds thereof; the availability and cost of corporate debt; our ability to comply with debt covenants; and risks related to the provision of property management services to Aimco and our ability to collect property management related ~~fees; and risks related to the inability to fully collect the notes receivable due from Aimco.~~fees.

These forward-looking statements are based on management’s current expectations, estimates and assumptions and subject to risks and uncertainties, that could cause actual results to differ materially from such forward-looking statements, including, but not limited to: 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 inflation, the pace of job growth and the level of unemployment; the effects of the ~~coronavirus~~COVID-19 pandemic on AIR’s business and on the global and U.S. economies generally, and the ongoing, dynamic and uncertain nature and duration of the pandemic, all of which heightens the impact of the other risks and factors described herein; 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;~~supply, which may be impacted by global supply chain disruptions; the timing and effects of acquisitions and dispositions; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; loss of key personnel; AIR’s ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding sales of apartment communities and the use of proceeds thereof; insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; financing risks, including interest rate changes and the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and 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 AIR; our relationship with AIMCO after the Separation; the ability and willingness of the parties to the Separation to meet and/or perform their obligations under the related contractual arrangements and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve the expected benefits from the Separation.AIR. Other risks and uncertainties are described in this Quarterly Report on Form 10-Q, as well as “Risk Factors” in Item 1A of AIR’s and AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and subsequent filings with the SEC. ~~We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.~~

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 of 1986, as amended (the “Code”) and depends on our ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership.

Certain financial and operating measures found herein and used by management are not defined under ~~accounting principles generally accepted in the United States (“GAAP”).~~GAAP. These measures are defined and reconciled to the most comparable GAAP measures under the Non-GAAP Measures heading and include: NAREIT Funds from Operations, Pro forma Funds from Operations, and the measures used to compute our leverage ratios.

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Executive Overview

We created AIR ~~provides investors with a simple and transparent way to invest in the multi-family sector with public market liquidity.~~

~~AIR is distinctive in five important respects:~~



~~Efficient: AIR was designed~~ to be the most efficient way to invest in multi-family real estate, as measured by revenue conversion to cash flow, the percent of every revenue dollar available for reinvestment or return to shareholders. AIR has peer leading operating margins and ~~the lowest relative general and administrative expenses.~~



Low Risk: AIR was designed to be low risk relative to peers. Investment risk is mitigated by a portfolio that is diversified by market and price point. Execution risk is mitigated by investing in only stabilized properties. AIR has no entitlement risk, construction risk, lease-up risk, or exposure to supply-chain disruption. Financial risk is mitigated by low leverage, expected to be 5.3x by year-end 2021, as measured by Leverage to EBITDAre.



~~Growth: AIR was designed to have superior growth, achieved organically through superior revenue conversion and externally through implementing our operating platform at acquired communities.~~



~~Shareholder friendly: AIR was designed to be shareholder friendly, with peer leading general and administrative expenses.~~



ESG: AIR has been named a Top Workplace in Colorado for nine consecutive years. Assuming the election of the three new nominees, AIR’s Board of Directors will be refreshed and diverse. The eight independent directors will have an average tenure of three years.

~~Our principal financial objective is to be a low-cost and efficient~~effective way to invest in U.S. multi-family real ~~estate. Many~~estate, due to our simplified business model, diversified portfolio of stabilized apartment communities, and low leverage. The Board of Directors has set the following strategic objectives:

•

Pursue a simple, efficient, and predictable business model with a low-risk premium.

•

Maintain a high quality and diversified portfolio of stabilized multi-family properties.

•

Improve our ~~investors focus~~best-in-class property operations platform to generate above-market organic growth.

•

Maintain an efficient cost structure with general and administrative expenses less than or equal to 15 basis points of gross asset value.

•

Maintain a flexible, low levered balance sheet with access to public debt markets.

•

Enhance portfolio quality through a disciplined approach to capital allocation, targeting accretive opportunities on multiples of Funds From Operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), referred to herein as “NAREIT FFO.” These investors also focus on NAREIT FFO, as adjusted for non-cash, unusual or non-recurring items. We refer to this metric as Pro forma Funds From Operations (“Pro forma FFO”) and use ita leverage neutral basis.

•

Develop private capital partnerships as a ~~secondary measure~~source of ~~operational performance.~~equity capital for accretive growth.

•

Continue our commitment to corporate responsibility with transparent and measurable goals.

We own and operate a portfolio of stabilized apartment communities, diversified by both geography and price point. As of September 30, 2022, our portfolio included 80 apartment communities with 26,600 apartment homes in which we held an average ownership of approximately 88%.

Our business is organized around four areas of strategic focus: operational excellence; portfolio management; balance sheet; and team and culture. The results from the execution of our business plan are further described in the sections that follow.

~~The Separation~~

For financial reporting purposes, GAAP requires that Aimco is presented as the predecessor (“AIR’s Predecessor”) for AIR’s financial statements. As a result, unless otherwise stated, financial results prior to the Separation on December 15, 2020 include the financial results of AIR’s Predecessor. The financial results prior to the Separation attributable to the apartment communities retained by Aimco are presented as discontinued operations and are excluded from our property net operating income (“NOI”).

Operational Excellence

We own and operate a portfolio of stabilized apartment communities, diversified by both geography and price point. As of September 30, 2021, our portfolio included 95 apartment communities with 26,364 apartment homes in which we held an average ownership of approximately 93%.

Same Store highlights for the third quarter of 2022 include:

•

~~Recognition~~Revenue increased by 9.6% and NOI increased by 13.3%, compared to the third quarter of ~~98.6% of all residential revenue billed~~2021;

•

NOI margins were 74.3%, an all-time high for the third quarter and up 240 basis points compared to 2021; and

•

For transacted leases becoming effective during the ~~quarter;~~



~~Average daily occupancy (“ADO”) of 96.6%, a year-over-year increase of approximately 330 basis points due primarily to AIR’s recovery efforts since the onset of COVID-19;~~



~~For leases signed during the~~ quarter, ~~(“signed leases”), renewal rents increased by 8.8% and~~ new lease rents increased by ~~11.0%~~17.1% and renewal rents increased by 11.1%, for a weighted-average increase of ~~10.0%~~14.0%; ~~and~~

Same Store Markets

~~For leases becoming effective during~~

Consumer demand remained strong through the quarter, ~~(“transacted leases”), renewal rents increased by 7.1% and~~with signed new lease ~~rents increased by 8.0%~~rates up 17.0% from the prior leases and renewals up 11.8%, ~~for~~resulting in a weighted-average increase of ~~7.6%~~14.5%.

30 We saw a sequential decline in ADO of 90 basis points to 95.9%, reflecting the frictional vacancy consistent with the higher move out volume that is typical during the summer leasing season. Year-to-date ADO of 96.9% was 120 bps higher than in the prior year. We anticipate continued occupancy gains throughout the fourth quarter.

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Acquisition Portfolio

~~Same Store Markets~~

~~Market conditions continued~~The acquisition portfolio is currently comprised of five properties acquired in 2021, four acquired in 2022, and represents 14% of AIR GAV. At those properties acquired in 2021, leasing continues to ~~be strong~~exceed expectations. Signed new lease rates were up 25.1% in the third quarter, ~~exceeding~~with renewals up 23.2%, resulting in a weighted-average increase of 24.1%. Fourth quarter revenue growth for the 2021 acquisitions, the first reporting period with a year-over-year comparison, is anticipated to be 50% above the Same Store portfolio. At properties we acquired in 2022, performance is consistent with our expectations, ~~from the beginning of the year,~~ and our revised expectations after a strong second quarter. The trend of strengthening lease growth rates continued through the third quarter, as weighted-average signed lease changes have trended upwards for 12 consecutive months.

As anticipated, occupancy increased sharply as we completed peak leasing season, with average daily occupancy increasing from 95.4% in the second quarter to 96.6% in the third quarter, including 97.4% in September.

~~In addition to average daily occupancy, we also use “leased percentage” as a metric predictive of future occupancy. “Leased percentage”~~rental rate achievement is defined as occupied apartments plus apartments leased but not yet occupied and less apartments occupied where the resident has given notice of intent to vacate the apartment. During the quarter, the percentage of apartment homes currently leased increased from 93.1% to 97.5%. Our leased percentage is now 600 basis points ahead of ~~2020 and 300 basis points ahead of the third quarter of 2019. As a result, we see occupancy remaining at or above current levels through the first quarter of 2022.~~our initial projections. We will provide year-over-year comparable data as it becomes available.

Portfolio Management

Our portfolio of apartment communities is diversified across primarily “A” and “B” price points, averaging “B/B+” in quality, and is also ~~diversified~~ across ~~several of the largest~~eight core markets in the United States. ~~After~~In the past two years, AIR has recycled approximately $5.4 billion, or 40%, of its gross asset value as part of and since the Separation, property sales, and joint ventures, all during a period of attractive pricing for

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multi-family properties, ~~being sold~~using the proceeds to simplify its business, reduce leverage, and improve the ~~properties acquired this year,~~quality and expected profitability of its real estate portfolio.

We have improved AIR's portfolio through reducing our ~~portfolio will be higher quality, require lower recurring capital replacement spending, and have a greater~~ allocation to ~~states~~New York City and Chicago markets with ~~greater economic~~regulatory risk, and reallocating capital into higher growth submarkets, such as Miami-Dade and ~~a more reliable rule~~Broward counties, now 19% of ~~law.~~ AIR GAV, in markets with limited REIT competition.


	Aimco	AIR
	Q4 2019 or 2019A	Q3 2022	Change
Residents
Average Household Income	$165,000	$251,000	52%
Median Household Income	$116,000	$170,000	47%
CSAT Score (out of 5)	4.30	4.33 (2021)	0.03
Kingsley Index (1)	4.09	4.05	(0.04)
Portfolio
Properties	124	80	(35%)
Apartment Homes	32,598	23,499	(28%)
Average Revenue per Apartment Home	$2,272	$2,711	19%
Redevelopment and Development ($M)	$230	$–	($230)
Mezzanine Investments ($M)	$280	$–	($280)
Low G&A
Net G&A as % of GAV	36 bps (per GSA)	<15 bps (at AIR Target)	-21 bps
Balance Sheet
Net Leverage / EBITDAre	7.6x	5.9x	(1.7x)
Refunding: Next 3-Years (% Total Debt)	23%	10%	(13%)
Repricing: Next 3-Years (% Total Debt)	23%	10%	(13%)
Unencumbered Properties ($B)	$2.4	$8.3	$5.9

(1)

AIR named Kingsley Elite Five in 2022, #2 among all operators and #1 for public REITs

We measure the quality of apartment communities in our 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 data and analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of local market average; and as “B” quality apartment communities those earning rents between 90% and 125% of local market average. We classify as “B/B+” quality a portfolio that on average earns rents between 100% and 125% of local market average rents. Although some companies and analysts within the multi-family real estate industry use apartment community quality ratings of “A” and “B,” some of which are tied to local market rent averages, the metrics used to classify apartment community quality as well as the period for which 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 multi-family real estate industry.

We expect to improve the quality of our portfolio by allocating investment capital to enhance rent growth and increase long-term capital values through routine investments in property upgrades (such as upgrading kitchens, bathrooms, and other interior design aspects) and through portfolio design, emphasizing land value as well as location and submarket. We plan to maintain a dynamic capital allocation and market selection process, expecting over time to reallocate our investment to locations with lower public tax burdens, including the southeastern United States and the Mountain West. We target geographic diversification in our portfolio to reduce the volatility of our rental revenue by avoiding undue concentration in any particular market.

AsAIR uses “paired trades” to fund acquisitions, basing our cost of capital on the anticipated unlevered internal rates of return (“IRR”) of the communities or joint venture interests sold. We require a "spread" or accretion of an unlevered IRR at least 200 basis points higher on the communities purchased. This excess return is driven in part by what we call the AIR Edge, the cumulative result of our ~~portfolio strategy, we~~focus on resident selection, satisfaction, and retention, as well as relentless innovation in delivering best-in-class property management. We seek to sell communities with lower expected free cash flow (“FCF”) internal rates of return and reinvest the proceeds from such sales in accretive uses such as capital enhancements, share repurchases, and selective acquisitions of stabilized communities with projected ~~free cash flow~~FCF internal rates of return higher than expected from the communities being sold. When the cost of capital is favorable, we will look to grow through the acquisition of stabilized apartment communities that we believe we can operate better than their previous owners. Through this disciplined approach to capital allocation, we expect to increase the quality and expected growth rate of our portfolio.

In the past two years, we have acquired $1.4 billion, or 14% of GAV, of properties new to the AIR operating platform. New purchases will increase to 17% of GAV with the anticipated acquisition in early next year of Southgate Towers in Miami Beach. (Please see below for further information regarding this acquisition.)

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We estimate real estate values declined by approximately 10% during 2022, the result of approximately 85 basis points of NOI cap rate expansion, about half offset by strong NOI growth. As a paired trade investor, AIR is agnostic as to market changes insofar as it buys and sells properties in the same market conditions, and is focused on gaining an accretive “spread”. As market conditions change, AIR adjusts its target returns and spreads to reflect its new cost of capital. Our “paired trade” approach is intended to ensure that new acquisitions are accretive to earnings in the near-term, and will generate attractive spreads to IRRs in the long-term.

Transactions

Acquisitions

As previously announced, we acquired The District at Flagler Village in Fort Lauderdale, FL for $173 million in the third quarter. The property has 350 apartment homes and was newly constructed in 2021. It sits in the affluent and growing Flagler Village neighborhood with access to the Brightline train station. Year-to-date, we have acquired $640 million of properties new to the AIR platform.

Additionally, and as previously announced, we canceled existing master leases at four properties owned by AIR and previously leased to Aimco for purpose of their development. As part of the cancellation, AIR paid $200 million to Aimco for the added improvements. The four properties include 865 apartment homes with average revenue per apartment home of $3,669 and are located in the South Beach neighborhood of Miami Beach, FL, Kendall Square in Cambridge, MA, the Anschutz Medical Campus in Aurora, CO, and Redwood City, CA.

In aggregate, we expect a NOI yield in 2023 of mid 4%s and a long-term unlevered IRR of approximately 9%.

During the quarter, we also went under contract with a non-refundable deposit to acquire Southgate Towers, located in the South Beach neighborhood of Miami Beach with 495 apartment homes for $298 million. The acquisition is expected to close in early January 2023. We expect unlevered IRRs greater than 10% and at a spread of more than 200 basis points to the properties sold to fund its acquisition.

Dispositions

We had no dispositions in the third quarter. We anticipate selling six properties located in the New England area in November for a gross sales price of approximately $500 million, representing a trailing twelve-month NOI cap rate of 4.4%. These have been classified as held for sale as of September 30, 2022.

Capital Allocation – Share Repurchases

During the three months ended September 30, ~~2021, we sold one apartment community located in Elmhurst, Illinois, with 58 apartment homes~~2022, AIR repurchased 1.2 million shares for $47 million, at aan average price of ~~$40 million. Net sales proceeds from this transaction were $39.9 million.~~

AIR is under contract to sell four Washington, D.C. area communities with 976 apartment homes and 11 properties in New York City for total consideration of approximately $470 million, all of which are expected to close in the fourth quarter.

$39.07 per share. Subsequent to quarter end and through November 2, 2022 we entered into a joint venture with an affiliate of Blackstone to sell, for approximately $408 million, an expected 80% interest in three multi-family properties with 1,748 units located in Virginia. AIR is the general partner with an expected 20% ownership, and earns various fees for providing property management and corporate services.

~~Additionally, we are in contract negotiations on~~have purchased an additional ~~$800~~3.1 million shares for $115 million. In aggregate, we have repurchased 7.2 million shares during 2022 at an average price of $39.96. We are authorized by the AIR Board of Directors to repurchase an additional $213 million of ~~properties located primarily in select markets in California.~~

~~Table~~shares. We consider share buybacks as part of ~~Contents~~

In aggregate, the completed and under contract sales are expected to generate gross proceeds of approximately $1.7 billion and are valued at an implied NOI cap rate of 4.36%, based on forecasted 2021 NOI and inclusive of fees expected to be earned from the joint venture. The communities are being sold at a ~~15% premium to their estimated 2020 fair market value, pre-COVID.~~

~~Acquisitions~~

Subsequent to quarter end, we acquired a portfolio of four properties located in the Washington, D.C. area, with 1,400 apartment homes and 84,000 square feet of office and commercial space, for an expected purchase price of approximately $510 million. The communities acquired are:balanced investment program.



Vaughan Place, located in Washington, D.C., with 389 apartment homes and 52,000 square feet of office and commercial space. Sixteen of these homes remain subject to the Tenant Opportunity to Purchase Act ("TOPA"); if not ultimately acquired, our purchase price will be reduced by approximately $6.4 million;



~~Residences at Capital Crescent Trail, located in Bethesda, MD, with 258 apartment homes;~~



~~North Park, located in Chevy Chase, MD, with 310 apartment homes;~~



~~Huntington Gateway, located in Alexandria, VA, with 443 apartment homes and 32,000 square feet of office and commercial space; and~~



Two vacant land parcels adjacent to the Residences at Capital Crescent Trail, suitable for development of 498 additional apartment homes, and valued at approximately $20 million. AIR does not expect to undertake the development of these parcels but rather expects to sell or lease the land to a third-party developer.

The acquisition was initially funded with $259 million of existing property debt, an expected issuance of $128 million in OP Units, and $122 million borrowed on the AIR revolving credit facility. On a permanent basis, AIR expects to fund the acquisition with approximately 75% equity and 25% debt.

~~The paired trade of selling communities in New York and locations in the suburban Washington, D.C. area to acquire these four communities is expected to be somewhat accretive to FFO per share in 2022.~~

Balance Sheet

~~Components of Leverage~~

We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage and primarily long-dated ~~debt;~~debt. We target a Net Leverage to EBITDAre ratio between 5.0x and ~~we build~~6.0x and anticipate the actual ratio will vary based on the timing of transactions. We maintain financial flexibility ~~by maintaining~~through ample unused and available ~~credit;~~credit, holding properties with substantial value unencumbered by property ~~debt;~~debt, maintaining an investment grade ~~rating;~~rating, and using partners’ capital when it enhances financial returns or reduces investment risk. We seek to minimize refunding and repricing risk.

Components of Leverage

Our leverage includes our share of long-term, non-recourse property debt encumbering our apartment communities, together with outstanding borrowings under our revolving credit facility, our term loans, unsecured notes payable, and ~~our~~ preferred equity. ~~We have notes receivable from Aimco with an aggregate principal amount~~

As of ~~$534 million. The notes will mature on January 31, 2024,~~September 30, 2022, about $170 million of AIR’s debt matures before 2025 and ~~are secured by a pool of properties owned by Aimco. We consider the notes a reduction of leverage as we expect proceeds~~it is expected to be ~~used~~refunded before year end with $55 million at 4.9%, $14 million repaid and the remainder at a fixed rate to ~~repay loan amounts currently outstanding.~~be determined. Once completed, AIR will have no debt maturing before the second quarter of 2025.

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AIR anticipates using the net proceeds from the November property sales discussed above to reduce borrowings on its revolving credit facility.

Pro forma the completion of these refinancing activities, and exclusive of any remaining borrowings under its revolving credit facility, AIR’s floating rate debt exposure is anticipated to be $79 million. This debt is subject to an interest rate cap at an effective rate of 5.35%.

Please see the Liquidity and Capital Resources section for additional information regarding our ~~leverage.~~

~~On Track Leverage Reduction~~

~~We target Net Leverage to Adjusted EBITDAre at 5.5x, with a range between 5.0x~~leverage and ~~6.0x.~~

~~Our leverage ratios for the three months ended September 30, 2021 are presented below:~~


		~~Annualized Current Quarter~~
~~Proportionate Debt to Adjusted EBITDAre~~		~~6.9x~~
~~Net Leverage to Adjusted EBITDAre~~		~~7.1x~~

~~Table of Contents~~

~~Please see~~ the Leverage Ratios subsection of the Non-GAAP Measures section for further information about the calculation of our leverage ratios.

~~The net proceeds from the sales activity and property acquisitions described above, and our debt refinancing is expected to result in the following:~~

Sources & Uses

Estimated Yield

FFO Impact

Estimated gross proceeds
$
1,715,000

4.36%

$
(74,774
)
Transaction costs (~2% of gross proceeds) and transfer taxes (~0.5%) of gross proceeds

(43,500
)

—

Prepayment penalties on debt repaid to facilitate sales

(31,500
)

—

Prepayment penalties on other debt prepaid (1)

(148,408
)

—

Net Proceeds

1,491,592

(74,774
)

Acquisition equity funded through paired trades (2)

434,500

5.20%

22,594

Property debt repaid

1,057,091

3.72%

39,324

Property debt refinancing (3)

—

3,648

Uses of Net Proceeds

1,491,591

65,566

Net FFO impact before investment of incremental proceeds

(9,208
)
Investment of incremental proceeds (4)

7,220

Net FFO impact after investment of incremental proceeds

(1,988
)

Net FFO impact per share before investment of incremental proceeds

$
(0.05
)
Net FFO impact per share after investment of incremental proceeds

$
(0.01
)

~~(1)~~

Of the $148 million of estimated prepayment penalties approximately $66 million relates to the mark to market on the debt and the remaining $82 million is an investment in higher future earnings; a $1.8 billion increase in our pool of unencumbered properties; increased financial flexibility; and enhanced access to public debt markets.

~~(2)~~

~~The unlevered yield of the 2021 property acquisitions is expected to be ~4.3%, resulting in an expected levered yield of ~5.2%.~~

~~(3)~~

~~As part of our deleveraging activities, we are refinancing approximately $275 million of high cost property debt. The effective spread on this refinancing is 130 basis points.~~

~~(4)~~

~~Assumes the investment of $380 million of incremental proceeds at 4.3%; with a debt cost of 2.4%.~~

~~Pro forma expected sales activity, year-end Net Leverage to EBITDAre is expected to be ~5.3x, 0.2x of a turn better than target, providing ~$380 million of capacity to fund future acquisitions.~~

Liquidity

We use our revolving credit facility for working capital, ~~and~~ other short-term purposes, and to secure letters of credit. As of September 30, ~~2021,~~2022, our share of cash and restricted cash, excluding amounts related to tenant security deposits, was ~~$80.0~~$99.6 million and we had the capacity to borrow up to ~~$517.8~~$509.9 million under our revolving credit facility, bringing total liquidity to ~~$597.8~~$609.5 million. Liquidity is expected to increase by approximately $460 million with the closing of the November property sales.

We manage our financial flexibility by maintaining an investment grade rating from S&P and holding communities that are unencumbered by property debt. ~~AIR has been rated BBB by Standard & Poor’s.~~ As of September 30, ~~2021,~~2022, we held unencumbered apartment communities ~~with property debt~~ with an estimated fair market value of approximately ~~$4.2 billion; an increase of 50%~~$8.3 billion, almost triple the amount from December 31, ~~2020; pro forma expected sales activity, the value of properties unencumbered by property debt is anticipated to increase to approximately $6.0 billion.~~2020.

~~We anticipate~~As previously announced, AIR is seeking an ~~investment grade credit rating~~investment-grade Issuer Credit Rating from ~~Moody’s. In assigning ratings,~~ Moody’s places significant emphasis on the amount of non-recourse property debt as percentage of the undepreciated book value of a company’s assets. To achieve Moody’s required thresholds, we estimate that a Moody’s investment grade rating will require property debt to approximate $1.8 billion. Pro forma the leverage activities described above;and we anticipate ~~that~~receiving our ~~share of property debt will approximate this target level.~~rating during the fourth quarter.

Dividend and Equity Capital Markets

On ~~October 26, 2021,~~November 1, 2022, our Board of Directors declared a quarterly cash dividend of ~~$0.44~~$0.45 per share of ~~AIR~~ Common Stock. This amount is payable on November 30, ~~2021,~~2022, to stockholders of record on November ~~12, 2021.~~18, 2022. On an annualized basis, the dividend represents $1.80 per share, reflecting a dividend yield of approximately 4.7% based on AIR's closing share price on Tuesday, November 1, 2022. In setting AIR's 2022 dividend, our Board of Directors targeted a dividend level of approximately 75% of full year FFO per share.

33The after-tax dividend will benefit from AIR's refreshed tax basis. Two-thirds of the 2021 dividend was a tax-free return of capital while the remaining one-third was taxable at capital gain rates. In the same year, approximately 60% of peer dividends were taxed at ordinary income rates, with the remaining 40% taxed at capital gain rates.

~~Table~~In 2022, we currently project a majority of ~~Contents~~

our dividend will be taxable at capital gain rates, with the remainder taxable at ordinary income rates. We believe the tax characteristics of our dividend makes our stock more attractive to taxable investors, such as foreign investors, taxable individuals, and corporations by comparison to peer shares whose dividends are taxed at higher rates. For example, if AIR's 2022 dividend is characterized as 50% capital gains and 50% as ordinary income and peer 2022 dividends are characterized consistently with 2021, AIR's estimated after tax dividend would be approximately 35% higher than peer average.

Team and Culture

Our team and culture are keys to our success. Our intentional focus on a collaborative and productive culture based on respect for others and personal responsibility is reinforced by a preference for promotion from within. We focus on succession planning and talent development to produce a strong, stable team that is the enduring foundation of our success. We offer benefits reinforcing our value of caring for each other, including an opportunity to manage one’s life through flexible work schedules and “dress for your day,” paid time for parental leave, profit sharing, retirement plans for all, financial support for our teammates who are becoming United States citizens, and a bonus structure at all levels of the organization. Consistent with the duration of our other leave policies, we also pay full compensation and benefits for teammates who are actively deployed by the United States military.

A critical element of our culture is a relentless focus on efficiency. We continuously seek to reduce costs through the use of additional automation and continued technological investment. We expect this focus will enable our general and administrative expenses to be lower, as a percentage of gross asset value, than our peers.

~~Our focus~~Corporate responsibility is a longstanding AIR priority and a key part of our culture. We are committed to transparency, and continuous improvement, as measured by GRESB. Based on UN Sustainable Development Goals, we have set targets for energy, water, and greenhouse gas reductions. We contracted for expert review of the environmental impacts of our ~~team~~properties, and we are considering various ways to improve portfolio resilience.

Table of Contents

During the quarter, AIR engaged with holders of approximately 70% of outstanding common shares, which included the participation of multiple Board members alongside senior management, in a series of lunches, dinners, video meetings, and calls. Numerous topics were discussed such as governance, investment strategy, operations, and corporate responsibility, including CEO succession planning and matters related to Environmental, Social, and Governance ("ESG"). Board members have also participated in several industry conferences and private meetings throughout the year. AIR's Board is highly proactive and welcomes investor feedback to ensure stockholder perspectives are well heard in Board deliberations.

AIR launched new corporate responsibility webpages during the quarter to highlight our ~~culture~~commitments to ESG, and published corporate responsibility goals consistent with the United Nations Sustainable Development Goals. AIR also launched an inaugural materiality assessment and surveyed investors, its Board of Directors, teammates, vendors, and community partners to identify which topics they consider most material to the Company. Subsequent to quarter end, AIR published its 2021-2022 Corporate Responsibility Report, which demonstrates AIR's commitment to being an outstanding corporate citizen, and reinforces its dedication to ESG goal setting and reporting on progress through transparent, data-driven disclosures consistent with the Sustainability Accounting and Standards Board (“SASB”).

AIR has made progress on its goals to reduce the Company's environmental impact by 2025, which include a 15% energy use reduction, 10% water usage reduction, and 15% greenhouse gas reduction, all by 2025. This is in addition to more than a decade of investment in clean energy, energy efficiency and water conservation, including $7.9 million invested in energy conservation between 2019 and 2021.

AIR recently received its first public GRESB score of 78, which included an “A” grade for both ESG public disclosure and alignment with the Task Force for Climate-Related Financial Disclosures (“TCFD”). AIR received a “Green Star” from GRESB for overall Management and Performance in 2021, a perfect social responsibility score, and a near-perfect corporate governance score.

In partnership with the National Leased Housing Association, we continue our longstanding commitment to offer AIR Gives Opportunity Scholarships to students living in affordable housing. During 2022, we awarded 14 scholarships to students living in affordable housing.

AIR has been recognized ~~externally,~~nationally as ~~well. Out~~a “National Top Workplace Winner.” In addition to that national recognition, AIR has previously been recognized as a top workplace in Colorado, the Washington, D.C. area, and the San Francisco Bay area. Specifically in 2021, out of hundreds of participating companies, ~~in 2021,~~ AIR was one of only six recognized by the Denver Post as a “Top Workplace” in Colorado for each of the past nine ~~years, and~~years. Also in 2021, AIR was recognized by the Washington Post as a “Top Workplace” in the Washington, D.C. area. AIR was recognized by the Denver Business Journal as one of ~~only two real estate companies to receive a BEST award from~~ the ~~Association~~Denver Area's Healthiest Employers in 2022 for ~~Talent Development in recognition of our company-wide success in talent development, marking its~~the third consecutive ~~year receiving this award, and received for the first time the “Top Workplaces 2021” honor from the Washington Post.~~year.

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 acquire and dispose of our apartment communities affects 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.

Financial Highlights

Net income ~~(loss)~~attributable to common stockholders per common share, on a dilutive basis, decreased $0.05 for the three months ended September 30, 2022, compared to 2021, due primarily to higher depreciation and amortization expense due to properties acquired and lower gain on dispositions of real estate, offset partially by increased contribution from ~~continuing operations~~property operations. Net income attributable to common stockholders per common share, on a dilutive basis, increased $0.29 for the three months ended September 30, 2021, due primarily to an increase in interest income, including income earned from leased properties. Net income (loss) from continuing operations attributable to common stockholders per common share, on a dilutive basis, increased $0.40$3.20 for the nine months ended September 30, 2022, compared to 2021, respectively, due primarily to ~~a gain~~gains on ~~derecognition~~dispositions of ~~leased properties~~real estate and ~~higher interest income,~~lower prepayment penalties, offset partially by ~~increased prepayment penalties.~~higher depreciation and amortization expense due to property acquisitions.

Pro forma FFO per share was ~~$0.56~~$0.58 and ~~$1.58, respectively,~~$1.81 for the three and nine months ended September 30, ~~2021.~~2022, respectively, compared to $0.56 and $1.58, respectively, for 2021, due primarily to increased contribution in property operations and a decrease in interest expense.

~~Residential Rent Collection Update~~30

We measure residential rent collection as the amount of payments received as a percentage of all residential amounts owed. In the third quarter, we recognized 98.6% of all residential revenue owed during the quarter, treating the balance of 1.4% as bad debt. 2.8% of our residents have extended delinquencies, much of which we expect to collect from the residents based on their high credit scores or to be reimbursed by the State of California. 97.2% of our residents pay rent timely with bad debt under 30 basis points of revenue, a level still somewhat elevated from our historic experience.

As of September 30, 2021, our proportionate share of gross residential accounts receivable was $13.3 million. After consideration of tenant security deposits and reserves for uncollectible amounts, our net exposure is $1.3 million, an amount expected to be collected during the fourth quarter.

73% of the $13.3 million of uncollected accounts receivable relate to California residents. During the quarter, we received $2.7 million from California’s rent relief program. We await the state’s response to an additional $5.2 million of rent relief requests made. We are working with residents to file an additional $3.6 million of claims.

We remain cautiously optimistic that this program will allow us to recover rents uncollected in 2020 or 2021. We expect bad debt expense to decline with the end of emergency ordinances that suspend contractual remedies for non-payment of rent.

Table of Contents

~~Detailed~~ Results of Operations for the Three and Nine Months Ended September 30, ~~2021,~~2022, Compared to ~~2020~~

~~Net income (loss) from continuing operations increased by $38.1 million and increased by $62.5 million during the three and nine months ended September 30,~~ 2021 ~~respectively, compared to 2020, as more fully described below.~~

Property Operations

We have two segments: Same Store and Other Real Estate. Our Same Store segment includes communities ~~that: (i)~~that are owned and managed by AIR and ~~(ii)~~ had reached a stabilized level of operations. Our Other Real Estate segment includes five properties acquired in 2021, four properties acquired in 2022, four properties previously leased to Aimco, and three communities ~~that~~we expect to sell or lease to a third party, but do not yet meet the criteria to be classified as ~~Same Store.~~held for sale

As of September 30, ~~2021,~~2022, our Same Store segment included 9258 apartment communities with ~~25,427~~20,730 apartment homes and our Other Real Estate segment included ~~three~~16 apartment communities with ~~937~~4,556 apartment homes. As of September 30, 2022, we had six apartment communities with 1,314 homes that were classified as held for sale.

Proportionate Property Net Operating Income ~~(Non-GAAP)~~

Our proportionate share of financial information includes our share of unconsolidated real estate partnerships and excludes the noncontrolling interest partners’ share of consolidated real estate partnerships. We believe proportionate information benefits the users of our financial information by providing the amount of revenues, expenses, assets, liabilities, and other items attributable to our stockholders. Other companies may calculate their proportionate information differently than we do, limiting the usefulness as a comparative measure. Because of these limitations, the non-GAAP proportionate financial information should not be considered in isolation or as a substitute for information included in our financial statements as reported under GAAP.

We use proportionate property NOI to assess the operating performance of our ~~communities, which excludes the results of properties retained by Aimco in connection with the Separation, which are included in discontinued operations.~~communities. Proportionate property NOI ~~is a non-GAAP measure that~~ reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility ~~reimbursements, for consolidated communities. Accordingly, the results of operations of our segments discussed below are presented on a proportionate (“Ownership-Effected”) basis.~~reimbursements. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues in accordance with GAAP. In September 2020, we formed a joint venture with a passive institutional investor to own a portfolio of 12 multi-family communities in California. In order for both periods to be comparable, we have presented, in addition to the actual historical changes in results of operations of our segments, the property operating results as if the California joint venture had closed at the beginning of the earliest period presented.

We do not include offsite costs associated with property management, casualty gains or losses, or the results of apartment communities sold or held for sale ~~or retained by Aimco in the Separation, which are included in discontinued operations, reported in consolidated amounts,~~ in our assessment of segment performance. Accordingly, these items are not allocated to our segment results discussed below.

Please see Note 810 to the condensed consolidated financial statements in Item 1 for further discussion regarding our segments, including a reconciliation of these proportionate amounts to consolidated rental and other property revenues and property operating expenses.

Three Months Ended September 30,

Historical Change

Ownership-Effected
Change (1)

(in thousands)
2021

2020

$

%

$

%

Rental and other property revenues, before utility reimbursements:

   Same Store
$
162,535

$
163,003

$
(468
)

(0.3
%)

$
9,178

6.0
%
   Other Real Estate

5,456

1,106

4,350

393.3
%

4,350

393.3
%
      Total

167,991

164,109

3,882

2.4
%

13,528

8.8
%
Property operating expenses, net of utility reimbursements:

   Same Store

44,901

47,732

(2,831
)

(5.9
%)

(184
)

(0.4
%)
   Other Real Estate

2,920

1,242

1,678

135.1
%

1,678

135.1
%
      Total

47,821

48,974

(1,153
)

(2.4
%)

1,494

3.2
%
Proportionate property net operating income:

   Same Store

117,634

115,271

2,363

2.0
%

9,362

8.6
%
   Other Real Estate

2,536

(136
)

2,672

(1,964.7
%)

2,672

(1,964.7
%)
      Total
$
120,170

$
115,135

$
5,035

4.4
%

$
12,034

11.1
%

~~(1)~~

~~Reflects the change for the three months ended September 30, 2021 and 2020, as if the California joint venture had closed on July 1, 2020.~~

~~Table of Contents~~


	Three Months Ended September 30,				Historical Change						Change Attributable to Changes in Ownership						Change Excluding Changes in Ownership
(in thousands, except percentages)	2022		2021		$			%			$			%			$		%
Rental and other property revenues, before utility reimbursements:
Same Store	$	139,107	$	134,102	$	5,005			3.7	%	$	(7,157	)		(5.9	%)	$	12,162		9.6	%
Other Real Estate		30,258		5,558		24,700		nm				—			—	%		24,700	nm
Total		169,365		139,660		29,705			21.3	%		(7,157	)		(5.9	%)		36,862		27.2	%
Property operating expenses, net of utility reimbursements:
Same Store		35,632		36,883		(1,251	)		(3.4	%)		(1,286	)		(3.5	%)		35		0.1	%
Other Real Estate		10,606		2,963		7,643		nm				—			—	%		7,643	nm
Total		46,238		39,846		6,392			16.0	%		(1,286	)		(3.5	%)		7,678		19.5	%
Proportionate property net operating income:
Same Store		103,475		97,219		6,256			6.4	%		(5,871	)		(6.9	%)		12,127		13.3	%
Other Real Estate		19,652		2,595		17,057		nm				—			—	%		17,057	nm
Total	$	123,127	$	99,814	$	23,313			23.4	%	$	(5,871	)		(6.9	%)	$	29,184		30.3	%

For the three months ended September 30, ~~2021,~~2022, compared to ~~2020, after giving effect~~2021, excluding changes attributable to ~~the sale of partial interest~~changes in ~~certain Same Store communities in the California joint venture,~~ownership, our Same Store proportionate property NOI increased by ~~$9.4~~$12.1 million, or ~~8.6%~~13.3%. This increase was attributable primarily to a ~~$9.2~~$12.2 million, or ~~6.0%~~9.6%, increase in rental and other property revenues due to a ~~330 basis point increase in average daily occupancy and a 40 basis point~~10.4% increase in residential rental ~~rates.~~

~~The increase~~rates and a 30 basis point decrease in ~~proportionate property NOI was partially offset by an increase of $0.2 million, or 0.4%, in Same Store property operating expenses.~~net bad debt.

Other Real Estate proportionate property NOI for the three months ended September 30, ~~2021,~~2022, compared to ~~2020,~~2021, increased by ~~$2.7~~$17.1 million, due primarily to contribution from four properties acquired in 2021, four properties acquired in 2022, and NOI contribution from the ~~June acquisition~~four properties acquired on September 1, 2022 when their respective master leases were canceled.

Table of ~~City Center on 7th.~~Contents

Nine Months Ended September 30,

Historical Change

Ownership-Effected
Change (1)

(in thousands)
2021

2020

$

%

$

%

Rental and other property revenues, before utility reimbursements:

   Same Store
$
469,686

$
510,151

$
(40,465
)

(7.9
%)

$
(3,692
)

(0.8
%)
   Other Real Estate

8,255

4,274

3,981

93.1
%

3,981

93.1
%
      Total

477,941

514,425

(36,484
)

(7.1
%)

289

0.1
%
Property operating expenses, net of utility reimbursements:

   Same Store

133,983

140,115

(6,132
)

(4.4
%)

3,229

2.5
%
   Other Real Estate

5,191

3,400

1,791

52.7
%

1,791

52.7
%
      Total

139,174

143,515

(4,341
)

(3.0
%)

5,020

3.7
%
Proportionate property net operating income:

   Same Store

335,703

370,036

(34,333
)

(9.3
%)

(6,921
)

(2.0
%)
   Other Real Estate

3,064

874

2,190

250.6
%

2,190

250.6
%
      Total
$
338,767

$
370,910

$
(32,143
)

(8.7
%)

$
(4,731
)

(1.4
%)

~~(1)~~

~~Reflects the change for the nine months ended September 30, 2021and 2020, as if the California joint venture had closed on January 1, 2020.~~


	Nine Months Ended September 30,				Historical Change						Change Attributable to Changes in Ownership						Change Excluding Changes in Ownership
(in thousands, except percentages)	2022		2021		$			%			$			%			$		%
Rental and other property revenues, before utility reimbursements:
Same Store	$	402,756	$	386,998	$	15,758			4.1	%	$	(21,473	)		(6.1	%)	$	37,231		10.2	%
Other Real Estate		62,371		8,562		53,809		nm				—			—	%		53,809	nm
Total		465,127		395,560		69,567			17.6	%		(21,473	)		(6.1	%)		91,040		23.7	%
Property operating expenses, net of utility reimbursements:
Same Store		105,570		109,299		(3,729	)		(3.4	%)		(4,341	)		(4.0	%)		612		0.6	%
Other Real Estate		23,486		5,351		18,135		nm				—			—	%		18,135	nm
Total		129,056		114,650		14,406			12.6	%		(4,341	)		(4.0	%)		18,747		16.6	%
Proportionate property net operating income:
Same Store		297,186		277,699		19,487			7.0	%		(17,132	)		(7.1	%)		36,619		14.1	%
Other Real Estate		38,885		3,211		35,674		nm				—			—	%		35,674	nm
Total	$	336,071	$	280,910	$	55,161			19.6	%	$	(17,132	)		(7.1	%)	$	72,293		26.7	%

For the nine months ended September 30, ~~2021,~~2022, compared to ~~2020, after giving effect~~2021, excluding changes attributable to ~~the sale of partial interest~~changes in ~~certain Same Store communities in the California joint venture,~~ownership, our Same Store proportionate property NOI ~~decreased~~increased by ~~$6.9~~$36.6 million, or ~~2.0%~~14.1%. This ~~decrease~~increase was attributable primarily to a ~~$3.7~~$37.2 million, or ~~0.8%~~10.2%, ~~decrease~~increase in rental and other property revenues due to a 907.6% increase in residential rental rates, a 120 basis point increase in ADO to 96.9%, and a 100 basis point decrease in ~~residential rental rates and a 60 basis point increase in~~net bad debt.

The decrease in proportionate property NOI was also attributable to an increase of $3.2 million, or 2.5%, in Same Store property operating expenses. Controllable operating expenses were up $0.4 million, or 0.6%, compared to the nine months ended September 30, 2020, while real estate taxes and insurance costs increased by $1.4 million and $1.3 million, respectively.

Other Real Estate proportionate property NOI for the nine months ended September 30, ~~2021,~~2022, compared to ~~2020,~~2021, increased by ~~$2.2~~$35.7 million, due primarily to contribution from four properties acquired in 2021, four properties acquired in 2022, and NOI contribution from the ~~June acquisition of City Center~~four properties acquired on ~~7th.~~September 1, 2022 when their respective master leases were canceled.

Non-Segment Real Estate Operations

Operating income amounts not attributed to our segments include ~~revenues and~~ offsite costs associated with property management, casualty losses, ~~write-off of straight-line rent receivables,~~ and the results of apartment communities sold or held for sale, ~~reported in consolidated amounts,~~ which we do not allocate to our segments for purposes of evaluating segment performance.

For the three months ended September 30, ~~2021,~~2022, compared to ~~2020,~~2021, non-segment real estate operations decreased by ~~$7.2~~$11.7 million, due primarily ~~to:~~



~~$6.5 million of higher casualty losses primarily due~~ to ~~hurricane related flooding in Philadelphia;~~



~~$1.4~~$15.1 million of lower NOI attributable to sold properties, offset partially by a $1.9 million decrease in casualty losses and ~~properties leased to Aimco; and~~



~~$1.0~~a $1.5 million ~~of lower~~increase in property management ~~expenses; offset partially by~~

revenues.

~~$1.7 million of property management revenues recognized during the third quarter related to the management of Aimco communities as a result of the Separation.~~

For the nine months ended September 30, ~~2021,~~2022, compared to ~~2020,~~2021, non-segment real estate operations ~~were relatively flat.~~

~~Table~~decreased by $32.1 million, due primarily to $37.1 million of ~~Contents~~

lower NOI attributable to sold properties, offset partially by a $3.4 million increase in property management revenues and $1.6 million decrease in casualty losses.

Depreciation and Amortization

For the three and nine months ended September 30, ~~2021,~~2022, compared to ~~2020,~~2021, depreciation and amortization expense ~~was relatively flat.~~increased $9.3 million, or 11.5%, and $21.5 million, or 9.2%, respectively, due primarily to properties acquired subsequent to September 30, 2021, offset partially by the reduction in depreciation associated with properties sold.

General and Administrative Expenses

For the three months ended September 30, 2022, compared to 2021, general and administrative (“G&A”) expenses increased $1.8 million, or 30.4%, due primarily to the timing of incentive compensation accruals.

For the nine months ended September 30, ~~2021,~~2022, compared to ~~2020, general and administrative~~2021, G&A expenses ~~decreased~~increased by ~~$1.8~~$4.1 million, or ~~23.5%~~26.3%, ~~and $7.2 million, or 31.8%, respectively,~~ due primarily to ~~lower~~higher personnel costs and ~~structural changes made to reflect AIR’s more focused business model.~~timing of incentive compensation accruals.

Other Expenses, Net

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

For the three ~~and~~months ended September 30, 2022, compared to 2021, other expenses, net, increased $1.1 million, or 29.5%, due primarily to the ground lease expense at a property acquired in 2022, offset partially by the favorable settlement of litigation.

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For the nine months ended September 30, ~~2021,~~2022, compared to ~~2020,~~2021, other expenses, net decreased ~~$13.7~~by $3.3 million, or ~~78.2%~~36.1%, ~~and $13.9 million, or 60.2%, respectively,~~ due primarily to ~~costs associated with~~a gain on the ~~Separation included~~sale of a cost basis investment, offset partially by the ground lease expense at a property acquired in ~~the prior year~~2022 and ~~unrealized losses on an interest rate derivative recognized in the prior year.~~higher legal expenses.

Interest Income

For the three ~~and nine~~ months ended September 30, ~~2021,~~2022, compared to ~~2020,~~2021, interest income ~~increased~~decreased by ~~$10.9~~$3.8 million, ~~and $36.3 million, respectively. Interest income for the three and nine months ended September 30, 2021 includes $6.9 million and $20.8 million, respectively, of~~or 28.4%, due primarily to lower interest income associated with our ~~notes~~note receivable from Aimco, which was repaid during the third quarter of 2022, and ~~$6.5 million and $19.4 million, respectively, of~~lower interest income associated with properties leased to Aimco through September 1, 2022, when the leases were canceled. The decrease was offset partially by the receipt of a $4.5 million prepayment penalty associated with the final $147 million repayment of the note receivable from Aimco.

For the nine months ended September 30, 2022, compared to 2021, interest income was relatively flat.

Interest Expense

For the three months ended September 30, ~~2021,~~2022, compared to ~~2020,~~2021, interest expense ~~decreased by $7.4 million, or 16.6%, due primarily to lower interest expense on property-level debt following refinancing and debt payoff activity.~~was relatively flat.

For the nine months ended September 30, ~~2021,~~2022, compared to ~~2020,~~2021, interest expense ~~increased~~decreased by $19.4 million, or ~~15.4%~~19.4%, due primarily to lower average property debt balances, offset partially by higher rates on our term loans and revolving credit facility, and interest expense associated with our senior unsecured notes and interest rate swaps entered into in 2022.

Loss on Extinguishment of Debt

For the three and nine months ended September 30, 2022, compared to 2021, loss on extinguishment of debt decreased by $6.7 million and $21.2 million, respectively, due to ~~$44.9 million of~~ prepayment penalties ~~from~~incurred in 2021 associated with the ~~early payment~~deleveraging of ~~property debt~~AIR’s balance sheet and the write-off of deferred financing ~~costs. This was partially offset by $24.4 million of annual interest savings related to lower debt balances and interest rates.~~

~~Through September 30, 2021, we repaid $573.1 million of property debt~~costs associated with ~~a weighted-average interest rate of 4.26%.~~our previous revolving credit facility in 2021.

Gain on Dispositions of Real Estate and Derecognition of Leased Properties ~~and Dispositions of Real Estate~~

~~During~~There were no apartment communities sold during the three months ended September 30, ~~2021, we sold one apartment community with 58 apartment homes for a gain on disposition of $7.1 million and net proceeds of $39.9 million.~~2022. During the ~~three~~nine months ended September 30, ~~2020,~~2022, we recognized $587.6 million of gain on dispositions of real estate.

Apartment communities sold ~~no apartment communities.~~are summarized below (dollars in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Number of apartment communities sold		—	1			12		1
Gross proceeds	$	—	$	40.0	$	781.1	$	40.0
Net proceeds (1)	$	—	$	39.9	$	646.8	$	39.9

(1)

Net proceeds are after repayment of $114.0 million of property debt, net working capital settlements, payment of transaction costs, and debt prepayment penalties, if applicable.

During the nine months ended September 30, 2021, we recognized ~~$87.1~~$7.1 million of gain associated with the sale of one apartment community and $87.4 million of gain associated with the derecognition of the net book value of the properties leased to Aimco for redevelopment and ~~development and $7.1 million~~development. The associated leases were canceled during the third quarter of ~~gain associated with~~2022, as the sale of one apartment community. During the nine months ended September 30, 2020, we sold one apartment community with 219 apartment homes for a gain on disposition of $47.2 million and net proceeds of $36.9 million.developments were complete.

~~Mezzanine Investment Income, Net~~

In connection with the Separation, Aimco was allocated economic ownership of the mezzanine loan investment and option to acquire a 30% equity interest in the partnership. Subsequent to the Separation, all risks and rewards of ownership are Aimco’s, but legal transfer is not complete. During the three and nine months ended September 30, 2020, we recognized $6.9 million and $20.6 million, respectively, of income in connection with the mezzanine loan. For the three and nine months ended September 30, 2021, the mezzanine investment income was offset by an expense to recognize the requirement that this income be contributed to Aimco.

Income Tax (Expense) Benefit

Certain of our operations, including property management, are conducted through taxable REIT subsidiaries (“TRS entities”).

Our income tax (expense) benefit calculated in accordance with GAAP includes income taxes associated with the income or loss of our TRS entities for which the tax consequences have been realized or will be realized in future periods. Income taxes related to these

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items, as well as changes in valuation allowance, are included in income tax (expense) benefit in our condensed consolidated statements of operations.

For the three ~~months ended September 30, 2021, compared to 2020, we recognized income tax benefit of $0.3 million, compared to an income tax provision of $0.4 million during the same period in 2020.~~

~~For the nine months ended September 30, 2021, we recognized income tax expense of $0.8 million, compared to an income tax benefit of $1.7 million during the same period in 2020.~~

~~Income from Discontinued Operations, Net~~

~~For the three~~ and nine months ended September 30, ~~2020, apartment communities that were included in discontinued operations generated net~~2022, compared to 2021, income tax (expense) benefit was relatively flat.

Table of ~~$2.6 million and $9.8 million, respectively.~~Contents

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 capitalized costs and the impairment of our long-lived assets.

Our critical accounting ~~policies~~estimates are described in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2020.~~

In addition to the Critical Accounting Policies and Estimates described in the Annual Report on Form 10-K, we believe the sales-type lease arrangements entered into in 2021 require significant judgment.

We have entered into leases of existing properties with Aimco for redevelopment and development, which are generally accounted for as sales-type leases in accordance with ASC 842. The terms of such leases range from 10 to 25 years. We are required to estimate the fair value of the leased property for the purposes of lease classification and, for sales-type leases, the rate implicit in the lease. We estimate the fair value of our properties using various estimates and assumptions, the most significant being the capitalization rate. As of September 30, 2021, we have assets recorded reflecting our net investment in such leased properties totaling $466 million. Our net investment includes the present value of lease payments not yet received, the present value of the guaranteed amount of the underlying asset’s residual value at the end of the lease term, and the present value of the unguaranteed amount of the underlying asset’s residual value at the end of the lease term. The present value is determined based on the rate implicit in the lease. The residual value is based on the current estimated fair value of the leased property, adjusted for annual depreciation and cost of inflation. Over the respective lease term, we expect our net investment to be recovered as lease payments are made by Aimco.

~~Other than stated above, there~~2021. There have been no other significant changes in our critical accounting ~~policies~~estimates 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

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

NAREIT Funds From Operations and Pro forma Funds From Operations

Many of our investors focus on multiples of Funds From Operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), referred to herein as “NAREIT FFO.” These investors also focus on NAREIT FFO, as adjusted for non-cash, unusual, or non-recurring items. We refer to this metric as Pro forma Funds From Operations (“Pro forma FFO”) and use it as a secondary measure of operational performance.

NAREIT FFO is a non-GAAP 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 assets generally appreciate over time or maintain residual value to a much greater extent than do other depreciable assets such as machinery, computers, or other personal property. NAREIT defines FFO as net income ~~(loss)~~ computed in accordance with GAAP, excluding: (i) depreciation and amortization related to real estate; (ii) gains and losses from sales and impairment of depreciable assets and land used in our primary business; and (iii) income taxes directly associated with a gain or loss on the sale of real estate, and including (iv) our share of the FFO of unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine NAREIT FFO. We calculate NAREIT FFO

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attributable to AIR common stockholders (diluted) by subtracting dividends on preferred stock and preferred units and amounts allocated from NAREIT FFO to participating securities.

In addition to NAREIT FFO, we use Pro forma FFO to measure short-term performance. Pro forma FFO represents NAREIT FFO as defined above, excluding ~~the results of operations of properties retained by Aimco in the Separation and~~ certain amounts that are unique or occur infrequently.

~~In computing Pro forma FFO, we made the following adjustments to NAREIT FFO:~~



Prepayment penalties: as a result of refinancing activities in 2021, we incurred debt extinguishment costs and wrote-off capitalized deferred financing costs related to our previous credit facility and the prepayment of debt during the quarter. We excluded such costs from Pro forma FFO because we believe these costs are not representative of future cash flows.



Casualty losses: during 2021, we incurred casualty losses due to Hurricane Ida induced flooding in downtown Philadelphia causing damage to our Park Towne Place apartment community. We excluded these costs from Pro forma FFO because of the unusual nature of the weather event that caused the loss. We anticipate this loss will be covered by our third party insurance coverage.



Separation and transition related costs: during 2021, we incurred tax, legal and other transition related costs incurred as a result of the separation. We excluded these costs from Pro forma FFO because we believe they are not representative of ongoing operating performance.



Non-cash straight-line rent: in 2018, we assumed a 99-year ground lease with scheduled rent increases. Due to the terms of the lease, GAAP rent expense will exceed cash rent payments until 2076. We include the cash rent payments for this ground lease in Pro forma FFO but exclude the incremental straight-line non-cash rent expense. The rent expense for this lease is included in other expenses, net, on our consolidated statements of operations.



Incremental cash received from leased properties: during 2021, we leased properties to Aimco for redevelopment and development. Due to the terms of these leases, during 2021 cash received exceeded GAAP income. We include the cash lease income in Pro forma FFO.

NAREIT FFO and Pro forma FFO should not be considered alternatives to net income 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. Accordingly, there can be no assurance that our basis for computing these non-GAAP measures is comparable with that of other REITs.

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NAREIT FFO and Pro forma FFO are calculated as follows (in thousands, except per share data):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2021

Net income (loss) attributable to AIR common stockholders

$
9,289

$
74,455

Adjustments:

Real estate depreciation and amortization, net of noncontrolling partners’ interest

74,864

213,947

Gain on derecognition of leased properties and dispositions of real estate

(7,127
)

(94,512
)
Income tax adjustments related to gain on dispositions and other tax-related items

(122
)

150

Common noncontrolling interests in AIR OP’s share of above Adjustments

(3,269
)

(5,842
)
NAREIT FFO attributable to AIR common stockholders

$
73,635

$
188,198

Adjustments, all net of common noncontrolling interests in AIR Operating Partnership and participating securities:

Prepayment penalties

6,365

43,355

Casualty losses

4,891

4,891

Separation and transition related costs

1,324

3,666

Non-cash straight-line rent

611

1,881

Incremental cash received from leased properties

179

473

Other

190

190

Pro forma FFO

$
87,195

$
242,654

Weighted-average common shares outstanding – basic

156,646

153,289

Dilutive common share equivalents

396

361

Pro forma shares and dilutive share equivalents used to calculate Pro forma FFO per share

157,042

153,650

Net income (loss) attributable to AIR per common share – diluted

$
0.06

$
0.48

NAREIT FFO per share – diluted

$
0.47

$
1.22

Pro forma FFO per share – diluted

$
0.56

$
1.58


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net income attributable to AIR common stockholders	$	1,760		$	9,289		$	574,363		$	74,455
Adjustments:
Real estate depreciation and amortization, net of noncontrolling partners’ interest		85,057			74,864			240,436			213,947
Gain on dispositions of real estate and derecognition of leased properties, net of noncontrolling partners' interest		—			(7,127	)		(587,453	)		(94,512	)
Income tax adjustments related to gain on dispositions and other tax-related items		(348	)		(122	)		(1,448	)		150
Common noncontrolling interests in AIR OP’s share of above adjustments		(5,198	)		(3,269	)		21,083			(5,842	)
Amounts allocable to participating securities		(52	)		—			244			—
NAREIT FFO attributable to AIR common stockholders	$	81,219		$	73,635		$	247,225		$	188,198
Adjustments:
Loss on extinguishment of debt (1)		—			6,673			23,636			44,833
Separation, business transformation, and transition related costs (2)		1,419			1,393			3,881			3,858
Non-cash straight-line rent (3)		3,660			642			4,944			1,979
Incremental cash received from leased properties (4)		109			191			432			500
Casualty and other (5)		4,280			5,364			4,635			6,144
Common noncontrolling interests in AIR OP’s share of above adjustments		(581	)		(690	)		(2,300	)		(2,829	)
Amounts allocable to participating securities		—			(13	)		(19	)		(29	)
Pro forma FFO attributable to AIR common stockholders	$	90,106		$	87,195		$	282,434		$	242,654

Weighted-average common shares outstanding – basic		153,811			156,646			155,488			153,289
Dilutive common share equivalents (6)		246			396			269			361
Total shares and dilutive share equivalents		154,057			157,042			155,757			153,650

Net income attributable to AIR per share – diluted	$	0.01		$	0.06		$	3.68		$	0.48
NAREIT FFO per share – diluted	$	0.53		$	0.47		$	1.59		$	1.22
Pro forma FFO per share – diluted	$	0.58		$	0.56		$	1.81		$	1.58

(1)

During 2022 and 2021, we incurred debt extinguishment costs related to the prepayment of debt. We excluded these costs from Pro forma FFO because we believe they are not representative of future cash flows.

(2)

During 2022, we incurred consulting, placement, legal, and other transformation related costs as we fully implement AIR’s business model, including projects intended to increase efficiency and reduce costs in future periods. During 2021, we incurred tax, legal and other costs in connection with the Separation. We excluded these costs from Pro forma FFO because we believe they are not related to ongoing operating performance.

(3)

In 2018 and 2022, we assumed 99-year ground leases with scheduled rent increases. Due to the terms of the leases, GAAP rent expense will exceed cash rent payments until 2076 and 2079, respectively. We include the cash rent payments for this ground lease in Pro forma FFO but exclude the incremental straight-line non-cash rent expense. The rent expense for this lease is included in other expense, net, in our condensed consolidated statements of operations.

(4)

During 2021 and 2022, we had certain properties leased to a third party. Due to the terms of these leases, cash received exceeded GAAP income. We included the cash lease income in Pro forma FFO. These leases were canceled during the third quarter of 2022.

(5)

In the third quarter of 2022, we incurred casualty losses due to Hurricane Ian-related wind damage, primarily at one of our communities in South Florida, and flooding at one of our communities in Boston. In the third quarter of 2021, we incurred casualty losses due to Hurricane Ida-related flooding in downtown Philadelphia causing damage to our Park Towne Place apartment community, and continued to incur incremental costs related to its cleanup in 2022, net of third party reimbursements received. We excluded these costs and reimbursements from Pro forma FFO because of the unusual nature of the weather events.

(6)

Certain common share equivalents that are included in our calculation of net income attributable to AIR per share, diluted are excluded from our calculation of NAREIT FFO per share and Pro forma FFO per share as they are anti-dilutive.

During the nine months ended September 30, 2022, we sold our 2% cost basis investment in the portfolio serving as collateral for the note receivable from Aimco. We recognized $7.2 million of gain on dispositions of unconsolidated real estate partnerships in connection with the sale, or $5.4 million, net of tax. Consistent with prior treatment of gains on cost basis investments, this gain has been included in the determination of FFO given we consider the investment to be incidental to our main business as a REIT. Specifically, we only held the 2% interest in order to provide additional collateral for our short-term loan to Aimco and for tax planning

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associated with the Separation. Please see the Results of Operations section for discussion of the factors affecting our Pro forma FFO for ~~2021.~~

The AIR Operating Partnership does not separately compute or report NAREIT FFO or Pro forma FFO. However, based on AIR’s method for allocation of such amounts to noncontrolling interests in the AIR Operating Partnership, as well as limited differences between the amounts of net income attributable to AIR’s common stockholders and the AIR Operating Partnership’s unitholders during the periods presented, NAREIT FFO and Pro forma FFO amounts on a per unit basis for the AIR Operating Partnership would be expected to be substantially the same as the corresponding per share amounts for AIR.2022.

Leverage Ratios

~~As discussed under the Balance Sheet heading, we~~We target Net Leverage to Adjusted EBITDAre ~~below~~between 5.0x and 6.0x. We also focus on Proportionate Debt to Adjusted EBITDAre. We believe these ratios, which are based in part on non-GAAP financial information, 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.

Our leverage ratios for the three months ended September 30, 2022, are presented below:


	Annualized Current Quarter	Pro forma Completion of November 2022 Sales Annualized Current Quarter (1)
Proportionate Debt to Adjusted EBITDAre	6.4x	5.8x
Net Leverage to Adjusted EBITDAre	6.6x	5.9x

(1)

Pro forma for the planned use of net proceeds from the November sales of approximately $460 million.

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, outstanding borrowings under our revolving credit facility, term loans, and ~~our term loans.~~unsecured notes. Proportionate Debt excludes unamortized debt issuance costs because these amounts represent cash expended in earlier periods and do not reduce our contractual obligations. We reduce our recorded debt by the amounts of cash and restricted cash on-hand (which are primarily restricted under the terms of our property debt agreements), excluding tenant security deposits included in restricted cash, assuming the remaining amounts of cash and restricted cash would be used to reduce our outstanding leverage. ~~We further reduce our recorded debt by our notes receivable from Aimco, the proceeds from which we expect will be used to pay down property debt.~~

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 represents the redemption amounts for AIR’s Preferred Stock and the AIR Operating Partnership’s Preferred Partnership Units and, although perpetual in nature, are another component of our overall leverage.

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The reconciliation of total indebtedness to Proportionate Debt and Preferred Equity, as used in our leverage ratios, is as follows (in thousands):


	September 30, 2021			September 30, 2022
Total indebtedness	$	4,235,980		$	3,692,168
Adjustments:
Debt issuance costs related to non-recourse property debt and term loans		20,211			15,490
Proportionate share adjustments related to debt obligations		(476,772	)		(391,804	)
Cash and restricted cash		(97,127	)		(114,646	)
Tenant security deposits included in restricted cash		9,754			10,245
Proportionate share adjustments related to cash and restricted cash		7,338			4,844
Notes receivable from Aimco		(534,127	)
Proportionate Debt	$	3,165,257		$	3,216,297
Perpetual preferred stock		2,000			2,000
Preferred noncontrolling interests in AIR Operating Partnership		79,377			79,330
Net Leverage	$	3,246,634		$	3,297,627
Leverage reduction funded by anticipated November 2022 property sales					(460,000	)
Net Leverage, Pro forma for anticipated November 2022 sales				$	2,837,627

We calculated Adjusted EBITDAre used in our leverage ratios based on annualized current quarter amounts. EBITDAre and Adjusted EBITDAre are non-GAAP measures, which we believe are useful to investors, creditors, and rating agencies as a supplemental measure of our ability to incur and service debt because they are recognized measures of performance by the real estate industry and facilitate comparison of credit strength between AIR and other companies. EBITDAre and Adjusted EBITDAre should not be considered alternatives to net income as determined in accordance with GAAP as indicators of liquidity. There can be no assurance that our method of calculating EBITDAre and Adjusted EBITDAre is comparable with that of other real estate investment trusts. NAREIT defines EBITDAre as net income computed in accordance with GAAP, before interest expense, income taxes, and depreciation and amortization expense, which we have further adjusted for:

•

gains and losses on the derecognition of leased properties and dispositions of depreciated property;

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•

impairment write-downs of depreciated property; and

•

adjustments to reflect our share of EBITDAre of investments in unconsolidated entities.

EBITDAre is defined by NAREIT and provides for an additional performance measure independent of capital structure for greater comparability between real estate investment trusts. We define Adjusted EBITDAre as EBITDAre adjusted for the effect of the following ~~items:~~items for the reasons set forth below:

•

net income attributable to noncontrolling interests in consolidated real estate partnerships and EBITDAre adjustments attributable to noncontrolling interests isare excluded to allow investors to compare a measure of our earnings before the effects of our capital structure and indebtedness with that of other companies in the real estate industry;

•

the income recognized related to our ~~notes~~note receivable from Aimco, which was repaid during the third quarter of 2022, is excluded, as ~~their~~ proceeds ~~are expected to be~~were used to repay current amounts outstanding;

•

the amount by which GAAP rent expense exceeds cash rents for atwo long-term ground ~~lease~~leases for which expense exceeds cash payments until 2076 and 2079, respectively, is excluded. The excess of GAAP rent expense over the cash payments for this lease does not reflect a current obligation that affects our ability to service debt; and

•

the amount by which cash received exceeds GAAP lease income for the leased properties, ~~leased to Aimco for redevelopment and development~~four of which were canceled on September 1, 2022, is included.

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The reconciliation of net income to EBITDAre and Adjusted EBITDAre, as used in our leverage ratios, is as follows (in thousands):


	Three Months Ended			Three Months Ended
	September 30, 2021			September 30, 2022
Net income	$	10,671		$	3,396
Adjustments:
Interest expense		37,203			32,656
Income tax benefit		(275	)
Income tax expense					46
Depreciation and amortization		81,121			90,445
Gain on derecognition of leased properties and dispositions of real estate		(7,127	)
EBITDAre	$	121,593		$	126,543
Net loss from continuing operations attributable to noncontrolling interests in consolidated real estate partnerships		785
EBITDAre adjustments attributable to noncontrolling interests		(9,257	)
Interest income on notes receivable from Aimco		(6,944	)
Net income attributable to noncontrolling interests in consolidated real estate partnerships					102
EBITDAre adjustments attributable to noncontrolling interests and unconsolidated real estate partnerships					(7,463	)
Interest income and prepayment penalties on note receivable from Aimco					(5,209	)
Pro forma FFO adjustments, net (1)		8,246			11,293
Adjusted EBITDAre	$	114,423		$	125,266
Annualized Adjusted EBITDAre	$	457,692		$	501,064
Anticipated November 2022 property sales, annualized					(21,775	)
Annualized Adjusted EBITDAre, Pro forma for anticipated November 2022 property sales				$	479,289

(1)

Pro forma FFO adjustments, net, includes pro forma adjustments to NAREIT FFO under the heading NAREIT Funds From Operations and Pro forma Funds From Operations, excluding items that are not included in EBITDAre such as prepayment penalties, net, and amounts attributable to noncontrolling interest ~~share, a~~share. EBITDAre has also been adjusted by (i) $1.0 million ~~adjustment to normalize heightened short-term incentive compensation, and a $0.3 million adjustment~~ to reflect the ~~disposition~~cancellation of the four leased properties, and (ii) $0.4 million to reflect the acquisition of one ~~apartment community during the period~~property, as if both of the ~~transaction~~transactions closed on July 1, ~~2021.~~2022.

Liquidity and Capital Resources

Liquidity

Liquidity is the ability to meet present and future financial obligations. Our primary source of liquidity is cash flows from operations. Additional sources are proceeds from dispositions of apartment communities, proceeds from refinancing existing property debt, borrowings under new property debt, borrowings under our ~~$1.4 billion~~ credit ~~facility, proceeds from our notes receivable from Aimco,~~facilities, and proceeds from equity offerings.

As of September 30, ~~2021,~~2022, our available liquidity was ~~$605.2~~$609.5 million, which consisted of:

•

$~~73.7~~83.1 million in cash and cash equivalents;

•

$~~13.7~~16.5 million of restricted cash, excluding amounts related to tenant security deposits, which consists primarily of escrows held by lenders for capital additions, property taxes, and insurance; and

•

$~~517.8~~509.9 million of available capacity to borrow under our revolving credit facility after consideration of letters of credit.

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Additional liquidity may also be provided through ~~property debt financing at properties unencumbered by debt~~future secured and proceeds from our notes receivable from Aimco. As of September 30, 2021, we held unencumbered communities with property debt with an estimated fair market value of approximately $4.2 billion, an increase of 50% from December 31, 2020.unsecured financings.

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 meet our short-term liquidity needs, we have additional means, such as short-term borrowing availability and proceeds from apartment community sales and debt 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, including apartment community acquisitions, primarily through ~~primarily non-recourse, long-term~~secured and unsecured borrowings, the issuance of equity securities (including OP Units), the sale of apartment communities, and cash generated from operations. Additionally, we expect to meet our liquidity requirements associated with our debt maturities.

There have been no material changes to our contractual obligations and commitments outside the ordinary course of business from those disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, 2021, with the exception of the issuance of $400 million of senior unsecured notes, which were used to repay borrowings on our revolving credit facility, and the hedging of $830 million of our floating rate debt through placement of floating to fixed rate swaps, which were designated as cash flow hedges.

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 financing is~~

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~~readily available.~~ 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 debt. Additionally, during the second quarter of 2022, we entered into floating to fixed interest rate swaps for $830 million notional principal value of debt, further reducing our exposure to increasing interest rates. However, if financing options become unavailable for our future debt needs, we may consider alternative sources of liquidity, such as reductions in capital spending, or proceeds from apartment community dispositions.

Historically, our primary source of leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt. As of September 30, 2021, approximately 66.1% of our total leverage consisted of property-level, non-recourse, long-dated, amortizing debt. As of September 30, 2021, approximately 99.4% of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates, and inflation. The weighted-average remaining term to maturity of our property-level debt was 8.7 years. On average, 1.8% of our unpaid principal balances will mature each year from 2021 through 2023.

~~The following table summarizes the payments due under our debt commitments, excluding debt issuance costs, as of September 30, 2021 (in thousands):~~

Total

Remaining 2021

1-3 Years
(2022-2023)

3-5 Years
(2024-2025)

More than Five
Years (2026 and
Thereafter)

Non-recourse property debt (1)

$
3,027,991

$
12,910

$
268,165

$
463,278

$
2,283,638

Revolving credit facility borrowings (2)

78,200

—

—

78,200

—

Term loans (3)

1,150,000

—

350,000

600,000

200,000

Total

$
4,256,191

$
12,910

$
618,165

$
1,141,478

$
2,483,638

~~(1)~~

~~Includes scheduled principal amortization and maturity payments.~~

~~(2)~~

~~Includes outstanding borrowings on our revolving credit facility assuming repayment at the contractual maturity date.~~

~~(3)~~

~~Includes outstanding borrowings on our term loans assuming exercise of extension options.~~

As of September 30, 2021, our preferred equity, which includes outstanding preferred OP Units and outstanding perpetual preferred stock, represented approximately 2.1% of our total leverage. Preferred OP Units are redeemable at the holder’s option and our preferred stock is redeemable by AIR on or after December 15, 2025. For illustrative purposes, we compute the weighted-average maturity of our preferred OP Units assuming a 10-year maturity and our preferred stock assuming it is called at the expiration of the no-call period.

The combination of ~~non-recourse property-level~~secured and unsecured debt, ~~borrowings under our revolving credit facility, our term loans, our~~ preferred OP Units, and ~~our~~ redeemable noncontrolling interests in a consolidated real estate partnership comprise our total leverage. The weighted-average remaining term to maturity for our total leverage was ~~7.1~~6.4 years as of September 30, ~~2021.~~2022 with a weighted-average interest rate of 3.9%. As of September 30, 2022, the interest rate on our fixed rate loans and floating rate loans is 3.3% and 5.1%, respectively, and we face refunding and repricing risk in the next three years of only 10% of total debt.

Under our unsecured notes payable and revolving credit facility, we have agreed to maintain certain financial covenants, as well as other covenants customary for similar credit arrangements. The financial covenants we are required to maintain include a Maximum Leverage ratio of no greater than 0.60 to 1.00; a Fixed Charge Coverage Ratio of greater than 1.5x, a Maximum Secured Indebtedness to Total Assets ratio of no greater than 0.45 to 1.00 through March 31, 2023, and 0.40 to 1.00 thereafter, ~~and~~ a Maximum Unsecured Leverage ratio no greater than 0.60 to 1.00, and a Minimum Unsecured Interest Coverage Ratio no less than 1.50 to 1.00. We were in compliance with these covenants as of September 30, ~~2021~~2022 and expect to remain in compliance during the next 12 months.

We like the discipline of financing a portion of our real estate investments 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, Cash Equivalents, and Restricted Cash

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

Operating Activities

For the nine months ended September 30, ~~2021,~~2022, net cash provided by operating activities was ~~$232.7~~$351.5 million. Our operating cash flow is affected primarily by rental rates, occupancy levels, ~~and~~ operating expenses related to our portfolio of apartment ~~communities.~~communities, and changes in working capital items. Cash provided by operating activities for the nine months ended September 30, ~~2021, decreased~~2022, increased by ~~$33.1~~$118.7 million compared to the same period in ~~2020. The decrease was~~2021, due ~~primarily~~ to ~~lower~~higher contribution from our ~~apartment communities, which were negatively impacted by lower residential rental rates~~Same Store portfolio and increased ~~bad debt expense, offset partially by higher ADO and a recovery in commercial rents.~~

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contribution from properties recently acquired.

Investing Activities

For the nine months ended September 30, ~~2021,~~2022, our net cash provided by investing activities of $252.9 million consisted primarily of proceeds from dispositions of real estate and proceeds from the repayment of the note receivable from Aimco, offset partially by purchases of real estate and capital expenditures. Net cash used in investing activities of $250.6 million for the same period in 2021

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consisted primarily of purchases of real estate and capital expenditures, offset partially by the ~~maturation of~~cash received from debt ~~investments.~~investment maturities.

Capital additions totaled ~~$126.3~~$145.1 million and ~~$226.2~~$110.9 million during the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, 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 portfolio broadly into ~~four~~five primary categories:

•

capital replacements, which do not increase the useful life of an asset from its original purchase condition. Capital replacements represent capital additions made to replace the portion of our investment in acquired apartment communities consumed during our period of ownership;

•

capital improvements, which represent capital additions made to replace the portion of acquired apartment communities consumed prior to our period of ownership;

•

capital enhancements, which may include kitchen and bath remodeling, energy conservation projects, and investments in more durable, longer-lived materials designed to reduce costs, and do not significantly disrupt property operations; ~~and~~

•

~~other additions,~~initial capital expenditures, which represent capital ~~additions: (i)~~additions contemplated in the underwriting ofat our recently acquired ~~communities; (ii) prior to~~communities. These amounts are considered in the ~~Separation, costs intended to enhance the value~~underwriting of the ~~apartment community through the ability to generate higher average rental rates,~~acquisition 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; (iii) construction and related capitalized costs associatedare therefore included with the ~~ground-up development of apartment communities prior to the Separation;~~purchase price when determining expected returns; and ~~(iv)~~

•

casualty, which represents capitalized costs incurred in connection with the restoration
of an apartment community after a casualty event. ~~We expect these amounts to be significantly reduced under our business model. After the Separation, certain properties are leased to Aimco for redevelopment and development.~~

We exclude the amounts of capital spending related to apartment communities sold or classified as held for sale at the end of the period from the foregoing measures. ~~We have also excluded from these measures indirect capitalized costs, which are not yet allocated to 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 flows, are presented below (in thousands):


	Nine Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2022		2021
Capital replacements	$	23,980	$	23,173	$	20,820	$	20,377
Capital improvements		6,717		7,816		10,037		5,989
Capital enhancements		82,586		19,163		75,606		71,806
Other capital expenditures		13,045		176,075
Initial capital expenditures						24,156		3,851
Casualty						12,348		2,565
Entitlement and planning						2,171		6,294
Total capital additions	$	126,328	$	226,227	$	145,138	$	110,882
Plus: additions related to apartment communities sold		2,036		20,144
Plus: additions related to apartment communities sold and held for sale						4,014		17,482
Consolidated capital additions	$	128,364	$	246,371	$	149,152	$	128,364
Plus: net change in accrued capital spending from continuing operations		2,513		10,581
Total capital expenditures from continuing operations per condensed consolidated statement of cash flows	$	130,877	$	256,952
Plus: net change in accrued capital spending						1,963		2,513
Total capital expenditures per condensed consolidated statements of cash flows					$	151,115	$	130,877

For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we capitalized ~~$1.8~~$1.1 million and ~~$8.6~~$1.8 million of interest costs, respectively, and $12.6 million and $12.3 million ~~and $24.4 million~~ of ~~other direct and~~ indirect costs, respectively.

~~Other capital expenditures decreased by $163.0~~Financing Activities

Net cash used in financing activities of $582.5 million for the nine months ended September 30, ~~2021, compared to 2020, due~~2022 consisted primarily ~~to increased spend incurred in 2020 related to the redevelopment and development~~ of ~~properties that have subsequently been leased to Aimco effective January 1, 2021.~~

~~Table~~repayments of ~~Contents~~

~~Financing Activities~~

~~For the nine months ended September 30, 2021, net cash provided by financing activities was $41.5 million. Our financing cash flow is affected primarily by principal repayments on~~ non-recourse property debt ~~proceeds from~~ and ~~repayments of our~~ term loans, ~~and the~~ payment of dividends. Cash provided by financing activities for the nine months ended September 30, 2021 decreased by $139.4 million compared to the same period in 2020. The decrease was due primarily to higher principal repayments on non-recourse debt, the repaymentdividends and distributions, and repurchases of ~~our previous term loan,~~Common Stock and ~~repayments on our credit facility,~~OP Units, offset partially by proceeds from the ~~April closing~~issuance of unsecured notes payable. Net cash provided by financing activities of $41.5 million for the ~~credit facility~~same period in 2021 consisted primarily of proceeds from term loans and the issuance of Common Stock, ~~in a private placement for $342.2 million, net~~offset partially by repayments of ~~fees.~~non-recourse property debt and term loans.

Future Capital Needs

We expect to fund any future acquisitions, debt maturities, and other capital spending principally with proceeds from apartment community sales ~~short-term~~(including the formation of joint ventures), secured and unsecured borrowings, ~~debt and~~the issuance of equity ~~financing,~~securities

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(including OP Units), and operating cash flows. We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for ~~2021~~2022 and beyond.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, ~~2021,~~2022, on a consolidated basis, we had approximately ~~$14.5~~$800.0 million of outstanding borrowings on our term loans, $88.5 million of variable-rate property-level debt outstanding, ~~in addition to $1.2 billion of term loans~~ and ~~$78.2~~$479.0 million of variable-rate borrowings under our revolving credit facility. We estimate that a change in ~~30-day LIBOR~~the floating rate of 100 basis points with constant credit risk spreads would ~~reduce~~increase or ~~increase~~decrease interest expense by ~~approximately $1.8~~$5.4 million ~~and $12.4 million, respectively,~~ on an annual ~~basis.~~basis, after consideration of our interest rate swaps.

As of September 30, ~~2021,~~2022, we had ~~approximately $97.1~~$114.6 million of cash and cash equivalents and restricted cash, a portion of which bears interest at variable rates, which may ~~offset somewhat a change~~partially mitigate the effect of an increase in variable rates on our variable-rate debt discussed above.

We estimate the fair value of debt instruments as described in Note 5 to the condensed consolidated financial statements in Item 1. The estimated fair value of total indebtedness, including our term loans, revolving credit facility, and unsecured notes payable, was $3.5 billion as of September 30, 2022, inclusive of a $242.8 million mark-to-market asset, of which the amount attributable to AIR common shareholders is $189.4 million, or $1.13 per share.

ITEM 4. CONTROLS AND PROCEDURES

AIR

Disclosure Controls and Procedures

AIR’s management, with the participation of AIR’s chief executive officer and chief financial officer, has evaluated the effectiveness of AIR’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, AIR’s chief executive officer and chief financial officer have concluded that, as of the end of such period, AIR’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There has been no change in AIR’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 ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, AIR’s internal control over financial reporting.

The AIR Operating Partnership

Disclosure Controls and Procedures

The AIR Operating Partnership’s management, with the participation of the chief executive officer and chief financial officer of AIR, who are the equivalent of the AIR Operating Partnership’s chief executive officer and chief financial officer, respectively, has evaluated the effectiveness of the AIR 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 AIR have concluded that, as of the end of such period, the AIR Operating Partnership’s disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There has been no change in the AIR 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 ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, the AIR Operating Partnership’s internal control over financial reporting.

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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 AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

AIR

Unregistered Sales of Equity Securities

From time to time, we may issue shares of Common Stock in exchange for OP Units, defined under The AIR Operating Partnership heading below. Such shares are issued based on an exchange ratio of one share for each common OP Unit. We may also issue shares of Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended September 30, ~~2021,~~2022, we ~~issued 125,651~~did not issue any shares of Common Stock in exchange for OP Units or limited partnership interests in consolidated real estate partnerships.

Repurchases of Equity Securities

The following table summarizes AIR's share repurchases during the three months ended September 30, 2022:


Fiscal period	Total Number of Shares Repurchased		Average Price Paid per Unit		Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs		Maximum Dollar Value of Shares that May Yet Be Repurchased Under Plans or Programs (in thousands) (1)
July 1 - July 31, 2022		—	$	—		—	$	375,000
August 1 - August 30, 2022		—	$	—		—	$	375,000
September 1 - September 30, 2022		1,195,690	$	39.07		1,195,690	$	328,289
Total		1,195,690	$	39.07		1,195,690

(1)

AIR's Board of Directors has authorized a share repurchase program of its outstanding capital stock for $500 million. 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 AIR Operating Partnership

Unregistered Sales of Equity Securities

The AIR Operating Partnership did not issue any unregistered OP Units during the three months ended September 30, ~~2021.~~2022.

Repurchases of Equity Securities

The AIR Operating Partnership’s Partnership Agreement generally provides that after holding common OP Units for one year, limited partners other than AIR have the right to redeem their common OP Units for cash or, at our election, shares of AIR Common Stock on a one-for-one basis (subject to customary antidilution adjustments). During the three months ended September 30, ~~2021, approximately 125,651~~2022, no common OP Units were redeemed in exchange for Common Stock.

The following table summarizes the AIR Operating Partnership’s repurchases, or redemptions in exchange for cash, of common OP ~~Units.~~Units during the three months ended September 30, 2022:

Fiscal 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, 2021 ‒ July 31, 2021

1,294

$
48.75

N/A

N/A
August 1, 2021 ‒ August 31, 2021

695

$
51.24

N/A

N/A
September 1, 2021 ‒ September 30, 2021

4,365

$
50.55

N/A

N/A
Total

6,354

$
50.26


Fiscal period	Total Number of Units Repurchased		Average Price Paid per Unit		Total Number of Units Repurchased as Part of Publicly Announced Plans or Programs	Maximum Number of Units that May Yet Be Repurchased Under Plans or Programs (1)
July 1 - July 31, 2022		23,205	$	41.00	N/A	N/A
August 1 - August 30, 2022		12,578	$	43.28	N/A	N/A
September 1 - September 30, 2022		37,911	$	44.38	N/A	N/A
Total		73,694	$	43.13

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(1)

The terms of the AIR 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 AIR Operating Partnership has no publicly announced plans or programs of repurchase. However, for AIR to repurchase shares of its Common Stock, the AIR Operating Partnership must make a concurrent repurchase of its ~~common partnership units~~OP Units held by AIR at a price per unit that is equal to the price per share AIR pays for its Common Stock.

Dividend and Distribution Payments

As a REIT, AIR is required to distribute annually to holders of its Common Stock at least 90% of its “real estate investment trust taxable income,” which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary income. Our credit ~~agreement~~agreements includes customary covenants, including a restriction on dividends and distributions and other restricted payments, but permits dividends and distributions during any four consecutive fiscal quarters in an aggregate amount of up to 95% of AIR’s FFO for such period, subject to certain non-cash adjustments, or such amount as may be necessary to maintain AIR’s REIT status.

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~~ITEM 5. OTHER INFORMATION~~

On October 29, 2021, AIR and AIR’s chief executive officer, Terry Considine, entered into an amendment to Mr. Considine’s employment agreement pursuant to which the term of his employment under the agreement was extended by an additional year, through December 31, 2022. Additionally, AIR and Mr. Considine agreed that the compensation earned and payable to Mr. Considine with respect to 2021 and 2022 would be reduced to assist AIR’s achievement of its goal that general and administrative expenses not exceed 0.15% of AIR’s gross asset value, as determined by AIR’s Board of Directors and Mr. Considine.

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ITEM 6. EXHIBITS

The following exhibits are filed with this report:


EXHIBIT NO.		DESCRIPTION

3.1		Amended and Restated Charter of Apartment Income REIT Corp. (Exhibit 3.1 to AIR’s Current Report on Form 8-K dated December 15, 2020, is incorporated herein by this reference)

3.2		Amended and Restated Bylaws of Apartment Income REIT Corp. (Exhibit 3.4 to AIR’s Current Report on Form 8-K dated December 15, 2020, is incorporated herein by this reference)

10.1		Seventh Amended and Restated Partnership Agreement of Apartment Income REIT, L.P. (Exhibit 10.1 to AIR’s ~~Current~~Quarterly Report on Form ~~8-K~~10-Q dated ~~July 7, 2021,~~May 4, 2022, is incorporated herein by this reference)

~~10.2~~		~~Amendment dated October 29, 2021, to employment agreement between Terry Considine and Apartment Income REIT, L.P. (f/k/a AIMCO Properties, L.P.)( Exhibit 10.1 to Aimco’s Current Report on Form 8-K dated December 21, 2017, 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 – Apartment Income REIT Corp.

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 – Apartment Income REIT Corp.

31.3		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – the AIR Operating Partnership

31.4		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – the AIR Operating Partnership

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 – Apartment Income REIT Corp.

32.2		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – the AIR Operating Partnership

101		The following materials from AIR’s and the AIR Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended September 30, ~~2021,~~2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) condensed consolidated balance sheets; (ii) condensed consolidated statements of operations; (iii) condensed consolidated statements of comprehensive ~~income (loss);~~income; (iv) condensed consolidated statements of equity and partners’ capital; (v) condensed consolidated statements of cash flows; and (vi) notes to condensed consolidated financial statements.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

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SIGNATURES

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


	APARTMENT INCOME REIT CORP.

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


	APARTMENT INCOME REIT, L.P.

	By:	AIR-GP, Inc., its General Partner

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

Date: November ~~2, 2021~~4, 2022

4944


Maryland (Apartment Income REIT Corp.)		84-1299717
Delaware (Apartment Income REIT, L.P.)		84-1275621
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

4582 South Ulster Street, Suite 1700
Denver, Colorado		80237
(Address of principal executive offices)		(Zip Code)


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Class A Common Stock (Apartment Income REIT Corp.)	AIRC	New York Stock Exchange


Apartment Income REIT Corp.:	☐		Apartment Income REIT, L.P.:	☐


	September 30,			December 31,			September 30,			December 31,
	2021			2020			2022			2021
ASSETS
Buildings and improvements	$	5,971,806		$	6,127,249		$	6,742,347		$	5,720,267
Land		1,329,521			1,341,615			1,296,223			1,164,814
Total real estate		7,301,327			7,468,864			8,038,570			6,885,081
Accumulated depreciation		(2,585,474	)		(2,455,505	)		(2,370,792	)		(2,284,793	)
Net real estate		4,715,853			5,013,359			5,667,778			4,600,288
Cash and cash equivalents		73,687			44,214			87,732			67,320
Restricted cash		23,440			29,266			26,914			25,441
Notes receivable from Aimco		534,127			534,127
Note receivable from Aimco								—			534,127
Leased real estate assets		466,448			0			—			466,355
Goodwill		32,286			32,286			32,286			32,286
Other assets		588,668			576,026
Other assets, net								779,205			568,051
Assets held for sale								128,538			146,492
Total assets	$	6,434,509		$	6,229,278		$	6,722,453		$	6,440,360

LIABILITIES AND EQUITY
Non-recourse property debt, net	$	3,013,913		$	3,628,236		$	2,019,417		$	2,294,739
Term loans, net		1,143,867			349,164			796,334			1,144,547
Revolving credit facility borrowings		78,200			265,600			479,000			304,000
Unsecured notes payable, net								397,417			—
Total indebtedness		4,235,980			4,243,000			3,692,168			3,743,286
Accrued liabilities and other		610,217			598,736			758,441			592,774
Liabilities related to assets held for sale								472			85,775
Total liabilities		4,846,197			4,841,736			4,451,081			4,421,835

Commitments and contingencies (Note 6)

Preferred noncontrolling interests in AIR Operating Partnership		79,377			79,449			79,330			79,370
Commitments and contingencies (Note 4)

Equity:
Perpetual preferred stock		2,000			2,000			2,000			2,129
Common Stock, $0.01 par value, 1,021,175,000 shares authorized at September 30, 2021 and December 31, 2020, and 156,983,542 and 148,861,036 shares issued/outstanding at September 30, 2021 and December 31, 2020, respectively		1,570			1,489
Common Stock, $0.01 par value, 1,021,175,000 shares authorized at September 30, 2022 and December 31, 2021, and 152,993,448 and 156,998,367 shares issued/outstanding at September 30, 2022 and December 31, 2021, respectively								1,530			1,570
Additional paid-in capital		3,773,936			3,432,121			3,583,111			3,763,105
Accumulated other comprehensive income		0			3,039			45,948			—
Distributions in excess of earnings		(2,257,562	)		(2,131,798	)		(1,589,409	)		(1,953,779	)
Total AIR equity		1,519,944			1,306,851			2,043,180			1,813,025
Noncontrolling interests in consolidated real estate partnerships		(68,098	)		(61,943	)		(76,200	)		(70,883	)
Common noncontrolling interests in AIR Operating Partnership		57,089			63,185			225,062			197,013
Total equity		1,508,935			1,308,093			2,192,042			1,939,155
Total liabilities and equity	$	6,434,509		$	6,229,278
Total liabilities, preferred noncontrolling interests in AIR Operating Partnership, and equity							$	6,722,453		$	6,440,360


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net income	$	3,396		$	10,671		$	616,439		$	80,099
Unrealized gains on derivative instruments		34,209			—			47,141			—
Losses on derivative instruments reclassified into interest expense from accumulated other comprehensive income		731			—			2,720			—
Unrealized losses on available for sale debt securities		—			—			—			(3,251	)
Other comprehensive income		38,336			10,671			666,300			76,848
Comprehensive income attributable to noncontrolling interests		(4,379	)		(1,293	)		(45,488	)		(5,147	)
Comprehensive income attributable to AIR	$	33,957		$	9,378		$	620,812		$	71,701


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Apartment Income REIT Corp.: Yes ☒ No ☐		Apartment Income REIT, L.P.: Yes ☒ No ☐


Apartment Income REIT Corp.: Yes ☐ No ☒		Apartment Income REIT, L.P.: Yes ☐ No ☒


		~~Page~~
	PART I. FINANCIAL INFORMATION	Page
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)
	Apartment Income REIT Corp.:
	Condensed Consolidated Balance Sheets	43
	Condensed Consolidated Statements of Operations	54
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~	65
	Condensed Consolidated Statements of Equity	76
	Condensed Consolidated Statements of Cash Flows	98
	Apartment Income REIT, L.P.:
	Condensed Consolidated Balance Sheets	109
	Condensed Consolidated Statements of Operations	1110
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~	1211
	Condensed Consolidated Statements of Partners’ Capital	1312
	Condensed Consolidated Statements of Cash Flows	1514
	Notes to the Condensed Consolidated Financial Statements of Apartment Income REIT Corp. and Apartment Income REIT, L.P.	15
	Note 1 — Basis of Presentation and Organization	15
	Note 2 — Summary of Significant Accounting Policies	16
	Note 3 — Significant Transactions	17
	Note 4 — Leases	18
	Note 5 — Debt	19
	Note 6 — Commitments and Contingencies	19
	Note 7 — Earnings and Dividends per Share and per Unit	20
	Note 8 — Fair Value Measurements	21
	Note 9 — Variable Interest Entities	21
	Note 10 — Business Segments	22

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2925
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4540
ITEM 4.	CONTROLS AND PROCEDURES	4540
	PART II. OTHER INFORMATION
ITEM 1A.	RISK FACTORS	4641
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4641
ITEM 6.	EXHIBITS	4843
Signatures		4944


	Preferred Stock				Common Stock							Accumulated									Noncontrolling Interests in			Common Noncontrolling Interests in						Perpetual Preferred Stock				Common Stock									Accumulated								Noncontrolling Interests in			Common Noncontrolling Interests in
	Shares Issued		Amount		Shares Issued		Amount		Additional Paid- in Capital			Other Comprehensive Income			Distributions in Excess of Earnings			Total AIR Equity			Consolidated Real Estate Partnerships			AIR Operating Partnership			Total Equity			Shares Issued		Amount		Shares Issued			Amount			Additional Paid- in Capital			Other Comprehensive Income		Distributions in Excess of Earnings			Total AIR Equity			Consolidated Real Estate Partnerships			AIR Operating Partnership			Total Equity
Balances at June 30, 2020		0	$	0		120,225	$	1,201	$	3,491,565		$	3,807		$	(1,798,561	)	$	1,698,012		$	(3,190	)	$	79,414		$	1,774,236
Balances at June 30, 2021																															20	$	2,000		156,856,952		$	1,569		$	3,773,173		$	—	$	(2,197,843	)	$	1,578,899		$	(67,531	)	$	60,388		$	1,571,756
Issuance costs																															—		—		—			—			(31	)		—		—			(31	)		—			—			(31	)
Redemption of AIR Operating Partnership units		—		—		—		—		—			—			—			—			—			(484	)		(484	)		—		—		—			—			—			—		—			—			—			(425	)		(425	)
Conversion of AIR Operating Partnership units																															—		—		125,621			1			6,282			—		—			6,283			—			(6,283	)		—
Amortization of share-based compensation cost		—		—		—		—		902			—			—			902			—			1,052			1,954			—		—		—			—			409			—		—			409			—			992			1,401
Effect of changes in ownership of consolidated entities		—		—		—		—		508,716			—			—			508,716			(61,356	)		335			447,695			—		—		—			—			(5,423	)		—		—			(5,423	)		—			5,653			230
Contribution from noncontrolling interest in consolidated real estate partnerships		—		—		—		—		—			—			—			—			4,701			—			4,701
Change in accumulated other comprehensive income (loss)		—		—		—		—		—			(228	)		—			(228	)		—			(15	)		(243	)
Contributions from noncontrolling interests in consolidated real estate partnerships																															—		—		—			—			—			—		—			—			4,128			—			4,128
Net income (loss)																															—		—		—			—			—			—		9,378			9,378			(785	)		475			9,068
Common Stock dividends																															—		—		—			—			—			—		(69,051	)		(69,051	)		—			—			(69,051	)
Preferred Stock dividends																															—		—		—			—			—			—		(43	)		(43	)		—			—			(43	)
Distributions to noncontrolling interests																															—		—		—			—			—			—		—			—			(3,910	)		(3,481	)		(7,391	)
Other, net																															—		—		969			—			(474	)		—		(3	)		(477	)		—			(230	)		(707	)
Balances at September 30, 2021																															20	$	2,000		156,983,542		$	1,570		$	3,773,936		$	—	$	(2,257,562	)	$	1,519,944		$	(68,098	)	$	57,089		$	1,508,935

Balances at June 30, 2022																															20	$	2,000		154,187,241		$	1,542		$	3,636,906		$	13,750	$	(1,521,749	)	$	2,132,449		$	(70,609	)	$	226,985		$	2,288,825
Redemption of AIR Operating Partnership units																															—		—		—			—			—			—		—			—			—			(3,178	)		(3,178	)
Repurchase of Common Stock, net																															—		—		(1,195,690	)		(12	)		(46,699	)		—		—			(46,711	)		—			—			(46,711	)
Amortization of share-based compensation cost																															—		—		—			—			878			—		—			878			—			943			1,821
Effect of changes in ownership of consolidated entities																															—		—		—			—			(2,140	)		—		—			(2,140	)		—			2,140			—
Purchase of noncontrolling interests in consolidated real estate partnerships																															—		—		—			—			(5,529	)		—		—			(5,529	)		120			—			(5,409	)
Contributions from noncontrolling interests in consolidated real estate partnerships																															—		—		—			—			—			—		—			—			529			—			529
Change in accumulated other comprehensive income																															—		—		—			—			—			32,198		—			32,198			—			2,742			34,940
Net income (loss)		—		—		—		—		—			—			(25,007	)		(25,007	)		(31	)		(1,341	)		(26,379	)		—		—		—			—			—			—		1,759			1,759			(102	)		137			1,794
Common Stock dividends		—		—		—		—		—			—			(61,034	)		(61,034	)		—			—			(61,034	)		—		—		—			—			—			—		(69,377	)		(69,377	)		—			—			(69,377	)
Distributions to noncontrolling interests		—		—		—		—		—			—			—			—			(70	)		(3,343	)		(3,413	)		—		—		—			—			—			—		—			—			(6,226	)		(4,472	)		(10,698	)
Other, net		—		—		1		—		30			—			—			30			(266	)		—			(236	)		—		—		1,897						(305	)		—		(42	)		(347	)		88			(235	)		(494	)
Balances at September 30, 2020		0	$	0		120,226	$	1,201	$	4,001,213		$	3,579		$	(1,884,602	)	$	2,121,391		$	(60,212	)	$	75,618		$	2,136,797

Balances at June 30, 2021		20	$	2,000		156,857	$	1,569	$	3,773,173		$	0		$	(2,197,843	)	$	1,578,899		$	(67,531	)	$	60,388		$	1,571,756
Issuance of Common Stock, net		—		—		—		—		(31	)		—			—			(31	)		—			—			(31	)
Redemption of AIR Operating Partnership units		—		—		126		1		6,282			—			—			6,283			—			(6,708	)		(425	)
Amortization of share-based compensation cost		—		—		—		—		409			—			—			409			—			992			1,401
Effect of changes in ownership of consolidated entities		—		—		—		—		(5,423	)		—			—			(5,423	)		—			5,653			230
Contribution from noncontrolling interest in consolidated real estate partnerships		—		—		—		—		—			—			—			—			4,128			—			4,128
Net income (loss)		—		—		—		—		—			—			9,378			9,378			(785	)		475			9,068
Common Stock dividends		—		—		—		—		—			—			(69,051	)		(69,051	)		—			—			(69,051	)
Preferred stock dividends		—		—		—		—		—			—			(43	)		(43	)		—			—			(43	)
Distributions to noncontrolling interests		—		—		—		—		—			—			—			—			(3,910	)		(3,481	)		(7,391	)
Other, net		—		—		1		—		(474	)		—			(3	)		(477	)		—			(230	)		(707	)
Balances at September 30, 2021		20	$	2,000		156,984	$	1,570	$	3,773,936		$	0		$	(2,257,562	)	$	1,519,944		$	(68,098	)	$	57,089		$	1,508,935
Balances at September 30, 2022																															20	$	2,000		152,993,448		$	1,530		$	3,583,111		$	45,948	$	(1,589,409	)	$	2,043,180		$	(76,200	)	$	225,062		$	2,192,042


	Preferred Units		General Partner and Special Limited Partner			Limited Partners			Partners’ Capital Attributable to the AIR Operating Partnership			Noncontrolling Interests in Consolidated Real Estate Partnerships			Total Partners’ Capital			Preferred Units		General Partner and Special Limited Partner			Limited Partners			Partners’ Capital Attributable to the AIR Operating Partnership			Noncontrolling Interests in Consolidated Real Estate Partnerships			Total Partners’ Capital
Balances at June 30, 2020	$	—	$	1,698,012		$	79,414		$	1,777,426		$	(3,190	)	$	1,774,236
Redemption of AIR Operating Partnership units		—		—			(484	)		(484	)		—			(484	)
Balances at June 30, 2021																		$	2,000	$	1,576,899		$	60,388		$	1,639,287		$	(67,531	)	$	1,571,756
Issuance costs																			—		(31	)		—			(31	)		—			(31	)
Redemption of common partnership units																			—		—			(425	)		(425	)		—			(425	)
Conversion of common partnership units																			—		6,283			(6,283	)		—			—			—
Amortization of share-based compensation cost		—		902			1,052			1,954			—			1,954			—		409			992			1,401			—			1,401
Effect of changes in ownership of consolidated entities		—		508,709			335			509,044			(61,356	)		447,688			—		(5,423	)		5,653			230			—			230
Contribution from noncontrolling interest in consolidated real estate partnerships		—		—			—			—			4,701			4,701
Change in accumulated other comprehensive income (loss)		—		(228	)		(15	)		(243	)		—			(243	)
Net income (loss)		—		(25,007	)		(1,341	)		(26,348	)		(31	)		(26,379	)
Distributions to common unitholders		—		(61,034	)		(3,343	)		(64,377	)		—			(64,377	)
Distributions to noncontrolling interests		—		—			—			—			(70	)		(70	)
Other, net		—		37			—			37			(266	)		(229	)
Balances at September 30, 2020	$	—	$	2,121,391		$	75,618		$	2,197,009		$	(60,212	)	$	2,136,797

Balances at June 30, 2021	$	2,000	$	1,576,899		$	60,388		$	1,639,287		$	(67,531	)	$	1,571,756
Issuance of common partnership units to AIR, net		—		(31	)		—			(31	)		—			(31	)
Redemption of AIR Operating Partnership units		—		6,283			(6,708	)		(425	)		—			(425	)
Amortization of share-based compensation cost		—		409			992			1,401			—			1,401
Effect of changes in ownership of consolidated entities		—		(5,423	)		5,653			230			—			230
Contribution from noncontrolling interest in consolidated real estate partnerships		—		—			—			—			4,128			4,128
Contributions from noncontrolling interests in consolidated real estate partnerships																			—		—			—			—			4,128			4,128
Net income (loss)		—		9,378			475			9,853			(785	)		9,068			—		9,378			475			9,853			(785	)		9,068
Distributions to common unitholders		—		(69,051	)		(3,481	)		(72,532	)		—			(72,532	)		—		(69,051	)		(3,481	)		(72,532	)		—			(72,532	)
Distributions to preferred unitholders				(43	)		—			(43	)		—			(43	)		—		(43	)		—			(43	)		—			(43	)
Distributions to noncontrolling interests		—		—			—			—			(3,910	)		(3,910	)		—		—			—			—			(3,910	)		(3,910	)
Other, net		—		(477	)		(230	)		(707	)		—			(707	)		—		(477	)		(230	)		(707	)		—			(707	)
Balances at September 30, 2021	$	2,000	$	1,517,944		$	57,089		$	1,577,033		$	(68,098	)	$	1,508,935		$	2,000	$	1,517,944		$	57,089		$	1,577,033		$	(68,098	)	$	1,508,935

Balances at June 30, 2022																		$	2,000	$	2,130,449		$	226,985		$	2,359,434		$	(70,609	)	$	2,288,825
Redemption of common partnership units																			—		—			(3,178	)		(3,178	)		—			(3,178	)
Repurchase of common partnership units																			—		(46,711	)		—			(46,711	)		—			(46,711	)
Amortization of share-based compensation cost																			—		878			943			1,821			—			1,821
Effect of changes in ownership of consolidated entities																			—		(2,140	)		2,140			—			—			—
Purchase of noncontrolling interests in consolidated real estate partnerships																			—		(5,529	)		—			(5,529	)		120			(5,409	)
Contributions from noncontrolling interests in consolidated real estate partnerships																			—		—			—			—			529			529
Change in accumulated other comprehensive income (loss)																			—		32,198			2,742			34,940			—			34,940
Net income (loss)																			—		1,759			137			1,896			(102	)		1,794
Distributions to common unitholders																			—		(69,377	)		(4,472	)		(73,849	)		—			(73,849	)
Distributions to noncontrolling interests																			—		—			—			—			(6,226	)		(6,226	)
Other, net																			—		(347	)		(235	)		(582	)		88			(494	)
Balances at September 30, 2022																		$	2,000	$	2,041,180		$	225,062		$	2,268,242		$	(76,200	)	$	2,192,042


Balance at December 31, 2020	$	79,449
Preferred distributions		(4,810	)
Redemption of preferred units		(72	)
Net income		4,810
Balance at September 30, 2021	$	79,377


Number of apartment homes		700
Purchase price	$	222,650
Capitalized transaction costs (1)		2,876
Total consideration	$	225,526
Consideration allocated to land	$	35,184
Consideration allocated to building and improvements		186,823
Consideration allocated to intangible assets (2)		3,644
Consideration allocated to below-market lease liabilities (3)		(125	)
Total consideration	$	225,526


	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Income (Numerator)		Shares (Denominator)		Per Share Amount		Income (Numerator)		Shares (Denominator)		Per Share Amount
Basic earnings (loss) per share:
Net income (loss) attributable to AIR common stockholders	$	9,289		156,646	$	0.06	$	74,455		153,289	$	0.49
Diluted earnings (loss) per share:
Effect of dilutive securities		0		396		0		0		361		(0.01	)
Net income (loss) attributable to AIR common stockholders	$	9,289		157,042	$	0.06	$	74,455		153,650	$	0.48

Non-dilutive share equivalents outstanding				7,958						8,093


	Three Months Ended September 30, 2020								Nine Months Ended September 30, 2020
	Income (Numerator)			Shares (Denominator)		Per Share Amount			Income (Numerator)		Shares (Denominator)		Per Share Amount
Basic earnings (loss) per share:
Income from continuing operations attributable to AIR	$	(27,746	)		119,967	$	(0.23	)	$	10,735		119,957	$	0.09
Income from discontinued operations attributable to AIR		2,700			119,967		0.02			10,110		119,957		0.08
Net income attributable to AIR common stockholders	$	(25,046	)		119,967	$	(0.21	)	$	20,845		119,957	$	0.17
Diluted earnings (loss) per share:
Effect of dilutive securities		0			0		0			0		78		0
Net income (loss) attributable to AIR common stockholders	$	(25,046	)		119,967	$	(0.21	)	$	20,845		120,035	$	0.17

Non-dilutive share equivalents outstanding					9,007							8,337


	As of September 30, 2021								As of December 31, 2020
	Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3
AFS debt securities	$	0	$	0	$	0	$	0	$	100,151	$	0	$	100,151	$	0
Interest rate option	$	25,617	$	0	$	25,617	$	0	$	13,177	$	0	$	13,177	$	0


	Three Months Ended			Nine Months Ended
	September 30, 2020			September 30, 2020
REVENUES
Rental and other property revenues	$	37,331		$	113,005

OPERATING EXPENSES
Property operating expenses		12,770			39,506
Depreciation and amortization		18,985			56,755
Other expenses, net		78			403
Total operating expenses		31,833			96,664

Interest income		548			1,622
Interest expense		(5,911	)		(15,004	)
Income from unconsolidated real estate partnerships		277			629
Income before income tax benefit		412			3,588
Income tax benefit		2,166			6,181
Income from discontinued operations, net of tax		2,578			9,769
Net loss attributable to noncontrolling interests in consolidated real estate partnerships		122			341
Net income from discontinued operations attributable to Spinnee	$	2,700		$	10,110


2021 (remaining)	$	6,270
2022		25,262
2023		25,262
2024		25,262
2025		25,373
Thereafter		730,233
Total lease receivable (1) (2)	$	837,662
Add: Unguaranteed residual value		131,580
Less: Discount		(502,794	)
Total leased real estate assets	$	466,448


	Sources & Uses			Estimated Yield	FFO Impact
Estimated gross proceeds	$	1,715,000		4.36%	$	(74,774	)
Transaction costs (~2% of gross proceeds) and transfer taxes (~0.5%) of gross proceeds		(43,500	)			—
Prepayment penalties on debt repaid to facilitate sales		(31,500	)			—
Prepayment penalties on other debt prepaid (1)		(148,408	)			—
Net Proceeds		1,491,592				(74,774	)

Acquisition equity funded through paired trades (2)		434,500		5.20%		22,594
Property debt repaid		1,057,091		3.72%		39,324
Property debt refinancing (3)		—				3,648
Uses of Net Proceeds		1,491,591				65,566

Net FFO impact before investment of incremental proceeds						(9,208	)
Investment of incremental proceeds (4)						7,220
Net FFO impact after investment of incremental proceeds						(1,988	)

Net FFO impact per share before investment of incremental proceeds					$	(0.05	)
Net FFO impact per share after investment of incremental proceeds					$	(0.01	)


	Three Months Ended September 30,					Historical Change						Ownership-Effected Change (1)
(in thousands)	2021		2020			$			%			$			%
Rental and other property revenues, before utility reimbursements:
Same Store	$	162,535	$	163,003		$	(468	)		(0.3	%)	$	9,178			6.0	%
Other Real Estate		5,456		1,106			4,350			393.3	%		4,350			393.3	%
Total		167,991		164,109			3,882			2.4	%		13,528			8.8	%
Property operating expenses, net of utility reimbursements:
Same Store		44,901		47,732			(2,831	)		(5.9	%)		(184	)		(0.4	%)
Other Real Estate		2,920		1,242			1,678			135.1	%		1,678			135.1	%
Total		47,821		48,974			(1,153	)		(2.4	%)		1,494			3.2	%
Proportionate property net operating income:
Same Store		117,634		115,271			2,363			2.0	%		9,362			8.6	%
Other Real Estate		2,536		(136	)		2,672			(1,964.7	%)		2,672			(1,964.7	%)
Total	$	120,170	$	115,135		$	5,035			4.4	%	$	12,034			11.1	%


	Three Months Ended September 30,			Nine Months Ended September 30,
	2021			2021
Net income (loss) attributable to AIR common stockholders	$	9,289		$	74,455
Adjustments:
Real estate depreciation and amortization, net of noncontrolling partners’ interest		74,864			213,947
Gain on derecognition of leased properties and dispositions of real estate		(7,127	)		(94,512	)
Income tax adjustments related to gain on dispositions and other tax-related items		(122	)		150
Common noncontrolling interests in AIR OP’s share of above Adjustments		(3,269	)		(5,842	)
NAREIT FFO attributable to AIR common stockholders	$	73,635		$	188,198
Adjustments, all net of common noncontrolling interests in AIR Operating Partnership and participating securities:
Prepayment penalties		6,365			43,355
Casualty losses		4,891			4,891
Separation and transition related costs		1,324			3,666
Non-cash straight-line rent		611			1,881
Incremental cash received from leased properties		179			473
Other		190			190
Pro forma FFO	$	87,195		$	242,654

Weighted-average common shares outstanding – basic		156,646			153,289
Dilutive common share equivalents		396			361
Pro forma shares and dilutive share equivalents used to calculate Pro forma FFO per share		157,042			153,650

Net income (loss) attributable to AIR per common share – diluted	$	0.06		$	0.48
NAREIT FFO per share – diluted	$	0.47		$	1.22
Pro forma FFO per share – diluted	$	0.56		$	1.58


	Total		Remaining 2021		1-3 Years (2022-2023)		3-5 Years (2024-2025)		More than Five Years (2026 and Thereafter)
Non-recourse property debt (1)	$	3,027,991	$	12,910	$	268,165	$	463,278	$	2,283,638
Revolving credit facility borrowings (2)		78,200		—		—		78,200		—
Term loans (3)		1,150,000		—		350,000		600,000		200,000
Total	$	4,256,191	$	12,910	$	618,165	$	1,141,478	$	2,483,638


Fiscal 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, 2021 ‒ July 31, 2021		1,294	$	48.75	N/A	N/A
August 1, 2021 ‒ August 31, 2021		695	$	51.24	N/A	N/A
September 1, 2021 ‒ September 30, 2021		4,365	$	50.55	N/A	N/A
Total		6,354	$	50.26