UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended June 30, ~~2022~~2023


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

For the transition period fromto

Commission File Number: 1-39686 (Apartment Income REIT Corp.)

Commission File Number: 0-24497 (Apartment Income REIT, L.P.)

APARTMENT INCOME REIT CORP.

APARTMENT INCOME REIT, L.P.

(Exact name of registrant as specified in its charter)


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)	(I.R.S. Employer Identification No.)

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

(~~303~~)

(303) 757-8101

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


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

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).


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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

Large accelerated filer

☒x

Accelerated filer

☐o

Large accelerated filer

☒x

Accelerated filer

☐o

Non-accelerated filer

☐o

Smaller reporting company

☐o

Non-accelerated filer

☐o

Smaller reporting company

☐o

Emerging growth company

☐o

Emerging growth company

☐o

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

Apartment Income REIT Corp.:

☐o

Apartment Income REIT, L.P.:

☐o

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


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

The number of shares of Apartment Income REIT Corp. Class A Common Stock outstanding as of July ~~27, 2022:~~ 25, 2023: 149,223,527

~~154,187,241~~

Table of Contents

EXPLANATORY NOTE

This filing combines the quarterly reports on Form 10-Q for the quarterly period ended June 30, ~~2022,~~2023, of Apartment Income REIT Corp. (“AIR”), Apartment Income REIT, L.P. (“AIR Operating 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,” “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.~~trust (“REIT”). AIR Operating Partnership owns all of the assets and owes all of the liabilities of the AIR enterprise and manages the daily operations of AIR’s business. AIR owns, through its wholly-owned subsidiaries, is the general partner interest and special limited partner ofinterest in the AIR Operating Partnership.

As of June 30, ~~2022,~~2023, AIR owned approximately ~~92.2%~~91.3% of the legal interest and 93.1% of the economic interest in the common partnership units of the AIR Operating Partnership, ~~(“OP Units”) and 93.8% of the economic interest in the AIR Operating Partnership.~~respectively. The remaining~~7.8%~~ 8.7% legal interest is owned by ~~third-party limited partners.~~third parties. A portion of the 8.7% owned by third parties is subject to vesting. If the vesting requirements are not met, the 8.7% ownership will be reduced to no less than 6.9%. The legal ownership percentage is based on the outstanding ~~common stock~~Class A Common Stock of AIR (“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~~

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

•

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

•

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

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~~with terms substantially similar ~~type and in an amount equal~~ to the ~~shares of~~ stock sold in the ~~offering),~~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 separate condensed consolidated financial statements for AIR and the AIR Operating Partnership; a single set of condensed

Table of Contents

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.

Table of Contents

APARTMENT INCOME REIT CORP.

APARTMENT INCOME REIT, L.P.

TABLE OF CONTENTS

FORM 10-Q


				~~Page~~
	PART I. FINANCIAL INFORMATION	Page
ITEM 1.			FINANCIAL STATEMENTS (Unaudited)
			Apartment Income REIT Corp.:
			Condensed Consolidated Balance Sheets	34
			Condensed Consolidated Statements of Operations	45
			Condensed Consolidated Statements of Comprehensive Income (Loss)	56
			Condensed Consolidated Statements of Equity	67
			Condensed Consolidated Statements of Cash Flows	89
			Apartment Income REIT, L.P.:
			Condensed Consolidated Balance Sheets	910
			Condensed Consolidated Statements of Operations	1011
			Condensed Consolidated Statements of Comprehensive Income (Loss) ~~(Loss)~~	1112
			Condensed Consolidated Statements of Partners’ Capital	1213
			Condensed Consolidated Statements of Cash Flows	1415
			Notes to the Condensed Consolidated Financial Statements of Apartment Income REIT Corp. and Apartment Income REIT, L.P.:	1516
			Note 1 — Basis of Presentation and Organization	16
			Note 2 — Summary of Significant Accounting Policies	17
			Note 3 — Significant Transactions	18
			Note 4 — Leases	19
			Note 5 — Debt	20
			Note 6 — Commitments and Contingencies	20
			Note 7 — Earnings and Dividends per Share and per Unit	21
			Note 8 — Fair Value Measurements	22
			Note 9 — Derivative Financial Instruments and Hedging Activities	23
			Note 10 — Variable Interest Entities	24
			Note 11 — Business Segments	25

ITEM 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2428
ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3742
ITEM 4.			CONTROLS AND PROCEDURES	3742
			PART II. OTHER INFORMATION
ITEM 1A.			RISK FACTORS	3944
ITEM 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3944
ITEM 6.			EXHIBITS	4146
Signatures				4347

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

June 30,

December 31,

2022

2021

ASSETS

Buildings and improvements

$
6,179,325

$
5,720,267

Land

1,200,540

1,164,814

Total real estate

7,379,865

6,885,081

Accumulated depreciation

(2,400,722
)

(2,284,793
)
Net real estate

4,979,143

4,600,288

Cash and cash equivalents

74,949

67,320

Restricted cash

25,942

25,441

Note receivable from Aimco

147,039

534,127

Leased real estate assets

466,013

466,355

Goodwill

32,286

32,286

Other assets, net

707,913

568,051

Assets held for sale

0

146,492

Total assets

$
6,433,285

$
6,440,360

LIABILITIES AND EQUITY

Non-recourse property debt, net

$
2,026,513

$
2,294,739

Term loans, net

795,905

1,144,547

Revolving credit facility borrowings

148,000

304,000

Unsecured notes payable, net

398,039

0

Total indebtedness

3,368,457

3,743,286

Accrued liabilities and other

696,673

592,774

Liabilities related to assets held for sale

0

85,775

Total liabilities

4,065,130

4,421,835

Commitments and contingencies (Note 6)

Preferred noncontrolling interests in AIR Operating Partnership

79,330

79,370

Equity:

Perpetual preferred stock

2,000

2,129

Common Stock, $0.01 par value, 1,021,175,000 shares authorized at June 30, 2022 and December 31, 2021, and 154,187,241 and 156,998,367 shares issued/outstanding at June 30, 2022 and December 31, 2021, respectively

1,542

1,570

Additional paid-in capital

3,636,906

3,763,105

Accumulated other comprehensive income

13,750

0

Distributions in excess of earnings

(1,521,749
)

(1,953,779
)
Total AIR equity

2,132,449

1,813,025

Noncontrolling interests in consolidated real estate partnerships

(70,609
)

(70,883
)
Common noncontrolling interests in AIR Operating Partnership

226,985

197,013

Total equity

2,288,825

1,939,155

Total liabilities, preferred noncontrolling interests in AIR Operating Partnership, and equity

$
6,433,285

$
6,440,360


	June 30, 2023		December 31, 2022
ASSETS
Buildings and improvements	$	6,888,234	$	6,784,965
Land	1,345,086		1,291,429
Total real estate	8,233,320		8,076,394
Accumulated depreciation	(2,562,252)		(2,449,883)
Net real estate	5,671,068		5,626,511
Cash and cash equivalents	106,349		95,797
Restricted cash	23,564		205,608
Goodwill	32,286		32,286
Other assets, net	573,743		591,681
Total assets	$	6,407,010	$	6,551,883

LIABILITIES AND EQUITY
Non-recourse property debt, net	$	2,197,437	$	1,985,430
Term loans, net	797,471		796,713
Revolving credit facility borrowings	292,000		462,000
Unsecured notes payable, net	397,669		397,486
Total indebtedness	3,684,577		3,641,629
Accrued liabilities and other	476,400		513,805
Total liabilities	4,160,977		4,155,434

Commitments and contingencies (Note 6)

Preferred noncontrolling interests in AIR Operating Partnership	77,143		77,143

Equity:
Perpetual Preferred Stock	2,000		2,000
Common Stock, $0.01 par value, 1,021,175,000 shares authorized at June 30, 2023 and December 31, 2022, and 149,223,526 and 149,086,548 shares issued/outstanding at June 30, 2023 and December 31, 2022, respectively	1,492		1,491
Additional paid-in capital	3,430,731		3,436,635
Accumulated other comprehensive income	39,343		43,562
Distributions in excess of earnings	(1,474,101)		(1,327,271)
Total AIR equity	1,999,465		2,156,417
Noncontrolling interests in consolidated real estate partnerships	(80,087)		(78,785)
Common noncontrolling interests in AIR Operating Partnership	249,512		241,674
Total equity	2,168,890		2,319,306
Total liabilities, preferred noncontrolling interests in AIR Operating Partnership, and equity	$	6,407,010	$	6,551,883

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

REVENUES

Rental and other property revenues

$
181,012

$
176,721

$
360,273

$
351,451

Other revenues

2,488

1,612

4,705

3,295

Total revenues

183,500

178,333

364,978

354,746

EXPENSES

Property operating expenses

63,787

64,758

127,023

129,375

Depreciation and amortization

78,656

75,791

163,205

151,071

General and administrative expenses

5,333

5,221

11,930

9,635

Other (income) expenses, net

(3,076
)

2,515

942

5,391

144,700

148,285

303,100

295,472

Interest income

25,652

15,684

39,133

31,656

Interest expense

(26,027
)

(33,657
)

(48,134
)

(69,682
)
Loss on extinguishment of debt

—

(37,150
)

(23,636
)

(38,160
)
Gain on dispositions of real estate and derecognition of leased properties

175,606

3,353

587,609

87,385

Loss from unconsolidated real estate partnerships

(873
)

—

(2,887
)

—

Income (loss) before income tax (expense) benefit

213,158

(21,722
)

613,963

70,473

Income tax (expense) benefit

(1,499
)

2,035

(920
)

(1,045
)
Net income (loss)

211,659

(19,687
)

613,043

69,428

Noncontrolling interests:

Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships

(381
)

2,397

183

2,632

Net income attributable to preferred noncontrolling interests in AIR Operating Partnership

(1,602
)

(1,603
)

(3,205
)

(3,207
)
Net (income) loss attributable to common noncontrolling interests in AIR Operating Partnership

(12,749
)

945

(36,916
)

(3,491
)
Net (income) loss attributable to noncontrolling interests

(14,732
)

1,739

(39,938
)

(4,066
)
Net income (loss) attributable to AIR

196,927

(17,948
)

573,105

65,362

Net income attributable to AIR preferred stockholders

(43
)

(43
)

(85
)

(93
)
Net income attributable to participating securities

(162
)

(39
)

(417
)

(103
)
Net income (loss) attributable to AIR common stockholders

$
196,722

$
(18,030
)

$
572,603

$
65,166

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

$
1.26

$
(0.12
)

$
3.66

$
0.43

Weighted-average common shares outstanding – basic

155,927

154,608

156,327

151,609

Weighted-average common shares outstanding – diluted

156,136

154,608

156,607

152,083


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
REVENUES
Rental and other property revenues	$	212,492	$	181,012	$	422,415	$	360,273
Other revenues	2,068		2,488		4,138		4,705
Total revenues	214,560		183,500		426,553		364,978

EXPENSES
Property operating expenses	72,012		63,787		147,465		127,023
Depreciation and amortization	89,260		78,656		184,926		163,205
General and administrative expenses	6,023		5,333		13,203		11,930

Other expenses (income), net	2,519		(3,076)		6,179		942
	169,814		144,700		351,773		303,100

Interest income	1,507		25,652		3,032		39,133
Interest expense	(37,554)		(26,027)		(73,741)		(48,134)
Loss on extinguishment of debt	—		—		(2,008)		(23,636)
(Loss) gain on dispositions and impairments of real estate	(17,472)		175,606		(17,472)		587,609
Gain on derivative instruments, net	11,390		—		9,252		—
Loss from unconsolidated real estate partnerships	(842)		(873)		(1,877)		(2,887)
Income (loss) before income tax expense	1,775		213,158		(8,034)		613,963
Income tax expense	(1,177)		(1,499)		(1,316)		(920)
Net income (loss)	598		211,659		(9,350)		613,043

Noncontrolling interests:
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships	(684)		(381)		(1,369)		183
Net income attributable to preferred noncontrolling interests in AIR Operating Partnership	(1,570)		(1,602)		(3,140)		(3,205)
Net loss (income) attributable to common noncontrolling interests in AIR Operating Partnership	315		(12,749)		1,141		(36,916)
Net income attributable to noncontrolling interests	(1,939)		(14,732)		(3,368)		(39,938)
Net (loss) income attributable to AIR	(1,341)		196,927		(12,718)		573,105
Net income attributable to AIR preferred stockholders	(42)		(43)		(85)		(85)
Net income attributable to participating securities	(56)		(162)		(93)		(417)
Net (loss) income attributable to AIR common stockholders	$	(1,439)	$	196,722	$	(12,896)	$	572,603

Net (loss) income attributable to AIR common stockholders per share – basic and diluted	$	(0.01)	$	1.26	$	(0.09)	$	3.66


Weighted-average common shares outstanding – basic	148,832		155,927		148,821		156,327
Weighted-average common shares outstanding – diluted	148,832		156,136		148,821		156,607

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Net income (loss)

$
211,659

$
(19,687
)

$
613,043

$
69,428

Unrealized gains on derivative instruments

13,715

—

12,932

—

Losses on derivative instruments reclassified into interest expense from accumulated other comprehensive income (loss)

1,989

—

1,989

—

Unrealized losses on available for sale debt securities

—

(1,180
)

—

(3,251
)
Comprehensive income (loss)

227,363

(20,867
)

627,964

66,177

Comprehensive (income) loss attributable to noncontrolling interests

(15,903
)

1,819

(41,109
)

(3,854
)
Comprehensive income (loss) attributable to AIR

$
211,460

$
(19,048
)

$
586,855

$
62,323


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net income (loss)	$	598	$	211,659	$	(9,350)	$	613,043
Unrealized gain on derivative instruments, net	16,631		13,715		5,191		12,932
Reclassification of interest rate derivative (gain) loss to net income (loss)	(5,364)		1,989		(9,518)		1,989
Comprehensive income (loss)	11,865		227,363		(13,677)		627,964
Comprehensive income attributable to noncontrolling interests	(2,933)		(15,903)		(3,260)		(41,109)
Comprehensive income (loss) attributable to AIR	$	8,932	$	211,460	$	(16,937)	$	586,855

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended June 30, ~~2022~~2023 and ~~2021~~

2022

(In thousands, except share data)

(Unaudited)

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 (Loss)

Distributions in Excess
of Earnings

Total AIR
Equity

Consolidated
Real Estate
Partnerships

AIR
Operating
Partnership

Total
Equity

Balances at March 31, 2021

20

$
2,000

148,974,839

$
1,490

$
3,430,694

$
1,100

$
(2,112,381
)

$
1,322,903

$
(64,619
)

$
63,812

$
1,322,096

Issuance of Common Stock, net

—

—

7,825,000

79

342,084

—

—

342,163

—

—

342,163

Issuance costs

—

—

—

—

(306
)

—

—

(306
)

—

—

(306
)
Redemption of AIR Operating Partnership units

—

—

—

—

—

—

—

—

—

(327
)

(327
)
Conversion of AIR Operating Partnership units

—

—

43,363

2

1,957

—

—

1,959

—

(1,959
)

-

Amortization of share-based compensation cost

—

—

—

—

629

—

—

629

—

1,260

1,889

Effect of changes in ownership of consolidated entities

—

—

—

—

(1,833
)

—

—

(1,833
)

—

1,833

—

Contributions from noncontrolling interests in consolidated real estate partnerships

—

—

—

—

—

—

—

—

1,998

—

1,998

Change in accumulated other comprehensive income (loss)

—

—

—

—

—

(1,100
)

—

(1,100
)

—

(80
)

(1,180
)
Net loss

—

—

—

—

—

—

(17,948
)

(17,948
)

(2,397
)

(945
)

(21,290
)
Common Stock dividends

—

—

—

—

—

—

(67,418
)

(67,418
)

—

—

(67,418
)
Preferred Stock dividends

—

—

—

—

—

—

(43
)

(43
)

—

—

(43
)
Distributions to noncontrolling interests

—

—

—

—

—

—

—

—

(3,432
)

(3,436
)

(6,868
)
Other, net

—

—

13,750

(2
)

(52
)

—

(53
)

(107
)

919

230

1,042

Balances at June 30, 2021

20

$
2,000

156,856,952

$
1,569

$
3,773,173

$
0

$
(2,197,843
)

$
1,578,899

$
(67,531
)

$
60,388

$
1,571,756

Balances at March 31, 2022

20

$
2,000

157,082,823

$
1,571

$
3,762,457

$
(783
)

$
(1,648,077
)

$
2,117,168

$
(70,157
)

$
216,827

$
2,263,838

Redemption of AIR Operating Partnership units

—

—

—

—

—

—

—

—

—

(793
)

(793
)
Repurchase of common stock, net

—

—

(2,911,761
)

(29
)

(124,971
)

—

—

(125,000
)

—

—

(125,000
)
Amortization of share-based compensation cost

—

—

—

—

751

—

—

751

—

950

1,701

Effect of changes in ownership of consolidated entities

—

—

—

—

(578
)

—

—

(578
)

—

578

—

Contributions from noncontrolling interests in consolidated real estate partnerships

—

—

—

—

—

—

—

—

3,483

—

3,483

Change in accumulated other comprehensive income (loss)

—

—

—

—

—

14,533

—

14,533

—

1,171

15,704

Net income

—

—

—

—

—

—

196,927

196,927

381

12,749

210,057

Common Stock dividends

—

—

—

—

—

—

(70,556
)

(70,556
)

—

—

(70,556
)
Distributions to noncontrolling interests

—

—

—

—

—

—

—

—

(4,188
)

(4,489
)

(8,677
)
Other, net

—

—

16,179

—

(753
)

—

��
(43
)

(796
)

(128
)

(8
)

(932
)
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


	Perpetual Preferred Stock			Common Stock			Additional Paid- in Capital		Accumulated Other Comprehensive Income (Loss)		Distributions in Excess of Earnings		Total AIR Equity		Noncontrolling Interests in Consolidated Real Estate Partnerships		Common Noncontrolling Interests in AIR Operating Partnership		Total Equity
	Shares Issued	Amount		Shares Issued	Amount
Balances at March 31, 2022	20	$	2,000	157,082,823	$	1,571	$	3,762,457	$	(783)	$	(1,648,077)	$	2,117,168	$	(70,157)	$	216,827	$	2,263,838
Redemption of AIR Operating Partnership units	—	—		—	—		—		—		—		—		—		(793)		(793)
Repurchase of Common Stock, net	—	—		(2,911,761)	(29)		(124,971)		—		—		(125,000)		—		—		(125,000)
Amortization of share-based compensation cost	—	—		—	—		751		—		—		751		—		950		1,701
Effect of changes in ownership of consolidated entities	—	—		—	—		(578)		—		—		(578)		—		578		—
Contributions from noncontrolling interests in consolidated real estate partnerships	—	—		—	—		—		—		—		—		3,483		—		3,483

Change in accumulated other comprehensive income (loss)	—	—		—	—		—		14,533		—		14,533		—		1,171		15,704
Net income	—	—		—	—		—		—		196,927		196,927		381		12,749		210,057
Common Stock dividends	—	—		—	—		—		—		(70,556)		(70,556)		—		—		(70,556)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(4,188)		(4,489)		(8,677)
Other, net	—	—		16,179	—		(753)		—		(43)		(796)		(128)		(8)		(932)
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

Balances at March 31, 2023	20	$	2,000	149,199,684	$	1,492	$	3,432,573	$	29,070	$	(1,405,520)	$	2,059,615	$	(79,017)	$	254,304	$	2,234,902

Redemption of AIR Operating Partnership units	—	—		—	—		—		—		—		—		—		(5,285)		(5,285)
Amortization of share-based compensation cost	—	—		—	—		820		—		—		820		—		1,155		1,975
Effect of changes in ownership of consolidated entities	—	—		—	—		(3,184)		—		—		(3,184)		—		3,184		—
Purchase of noncontrolling interests in consolidated real estate partnerships	—	—		—	—		479		—		—		479		(1,996)		—		(1,517)
Contributions from noncontrolling interests in consolidated real estate partnerships	—	—		—	—		—		—		—		—		2,950		—		2,950
Change in accumulated other comprehensive income (loss)	—	—		—	—		—		10,273		—		10,273		—		994		11,267
Net (loss) income	—	—		—	—		—		—		(1,341)		(1,341)		684		(315)		(972)
Common Stock dividends	—	—		—	—		—		—		(67,201)		(67,201)		—		—		(67,201)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(2,572)		(4,526)		(7,098)
Other, net	—	—		23,842	—		43		—		(39)		4		(136)		1		(131)
Balances at June 30, 2023	20	$	2,000	149,223,526	$	1,492	$	3,430,731	$	39,343	$	(1,474,101)	$	1,999,465	$	(80,087)	$	249,512	$	2,168,890

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June 30, ~~2022~~2023 and ~~2021~~

2022

(In thousands, except share data)

(Unaudited)


	Perpetual Preferred Stock			Common Stock			Additional Paid- in Capital		Accumulated Other Comprehensive Income (Loss)		Distributions in Excess of Earnings		Total AIR Equity		Noncontrolling Interests in Consolidated Real Estate Partnerships		Common Noncontrolling Interests in AIR Operating Partnership		Total Equity
	Shares Issued	Amount		Shares Issued	Amount
Balances at December 31, 2021	145	$	2,129	156,998,367	$	1,570	$	3,763,105	$	—	$	(1,953,779)	$	1,813,025	$	(70,883)	$	197,013	$	1,939,155

Redemption of AIR Operating Partnership units	—	—		—	—		—		—		—		—		—		(4,245)		(4,245)
Repurchase of Common Stock, net	—	—		(2,911,761)	(29)		(124,971)		—		—		(125,000)		—		—		(125,000)

Amortization of share-based compensation cost	—	—		—	—		2,641		—		—		2,641		—		1,810		4,451
Effect of changes in ownership of consolidated entities	—	—		—	—		(3,264)		—		—		(3,264)		—		3,264		—
Contributions from noncontrolling interests in consolidated real estate partnerships	—	—		—	—		—		—		—		—		7,808		—		7,808
Change in accumulated other comprehensive income (loss)	—	—		—	—		—		13,750		—		13,750		—		1,171		14,921
Net income (loss)	—	—		—	—		—		—		573,105		573,105		(183)		36,916		609,838
Common Stock dividends	—	—		—	—		—		—		(140,984)		(140,984)		—		—		(140,984)

Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(7,335)		(8,936)		(16,271)
Other, net	(125)	(129)		100,635	1		(605)		—		(91)		(824)		(16)		(8)		(848)
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

Balances at December 31, 2022	20	$	2,000	149,086,548	$	1,491	$	3,436,635	$	43,562	$	(1,327,271)	$	2,156,417	$	(78,785)	$	241,674	$	2,319,306
Issuance of AIR Operating Partnership units	—	—		—	—		—		—		—		—		—		22,383		22,383
Redemption of AIR Operating Partnership units	—	—		—	—		—		—		—		—		—		(15,814)		(15,814)

Amortization of share-based compensation cost	—	—		—	—		2,791		—		—		2,791		—		2,310		5,101
Effect of changes in ownership of consolidated entities	—	—		—	—		(9,286)		—		—		(9,286)		—		9,286		—
Purchase of noncontrolling interests in consolidated real estate partnerships	—	—		—	—		479		—		—		479		(1,996)		—		(1,517)
Contributions from noncontrolling interests in consolidated real estate partnerships	—	—		—	—		—		—		—		—		4,517		—		4,517
Change in accumulated other comprehensive income (loss)	—	—		—	—		—		(4,219)		—		(4,219)		—		(108)		(4,327)
Net (loss) income	—	—		—	—		—		—		(12,718)		(12,718)		1,369		(1,141)		(12,490)
Common Stock dividends	—	—		—	—		—		—		(134,140)		(134,140)		—		—		(134,140)

Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(5,057)		(9,078)		(14,135)
Other, net	—	—		136,978	1		112		—		28		141		(135)		—		6
Balances at June 30, 2023	20	$	2,000	149,223,526	$	1,492	$	3,430,731	$	39,343	$	(1,474,101)	$	1,999,465	$	(80,087)	$	249,512	$	2,168,890

~~(Unaudited)~~

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 (Loss)

Distributions in Excess
of Earnings

Total AIR
Equity

Consolidated
Real Estate
Partnerships

AIR
Operating
Partnership

Total
Equity

Balances at December 31, 2020

20

$
2,000

148,861,036

$
1,489

$
3,432,121

$
3,039

$
(2,131,798
)

$
1,306,851

$
(61,943
)

$
63,185

$
1,308,093

Issuance of Common Stock, net

—

—

7,825,000

79

342,084

—

—

342,163

—

—

342,163

Issuance costs

—

—

—

—

(306
)

—

—

(306
)

—

—

(306
)
Redemption of AIR Operating Partnership units

—

—

—

—

—

—

—

—

—

(3,550
)

(3,550
)
Conversion of AIR Operating Partnership units

—

—

43,319

2

1,957

—

—

1,959

—

(1,959
)

—

Amortization of share-based compensation cost

—

—

33,000

—

2,544

—

—

2,544

—

1,983

4,527

Effect of changes in ownership of consolidated entities

—

—

—

—

(4,423
)

—

—

(4,423
)

—

4,423

—

Contributions from noncontrolling interests in consolidated real estate partnerships

—

—

—

—

—

—

—

—

1,998

—

1,998

Change in accumulated other comprehensive income (loss)

—

—

—

—

—

(3,039
)

—

(3,039
)

—

(212
)

(3,251
)
Net income (loss)

—

—

—

—

—

—

65,362

65,362

(2,632
)

3,491

66,221

Common Stock dividends

—

—

—

—

—

—

(131,276
)

(131,276
)

—

—

(131,276
)
Preferred Stock dividends

—

—

—

—

—

—

(93
)

(93
)

—

—

(93
)
Distributions to noncontrolling interests

—

—

—

—

—

—

—

—

(4,834
)

(7,203
)

(12,037
)
Other, net

—

—

94,597

(1
)

(804
)

—

(38
)

(843
)

(120
)

230

(733
)
Balances at June 30, 2021

20

$
2,000

156,856,952

$
1,569

$
3,773,173

$
0

$
(2,197,843
)

$
1,578,899

$
(67,531
)

$
60,388

$
1,571,756

Balances at December 31, 2021

145

$
2,129

156,998,367

$
1,570

$
3,763,105

$
0

$
(1,953,779
)

$
1,813,025

$
(70,883
)

$
197,013

$
1,939,155

Redemption of AIR Operating Partnership units

—

—

—

—

—

—

—

—

—

(4,245
)

(4,245
)
Repurchase of common stock, net

—

—

(2,911,761
)

(29
)

(124,971
)

—

—

(125,000
)

—

—

(125,000
)
Amortization of share-based compensation cost

—

—

—

—

2,641

—

—

2,641

—

1,810

4,451

Effect of changes in ownership of consolidated entities

—

—

—

—

(3,264
)

—

—

(3,264
)

—

3,264

—

Contributions from noncontrolling interests in consolidated real estate partnerships

—

—

—

—

—

—

—

—

7,808

—

7,808

Change in accumulated other comprehensive income (loss)

—

—

—

—

—

13,750

—

13,750

—

1,171

14,921

Net income (loss)

—

—

—

—

—

—

573,105

573,105

(183
)

36,916

609,838

Common Stock dividends

—

—

—

—

—

—

(140,984
)

(140,984
)

—

—

(140,984
)
Distributions to noncontrolling interests

—

—

—

—

—

—

—

—

(7,335
)

(8,936
)

(16,271
)
Other, net

(125
)

(129
)

100,635

1

(605
)

—

(91
)

(824
)

(16
)

(8
)

(848
)
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

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30,

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
613,043

$
69,428

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

163,205

151,071

Loss on extinguishment of debt

23,636

38,160

Gain on derecognition of leased properties and dispositions of real estate

(587,609
)

(87,385
)
Income tax expense

920

1,045

Other, net

2,939

9,314

Net changes in operating assets and operating liabilities

(14,638
)

(87,836
)
Net cash provided by operating activities

201,496

93,797

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of real estate and deposits related to purchases of real estate

(472,317
)

(225,526
)
Capital expenditures

(90,599
)

(76,469
)
Proceeds from dispositions of real estate

759,344

6,230

Proceeds from dispositions of unconsolidated real estate partnerships

7,244

—

Purchases of corporate assets

(6,135
)

(4,509
)
Proceeds from repayment of note receivable

387,088

—

Proceeds from investments in debt securities

—

100,852

Other investing activities

(9,958
)

(61
)
Net cash provided by (used in) investing activities

574,667

(199,483
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Principal repayments on non-recourse property debt

(353,770
)

(566,523
)
Proceeds from term loans

—

800,000

Repayment of term loan

(350,000
)

(350,000
)
Net (repayments of) borrowings on revolving credit facility

(154,795
)

81,600

Payment of debt issuance costs

(3,990
)

(9,885
)
Payment of debt extinguishment costs

(22,723
)

(36,198
)
Proceeds from the issuance of unsecured notes payable

400,000

—

Proceeds from the issuance of Common Stock

—

342,163

Repurchases of Common Stock

(125,000
)

—

Payment of dividends to holders of Common Stock

(141,104
)

(131,654
)
Payment of distributions to preferred noncontrolling interests

(3,221
)

(3,209
)
Payment of distributions to common noncontrolling interests

(16,306
)

(12,092
)
Redemptions of noncontrolling interests in the AIR Operating Partnership

(4,269
)

(3,622
)
Contribution from noncontrolling interests in consolidated real estate partnerships

7,808

1,998

Other financing activities

(663
)

329

Net cash (used in) provided by financing activities

(768,033
)

112,907

NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

8,130

7,221

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD

92,761

73,480

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD

$
100,891

$
80,701


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(9,350)	$	613,043
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	184,926		163,205
Loss (gain) on dispositions and impairments of real estate	17,472		(587,609)
Loss on extinguishment of debt	2,008		23,636


Income tax expense	1,316		920
Other, net	624		2,939
Net changes in operating assets and operating liabilities	(14,334)		(14,638)
Net cash provided by operating activities	182,662		201,496
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate	(182,459)		(472,317)
Capital expenditures	(89,388)		(90,599)
Proceeds from dispositions of real estate	33,633		759,344



Proceeds from repayment of note receivable	—		387,088

Other investing activities, net	9,804		(8,849)
Net cash (used in) provided by investing activities	(228,410)		574,667
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on non-recourse property debt	(103,964)		(353,770)
Proceeds from non-recourse property debt	320,000		—

Repayment of term loan	—		(350,000)
Net (repayments of) borrowings on revolving credit facility	(170,000)		(154,795)


Proceeds from the issuance of unsecured notes payable	—		400,000
Repurchases of Common Stock	—		(125,000)


Payment of dividends to holders of Common Stock	(134,135)		(141,104)
Payment of distributions to common noncontrolling interests	(14,159)		(16,306)

Redemptions of noncontrolling interests in the AIR Operating Partnership	(15,814)		(4,269)


Other financing activities, net	(7,672)		(22,789)
Net cash used in financing activities	(125,744)		(768,033)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(171,492)		8,130
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD	301,405		92,761
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	129,913	$	100,891

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

June 30,

December 31,

2022

2021

ASSETS

Buildings and improvements

$
6,179,325

$
5,720,267

Land

1,200,540

1,164,814

Total real estate

7,379,865

6,885,081

Accumulated depreciation

(2,400,722
)

(2,284,793
)
Net real estate

4,979,143

4,600,288

Cash and cash equivalents

74,949

67,320

Restricted cash

25,942

25,441

Note receivable from Aimco

147,039

534,127

Leased real estate assets

466,013

466,355

Goodwill

32,286

32,286

Other assets, net

707,913

568,051

Assets held for sale

0

146,492

Total assets

$
6,433,285

$
6,440,360

LIABILITIES AND PARTNERS’ CAPITAL

Non-recourse property debt, net

$
2,026,513

$
2,294,739

Term loans, net

795,905

1,144,547

Revolving credit facility borrowings

148,000

304,000

Unsecured notes payable, net

398,039

0

Total indebtedness

3,368,457

3,743,286

Accrued liabilities and other

696,673

592,774

Liabilities related to assets held for sale

0

85,775

Total liabilities

4,065,130

4,421,835

Commitments and contingencies (Note 6)

Redeemable preferred units

79,330

79,370

Partners’ capital:

Preferred units

2,000

2,129

General Partner and Special Limited Partner

2,130,449

1,810,896

Limited Partners

226,985

197,013

Partners’ capital attributable to the AIR Operating Partnership

2,359,434

2,010,038

Noncontrolling interests in consolidated real estate partnerships

(70,609
)

(70,883
)
Total partners’ capital

2,288,825

1,939,155

Total liabilities, redeemable preferred units, and partners’ capital

$
6,433,285

$
6,440,360


	June 30, 2023		December 31, 2022
ASSETS
Buildings and improvements	$	6,888,234	$	6,784,965
Land	1,345,086		1,291,429
Total real estate	8,233,320		8,076,394
Accumulated depreciation	(2,562,252)		(2,449,883)
Net real estate	5,671,068		5,626,511
Cash and cash equivalents	106,349		95,797
Restricted cash	23,564		205,608
Goodwill	32,286		32,286
Other assets, net	573,743		591,681
Total assets	$	6,407,010	$	6,551,883

LIABILITIES AND PARTNERS’ CAPITAL
Non-recourse property debt, net	$	2,197,437	$	1,985,430
Term loans, net	797,471		796,713
Revolving credit facility borrowings	292,000		462,000
Unsecured notes payable, net	397,669		397,486
Total indebtedness	3,684,577		3,641,629
Accrued liabilities and other	476,400		513,805
Total liabilities	4,160,977		4,155,434

Commitments and contingencies (Note 6)

Redeemable preferred units	77,143		77,143

Partners’ capital:
Preferred units	2,000		2,000




General Partner and Special Limited Partner	1,997,465		2,154,417
Limited Partners	249,512		241,674
Partners’ capital attributable to the AIR Operating Partnership	2,248,977		2,398,091
Noncontrolling interests in consolidated real estate partnerships	(80,087)		(78,785)
Total partners’ capital	2,168,890		2,319,306
Total liabilities, redeemable preferred units, and partners’ capital	$	6,407,010	$	6,551,883

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

REVENUES

Rental and other property revenues

$
181,012

$
176,721

$
360,273

$
351,451

Other revenues

2,488

1,612

4,705

3,295

Total revenues

183,500

178,333

364,978

354,746

EXPENSES

Property operating expenses

63,787

64,758

127,023

129,375

Depreciation and amortization

78,656

75,791

163,205

151,071

General and administrative expenses

5,333

5,221

11,930

9,635

Other (income) expenses, net

(3,076
)

2,515

942

5,391

144,700

148,285

303,100

295,472

Interest income

25,652

15,684

39,133

31,656

Interest expense

(26,027
)

(33,657
)

(48,134
)

(69,682
)
Loss on extinguishment of debt

—

(37,150
)

(23,636
)

(38,160
)
Gain on dispositions of real estate and derecognition of leased properties

175,606

3,353

587,609

87,385

Loss from unconsolidated real estate partnerships

(873
)

—

(2,887
)

—

Income (loss) before income tax (expense) benefit

213,158

(21,722
)

613,963

70,473

Income tax (expense) benefit

(1,499
)

2,035

(920
)

(1,045
)
Net income (loss)

211,659

(19,687
)

613,043

69,428

Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships

(381
)

2,397

183

2,632

Net income (loss) attributable to the AIR Operating Partnership

211,278

(17,290
)

613,226

72,060

Net income attributable to the AIR Operating Partnership’s preferred unitholders

(1,645
)

(1,646
)

(3,290
)

(3,300
)
Net income attributable to participating securities

(162
)

(39
)

(417
)

(103
)
Net income (loss) attributable to the AIR Operating Partnership’s common unitholders

$
209,471

$
(18,975
)

$
609,519

$
68,657

Net income (loss) attributable to the AIR Operating Partnership per common unit – basic and diluted

$
1.26

$
(0.12
)

$
3.66

$
0.43

Weighted-average common units outstanding – basic

166,023

162,698

166,434

159,701

Weighted-average common units outstanding – diluted

166,232

162,698

166,714

160,175


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
REVENUES
Rental and other property revenues	$	212,492	$	181,012	$	422,415	$	360,273
Other revenues	2,068		2,488		4,138		4,705
Total revenues	214,560		183,500		426,553		364,978

EXPENSES
Property operating expenses	72,012		63,787		147,465		127,023
Depreciation and amortization	89,260		78,656		184,926		163,205
General and administrative expenses	6,023		5,333		13,203		11,930

Other expenses (income), net	2,519		(3,076)		6,179		942
	169,814		144,700		351,773		303,100

Interest income	1,507		25,652		3,032		39,133
Interest expense	(37,554)		(26,027)		(73,741)		(48,134)
Loss on extinguishment of debt	—		—		(2,008)		(23,636)
(Loss) gain on dispositions and impairments of real estate	(17,472)		175,606		(17,472)		587,609
Gain on derivative instruments, net	11,390		—		9,252		—
Loss from unconsolidated real estate partnerships	(842)		(873)		(1,877)		(2,887)
Income (loss) before income tax expense	1,775		213,158		(8,034)		613,963
Income tax expense	(1,177)		(1,499)		(1,316)		(920)
Net income (loss)	598		211,659		(9,350)		613,043
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships	(684)		(381)		(1,369)		183
Net (loss) income attributable to the AIR Operating Partnership	(86)		211,278		(10,719)		613,226


Net income attributable to the AIR Operating Partnership's preferred unitholders	(1,612)		(1,645)		(3,225)		(3,290)
Net income attributable to participating securities	(56)		(162)		(93)		(417)
Net (loss) income attributable to the AIR Operating Partnership’s common unitholders	$	(1,754)	$	209,471	$	(14,037)	$	609,519

Net (loss) income attributable to the AIR Operating Partnership common unitholders per unit – basic and diluted	$	(0.01)	$	1.26	$	(0.09)	$	3.66


Weighted-average common units outstanding – basic	159,778		166,023		159,531		166,434
Weighted-average common units outstanding – diluted	159,778		166,232		159,531		166,714

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED ~~STATEMENTS~~STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Net income (loss)

$
211,659

$
(19,687
)

$
613,043

$
69,428

Unrealized gains on derivative instruments

13,715

—

12,932

—

Losses on derivative instruments reclassified into interest expense from accumulated other comprehensive income (loss)

1,989

—

1,989

—

Unrealized losses on available for sale debt securities

—

(1,180
)

—

(3,251
)
Comprehensive income (loss)

227,363

(20,867
)

627,964

66,177

Comprehensive (income) loss attributable to noncontrolling interests

(381
)

2,397

183

2,632

Comprehensive income (loss) attributable to the AIR Operating Partnership

$
226,982

$
(18,470
)

$
628,147

$
68,809


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net income (loss)	$	598	$	211,659	$	(9,350)	$	613,043
Unrealized gain on derivative instruments, net	16,631		13,715		5,191		12,932
Reclassification of interest rate derivative (gain) loss to net income (loss)	(5,364)		1,989		(9,518)		1,989
Comprehensive income (loss)	11,865		227,363		(13,677)		627,964
Comprehensive (income) loss attributable to noncontrolling interests	(684)		(381)		(1,369)		183
Comprehensive income (loss) attributable to the AIR Operating Partnership	$	11,181	$	226,982	$	(15,046)	$	628,147

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Three Months Ended June 30, ~~2022~~2023 and ~~2021~~

2022

(In thousands)

(Unaudited)

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 March 31, 2021

$
2,000

$
1,320,903

$
63,812

$
1,386,715

$
(64,619
)

$
1,322,096

Issuance of common partnership units to AIR, net

—

342,163

—

342,163

—

342,163

Issuance costs

—

(306
)

—

(306
)

—

(306
)
Redemption of common partnership units

—

—

(327
)

(327
)

—

(327
)
Conversion of common partnership units

—

1,959

(1,959
)

—

—

—

Amortization of share-based compensation cost

—

629

1,260

1,889

—

1,889

Effect of changes in ownership of consolidated entities

—

(1,833
)

1,833

—

—

—

Contributions from noncontrolling interests in consolidated real estate partnerships

—

—

—

—

1,998

1,998

Change in accumulated other comprehensive income (loss)

—

(1,100
)

(80
)

(1,180
)

—

(1,180
)
Net loss

—

(17,948
)

(945
)

(18,893
)

(2,397
)

(21,290
)
Distributions to common unitholders

—

(67,418
)

(3,436
)

(70,854
)

—

(70,854
)
Distributions to preferred unitholders

—

(43
)

—

(43
)

—

(43
)
Distributions to noncontrolling interests

—

—

—

—

(3,432
)

(3,432
)
Other, net

—

(107
)

230

123

919

1,042

Balances at June 30, 2021

$
2,000

$
1,576,899

$
60,388

$
1,639,287

$
(67,531
)

$
1,571,756

Balances at March 31, 2022

$
2,000

$
2,115,168

$
216,827

$
2,333,995

$
(70,157
)

$
2,263,838

Redemption of common partnership units

—

—

(793
)

(793
)

—

(793
)
Repurchase of common partnership units

—

(125,000
)

—

(125,000
)

—

(125,000
)
Amortization of share-based compensation cost

—

751

950

1,701

—

1,701

Effect of changes in ownership of consolidated entities

—

(578
)

578

—

—

—

Contributions from noncontrolling interests in consolidated real estate partnerships

—

—

—

—

3,483

3,483

Change in accumulated other comprehensive income (loss)

—

14,533

1,171

15,704

—

15,704

Net income

—

196,927

12,749

209,676

381

210,057

Distributions to common unitholders

—

(70,556
)

—

(70,556
)

—

(70,556
)
Distributions to noncontrolling interests

—

—

(4,489
)

(4,489
)

(4,188
)

(8,677
)
Other, net

—

(796
)

(8
)

(804
)

(128
)

(932
)
Balances at June 30, 2022

$
2,000

$
2,130,449

$
226,985

$
2,359,434

$
(70,609
)

$
2,288,825


	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 March 31, 2022	$	2,000	$	2,115,168	$	216,827	$	2,333,995	$	(70,157)	$	2,263,838
Redemption of common partnership units	—		—		(793)		(793)		—		(793)
Repurchase of common partnership units	—		(125,000)		—		(125,000)		—		(125,000)
Amortization of share-based compensation cost	—		751		950		1,701		—		1,701
Effect of changes in ownership of consolidated entities	—		(578)		578		—		—		—
Contributions from noncontrolling interests in consolidated real estate partnerships	—		—		—		—		3,483		3,483
Change in accumulated other comprehensive income (loss)	—		14,533		1,171		15,704		—		15,704
Net income	—		196,927		12,749		209,676		381		210,057
Distributions to common unitholders	—		(70,556)		—		(70,556)		—		(70,556)
Distributions to noncontrolling interests	—		—		(4,489)		(4,489)		(4,188)		(8,677)
Other, net	—		(796)		(8)		(804)		(128)		(932)
Balances at June 30, 2022	$	2,000	$	2,130,449	$	226,985	$	2,359,434	$	(70,609)	$	2,288,825

Balances at March 31, 2023	$	2,000	$	2,057,615	$	254,304	$	2,313,919	$	(79,017)	$	2,234,902
Redemption of common partnership units	—		—		(5,285)		(5,285)		—		(5,285)

Amortization of share-based compensation cost	—		820		1,155		1,975		—		1,975
Effect of changes in ownership of consolidated entities	—		(3,184)		3,184		—		—		—
Purchase of noncontrolling interests in consolidated real estate partnerships	—		479		—		479		(1,996)		(1,517)
Contributions from noncontrolling interests in consolidated real estate partnerships	—		—		—		—		2,950		2,950
Change in accumulated other comprehensive income (loss)	—		10,273		994		11,267		—		11,267
Net (loss) income	—		(1,341)		(315)		(1,656)		684		(972)
Distributions to common unitholders	—		(67,201)		(4,526)		(71,727)		—		(71,727)
Distributions to noncontrolling interests	—		—		—		—		(2,572)		(2,572)
Other, net	—		4		1		5		(136)		(131)
Balances at June 30, 2023	$	2,000	$	1,997,465	$	249,512	$	2,248,977	$	(80,087)	$	2,168,890

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Six Months Ended June 30, ~~2022~~2023 and ~~2021~~

2022

(In thousands)

(Unaudited)

~~(Unaudited)~~

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 December 31, 2020

$
2,000

$
1,304,851

$
63,185

$
1,370,036

$
(61,943
)

$
1,308,093

Issuance of common partnership units to AIR, net

—

342,163

—

342,163

—

342,163

Issuance costs

—

(306
)

—

(306
)

—

(306
)
Redemption of common partnership units

—

—

(3,550
)

(3,550
)

—

(3,550
)
Conversion of common partnership units

—

1,959

(1,959
)

—

—

—

Amortization of share-based compensation cost

—

2,544

1,983

4,527

—

4,527

Effect of changes in ownership of consolidated entities

—

(4,423
)

4,423

—

—

—

Contributions from noncontrolling interests in consolidated real estate partnerships

—

—

—

—

1,998

1,998

Change in accumulated other comprehensive income (loss)

—

(3,039
)

(212
)

(3,251
)

—

(3,251
)
Net income (loss)

—

65,362

3,491

68,853

(2,632
)

66,221

Distributions to common unitholders

—

(131,276
)

(7,203
)

(138,479
)

—

(138,479
)
Distributions to preferred unitholders

—

(93
)

—

(93
)

—

(93
)
Distributions to noncontrolling interests

—

—

—

—

(4,834
)

(4,834
)
Other, net

—

(843
)

230

(613
)

(120
)

(733
)
Balances at June 30, 2021

$
2,000

$
1,576,899

$
60,388

$
1,639,287

$
(67,531
)

$
1,571,756

Balances at December 31, 2021

$
2,129

$
1,810,896

$
197,013

$
2,010,038

$
(70,883
)

$
1,939,155

Redemption of common partnership units

—

—

(4,245
)

(4,245
)

—

(4,245
)
Repurchase of common partnership units

—

(125,000
)

—

(125,000
)

—

(125,000
)
Amortization of share-based compensation cost

—

2,641

1,810

4,451

—

4,451

Effect of changes in ownership of consolidated entities

—

(3,264
)

3,264

—

—

—

Contributions from noncontrolling interests in consolidated real estate partnerships

—

—

—

—

7,808

7,808

Change in accumulated other comprehensive income (loss)

—

13,750

1,171

14,921

—

14,921

Net income (loss)

—

573,105

36,916

610,021

(183
)

609,838

Distributions to common unitholders

—

(140,984
)

—

(140,984
)

—

(140,984
)
Distributions to noncontrolling interests

—

—

(8,936
)

(8,936
)

(7,335
)

(16,271
)
Other, net

(129
)

(695
)

(8
)

(832
)

(16
)

(848
)
Balances at June 30, 2022

$
2,000

$
2,130,449

$
226,985

$
2,359,434

$
(70,609
)

$
2,288,825


	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 December 31, 2021	$	2,129	$	1,810,896	$	197,013	$	2,010,038	$	(70,883)	$	1,939,155
Redemption of common partnership units	—		—		(4,245)		(4,245)		—		(4,245)
Repurchase of common partnership units	—		(125,000)		—		(125,000)		—		(125,000)
Amortization of share-based compensation cost	—		2,641		1,810		4,451		—		4,451
Effect of changes in ownership of consolidated entities	—		(3,264)		3,264		—		—		—
Contributions from noncontrolling interests in consolidated real estate partnerships	—		—		—		—		7,808		7,808
Change in accumulated other comprehensive income (loss)	—		13,750		1,171		14,921		—		14,921
Net income (loss)	—		573,105		36,916		610,021		(183)		609,838
Distributions to common unitholders	—		(140,984)		—		(140,984)		—		(140,984)
Distributions to noncontrolling interests	—		—		(8,936)		(8,936)		(7,335)		(16,271)
Other, net	(129)		(695)		(8)		(832)		(16)		(848)
Balances at June 30, 2022	$	2,000	$	2,130,449	$	226,985	$	2,359,434	$	(70,609)	$	2,288,825

Balances at December 31, 2022	$	2,000	$	2,154,417	$	241,674	$	2,398,091	$	(78,785)	$	2,319,306
Issuance of AIR Operating Partnership units	—		—		22,383		22,383		—		22,383
Redemption of common partnership units	—		—		(15,814)		(15,814)		—		(15,814)

Amortization of share-based compensation cost	—		2,791		2,310		5,101		—		5,101
Effect of changes in ownership of consolidated entities	—		(9,286)		9,286		—		—		—
Purchase of noncontrolling interests in consolidated real estate partnerships	—		479		—		479		(1,996)		(1,517)
Contributions from noncontrolling interests in consolidated real estate partnerships	—		—		—		—		4,517		4,517
Change in accumulated other comprehensive income (loss)	—		(4,219)		(108)		(4,327)		—		(4,327)
Net (loss) income	—		(12,718)		(1,141)		(13,859)		1,369		(12,490)
Distributions to common unitholders	—		(134,140)		(9,078)		(143,218)		—		(143,218)

Distributions to noncontrolling interests	—		—		—		—		(5,057)		(5,057)
Other, net	—		141		—		141		(135)		6
Balances at June 30, 2023	$	2,000	$	1,997,465	$	249,512	$	2,248,977	$	(80,087)	$	2,168,890

See notes to the condensed consolidated financial statements.

Table of Contents

APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30,

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
613,043

$
69,428

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

163,205

151,071

Loss on extinguishment of debt

23,636

38,160

Gain on derecognition of leased properties and dispositions of real estate

(587,609
)

(87,385
)
Income tax expense

920

1,045

Other, net

2,939

9,314

Net changes in operating assets and operating liabilities

(14,638
)

(87,836
)
Net cash provided by operating activities

201,496

93,797

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of real estate and deposits related to purchases of real estate

(472,317
)

(225,526
)
Capital expenditures

(90,599
)

(76,469
)
Proceeds from dispositions of real estate

759,344

6,230

Proceeds from dispositions of unconsolidated real estate partnerships

7,244

—

Purchases of corporate assets

(6,135
)

(4,509
)
Proceeds from repayment of note receivable

387,088

—

Proceeds from investments in debt securities

—

100,852

Other investing activities

(9,958
)

(61
)
Net cash provided by (used in) investing activities

574,667

(199,483
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Principal repayments on non-recourse property debt

(353,770
)

(566,523
)
Proceeds from term loans

—

800,000

Repayment of term loan

(350,000
)

(350,000
)
Net (repayments of) borrowings on revolving credit facility

(154,795
)

81,600

Payment of debt issuance costs

(3,990
)

(9,885
)
Payment of debt extinguishment costs

(22,723
)

(36,198
)
Proceeds from the issuance of unsecured notes payable

400,000

—

Proceeds from issuance of common partnership units to AIR, net

—

342,163

Repurchases of common partnership units held by GP and Special Limited Partner

(125,000
)

—

Payment of distributions to preferred units

(3,221
)

(3,300
)
Payment of distributions General Partner and Special Limited Partner

(141,104
)

(131,654
)
Payment of distributions to Limited Partners

(8,970
)

(7,258
)
Payment of distributions to noncontrolling interests

(7,336
)

(4,836
)
Redemption of common and preferred units

(4,269
)

(3,622
)
Contribution from noncontrolling interests in consolidated real estate partnerships

7,808

1,998

Other financing activities

(663
)

422

Net cash (used in) provided by financing activities

(768,033
)

112,907

NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

8,130

7,221

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD

92,761

73,480

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD

$
100,891

$
80,701


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(9,350)	$	613,043
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	184,926		163,205
Loss (gain) on dispositions and impairments of real estate	17,472		(587,609)
Loss on extinguishment of debt	2,008		23,636

Income tax expense	1,316		920

Other, net	624		2,939
Net changes in operating assets and operating liabilities	(14,334)		(14,638)
Net cash provided by operating activities	182,662		201,496
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate	(182,459)		(472,317)
Capital expenditures	(89,388)		(90,599)
Proceeds from dispositions of real estate	33,633		759,344


Proceeds from repayment of note receivable	—		387,088

Other investing activities, net	9,804		(8,849)
Net cash (used in) provided by investing activities	(228,410)		574,667
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on non-recourse property debt	(103,964)		(353,770)
Proceeds from non-recourse property debt	320,000		—

Repayment of term loan	—		(350,000)

Net (repayments of) borrowings on revolving credit facility	(170,000)		(154,795)


Proceeds from the issuance of unsecured notes payable	—		400,000

Repurchases of common partnership units held by General Partner and Special Limited Partner	—		(125,000)

Payment of distributions to General Partner and Special Limited Partner	(134,135)		(141,104)
Payment of distributions to Limited Partners	(9,103)		(8,970)
Payment of distributions to noncontrolling interests	(5,056)		(7,336)

Redemption of common and preferred units	(15,814)		(4,269)

Other financing activities, net	(7,672)		(22,789)
Net cash used in financing activities	(125,744)		(768,033)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(171,492)		8,130
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD	301,405		92,761
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	129,913	$	100,891

See notes to the condensed consolidated financial statements.

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APARTMENT INCOME REIT CORP.

APARTMENT INCOME REIT, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2022~~

2023

(Unaudited)

Note 1 — Basis of Presentation and Organization

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Apartment Income REIT Corp. (“AIR”), Apartment Income REIT, L.P. (“AIR Operating 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. All significant intercompany balances and transactions have been eliminated in consolidation.

As used herein, and except where the context otherwise requires, “partnership” refers to a limited partnership or a limited liability company and “partner” refers to a partner in a limited partnership or a member of a limited liability company. Interests in the AIR Operating Partnership that are held by limited partners other than AIR are reflected in AIR’s accompanying condensed consolidated balance sheets as noncontrolling interests in the AIR Operating Partnership. Interests in partnerships consolidated by the AIR Operating Partnership that are held by third parties are reflected in AIR’s and AIR Operating Partnership’s accompanying condensed consolidated balance sheets as noncontrolling interests in consolidated real estate partnerships.

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

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, ~~2022,~~2023, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~

2023.

The condensed consolidated balance sheets of AIR, the AIR Operating Partnership, and their consolidated subsidiaries as of December 31, ~~2021,~~2022, have been derived from their respective audited financial statements at that date, but do not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in AIR’s and the AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Except where indicated, the footnotes refer to AIR, the AIR Operating Partnership and their consolidated subsidiaries, collectively.

Reclassifications

Certain prior period balances in the condensed consolidated balance sheets, statements of operations, and statements of cash flows have been combined or reclassified to conform to current period presentation pursuant to Rule 10-01(a)(2) of Regulation S-X of the SEC. These changes had no impact on net income (loss), cash flows, assets and liabilities, equity or partners’ capital previously reported.

Organization and Business

AIR is a self-administered and self-managed ~~real estate investment trust (“REIT”).~~REIT. AIR owns, through its wholly-owned subsidiaries, ~~all of the common equity,~~ the general partner interest and special limited partner interest in AIR Operating ~~Partnership, a Delaware limited partnership originally formed on May 16, 1994.~~Partnership. AIR Operating Partnership conducts all of the business of AIR, which is focused on the ownership of stabilized multi-family properties located in top markets including eight important geographic concentrations: Boston; Philadelphia; Washington, D.C.; Miami; Denver; the San Francisco Bay Area; Los Angeles; and San Diego.

We own and operate a portfolio of stabilized apartment communities, diversified by both geography and price point, in 1110 states and the District of Columbia. As of June 30, ~~2022,~~2023, our portfolio included 7573 apartment communities with

~~25,363~~Table of Contents

25,739 apartment homes, in which we held an average ownership of approximately 88%87%. We also have ~~four properties,~~ one land parcel and one indirect land interest that we lease to third parties. ~~As further discussed in Note 3, we expect four of these leases to be cancelled in the third quarter of 2022.~~

Interests in the AIR Operating Partnership that are held by limited partners other than AIR are referred to as OP Units. OP Units include common partnership units, which we refer to as common OP Units, as well as preferred partnership units, which we refer to as preferred OP Units. As of June 30, ~~2022,~~2023, after elimination of units held by consolidated subsidiaries, the AIR Operating Partnership had ~~167,313,269~~163,508,889 common OP Units outstanding. As of June 30, ~~2022,~~2023, AIR owned ~~154,187,241~~149,223,526 of the common OP Units of the AIR Operating Partnership and AIR had an equal number of shares of its Class A Common Stock outstanding, which we refer to as Common

~~Table of Contents~~

Stock. AIR’s ownership of the total common OP Units outstanding represents a ~~92.2~~%91.3% legal interest in the AIR Operating Partnership and a ~~93.8~~%93.1% economic interest.

Note 2 — Summary of Significant Accounting Policies

Principles of Consolidation

We consolidate a variable interest ~~entity~~entities (“~~VIE”~~VIEs”), 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.

As of June 30, 2023 and December 31, 2022, AIR consolidated six and seven VIEs, respectively, including the AIR Operating Partnership.

Redeemable Preferred OP Units

The AIR Operating Partnership has various classes of preferred OP ~~units, which may be redeemed~~Units. Each class of preferred OP Units is currently redeemable at the ~~holders' option for~~holders’ option. The AIR Operating Partnership, at its sole discretion, may settle such redemption requests in cash or ~~at its option,~~cause AIR to issue shares of its Common ~~Stock.~~Stock with a value equal to the redemption price. The preferred OP ~~units~~Units are therefore presented within temporary equity in AIR’s condensed consolidated balance sheets and within temporary ~~partners'~~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~~Units’ redemption value (in thousands):

Balance at January 1, 2022

$
79,370

Preferred distributions

(3,221
)
Redemption of preferred units and other

(24
)
Net income allocated to preferred units

3,205

Balance at June 30, 2022

$
79,330


Balance at January 1, 2023	$	77,143
Preferred distributions	(3,140)
Net income allocated to preferred units	3,140
Balance at June 30, 2023	$	77,143

The AIR Operating Partnership has outstanding various classes of redeemable preferred OP Units. As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the AIR Operating Partnership had ~~2,934,063~~ ~~and~~ ~~2,935,662~~2,846,574 redeemable preferred OP Units ~~respectively,~~ issued and outstanding. Distributions per annum range from ~~1.92~~%1.92% to ~~8.75~~%8.75% per class and $~~0.48~~$0.48 to $~~8.00~~$8.00 per unit.

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 condensed consolidated financial statements and accompanying notes thereto. Actual results could differ from those estimates.

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Note 3 — Significant Transactions

Apartment Community Acquisitions

During the ~~three~~six months ended June 30, ~~2022,~~2023, we acquired ~~three~~one apartment ~~communities, one located in the Washington, D.C. area and two located~~community in South ~~Florida.~~Florida, with 495 apartment homes, and 29,000 square feet of commercial space. Summarized information regarding ~~these acquisitions~~this acquisition is set forth in the table below (dollars in thousands):

Number of apartment communities

3

Number of apartment homes

1,001

Purchase price
$
467,067

Capitalized transaction costs

5,250

Total consideration
$
472,317

Land
$
40,066

Building and improvements

419,023

Right of use lease asset

80,651

Intangible assets (1)

13,738

Lease liability

(80,651
)
Below-market lease liabilities (1)

(510
)
Total consideration
$
472,317






Purchase price	$	298,000
Capitalized transaction costs	5,469
Total consideration (1)	$	303,469

Land	$	99,338
Building and improvements	187,427
Intangible assets (2)	12,077
Mark-to-market on debt assumed	7,370
Below-market lease liabilities (2)	(2,743)
Total consideration (1)	$	303,469

(1)Total consideration includes $101.2 million of debt assumed and the issuance of $22.4 million in common OP Units.

(2)Intangible assets and below-market lease liabilities have a weighted-average term of ~~2.6~~1.4 years and ~~1.6~~0.5 years, respectively.

Apartment Community Dispositions

~~Table of Contents~~

~~Subsequent to~~

During the three and six months ended June 30, ~~2022,~~2023, we ~~acquired an additional~~sold two apartment ~~community located in South Florida~~communities with ~~350~~62 apartment homes ~~for a total purchase price of $173.0~~ ~~million.~~

~~Apartment Community Dispositions~~

included in our Other Real Estate segment.

During the three months ended June 30, 2022, we sold 4four apartment communities with 718 homes, three of which were included in our Same Store segment and one in our Other Real Estate segment, for ~~gross proceeds~~a gain on disposition of $~~203.1~~$175.6 million. During the six months ended June 30, 2022, we sold 12 apartment communities with 2,050 homes, 10 of which were included in our Same Store segment and two included in our Other Real Estate segment, for ~~gross proceeds~~a gain on disposition of $~~781.1~~$587.6 million.

~~We did~~

At the end of each reporting period we evaluate whether such communities meet the criteria to be classified as held for sale. As of June 30, 2023, no communities were classified as held for sale.

Impairment

Real estate and other long-lived assets to be held and used are individually evaluated for impairment when conditions exist that may indicate the carrying amount of a long-lived asset may not ~~sell any apartment communities~~be recoverable. Impairment indicators include significant fluctuations in rental and other property revenues less property operating expenses, occupancy changes, significant near-term lease expirations, current and historical cash flow losses, rental rates, and if applicable, a comparison of an asset’s carrying value to its estimated fair value. Upon determination that an impairment has occurred, we recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the community.

During the three months ended June 30, 2023, we evaluated the expected hold period of two real estate assets in our Other Real Estate reporting segment. Given management’s assessment of the likelihood of the sale of these assets, we reduced the carrying value to their estimated fair value and recognized a non-cash impairment loss on real estate of $8.2 million. During the three months ended June 30, 2023, these two properties sold for their estimated carrying value.

Additionally, during the quarter we evaluated the expected hold period of one additional real estate asset in our Other Real Estate reporting segment. Given management’s assessment of the likelihood of its pending sale, we reduced the carrying value to its estimated fair value and recognized a non-cash impairment loss on real estate of $15.4 million. Subsequent to June 30, 2023, we received a non-refundable deposit on this community, which is expected to be sold by year end. This sale will complete our previously announced exit from the New York market.

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During the three and six months ended June 30, ~~2021.~~

~~Lease Cancellation~~

2022, we did not recognize any impairment losses.

Joint Venture Transactions

During the three months ended June 30, ~~2022,~~2023, we ~~reached~~formed an ~~agreement~~unconsolidated joint venture (the "Value-Add JV") with ~~Apartment Investment~~a global asset manager by selling a 70% interest in our Huntington Gateway property, a 443-unit property located in Virginia. Gross proceeds from this sale were $9 million and ~~Management Company ("Aimco"~~the joint venture assumed $94.1 million of debt. We recognized a gain of $6.4 million in connection with the transaction. AIR is the general partner with legal ownership of 30%, and AIR will receive 50% of the cash flows from operations, and various fees for providing property management, construction, and corporate services to the joint venture.

Subsequent to June 30, 2023, we formed a joint venture with a global institutional investor (the "Core JV") through selling a 47% interest in a portfolio of 10 of our Same Store properties in Philadelphia, Washington D.C., Denver, San Diego, and Miami with 3,093 apartment homes and average monthly revenues of $2,534. Eight of the ten properties are now closed. Our purchases of two are subject to ~~cancel existing master leases at four properties owned by AIR and leased to Aimco~~regulatory approvals, expected before year-end.

In preparation for the ~~purpose~~joint venture, AIR borrowed $611.4 million in new non-recourse property debt. The properties were contributed to the Core JV subject to this debt. Specifically, the first eight properties contributed were subject to $584.8 million of ~~their development. With~~debt, and AIR received $184.6 million in cash.

Assuming the ~~developments largely completed, we agreed~~completion of the two pending transactions, AIR will receive $17.3 million in additional cash, and the Core JV will be subject to ~~terminate~~an additional $59.6 million of the ~~leases for a payment~~new non-recourse property debt. The net of $~~200~~ ~~million. The four properties include~~ ~~865~~ ~~apartment homes~~these two transactions is that AIR will receive $813.3 million in cash, with ~~average monthly rents~~proceeds used to prepay $292.0 million on the revolving credit facility and $325.0 million of ~~approximately $3,400~~ ~~per home.~~

term loans, with weighted-average interest rates of slightly less than 6%, and the remaining invested in short-term liquid investments.

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 June 30,				Six Months Ended June 30,					Three Months Ended				Six Months Ended
	2022		2021		2022		2021			June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Fixed lease income	$	169,337	$	165,044	$	337,567	$	329,012	Fixed lease income	$	196,718	$	169,337	$	393,054	$	337,567
Variable lease income		11,216		11,177		22,021		21,636	Variable lease income	15,253		11,216		28,541		22,021
Total lease income	$	180,553	$	176,221	$	359,588	$	350,648	Total lease income	$	211,971	$	180,553	$	421,595	$	359,588

Generally, our residential leases do not provide extension options and, as of June 30, ~~2022,~~2023, have an average remaining term of ~~8.8~~17.1 months. In general, our commercial leases have options to extend for a certain period of time at the tenant’s option. ~~Future~~As of June 30, 2023, 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 June 30, 2022~~ (in thousands):


2023 (remaining)	$	262,306
2024	258,690
2025	41,745
2026	11,214
2027	9,701
Thereafter	34,712
Total	$	618,368

2022 (remaining)

$
324,862

2023

352,182

2024

62,478

2025

11,183

2026

9,470

Thereafter

42,416

Total

$
802,591

19

~~Lessor Arrangements~~

~~As of June 30, 2022, the aggregate minimum lease payments owed to us under the sales-type leases is as follows (in thousands):~~

2022 (remaining)

$
12,632

2023

25,262

2024

25,262

2025

25,373

2026

25,966

Thereafter

704,267

Total lease receivable (1)

$
818,762

Add: Unguaranteed residual value

131,580

Less: Discount

484,329

Total leased real estate assets

$
466,013

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~~(1)~~

~~As of June 30, 2022, this amount includes $244.8~~ ~~million of guaranteed residual value and $574.0~~ ~~million of remaining cash lease payments. The total future minimum lease payments assume that no early termination option is elected. The term of each of the leases ranges from~~ 10 to 25 ~~years.~~

~~During the three and six months ended June 30, 2022, we recognized income of $6.5~~ ~~million and $13.1~~ ~~million related to these sales-type leases, respectively, compared to $6.5~~ ~~million and $12.9~~ million, respectively, during the same periods in 2021, 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 statements of operations.

During the second quarter of 2022, we reached an agreement with Aimco to cancel the existing sales-type leases, which is expected to occur during the third quarter of 2022. Accordingly, the preceding Lessor Arrangements table will not have any minimum lease payments associated with these sales-type leases going forward.

Note 5 — Debt

The following table summarizes ~~debt as of June 30, 2022 and December 31, 2021 (dollars in~~our total indebtedness (in thousands):

Outstanding Balance

June 30, 2022

December 31, 2021

Secured debt:

Fixed-rate property debt due December 2022 to June 2032 (1)

$
1,947,527

$
2,217,256

Variable-rate property debt due October 2024 (2)

88,500

88,500

Total non-recourse property debt

2,036,027

2,305,756

Debt issuance costs, net of accumulated amortization

(9,514
)

(11,017
)
Total non-recourse property debt, net

$
2,026,513

$
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)

148,000

304,000

4.58% Notes payable due June 2027 (5)

100,000

0

4.77% Notes payable due June 2029 (5)

100,000

0

4.84% Notes payable due June 2032 (5)

200,000

0

Total unsecured debt

1,348,000

1,454,000

Debt issuance costs, net of accumulated amortization

(6,056
)

(5,453
)
Total unsecured debt, net

$
1,341,944

$
1,448,547

Total indebtedness

$
3,368,457

$
3,743,286

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	June 30, 2023		December 31, 2022
Secured debt:
Fixed-rate property debt due May 2025 to January 2055 (1)	$	2,211,002	$	1,906,151
Variable-rate property debt	—		88,500
Total non-recourse property debt	2,211,002		1,994,651
Debt issuance costs, net of accumulated amortization	(13,565)		(9,221)
Total non-recourse property debt, net	$	2,197,437	$	1,985,430

Unsecured debt:
Term loans due December 2023 to April 2026 (2)	$	800,000	$	800,000
Revolving credit facility borrowings due April 2025 (3)	292,000		462,000
4.58% Notes payable due June 2027	100,000		100,000
4.77% Notes payable due June 2029	100,000		100,000
4.84% Notes payable due June 2032	200,000		200,000
Total unsecured debt	1,492,000		1,662,000
Debt issuance costs, net of accumulated amortization	(4,860)		(5,801)
Total unsecured debt, net	$	1,487,140	$	1,656,199
Total indebtedness	$	3,684,577	$	3,641,629

(1)

In the first quarter of 2023, AIR borrowed $320 million using 10-year fixed rate financing, bearing interest at 4.9%. Proceeds were used to refinance a floating rate loan and reduce borrowings by $230 million on our revolving credit facility. The stated ~~rate~~rates on our fixed-rate property debt is ~~2.4~~%are between 2.4% to ~~4.2~~%5.7%.

(2)

~~During the second quarter of 2022, we hedged $830~~ million of our floating rate debt through placement of floating to 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~~one-month Term Secured Overnight Financing Rate ~~("SOFR"~~(“SOFR”) plus ~~1.00~~%1.00% and a SOFR adjustment of ~~10 basis~~10-basis points, ~~with a SOFR floor of 0.00%,~~ based on our current credit rating. As of June 30, ~~2022,~~2023, the weighted-average interest rate for our term loans before consideration of in place interest rate swaps was~~4.1~~%.

~~(4)~~

~~On May 2, 2022, we exercised the accordion feature on our revolving credit facility, increasing the revolving credit facility by $400~~ ~~million to $1.0~~6.2%. ~~billion.~~ The term loans mature on the following schedule: $150 million mature on December 15, 2023, with two one-year extension options; $300 million mature on December 15, 2024, with a one-year extension option; $150 million mature on December 15, 2025; and $200 million mature on April 14, 2026. As of June 30, ~~2022,~~2023, the weighted-average remaining term of the term loans was 2.5 years. Refer to Not e 9 for additional discussion regarding the purpose of these transactions. Subsequent to the closing of the Core JV, our floating rate debt, after consideration of our interest rate swaps, is $125 million, or 4% of total leverage.

(3)As of June 30, 2023, we had capacity to borrow up to $~~840.9~~$703.7 million under our revolving credit facility after consideration of undrawn letters of credit. The revolving credit facility bears interest at a ~~1-month~~one-month Term SOFR plus ~~0.89~~%0.89%, based on our current credit rating, and a SOFR adjustment of ~~10 basis points, based on our current credit rating.~~10-basis points. As of June 30, ~~2022,~~2023, the weighted-average interest rate for our revolving credit facility was ~~3.2~~%. 6.1%

~~(5)~~

During the three months ended June 30, ~~2022,~~2023, we ~~issued three tranches~~established a secured credit facility that provides for up to $1 billion of ~~guaranteed, senior~~committed property level financing, on an as needed basis. The facility has minimal upfront costs, a 15-year term, and provides AIR the opportunity to place up to 10-year non-recourse property debt financing. Pricing can be fixed rate or variable rate at AIR's choice and is based on the Fannie Mae grid. After consideration of the secured credit facility, total liquidity is approximately $1.8 billion.

Under our credit agreement and unsecured notes ~~totaling $400~~ ~~million at a weighted-average effective interest rate of~~ ~~4.3%, inclusive of the previously-placed treasury lock, and a weighted-average maturity of~~ ~~eight years~~.

~~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~~maximum leverage ratio of no greater than 0.60 to ~~1.00~~;1.00; a ~~Fixed Charge Coverage Ratio~~fixed charge coverage ratio of ~~greater~~no less than ~~1.5~~x,1.50 to 1.00, a ~~Maximum Secured Indebtedness~~maximum secured indebtedness to ~~Total Assets~~total assets ratio of no greater than ~~0.45~~0.40 to 1.00, ~~through March 31, 2023, and~~ ~~0.40~~ to ~~1.00~~ ~~thereafter,~~ a ~~Maximum Unsecured Leverage~~maximum unsecured leverage ratio no greater than 0.60 to 1.00,, and a ~~Minimum Unsecured Interest Coverage Ratio~~minimum unsecured interest coverage ratio no ~~greater~~less than 1.50 to ~~1.00. We were in compliance with these covenants as of June 30, 2022 and expect to remain in compliance during the next 12 months.~~

1.00.

Note 6 — Commitments and Contingencies

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 condensed consolidated financial condition, results of operations, or cash flows.

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Environmental

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

We 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 June 30, ~~2022,~~2023, are immaterial to ourour condensed consolidated financial statements.

Note 7 — Earnings and Dividends per Share and per Unit

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

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Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Earnings (loss) per share

Numerator:

Basic and dilutive net income (loss) attributable to AIR common stockholders
$
196,722

$
(18,030
)

$
572,603

$
65,166

Denominator – shares:

   Basic weighted-average common shares outstanding

155,927

154,608

156,327

151,609

   Dilutive common share equivalents outstanding

209

—

280

474

Dilutive weighted-average common shares outstanding

156,136

154,608

156,607

152,083

Earnings (loss) per common share – basic and diluted
$
1.26

$
(0.12
)

$
3.66

$
0.43

Earnings (loss) per unit

Numerator:

Basic and dilutive net income (loss) attributable to the AIR Operating Partnership's common unitholders
$
209,471

$
(18,975
)

$
609,519

$
68,657

Denominator – units

   Basic weighted-average common units outstanding

166,023

162,698

166,434

159,701

   Dilutive common unit equivalents outstanding

209

—

280

474

Dilutive weighted-average common units outstanding

166,232

162,698

166,714

160,175

Earnings (loss) per common unit – basic and diluted
$
1.26

$
(0.12
)

$
3.66

$
0.43


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Earnings per share
Numerator:
Basic and dilutive net (loss) income attributable to AIR common stockholders	$	(1,439)	$	196,722	$	(12,896)	$	572,603



Denominator – shares:
Basic weighted-average common shares outstanding	148,832		155,927		148,821		156,327
Dilutive common share equivalents outstanding	—		209		—		280
Dilutive weighted-average common shares outstanding	148,832		156,136		148,821		156,607

Earnings per share – basic and diluted	$	(0.01)	$	1.26	$	(0.09)	$	3.66


Earnings per unit
Numerator:
Basic and dilutive net (loss) income attributable to the AIR Operating Partnership’s common unitholders	$	(1,754)	$	209,471	$	(14,037)	$	609,519



Denominator – units:
Basic weighted-average common units outstanding	159,778		166,023		159,531		166,434
Dilutive common unit equivalents outstanding	—		209		—		280
Dilutive weighted-average common units outstanding	159,778		166,232		159,531		166,714

Earnings per unit – basic and diluted	$	(0.01)	$	1.26	$	(0.09)	$	3.66

For the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, dividends and distributions paid per share of Common Stock and per common unit were $~~0.45~~$0.45 and $$0.90, respectively.

~~0.90~~Table of Contents~~, respectively,~~

The number of common share equivalent securities excluded from the diluted earnings per share calculation was 2.2 million for the three and $~~0.43~~six months ended June 30, 2023, and $~~0.86~~,1.7 million and 1.6 million for the three and six months ended June 30, 2022, respectively.

These securities, which include preferred OP Units redeemable for Common Stock, were excluded from the earnings per share calculation as they are anti-dilutive.

Note 8 — Fair Value Measurements

~~Recurring Fair Value Measurements~~

~~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 (loss). 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 $~~3.3~~ ~~million of the unrealized losses in accumulated other comprehensive income.~~

~~Additionally, in connection with our issuance of senior unsecured notes, we entered into a $400~~ ~~million treasury hedge,~~ ~~locking the interest rate of the ten-year treasury at~~ ~~2.43~~%~~. During the three months ended June 30, 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 unrealized gains (losses) on derivative instruments in other comprehensive income (loss) and will be amortized to interest expense over the term of the senior unsecured notes issued.

~~During 2020, we paid an upfront premium of $12.1~~ million for the option to enter into an interest rate swap at a future date. In connection with the separation on December 15, 2020 (“Separation”), AIR assigned all of the risks and rewards of ownership related to this swap to Aimco, with an offsetting and equal asset and liability recognized for the amount of gain or loss.

We estimate the fair value of certain assets and liabilities using pricing models that rely on observable market information, including contractual terms, market prices, and interest rate yield curves. A three-level valuation hierarchy prioritizes observable and unobservable inputs used to measure fair value, as described below:

•Level 1 – Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

~~These~~•Level 2 – Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

•Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

Recurring Fair Value Measurements

The following table summarizes investments ~~are~~ measured at fair value on a recurring basis, ~~and~~which are presented in other assets, net, and accrued liabilities and other in our condensed consolidated balance ~~sheets.~~sheets (in thousands):


	As of June 30, 2023								As of December 31, 2022
	Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3
Interest rate option (1)	$	—	$	—	$	—	$	—	$	53,481	$	—	$	53,481	$	—
Interest rate swaps - pay-fixed, receive floating	$	35,395	$	—	$	35,395	$	—	$	32,222	$	—	$	32,222	$	—
Interest rate swaps - pay-floating, receive fixed	$	(1,959)	$	—	$	(1,959)	$	—	$	—	$	—	$	—	$	—
Treasury rate lock	$	2,236	$	—	$	2,236	$	—	$	319	$	—	$	319	$	—

(1)

~~The following table summarizes fair value for our~~During the three months ended June 30, 2023, the interest rate swap option asset and ~~swaps (in thousands):~~

As of June 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

$
47,990

$
—

$
47,990

$
—

$
21,699

$
—

$
21,699

$
—

Interest rate swap asset

$
4,052

$
—

$
4,052

$
—

$
—

$
—

$
—

$
—

Interest rate swap liability

$
(4,988
)

$
—

$
(4,988
)

$
—

$
—

$
—

$
—

$
—

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~~We have not posted any collateral related to these agreements. If we had breached any of these provisions at June 30, 2022, we could have been required to settle our swap~~offsetting liability associated with the Parkmerced mezzanine investment was settled, resulting in equal decreases in other assets and accrued liabilities ~~including accrued interest, under the agreements at their termination value of $~~and other.~~3.6~~ ~~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 June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, due to their relatively short-term nature and high probability of realization. The carrying value of our ~~unsecured notes payable,~~ revolving credit facility and term loans, which we classify as Level 2 in the GAAP fair value hierarchy, approximated their estimated fair value as of June 30, ~~2022~~2023 and December 31, ~~2021.~~

2022, as they bear interest at floating rates which approximate market rates.

We classify the fair value of our non-recourse property debt, unsecured notes payable, and seller financing notes receivable within Level 2 of the GAAP fair value hierarchy, as summarized in the following table (in thousands):


	As of June 30, 2023				As of December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Non-recourse property debt	$	2,211,002	$	1,966,566	$	1,994,651	$	1,753,222
Unsecured notes payable	$	400,000	$	373,648	$	400,000	$	371,368
Seller financing note receivable, net (1)	$	32,032	$	32,573	$	31,611	$	32,286

(1)During the year ended December 31, 2022, we provided $40.0 million of seller financing as partial consideration for the sale of our New England portfolio. The contractual interest rate on the note is 4.5%. The difference between the stated rate and the effective interest rate as of the date of sale resulted in a discount recorded of $8.5 million. The seller financing note and related discount are included in other assets, net in our condensed consolidated balance sheets.

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Nonrecurring Fair Value Measurements

As of June 30, 2023, assets measured at fair value on a nonrecurring basis in our condensed consolidated balance sheets consist of one real estate asset that was written down to its estimated fair value for impairment purposes. Our estimate of fair value was determined using the stated price within the purchase and sale agreement for this asset, which is classified as Level 2 within the GAAP fair value hierarchy. As of June 30, 2023, the fair value of the real estate asset, net of estimated transaction costs, measured on a nonrecurring basis was $19.9 million. There were no assets measured at fair value on a nonrecurring basis as of December 31, 2022. Refer to Note 3 for further detail on the non-cash impairment.

Note 9 — Derivative Financial Instruments and Hedging Activities

Risk Management Objective of Using Derivatives

Our objectives in using interest rate derivatives are to add predictability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps and treasury locks as part of our interest rate management strategy. Interest rate swaps involve the receipt of variable-rate and fixed-rate amounts from a counterparty in exchange for us making fixed-rate or variable-rate payments over the life of the agreements without exchange of the underlying notional amounts.

Changes in fair value of derivatives designated as cash flow hedges are recognized in accumulated other comprehensive income and subsequently reclassified into earnings as an increase or decrease to interest expense. During the three and six months ended June 30, 2023, we reclassified gains of $5.4 million and $9.5 million out of accumulated other comprehensive income into interest expense, respectively. During the three and six months ended June 30, 2022, we reclassified losses of $2.0 million and $2.0 million out of accumulated other comprehensive income into interest expense, respectively.

Changes in fair value of derivatives not designated in a hedge relationship, or economic hedges, are recognized in gain on derivative instruments in our condensed consolidated statements of operations once realized. During the three and six months ended June 30, 2023, we recorded gains of $11.4 million and $9.3 million, respectively. During the three and six months ended June 30, 2022, no amounts were recognized related to derivatives not designated in a hedge relationship.

During the three months ended June 30, 2023, we decided to de-designate $830 million of pay-fixed, receive-floating interest rate swaps. As a result, the accumulated unrealized gains at time of de-designation of $29.5 million will be reclassified into earnings over the remaining term of the associated debt, and future changes in the fair value of these derivatives will be recognized in gain on derivative instruments, net in our condensed consolidated statements of operations.

As of June 30, 2023, we estimate that during the next 12 months, we will reclassify into earnings approximately $10.8 million of the unrealized gain in accumulated other comprehensive income.

During the three months ended June 30, 2023, we entered into $480 million of pay-floating, receive-fixed interest rate swaps, which will not be designated as accounting hedges and accordingly, the changes in the fair value of these derivatives are recognized in gain on derivative instruments, net, in our condensed consolidated statements of operations. These derivative instruments economically offset $480 million of the previously issued interest rate swaps noted above and were done in anticipation of the closing of the Core JV, as proceeds from the transaction were utilized to pay off $325 million of previously hedged term loans. As a result of these instruments, we expect to receive monthly fixed interest income representing the spread between the pay-fixed and receive-fixed legs of our interest rate swap positions over a weighted-average term of 3.4 years.

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

As of June 30, 2022

As of December 31, 2021

Carrying Value

Fair Value

Carrying Value

Fair Value

Non-recourse property debt

$
2,036,027

$
1,871,223

$
2,305,756

$
2,367,713


	As of June 30, 2023
	Number of	Aggregate Notional		Derivative Assets (included in Other Assets, net)		Derivative Liabilities (included in Accrued Liabilities and Other)
	Instruments	Amount		Fair Value
Derivatives designated as hedging instruments:
Treasury rate locks	1	$	150,000	$	2,236	$	—
Derivatives not designated as hedging instruments:
Interest rate swap, floating to fixed	10	$	830,000	$	35,395	$	—
Interest rate swap, fixed to floating	6	$	480,000	$	—	$	(1,959)


	As of December 31, 2022
	Number of	Aggregate Notional		Derivative Assets (included in Other Assets, net)		Derivative Liabilities (included in Accrued Liabilities and Other)
	Instruments	Amount		Fair Value
Derivatives designated as hedging instruments:
Treasury rate locks	1	$	100,000	$	319	$	—
Interest rate swaps, floating to fixed	10	$	830,000	$	32,222	$	—

Note 910 — Variable Interest Entities

Consolidated Entities

AIR consolidates the AIR Operating Partnership, a 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~~those of the AIR Operating Partnership.

The AIR Operating Partnership consolidates (i) ~~five~~four VIEs that own 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 interests~~owns an interest in ~~properties~~a property leased to a third ~~parties. The assets and liabilities of the VIEs associated with the leased properties consist of our net investment in the leases.~~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.

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


	June 30, 2023 (1)	December 31, 2022
VIEs with interests in apartment communities	4	5
Apartment communities owned by VIEs	15	16
Apartment homes in communities owned by VIEs	5,041	5,369

(1)During the three months ended June 30, 2023, we purchased the remaining noncontrolling interest in a consolidated limited partnership in one apartment community with 328 apartment homes. Subsequent to this purchase, this apartment community no longer represents a VIE.

June 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

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

June 30, 2022

December 31, 2021

ASSETS:

Net real estate

$
1,080,247

$
1,096,039

Cash and cash equivalents

42,668

29,863

Restricted cash

2,202

2,380

Other assets, net

22,446

21,745

LIABILITIES:

Non-recourse property debt

$
1,219,770

$
1,227,345

Accrued liabilities and other

35,899

34,659

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	June 30, 2023		December 31, 2022
ASSETS:
Net real estate	$	1,040,597	$	1,066,482
Cash and cash equivalents	71,262		54,319
Restricted cash	2,009		2,378
Other assets, net	21,465		20,944
LIABILITIES:
Non-recourse property debt, net	$	1,204,242	$	1,212,065
Accrued liabilities and other	36,246		35,365

Unconsolidated Entities

As discussed in

~~During 2021,~~Note 3, during the three months ended June 30, 2023, we formed aan unconsolidated joint venture with ~~an affiliate of Blackstone~~a global asset manager, by selling an 80%a 70% interest in ~~three multi-family properties with~~ ~~1,748~~ ~~units~~our Huntington Gateway property, a 443-unit property located in Virginia. Our 20%30% interest and $28.0 million preferred interest in the joint venture meets the definition of a ~~VIE,~~VIE; however, we are not the primary beneficiary and do not consolidate ~~these communities.~~this community. As of June 30, ~~2022 and December 31, 2021,~~2023, the carrying value of ~~the investment of $21.7~~AIR's interest is $34.6 million, ~~and $26.0~~ ~~million, respectively,~~which is included in other assets, net, in our condensed consolidated balance sheets. ~~AIR's~~As of June 30, 2023, AIR’s exposure to the obligations of the VIE is limited to the carrying value of the limited partnership interests, and 20%$28.2 million of ~~Blackstone's~~the joint venture's guarantor non-recourse liabilities, which represents 30%.

We have a 20% interest in a joint venture with an affiliate of Blackstone, which meets the definition of a VIE. The joint venture includes three multi-family properties with 1,748 units located in Virginia. We are not the primary beneficiary and do not consolidate these communities. As of June 30, 2023 and December 31, 2022, the carrying value of the investment of $19.4 million and $20.7 million, respectively, is included in other assets, net, in our condensed consolidated balance sheets. As of June 30, 2023, AIR’s exposure to the obligations of the VIE is limited to the carrying value of the limited partnership interests, and $79.0 million of Blackstone’s guarantor liabilities, which ~~were $~~79 ~~million as of June 30, 2022.~~

represents 20%.

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. As of June 30, ~~2022,~~2023 and December 31, ~~2021,~~2022, the investment balance of $~~354.4~~$158.5 million and $~~337.8~~$158.7 million, respectively, is included in other assets, net, in our condensed consolidated balance sheets. Subsequent to the ~~Separation,~~December 2020 separation from Apartment Investment and Management Company (“Aimco”), all risks and rewards of ownership are ~~Aimco’s,~~Aimco’s; however, as legal transfer has not occurred, there is an equal and offsetting liability included in accrued liabilities and other in our condensed consolidated balance sheets. Accordingly, there is no net effect on AIR’s stockholders’ equity or the AIR Operating ~~Partnership's partners'~~Partnership’s partners’ capital.

Note 1011 — 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~~have reached a stabilized level of operations. Our Other Real Estate segment includes 5four properties acquired in ~~2021, three~~2022, four properties previously leased to Aimco, one property acquired in ~~the second quarter of 2022,~~2023, and 3 ~~communities we expect to sell or lease to a third party, but do not yet meet the criteria~~one community that is expected to be ~~classified as held for sale.~~

sold.

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

As of June 30, ~~2022,~~2023, our Same Store segment included 6463 apartment communities with ~~22,022~~22,794 apartment homes and our Other Real Estate segment included 1110 apartment communities with ~~3,341~~2,945 apartment homes.

The following tables present the total revenues, property operating expenses, proportionate property net operating income (loss), and income (loss) before income tax ~~(expense) benefit~~expense of our segments on a proportionate ~~basis.~~ basis, excluding amounts

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related to communities sold. To reflect how the CODM evaluates the business, prior period segment information has been recast to conform with our reportable segment composition as of June 30, ~~2022~~2023 (in thousands):

Same
Store

Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Three months ended June 30, 2022:

Total revenues
$
142,066

$
17,279

$
20,047

$
4,108

��
$
183,500

Property operating expenses

37,556

6,765

9,691

9,775

63,787

Other operating expenses not allocated to segments (3)

0

0

0

80,913

80,913

Total operating expenses

37,556

6,765

9,691

90,688

144,700

Proportionate property net operating income (loss)

104,510

10,514

10,356

(86,580
)

38,800

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

0

0

0

174,358

174,358

Income before income tax expense
$
104,510

$
10,514

$
10,356

$
87,778

$
213,158

Same
Store

Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Six months ended June 30, 2022:

Total revenues
$
280,174

$
32,113

$
39,744

$
12,947

$
364,978

Property operating expenses

75,059

12,873

19,698

19,393

127,023

Other operating expenses not allocated to segments (3)

0

0

0

176,077

176,077

Total operating expenses

75,059

12,873

19,698

195,470

303,100

Proportionate property net operating income (loss)

205,115

19,240

20,046

(182,523
)

61,878

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

0

0

0

552,085

552,085

Income before income tax expense
$
205,115

$
19,240

$
20,046

$
369,562

$
613,963

~~Table of Contents~~

Same
Store

Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Three months ended June 30, 2021:

Total revenues
$
134,478

$
1,840

$
19,400

$
22,615

$
178,333

Property operating expenses

38,990

1,263

10,050

14,455

64,758

Other operating expenses not allocated to segments (3)

0

0

0

83,527

83,527

Total operating expenses

38,990

1,263

10,050

97,982

148,285

Proportionate property net operating income (loss)

95,488

577

9,350

(75,367
)

30,048

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

0

0

0

(51,770
)

(51,770
)
Income (loss) before income tax benefit
$
95,488

$
577

$
9,350

$
(127,137
)

$
(21,722
)

Same
Store

Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Six months ended June 30, 2021:

Total revenues
$
268,036

$
3,004

$
38,623

$
45,083

$
354,746

Property operating expenses

76,891

2,396

19,814

30,274

129,375

Other operating expenses not allocated to segments (3)

0

0

0

166,097

166,097

Total operating expenses

76,891

2,396

19,814

196,371

295,472

Proportionate property net operating income (loss)

191,145

608

18,809

(151,288
)

59,274

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

0

0

0

11,199

11,199

Income (loss) before income tax expense
$
191,145

$
608

$
18,809

$
(140,089
)

$
70,473


	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)		Consolidated
Three months ended June 30, 2023:
Total revenues	$	160,180	$	29,684	$	22,385	$	2,311	$	214,560
Property operating expenses	41,330		10,640		11,496		8,546		72,012
Other operating expenses not allocated to segments (3)	—		—		—		97,802		97,802
Total operating expenses	41,330		10,640		11,496		106,348		169,814
Proportionate property net operating income (loss)	118,850		19,044		10,889		(104,037)		44,746
Other items included in income (loss) before income tax expense (4)	—		—		—		(42,971)		(42,971)
Income (loss) before income tax expense	$	118,850	$	19,044	$	10,889	$	(147,008)	$	1,775


	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)		Consolidated
Six months ended June 30, 2023:
Total revenues	$	318,082	$	59,501	$	44,327	$	4,643	$	426,553
Property operating expenses	82,577		21,911		22,860		20,117		147,465
Other operating expenses not allocated to segments (3)	—		—		—		204,308		204,308
Total operating expenses	82,577		21,911		22,860		224,425		351,773
Proportionate property net operating income (loss)	235,505		37,590		21,467		(219,782)		74,780
Other items included in income (loss) before income tax expense (4)	—		—		—		(82,814)		(82,814)
Income (loss) before income tax expense	$	235,505	$	37,590	$	21,467	$	(302,596)	$	(8,034)


	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)		Consolidated
Three months ended June 30, 2022:
Total revenues	$	147,075	$	3,718	$	19,894	$	12,813	$	183,500
Property operating expenses	39,667		1,989		9,630		12,501		63,787
Other operating expenses not allocated to segments (3)	—		—		—		80,913		80,913
Total operating expenses	39,667		1,989		9,630		93,414		144,700
Proportionate property net operating income (loss)	107,408		1,729		10,264		(80,601)		38,800
Other items included in income before income tax expense (4)	—		—		—		174,358		174,358
Income before income tax expense	$	107,408	$	1,729	$	10,264	$	93,757	$	213,158


	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)		Consolidated
Six months ended June 30, 2022:
Total revenues	$	290,405	$	4,952	$	39,428	$	30,193	$	364,978
Property operating expenses	79,553		2,928		19,511		25,031		127,023
Other operating expenses not allocated to segments (3)	—		—		—		176,077		176,077
Total operating expenses	79,553		2,928		19,511		201,108		303,100
Proportionate property net operating income (loss)	210,852		2,024		19,917		(170,915)		61,878
Other items included in income before income tax expense (4)	—		—		—		552,085		552,085
Income from before income tax expense	$	210,852	$	2,024	$	19,917	$	381,170	$	613,963

(1)

Represents adjustments ~~for third-party~~to: (i) include AIR’s proportionate share of the results of unconsolidated apartment communities, which is excluded in the related consolidated amounts, and (ii) exclude the noncontrolling interests in consolidated real estate partnerships’ proportionate share of the results of communities, ~~in our segments,~~ which ~~are~~is included in the related consolidated ~~amounts but excluded from proportionate property NOI for our segment evaluation.~~amounts. Also includes the reclassification of utility reimbursements from revenues to property operating

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expenses for the purpose of evaluating segment results. Utility reimbursements are included in rental and other property revenues in our condensed consolidated statements of operations prepared in accordance with GAAP.

(2)

~~Includes~~Includes: (i) 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~~any, (ii) 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.~~

measure, and (iii) the depreciation of capitalized costs of non-real estate assets.

(3)

Includes depreciation and amortization, general and administrative expenses, and other ~~(income)~~ expenses, 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 interest income, interest expense, loss on extinguishment of debt, gain on dispositions of real estate, provision for impairment loss, and ~~derecognition of leased properties, interest income, including interest income related to the leased properties, interest expense,~~ loss from unconsolidated real estate ~~partnerships, and loss on extinguishment of debt.~~

partnerships.

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

June 30, 2022

December 31, 2021

Same Store

$
3,978,640

$
3,962,175

Other Real Estate

1,270,661

788,572

Corporate and other assets (1)

1,183,984

1,689,613

Total consolidated assets

$
6,433,285

$
6,440,360


	June 30, 2023		December 31, 2022
Same Store	$	4,481,117	$	4,610,356
Other Real Estate	1,466,200		1,251,581
Corporate and other assets (1)	459,693		689,946
Total consolidated assets	$	6,407,010	$	6,551,883

(1)

Includes the assets not allocated to our segments including: (i) corporate assets; (ii) ~~our note receivable from Aimco, which was partially paid off during~~ the ~~second quarter of 2022; (iii) our~~ mezzanine loan ~~investment;~~investment where the rights and ~~(iv) assets~~obligations of ~~leased apartment communities,~~ownership have been assigned to Aimco; and (iii) properties sold ~~properties,~~ or ~~properties~~ classified as held for ~~sale as of June 30, 2022.~~

sale.

For the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, capital additions related to our segments were as follows (in thousands):


	2023		2022
Same Store	$	80,362	$	85,695
Other Real Estate	7,675		658
Total capital additions	$	88,037	$	86,353

2022

2021

Same Store

$
72,768

$
53,930

Other Real Estate

16,891

300

Total capital additions

$
89,659

$
54,230

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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 and the formation of 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~~third parties and our ability to collect property management and asset management related 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: the effects of the 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 inflation, the pace of job growth, ~~and~~ the level of ~~unemployment;~~unemployment, and recession; the amount, location, and quality of competitive new housing 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 the section entitled “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, ~~2021,~~2022, and subsequent filings with the SEC.

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.

These forward-looking statements reflect management’s judgment as of this date, and we assume no obligation to revise or update them to reflect future events or circumstances.

Certain financial and operating measures found herein and used by management are not defined under GAAP. These measures are defined and reconciled to the most directly 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 to be the most efficient and effective way to invest in U.S. multi-family real 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~~Continuously improve our best-in-class property operations platform, the “AIR Edge,” to generate above-market organic growth.

•

Maintain an efficient cost structure ~~with~~and our commitment to keep net general and administrative expenses less than or equal to ~~15 basis~~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 a leverage neutral basis.

•

~~Develop~~Form private capital partnerships as a source of equity capital for accretive growth.

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•

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.~~point, in 10 states and the District of Columbia. As of June 30, ~~2022,~~2023, our portfolio included 7573 apartment communities with ~~25,363~~25,739 apartment homes, in which we held an average ownership of approximately ~~88%~~87%.

We also have one land parcel and one indirect land interest that we lease to third parties.

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~~strategy are further described in the sections that follow.

Operational Excellence

Second quarter 2023 Same Store ~~highlights~~NOI margin was 74.2%, up 120-basis points year-over-year and an AIR record for the second quarter, ~~of 2022 include:~~

•

~~Revenue increased by 11.6% and NOI increased by 16.4%, respectively, compared to~~ the ~~second quarter of 2021;~~

result of:

•8.8% growth in Residential Rents, and

~~NOI margins were 73.6%, up 304~~•Sustained cost control with controllable expenses increasing only 100 basis points.

Second quarter signed lease rate growth is higher than assumed in our annual plan with a blended rate increase of 6.5% benefiting from (i) 10-basis points from 2021 acquisitions (now in Same Store) and (ii) 70-basis points from capital enhancement activity.

Average Daily Occupancy ("ADO") declined 190-basis points sequentially due to (i) normal and expected seasonality (110-basis points of decline) due to the ~~second quarter~~frictional vacancy of ~~2021;~~the leasing season and

•

~~For leases becoming effective during the quarter, new lease rents~~ (ii) increased ~~by 18.9% and renewal rents increased by 11.1%, for a weighted-average increase~~move-outs of ~~14.3%;~~

~~Same Store Markets~~

In the second quarter, AIR enjoyed stronger than typical consumer demand across all markets. Signed new lease rates were up 18.4% from the prior lease, with renewals up 10.6%, resulting in a weighted-average increase of 14.1%non-paying residents as COVID-related protections expired (60-basis points). ~~We saw sequential declines in~~ ADO ~~associated with higher move out volume during the summer leasing season. Second quarter ADO of 96.8% was 160 basis points higher than the prior year.~~

~~2021 Acquisition Performance~~

Included in AIR's acquisition portfolio are five properties acquired in 2021. Leasing at these properties has exceeded our expectations. Transacted new lease rates were up 28%, with renewals up 25%, resulting in a weighted-average increase of 26%. Fourth quarter revenue growth in this portfolio, the first reporting period with a year-over-year comparison, is anticipated to be 600 basis points above the Same Store portfolio. We anticipate our 2022 acquisitions will also grow faster than the Same Store portfolio. We will report their results as comparative data becomes available.

~~Portfolio Management~~

~~Our portfolio of apartment communities is diversified across primarily "A"~~reach its low point in July, and ~~"B" price points, averaging “B/B+” in quality, and also across eight core markets~~then increase in the ~~United States. Since Separation, we have reduced our allocation to New York City~~third and ~~Chicago and increased our investment in Miami-Dade and Broward counties to 18% of GAV.~~fourth quarters.

Acquisition Portfolio Performance

Year-over-Year Variance (1)

Year

Apartment Communities

% of Gross Asset Value

Rev

Exp

NOI

Class of 2021 (2)

8.0%

19.0%

(2.2%)

30.5%


			Sequential Variance (3)
Year	Apartment Communities	% of Gross Asset Value	NOI
Class of 2021 (2)	5	8.0%	4.9%
Class of 2022 and 2023 (4)	5	9.0%	3.4%
Acquisition Portfolio	10	17.0%	4.1%

Total Portfolio	73	100.0%	1.7%

(1)

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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 periodRepresents variance 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.

AIR uses "paired trades" to fund acquisitions, basing our cost of capital on the anticipated unlevered internal rates of return ("IRR") of the communities sold. We require an unlevered IRR at least 200 basis points higher on the communities purchased. As our cost of capital has increased, we have raised our required returns. 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 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.

Since Separation, we have acquired $1.4 billion of properties new to the AIR operating platform. This represents approximately 11% of our portfolio; our target is 30%. In a typical AIR Edge acquisition, the acquired property will experience NOI growth at market rates for six to 12 months, as the property is integrated onto AIR’s platform. During the following two to four years, NOI growth is expected to exceed the market growth rate by two or three times.

For example, AIR acquired five properties in 2021, at a cost of approximately $730 million. At the time, market cap rates were in the high 3% range. With confidence in the AIR Edge, we underwrote a first year yield of 4.3% and a long-term unlevered IRR of approximately 9%. We now expect these acquisitions will outperform their first-year underwriting by $2.6 million, or 9%, increasing the annualized fourth quarter 2022 yield to 5.0% and the expected long-term unlevered IRRs to over 11%.

When market conditions change, AIR adjusts its target returns and spreads to reflect the new environment. AIR seeks acquisitions that are accretive to earnings in the near term and that generate unlevered IRRs at least 200 basis points higher than the expected returns of the properties sold in the paired trade.

~~Transactions~~

~~Acquisitions~~

~~During~~ the three months ended June 30, ~~2022~~2023, compared to three months ended June 30, 2022.

(2)Acquisitions from 2021 are included in, and ~~through July, we acquired four apartment communities, one located in the Washington, D.C. area and three located in South Florida, with 1,351 apartment homes~~contribute to, Same Store Portfolio metrics.

(3)Represents variance for ~~a total purchase price of $640.1 million.~~

We also reached an agreement with Aimco to cancel existing master leases at four properties owned by AIR and leased to Aimco for the purpose of their development. With the developments largely completed, we agreed to terminate the leases for a payment of $200 million. The four properties include 865 apartment homes with average monthly rents of approximately $3,400 per home.

~~In aggregate, we anticipate a first year NOI yield of 4.0%. The yield is anticipated to grow to 5.0%, annualized, by the third quarter of next year. The expected unlevered IRR is approximately 9%.~~

~~Dispositions~~

~~During~~ the three months ended June 30, ~~2022, we~~2023, compared to three months ended March 31, 2023.

(4)Acquisition property results are often volatile, sometimes by design, when properties are first added to the AIR platform. Common examples are the implementation of AIR’s “no smoking” policy and AIR’s requirement of high credit ratings from new residents. Over three or four years, results become stable as new residents are selected by AIR, increasing numbers of high quality residents renew their leases, and the disturbance of property upgrades is in the past.

Transactions

AIR has property operation expertise, termed the AIR Edge, which results in higher property NOI, enabling AIR to acquire properties and deploy the AIR Edge to improve their profitability and value. This enables AIR to sell properties

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at market NOI cap rates and unlevered IRRs, and to reinvest capital in acquisition properties which generally enjoy accelerated growth in profitability relative to general market rates.

AIR’s business is to acquire properties, deploy the AIR Edge, and generate returns 200-basis points, or higher, than AIR’s cost of capital, as measured by unlevered IRR. “Paired trades” make agnostic to changes in market conditions insofar as AIR is buying and selling at roughly the same time. The benefits – enhanced total NOI growth and higher FFO – are realized primarily in years two through four as it requires more than one turn of the rent roll to implement AIR’s menu of high credit standards, measured customer satisfaction, customer retention, lowered operating costs, and completion of planned capital improvements.

Joint Venture Transactions

As previously announced, AIR formed two joint ventures in the quarter, the first of which closed on June 30, 2023 through the sale of a 70% interest in Huntington Gateway (the “Value-Add JV”), and the second of which closed on July 17, 2023 through the sale of a 47% interest in eight of ten properties (the “Core JV”). The remaining two properties within the Core JV are expected to close before year-end. AIR now has four separate joint venture partnerships, each (i) with world-class investors interested in doing more with AIR, (ii) paying asset and property management fees, and (iii) providing substantial opportunity to earn “promotes.” For AIR, joint ventures are a strategic source of attractively priced capital, and provide AIR the resources to pursue a broader opportunity set to pursue growth. AIR expects to sell further interests of the existing joint ventures to increase expected returns on its retained investment, and to make available additional capital to invest in future AIR Edge properties with higher returns.

California JV

Washington, D.C. JV

Core JV

Value-Add JV

September 2020

October 2021

July 2023

June 2023

Gross Asset Value @ 100%

$2.4B

$0.5B

$1.1B

$0.1B

AIR / JV Partner Ownership

61% / 39%

20% / 80%

53% / 47%

30% / 70% (1)

Number of Properties

Units

4,051

1,748

3,093

443

Average Revenue per Unit

$3,389

$2,070

$2,534

$2,307

(1)Legal ownership sold ~~four~~is 70%, while AIR will receive 50% of JV cash flow during the hold period.

Dispositions

AIR is nearing completion of its strategic exit from New York City through:

•The sale of two properties with 62 apartment ~~communities, three located in California and one in Virginia, with 718 apartment~~ homes to a developer for gross proceeds of ~~$203.1~~$33.2 million atand a ~~trailing twelve-month NOI cap rate~~non-cash GAAP loss of ~~4.7%, reflecting AIR’s low property tax basis. Adjusting for market rate real estate taxes, the NOI cap rate is 4.0%. Net sales proceeds, after transaction costs~~$8.2 million; and ~~repayment of debt at the sold properties, were $186.6 million.~~

26•

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~~During the balance of 2022, we anticipate selling approximately $550 million of communities in suburban Boston and~~Signing a contract to sell its remaining New York City property, at ~~expected trailing twelve-month NOI cap rates~~a price which resulted in a non-cash GAAP write-down of ~~approximately 4%. The proceeds are expected to be used to fund~~$15.4 million.

In aggregate since the ~~Aimco lease cancellation, the four apartment communities acquired in 2022, and the completed share repurchases.~~

~~Capital Allocation – Share Repurchases~~

~~During the three months ended June 30, 2022,~~Separation, AIR ~~repurchased 2.9 million shares for $125 million, an average price~~has recognized non-cash GAAP gains of ~~$42.93 per share. We are authorized to purchase an additional $375 million~~$1.5 billion on $2.2 billion of ~~shares. We regularly consider buybacks relative to alternative uses of capital.~~

dispositions.

Balance Sheet

~~We seek to increase~~ and Liquidity

To lower its cost of capital and enhance financial returns, ~~by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage and primarily long-dated debt. We target a leverage~~AIR targets Net Leverage to EBITDAre ~~ratio of approximately 5:5:1, and anticipate the actual ratio will vary based~~between 5.0x to 6.0x with focus on ~~the timing of transactions.~~fixed-rate, long-term debt with well laddered maturities. We maintain ~~financial~~ flexibility through (i) ample unused and available credit, (ii) holding properties with substantial value unencumbered by property debt, and (iii) maintaining an investment grade ~~rating,~~rating.

Balance sheet highlights, pro forma for the announced joint ventures, include:

•Reduction in Net Leverage to EBITDAre to 5.9x, within AIR’s targeted range, and ~~using partners’ capital when it enhances financial returns or reduces investment risk.~~extension of its weighted-average maturities by more than seven months;

•

~~Components~~96% fixed-rate leverage with limited repricing risk before the second quarter of ~~Leverage~~2025;

~~Our leverage includes our share~~•Available liquidity of ~~long-term, non-recourse~~$2.3 billion and access to more potentially secured by $5.8 billion in unencumbered property ~~debt encumbering our apartment communities, together~~value; and

•Limited refunding risk with ~~outstanding borrowings under our revolving credit facility, our term loans, unsecured notes payable, and preferred equity.~~

~~During~~ the three months ended June 30, 2022, we issued three tranches of guaranteed, senior unsecured notes, totaling $400 million at a weighted-average effective interest rate of 4.3%, inclusive of the previously placed treasury lock,ability to fund all maturities through 2027 from cash on hand, and a ~~weighted-average maturity~~10-year commitment to make $1 billion of ~~eight years.~~

Proceeds from the offering were used to repay borrowings on our revolving credit facility. The private placement of unsecured notes is an important step in the transition of AIR from a secured borrower to a primarily unsecured borrower.

During the three months ended June 30, 2022, we received $400 million from Aimco in payment on its note to AIR, inclusive of a $12.9 million prepayment penalty. The $147 million balance and a $4.5 million prepayment penalty were repaid in July. Proceeds were used to repay $350 million in termproperty loans ~~and to reduce borrowings on our revolving credit facility.~~

Please see the Liquidity and Capital Resources section for additional information regarding our leverage and the Leverage Ratios subsection of the Non-GAAP Measures section for further information about the calculation of our leverage ratios.

~~Liquidity~~

We use our revolving credit facility for working capital, other short-term purposes, and to secure letters of credit. As of June 30, 2022, our share of cash and restricted cash, excluding amounts related to tenant security deposits, was $83.6 million and we had the capacity to borrowwith up to ~~$840.9 million under our revolving credit facility, bringing total liquidity to $924.5 million.~~10-year maturities.

~~We manage our financial flexibility by maintaining an investment grade rating from S&P~~

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Dividend and holding communities that are unencumbered by property debt. As of June 30, 2022, we held unencumbered apartment communities with an estimated fair market value of approximately $7.8 billion, more than double the amount from December 31, 2020.

We anticipate seeking an investment grade credit rating from Moody’s. In assigning ratings, Moody’s places significant emphasis on the amount of non-recourse property debt as a percentage of the undepreciated book value of a borrower’s assets. We have lowered the amount of non-recourse property debt by $1.5 billion since December 31, 2020. At June 30, 2022, the AIR share of non-recourse property debt represented 19% of undepreciated book value.

~~Dividends~~

Equity Capital Markets

On July ~~26, 2022, our~~25, 2023, the AIR Board of Directors declared a quarterly cash dividend of $0.45 per share of ~~AIR~~ Common ~~Stock. This amount is~~Stock, payable on August ~~30, 2022,~~29, 2023 to ~~stockholders~~shareholders of record on August ~~19, 2022.~~

~~In setting AIR's 2022 dividend, our~~18, 2023. The Board of Directors targeted a 75% payout ratio on Pro forma FFO in setting the dividend ~~level of approximately 75% of full year FFO per share.~~

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~~The after-tax dividend will benefit from AIR's~~for 2023, which is also expected to have favorable tax characteristics due to AIR’s tax basis refreshed ~~tax basis. Two-thirds~~at the time 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.

In 2022, we currently project a majority of our dividend will be taxed at capital gain rates, with the remainder taxed 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.

Separation from Aimco.

Team and Culture

Our team and culture are keys to our success. We have a relentless focus on productivity and innovation. We continuously seek to reduce costs through the use of additional automation and continued technological investment, and by avoiding costs, for example by retention of residents. We apply this same focus to our general and administrative expenses, expecting these costs to be lower, as a percentage of the gross asset value of our investments, than are our peers’.

We are defined by a commitment to our mission, vision, and values. We strive to provide an exceptional living experience for residents and a great place to work for teammates, to be a good neighbor in the communities we serve, and a good steward for our investors. We are accountable to teammates in return for their hard and meaningful work of providing homes for others. We see our workforce as a team, and not employees only. Our view is relational, and not transactional, reflecting a longer view of the benefits of a cohesive and caring team.

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~~The Compensation and Human Resources Committee of the Board of Directors is responsible for succession planning in all leadership positions, both in the short-term and the long-term, with particular focus on CEO succession.

Our focus on our ~~value of caring for each other, including an opportunity to manage one’s life through flexible work schedules~~team 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,~~culture is widely recognized. In 2023, AIR was named a Kingsley Excellence Elite Five multifamily company and a ~~bonus structure at all levels~~winner of the ~~organization. Consistent with~~2023 Kingsley Excellence Awards for customer service. Of 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.

~~Corporate responsibility is a longstanding~~winners, 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 properties, and we are considering various ways to improve portfolio resilience.

~~During the quarter, AIR was honored as a Kingsley Elite Five, ranking first among public multi-family companies and~~ranked second among all ~~multi-family companies in~~operators, and first among publicly traded REITs. AIR is committed to world-class customer ~~satisfaction.~~

~~In partnership with~~service, which we deliver through listening to, learning from, and responding to our residents every day. We also benefit from the National Leased Housing Association, we continue our longstanding commitment to offer AIR Gives Opportunity Scholarship to students living in affordable housing. During the quarter, we awarded 14 scholarships to students living in affordable housing.

~~AIR has been recognized nationally~~support of great leadership, contributions from exceptional teammates, and a strong culture. These strengths are confirmed by such awards as AIR's 2023 Top Workplaces USA Award (the second consecutive year), a ~~“National~~10-time winner of Top Workplace ~~Winner.” In addition to that national recognition, AIR has previously been recognized as a top workplace~~ in Colorado (by the Denver Post), Top Workplace in Philadelphia (by The Philadelphia Inquirer), and in South Florida (by the Sun Sentinel) as well as Built in 2023 Best Places to Work in Colorado, Los Angeles, Miami, and Washington, D.C. ~~area,~~We take seriously our responsibility to care for our customers, our neighbors, and ~~the San Francisco Bay area. Specifically in 2021, out~~each other as teammates. We are grateful for these recognitions and consider them confirmation of hundreds of participating companies, AIR was one of only six recognized by the Denver Post as a "Top Workplace" in Colorado for each of the past nine 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 the Denver Area's Healthiest Employers in 2022 for the third consecutive year.

our success.

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)~~loss attributable to common stockholders per common share, on a dilutive basis ~~increased $1.38~~was $0.01 and ~~$3.23~~$0.09 for the three and six months ended June 30, 2023, respectively, compared to net income attributable to common stockholders per common share on a diluted basis of $1.26 and $3.66 for the three and six months ended June 30, 2022, ~~compared to 2021,~~ respectively, due primarily toto:

•Impairments recorded in the current year as discussed below as well as lower gains on dispositions of real ~~estate.~~estate,

•Lower interest income from the note receivable from Aimco, which was repaid in the second and third quarters of 2022, and the associated $12.9 million prepayment penalty received from Aimco in connection with its partial repayment during the second quarter of 2022, and

•Higher interest expense due to higher interest rates and higher leverage; offset partially by

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•Increased contribution from property operations, and

•Lower loss on extinguishment of debt.

Pro forma FFO per share was $0.58 and $1.12 for the three and six months ended June 30, 2023, respectively, compared to $0.66 and $1.23 for the three and six months ended June 30, 2022, respectively, ~~compared to $0.52 and $1.02, respectively, for 2021,~~ due primarily to ~~NOI growth~~the below factors. Before consideration of the impact from the Aimco note receivable contribution of $0.15 and ~~higher~~$0.19 per share for the three and six months ended June 30, 2022, Pro forma FFO per share was $0.51 and $1.04, respectively.

• A decrease in interest income ~~from the $12.9 million prepayment penalty received from Aimco.~~as noted above,

28•

An increase in interest expense as noted above; offset partially by

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Increased contribution in property operations.

Results of Operations for the Three and Six Months Ended June 30, ~~2022,~~2023, Compared to ~~2021~~

2022

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~~have reached a stabilized level of operations. Our Other Real Estate segment includes ~~five~~four properties acquired in ~~2021, three~~2022, four properties previously leased to Aimco, one property acquired in ~~the second quarter of 2022,~~2023, and ~~three communities we expect to sell or lease to a third party, but do not yet meet the criteria~~one community that is expected to be ~~classified as held for sale.~~

sold.

Proportionate Property Net Operating Income

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.

We use proportionate property NOI to assess the operating performance of our communities. Proportionate property NOI reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues in accordance with GAAP.

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 in our assessment of segment performance. Accordingly, these items are not allocated to our segment results discussed below.

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Please see Note 1011 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 June 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
$
142,066

$
134,478

$
7,588

5.6
%

$
(7,173
)

(6.0
%)

$
14,761

11.6
%
Other Real Estate

17,279

1,840

15,439

nm

—

—
%

15,439

nm

Total

159,345

136,318

23,027

16.9
%

(7,173
)

(6.0
%)

30,200

22.9
%
Property operating expenses, net of utility reimbursements:

Same Store

37,556

38,990

(1,434
)

(3.7
%)

(1,471
)

(3.8
%)

37

0.1
%
Other Real Estate

6,765

1,263

5,502

nm

—

—
%

5,502

nm

Total

44,321

40,253

4,068

10.1
%

(1,471
)

(3.8
%)

5,539

13.9
%
Proportionate property net operating income:

Same Store

104,510

95,488

9,022

9.4
%

(5,702
)

(7.0
%)

14,724

16.4
%
Other Real Estate

10,514

577

9,937

nm

—

—
%

9,937

nm

Total
$
115,024

$
96,065

$
18,959

19.7
%

$
(5,702
)

(7.0
%)

$
24,661

26.7
%


	Three Months Ended				Historical Change				Change Attributable to Changes in Ownership				Change Excluding Changes in Ownership
(dollars in thousands)	June 30, 2023		June 30, 2022		$		%		$		%		$		%
Rental and other property revenues, before utility reimbursements:
Same Store	$	160,180	$	147,075	$	13,105	8.9	%	$	233	0.1	%	$	12,872	8.8	%
Other Real Estate	29,684		3,718		25,966		nm		—		—	%	25,966		nm
Total	189,864		150,793		39,071		25.9	%	233		0.1	%	38,838		25.8	%
Property operating expenses, net of utility reimbursements:
Same Store	41,330		39,667		1,663		4.2	%	65		0.1	%	1,598		4.1	%
Other Real Estate	10,640		1,989		8,651		nm		—		—	%	8,651		nm
Total	51,970		41,656		10,314		24.8	%	65		0.1	%	10,249		24.7	%
Proportionate property net operating income:
Same Store	118,850		107,408		11,442		10.7	%	168		0.1	%	11,274		10.6	%
Other Real Estate	19,044		1,729		17,315		nm		—		—	%	17,315		nm
Total	$	137,894	$	109,137	$	28,757	26.3	%	$	168	0.1	%	$	28,589	26.2	%

For the three months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, excluding changes attributable to changes in ownership, our Same Store proportionate property NOI increased by ~~$14.7 million, or 16.4%~~10.6%. This increase was attributable primarily to a ~~$14.8~~$12.9 million, or ~~11.6%~~8.8%, increase in rental and other property revenues due to ~~a 750 basis point~~an 8.8% increase in residential rental rates, and a ~~160 basis point~~1.0% increase in ~~ADO to 96.8%,~~late fees and other, partially offset by a ~~200 basis point~~1.1% decrease in ~~bad debt.~~

ADO.

Other Real Estate proportionate property NOI for the three months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, increased by ~~$9.9~~$17.3 million, due primarily to ~~the October 2021 acquisition of~~contribution from one property acquired in 2023, four properties ~~located~~acquired in 2022, and NOI contribution from the ~~Washington, D.C. area and the June 2021 acquisition of City Center~~four properties acquired on ~~7th.~~

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Six Months Ended June 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
$
280,174

$
268,036

$
12,138

4.5
%

$
(14,292
)

(5.9
%)

$
26,430

10.4
%
Other Real Estate

32,113

3,004

29,109

nm

—

—
%

29,109

nm

Total

312,287

271,040

41,247

15.2
%

(14,292
)

(5.9
%)

55,539

21.1
%
Property operating expenses, net of utility reimbursements:

Same Store

75,059

76,891

(1,832
)

(2.4
%)

(2,978
)

(4.0
%)

1,146

1.6
%
Other Real Estate

12,873

2,396

10,477

nm

—

—
%

10,477

nm

Total

87,932

79,287

8,645

10.9
%

(2,978
)

(4.0
%)

11,623

14.9
%
Proportionate property net operating income:

Same Store

205,115

191,145

13,970

7.3
%

(11,314
)

(6.8
%)

25,284

14.1
%
Other Real Estate

19,240

608

18,632

nm

—

—
%

18,632

nm

Total
$
224,355

$
191,753

$
32,602

17.0
%

$
(11,314
)

(6.8
%)

$
43,916

23.8
%

September 1, 2022, when their respective master leases were canceled.


	Six Months Ended		Historical Change			Change Attributable to Changes in Ownership				Change Excluding Changes in Ownership
(dollars in thousands)	June 30, 2023	June 30, 2022	$	%		$		%		$		%
Rental and other property revenues, before utility reimbursements:
Same Store	$318,082	$290,405	$27,677	9.5	%	$	460	0.1	%	$	27,217	9.4	%
Other Real Estate	59,501	4,952	54,549	nm		—		—	%	54,549		nm
Total	377,583	295,357	82,226	27.8	%	460		0.1	%	81,766		27.7	%
Property operating expenses, net of utility reimbursements:
Same Store	82,577	79,553	3,024	3.8	%	95		0.1	%	2,929		3.7	%
Other Real Estate	21,911	2,928	18,983	nm		—		—	%	18,983		nm
Total	104,488	82,481	22,007	26.7	%	95		0.1	%	21,912		26.6	%
Proportionate property net operating income:
Same Store	235,505	210,852	24,653	11.7	%	365		0.1	%	24,288		11.6	%
Other Real Estate	37,590	2,024	35,566	nm		—		—	%	35,566		nm
Total	$273,095	$212,876	$60,219	28.3	%	$	365	0.1	%	$	59,854	28.2	%

For the six months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, excluding changes attributable to changes in ownership, our Same Store proportionate property NOI increased by ~~$25.3 million, or 14.1%~~11.6%. This increase was attributable primarily to a ~~$26.4~~$27.2 million, or ~~10.4%~~9.4%, increase in rental and other property revenues due to a ~~620 basis point~~9.4% increase in residential rental rates, and a ~~210 basis point~~0.6% increase in ~~ADO to 97.4%,~~late fees and other, partially offset by a ~~130 basis point~~0.7% decrease in ~~bad debt.~~

The increase in proportionate property NOI was offset partially by an increase of $1.1 million, or 1.6%, in Same Store property operating expenses, due primarily to an increase in controllable operating expenses of $1.0 million, or 2.7%.

ADO.

Other Real Estate proportionate property NOI for the six months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, increased by ~~$18.6~~$35.6 million, due primarily to ~~the October 2021 acquisition of~~contribution from one property acquired in 2023, four properties ~~located~~acquired in 2022, and NOI contribution from the ~~Washington, D.C. area and the June 2021 acquisition~~four properties acquired on September 1, 2022, when their respective master leases were canceled.

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Non-Segment Real Estate Operations

Operating income amounts not attributed to our segments include offsite costs associated with property management, casualty losses, and the results of apartment communities sold or held for sale, which we do not allocate to our segments for purposes of evaluating segment performance.

For the three months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, non-segment real estate operations decreased by ~~$13.8~~$6.6 million due primarily to ~~$13.0~~$6.7 million of lower NOI attributable to ~~properties~~ sold ~~subsequent to June 30, 2021.~~

properties.

For the six months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, non-segment real estate operations decreased by ~~$21.3~~$20.6 million, due primarily to ~~$22.9~~$16.4 million of lower NOI attributable to sold properties, ~~sold subsequent to June 30, 2021.~~

a $2.6 million increase in casualty losses, and a $1.6 million increase in property management expenses, net.

Depreciation and Amortization

For the three and six months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, depreciation and amortization expense ~~was relatively flat.~~

~~General~~increased $10.6 million, or 13.5%, and ~~Administrative Expenses~~

~~For the three months ended~~$21.7 million, or 13.3%, respectively, due primarily to properties acquired subsequent to June 30, 2022, ~~compared to 2021, general and administrative (“G&A”)~~offset partially by the reduction in depreciation associated with properties sold.

Other expenses ~~were relatively flat.~~

~~For the six months ended June 30, 2022, compared to 2021, G&A~~(income), net

Other expenses ~~increased by $2.3 million, or 23.8%~~(income), ~~due primarily to higher personnel costs.~~

~~Other (Income) Expenses, Net~~

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

~~For~~

Other expenses (income), net, decreased $5.6 million, from income of $3.1 million for the three months ended June 30, 2022, ~~compared~~ to ~~2021, other (income) expenses, net, increased by $5.6~~expense of $2.5 million for the three months ended June 30, 2023, due primarily to afees earned in connection with the closing of the Value-Add JV, and services provided under the transition services agreement for the 2022 sale of the New England portfolio, offset partially by the 2022 gain on the sale of a cost basis investment ~~offset partially by business transformation costs, early termination fees, and legal expenses.~~

in the prior year.

For the six months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, other ~~expenses,~~expense, net, ~~decreased by $4.4~~increased $5.2 million, ~~or 82.5%,~~ due primarily to aservices provided under the transition services agreement for the 2022 sale of the New England portfolio, offset partially by the 2022 gain on the sale of a cost basis investment ~~noted above, offset partially by higher legal expenses.~~

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in the prior year.

Interest Income

For the three and six months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, interest income ~~increased~~decreased by ~~$10.0~~$24.1 million, or, ~~63.6%~~94.1%, and ~~$7.5~~$36.1 million, or ~~23.6%~~92.3%, respectively, due primarily to ~~a $12.9 million prepayment penalty from the partial note repayment from Aimco during the second quarter of 2022, offset partially by $2.3 million of~~lower interest ~~income earned in the second quarter of 2021 associated with our previous investment in a securitization trust.~~

~~Interest income for the three and six months ended June 30, 2022 includes $6.4 million and $13.3 million, respectively, of~~ income associated with our note receivable from Aimco, which was repaid in the second and ~~$6.5~~third quarters of 2022, the $12.9 million and $13.1 million, respectively, of rental payments which GAAP characterizes as interest income, associated with properties leased. Interest income for the three and six months ended June 30, 2021, includes $6.9 million and $13.9 million, respectively, of income associated with our note receivableprepayment penalty received from Aimco ~~and $6.5 million and $12.9 million, respectively, of interest income associated~~in connection with properties leased. As noted above, we reached an agreement with Aimco during the three months ended June 30, 2022 to cancel the existing leases, expected to occur in third quarter of 2022, and Aimco repaid $400 million of its ~~note receivable~~partial repayment during the second quarter of 2022, and lower interest income associated with properties leased to Aimco through September 1, 2022, when the ~~remaining $147 million balance in July 2022.~~

leases were canceled.

Interest Expense

For the three and six months ended June 30, ~~2022,~~2023, compared to ~~2021,~~2022, interest expense ~~decreased by $7.6~~increased $11.5 million, or ~~22.7%~~44.3%, and ~~$21.5~~$25.6 million, or ~~30.9%~~53.2%, respectively, due primarily to higher rates on our term loans and revolving credit facility, interest expense associated with our senior unsecured notes issued in the ~~deleveraging~~second quarter of ~~AIR's balance sheet.~~

2022, and higher outstanding property debt balances.

Loss on Extinguishment of Debt

~~For~~

During the three months ended June 30, 2023 or 2022, we did not incur a loss on extinguishment of debt.

For the six months ended June 30, 2023, compared to ~~2021,~~2022, loss on extinguishment of debt decreased by ~~$37.2~~$21.6 million, due to prepayment penalties incurred from the early payment of property debt in ~~2021 associated with~~2022.

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(Loss) Gain on Dispositions and Impairments of Real Estate

During the ~~deleveraging of AIR's balance sheet~~three and ~~the write-off of deferred financing costs associated with our previous revolving credit facility in 2021.~~

~~For the~~ six months ended June 30, ~~2022, compared to 2021,~~2023, we recognized $17.5 million of loss (gain) on dispositions and impairments of real estate due primarily to:

•A non-cash impairment loss on ~~extinguishment of debt decreased $14.5 million,~~real estate due to the ~~timing~~evaluation of ~~prepayment penalties associated~~the expected hold period of two real estate assets in our Other Real Estate reporting segment. Given management's assessment of the likelihood of the sale of these assets, which occurred during the three months ended June 30, 2023, we reduced the carrying value to their estimated fair value and recognized a non-cash impairment loss on real estate of $8.2 million;

•A non-cash impairment loss on real estate due to the evaluation of the expected hold period of one additional real estate asset in our Other Real Estate reporting segment. Given management’s assessment of the likelihood of its pending sale, which is expected to occur by year end, we reduced the carrying value to its estimated fair value and recognized a non-cash impairment loss on real estate of $15.4 million; offset partially by

•A $6.4 million gain in connection with the ~~deleveraging~~formation of ~~AIR's balance sheet.~~the Value-Add JV.

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

During the three and six months ended June 30, 2022, we recognized $175.6 million and $587.6 million, respectively, of gain on dispositions of real ~~estate.~~

~~Apartment~~estate related to the sale of four and 12 apartment communities, ~~sold during the three~~respectively, and ~~six months ended June 30, 2022 are summarized below (dollars in millions):~~

Three Months Ended
June 30, 2022

Six Months Ended
June 30, 2022

Number of apartment communities sold

4

12

Gross proceeds
$
203.1

$
781.1

Net proceeds (1)
$
186.6

$
646.8

we did not recognize any real estate impairment losses.

~~(1)~~Gain on Derivative Instruments

Net proceeds for the three and six months ended June 30, 2022, are after repayment of $14.6 million and $114.0 million, respectively, of property debt, net working capital settlements, payment of transaction costs, and debt prepayment penalties, if applicable.

During the three and six months ended June 30, ~~2021,~~2023, we recognized ~~$3.4~~$11.4 million and ~~$87.4~~$9.3 million, respectively, of ~~gain associated with~~gains on derivative instruments that are not designated as cash flow hedges. Of the ~~derecognition of assets leased. There were no apartment communities sold during~~$11.4 million, $5.3 million represents cash gains and $6.1 million represents non-cash gains. Of the ~~three~~$9.3 million, $5.3 million represents cash gains and ~~six months ended June 30, 2021.~~

~~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 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 June 30, 2022, we recognized income tax expense of $1.5~~$4.0 million ~~compared to an income tax benefit of $2.0 million during the same period in 2021.~~

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~~For the six months ended June 30, 2022, we recognized income tax expense of $0.9 million, compared to $1.0 million during the same period in 2021.~~

represents non-cash gains, net.

Critical Accounting 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, ~~2021.~~2022. 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 directly 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

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a much greater extent than do other depreciable assets such as machinery, computers, or other personal property. NAREIT defines FFO as net income 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,~~estate; and ~~including (iv)~~adjustments for 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 attributable to AIR common stockholders (diluted) by subtracting dividends on ~~preferred stock~~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 certain amounts that are unique or occur infrequently.

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 June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Net income (loss) attributable to AIR common stockholders

$
196,722

$
(18,030
)

$
572,603

$
65,166

Adjustments:

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

73,922

69,588

155,379

139,083

Gain on dispositions of real estate and derecognition of leased properties, net of noncontrolling partners' interest

(175,450
)

(3,353
)

(587,453
)

(87,385
)
Income tax adjustments related to gain on dispositions and other tax-related items

(1,100
)

(1,528
)

(1,100
)

272

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

6,240

(3,217
)

26,281

(2,573
)
Amounts allocable to participating securities

88

(7
)

296

—

NAREIT FFO attributable to AIR common stockholders

$
100,422

$
43,453

$
166,006

$
114,563

Adjustments:

Loss on extinguishment of debt (1)

—

37,150

23,636

38,160

Separation, business transformation, and transition related costs (2)

1,593

300

2,462

2,465

Non-cash straight-line rent (3)

642

669

1,284

1,337

Incremental cash received from leased properties (4)

170

147

323

308

Other

152

797

355

780

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

(154
)

(1,942
)

(1,719
)

(2,140
)
Amounts allocable to participating securities

(6
)

(14
)

(19
)

(14
)
Pro forma FFO

$
102,819

$
80,560

$
192,328

$
155,459

Weighted-average common shares outstanding – basic

155,927

154,608

156,327

151,609

Dilutive common share equivalents

209

504

280

474

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

156,136

155,112

156,607

152,083

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

$
1.26

$
(0.12
)

$
3.66

$
0.43

NAREIT FFO per share – diluted

$
0.64

$
0.28

$
1.06

$
0.75

Pro forma FFO per share – diluted

$
0.66

$
0.52

$
1.23

$
1.02


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Net (loss) income attributable to AIR common stockholders	$	(1,439)	$	196,722	$	(12,896)	$572,603
Adjustments:
Real estate depreciation and amortization, net of noncontrolling partners’ interest	83,749		73,922		173,761		155,379
Loss (gain) on dispositions and impairments of real estate, net of noncontrolling partners’ interest	17,472		(175,450)		17,472		(587,453)

Income tax adjustments related to gain on dispositions and other tax-related items	—		(1,100)		—		(1,100)
Common noncontrolling interests in AIR OP’s share of above adjustments and amounts allocable to participating securities	(6,889)		6,328		(12,811)		26,577
NAREIT FFO attributable to AIR common stockholders	$	92,893	$	100,422	$	165,526	$	166,006
Adjustments:
Gain on derivative instruments (1)	(11,390)		—		(9,246)		—
Non-cash straight-line rent (2)	3,090		642		6,180		1,284
Business transformation and transition related costs (3)	310		1,593		523		2,462
Loss on extinguishment of debt (4)	—		—		2,008		23,636
Casualty losses and other	281		322		2,127		678
Common noncontrolling interests in AIR OP’s share of above adjustments and amounts allocable to participating securities	533		(160)		(93)		(1,738)
Pro forma FFO attributable to AIR common stockholders	$	85,717	$	102,819	$	167,025	$	192,328

Weighted-average common shares outstanding – basic	148,832		155,927		148,821		156,327
Dilutive common share equivalents	55		209		65		280
Total shares and dilutive share equivalents	148,887		156,136		148,886		156,607

Net income attributable to AIR per share – diluted	$	(0.01)	$	1.26	$	(0.09)	$	3.66
NAREIT FFO per share – diluted	$	0.62	$	0.64	$	1.11	$	1.06
Pro forma FFO per share – diluted	$	0.58	$	0.66	$	1.12	$	1.23

(1)

During 2023, in anticipation of future financing transactions, we entered into treasury locks that did not qualify for hedge accounting under GAAP. Changes in the fair value of these instruments are included in net (loss) income attributable to AIR common stockholders. Any non-cash changes in fair value is excluded in the determination of Pro forma FFO.

(2)In 2018 and 2022, ~~and 2021,~~ we ~~incurred debt extinguishment costs related~~assumed 99-year ground leases with scheduled rent increases. Due to the ~~prepayment~~terms of ~~debt.~~the leases, GAAP rent expense will exceed cash rent payments until 2076 and 2079, respectively. We ~~excluded~~include the cash rent payments for these ~~costs from~~ground leases in Pro forma FFO ~~because we believe they are not representative~~

Table of ~~future cash flows.~~Contents

but exclude the incremental straight-line non-cash rent expense. The rent expense for these leases is included in other expenses, net, in our condensed consolidated statements of operations.

~~(2)~~(3)

During 2023 and 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,~~As we ~~incurred tax, legal~~engage in and ~~other~~finalize our finance transformation initiative that modernizes our systems and processes, including a new ERP system, we expect to continue to incur these costs ~~in connection with the Separation.~~throughout 2023. We excluded these costs from Pro forma FFO because we believe they are not related to ongoing operating performance.

~~(3)~~(4)

~~In 2018,~~During 2023 and 2022, we ~~assumed a 99-year ground lease with scheduled rent increases. Due~~incurred debt extinguishment costs related to the ~~terms~~prepayment of debt. In 2023, these costs are related to the ~~lease, GAAP rent expense will exceed cash rent payments until 2076.~~prepayment of high-cost, floating-rate debt. We ~~include the cash rent payments for this ground lease in~~excluded these costs from Pro forma FFO ~~but exclude the incremental straight-line non-cash rent expense. The rent expense for this lease is included in other (income) expenses, net, in our condensed consolidated statements~~because we believe they are not representative of ~~operations.~~

future cash flows.

~~(4)~~

~~We have certain properties leased. Due to the terms of these leases, cash received in 2022 and 2021 exceeded GAAP income. We include the cash lease income in Pro forma FFO.~~

During the three and six months ended June 30, 2022, we sold our 2% cost basis investment in the portfolio serving as collateral for the Aimco note. 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 associated with the Separation. Please see the Results of Operations section for discussion of the factors affecting our Pro forma FFO for ~~2022.~~

2023.

Leverage Ratios

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.

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Our leverage ratios for the three months ended June 30, 2023, are presented below:


	Annualized Current Quarter	Annualized Current Quarter Pro forma for the Core Joint Venture Transaction
Proportionate Debt to Adjusted EBITDAre	6.3x	5.7x
Net Leverage to Adjusted EBITDAre	6.5x	5.9x

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 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 remaining note receivable from Aimco, the proceeds of which were used in July 2022 to repay borrowings on our revolving credit facility.~~

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):

June 30, 2022

Total indebtedness

$
3,368,457

Adjustments:

Debt issuance costs related to non-recourse property debt and term loans

15,570

Proportionate share adjustments related to debt obligations

(393,320
)
Cash and restricted cash

(100,891
)
Tenant security deposits included in restricted cash

10,626

Proportionate share adjustments related to cash and restricted cash

6,716

Note receivable from Aimco

(147,039
)
Proportionate Debt

$
2,760,119

Perpetual preferred stock

2,000

Preferred noncontrolling interests in AIR Operating Partnership

79,330

Net Leverage

$
2,841,449


	June 30, 2023
Total indebtedness	$	3,684,577
Adjustments:
Debt issuance costs related to non-recourse property debt and term loans	18,425

Proportionate share adjustments related to debt obligations	(360,696)
Cash and restricted cash	(129,913)
Tenant security deposits included in restricted cash	11,633
Proportionate share adjustments related to cash and restricted cash	9,082

Proportionate Debt	$	3,233,108
Perpetual Preferred Stock	2,000
Preferred noncontrolling interests in AIR Operating Partnership	77,143
Net Leverage	$	3,312,251
Leverage reduction funded by Core Joint Venture transaction	(451,904)
Net Leverage, Pro forma for Core Joint Venture transaction	$	2,860,347

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;

•

impairment write-downs of depreciated property; and

•

adjustments to reflect our share of EBITDAre of investments in unconsolidated ~~entities.~~entities and consolidated entities with non-controlling interests.

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:~~

•

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

reasons set forth below:

•

~~the income recognized related to our note receivable from Aimco is excluded, as their proceeds are expected to be used to repay current amounts outstanding;~~

•

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

•applicable Pro forma FFO 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, to exclude certain amounts that are unique or occur infrequently.

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•

~~the amount by which cash received exceeds GAAP lease income for the leased properties is included.~~

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

Three Months Ended

June 30, 2022

Net income

$
211,659

Adjustments:

Interest expense

26,027

Income tax expense

1,499

Depreciation and amortization

78,656

Gain on dispositions of real estate and derecognition of leased properties

(175,606
)
EBITDAre

$
142,235

Net income attributable to noncontrolling interests in consolidated real estate partnerships

(381
)
EBITDAre adjustments attributable to noncontrolling interests and unconsolidated real estate partnerships

(7,285
)
Interest income and prepayment penalties on note receivable from Aimco

(19,297
)
Pro forma FFO adjustments, net (1)

6,176

Adjusted EBITDAre

$
121,448

Annualized Adjusted EBITDAre, unadjusted for non-recurring items

$
485,792

Removal of annualization impact for non-recurring items (2)

(21,731
)
Annualized Adjusted EBITDAre

$
464,061


	Three Months Ended June 30, 2023
Net income	$	598
Adjustments:
Interest expense	37,554

Income tax expense	1,177
Depreciation and amortization	89,260
Loss on dispositions and impairments of real estate	17,472


Net income attributable to noncontrolling interests in consolidated real estate partnerships	(684)
EBITDAre adjustments attributable to noncontrolling interests and unconsolidated real estate partnerships	(6,765)
EBITDAre	$	138,612
Pro forma FFO and other adjustments, net (1)	(8,554)
Quarterly Adjusted EBITDAre	$	130,058
Adjusted EBITDAre, before removal of annualization impact for non-recurring items	$	520,232

Removal of annualization impact for non-recurring items (2)	(7,218)
Adjusted EBITDAre	$	513,014
Core Joint Venture transaction, annualized	(27,410)
Pro forma Adjusted EBITDAre	$	485,604

(1)

~~Pro forma FFO adjustments, net, includes~~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.~~net. EBITDAre has also been adjusted by ~~$4.5~~$0.8 million ~~to reflect the acquisition of three apartment communities as of April 1, 2022 and a $1.0 million adjustment~~ to reflect the disposition of ~~four apartment communities during~~two properties and the ~~period~~Value-Add Joint Venture, as if the transactions ~~also~~ closed on April 1, ~~2022.~~2023.

(2)

Second quarter ~~2022~~2023 EBITDAre benefits from ~~a $7.2~~$2.4 million ~~gain on dispositions~~ of ~~unconsolidated real estate partnerships. This amount was~~items that are not expected to recur in the future. As such, they were not annualized in the computation of ~~Annualized~~ Adjusted EBITDAre.

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 credit facilities, ~~proceeds from our note receivable from Aimco,~~ and proceeds from equity offerings.

As of June 30, ~~2022,~~2023, our available liquidity was ~~$924.5 million,~~$1.8 billion, which consisted of:

•

$~~68.4~~96.7 million inof our share of cash and cash equivalents;

•

$~~15.2~~12.5 million of our share 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~~

•

$~~840.9~~703.7 million of available capacity to borrow under our revolving credit facility after consideration of letters of ~~credit.~~credit; and

•$1.0 billion of committed property level financing through our secured credit facility with Fannie Mae.

After consideration of the completion of the Core JV, total liquidity is approximately $2.3 billion.

Additional liquidity may also be provided through future secured and unsecured financings.

Uses for liquidity include normal operating activities, payments of principal and interest on outstanding 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

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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.~~refinancing. 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 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.

~~Table of Contents~~

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.~~2022.

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. 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, 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~~

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.

The combination of ~~non-recourse property-level~~secured and unsecured debt, ~~borrowings under our term loans, unsecured notes payable, revolving credit facility,~~ preferred OP Units, and 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 ~~6.9~~6.6 years as of June 30, ~~2022~~2023, inclusive of extension options, with a weighted-average interest rate of ~~3.8%~~4.3%. ~~The~~Subsequent to the Core JV transaction, the weighted-average interest rate onfor total leverage is 4.0% and the average remaining term to maturity is 7.2 years, inclusive of extension options. We have sufficient committed credit to repay all debt coming due through 2027.

Under our ~~fixed rate loans is 3.3%~~credit agreement and ~~on our floating rate loans is 3.6% and 7% of our debt will reprice before 2025, after consideration of the interest rate swaps.~~

~~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~~maximum leverage ratio of no greater than 0.60 to 1.00; a ~~Fixed Charge Coverage Ratio~~fixed charge coverage ratio of ~~greater~~no less than ~~1.5x,~~1.50 to 1.00, a ~~Maximum Secured Indebtedness~~maximum secured indebtedness to ~~Total Assets~~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~~maximum unsecured leverage ratio no greater than 0.60 to 1.00, and a ~~Minimum Unsecured Interest Coverage Ratio~~minimum unsecured interest coverage ratio no ~~greater~~less than 1.50 to 1.00. We believe we were in compliance with these covenants as of June 30, ~~2022~~2023 and expect to remain in compliance during the next 12 months.

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 six months ended June 30, ~~2022,~~2023, net cash provided by operating activities was ~~$201.5~~$182.7 million. Our operating cash flow is affected primarily by rental rates, occupancy levels, operating expenses related to our portfolio of apartment communities, and changes in working capital items. Cash provided by operating activities for the six months ended June 30, ~~2022, increased~~2023, decreased by ~~$107.7~~$18.8 million compared to the same period in ~~2021,~~2022, due primarily to ~~favorable timing of working capital and a higher~~lower net operating income associated with apartment communities sold, partially offset by an increase contribution from ~~our apartment communities.~~

properties recently acquired.

Investing Activities

For the six months ended June 30, ~~2022,~~2023, our net used in investing activities of $228.4 million consisted primarily of purchases of real estate and capital expenditures. Net cash provided by investing activities of $574.7 million for the same period in 2022 consisted primarily of proceeds from dispositions of real estate and proceeds from the partial repayment of the notes receivable from Aimco, which was repaid in the second and third quarters of 2022, offset partially by purchases of real estate and capital expenditures.

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Capital additions ~~totaled $89.7~~totaled $88.0 million and ~~$54.2 million~~$86.4 million during the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, 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 ~~five~~six 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;

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•

initial capital expenditures, which represent capital additions contemplated in the underwriting at our recently acquired communities. These amounts are considered in the underwriting of the acquisition and are therefore included with the purchase price when determining expected returns; ~~and~~

•

casualty, which represents capitalized costs incurred in connection with the restoration
of an apartment community after a casualty ~~event.~~event; and

•entitlement and planning.

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.

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):

Six Months Ended June 30,

2022

2021

Capital replacements

$
13,335

$
13,916

Capital improvements

6,924

3,525

Capital enhancements

44,002

32,778

Initial capital expenditures

12,806

1,763

Casualty

10,986

1,262

Entitlement and planning

1,606

986

Total capital additions

$
89,659

$
54,230

Plus: additions related to apartment communities sold and held for sale

140

7,417

Consolidated capital additions

$
89,799

$
61,647

Plus: net change in accrued capital spending

800

14,822

Total capital expenditures per condensed consolidated statements of cash flows

$
90,599

$
76,469


	Six Months Ended
	June 30, 2023		June 30, 2022
Capital replacements	$	17,372	$	12,916
Capital improvements	5,880		6,855
Capital enhancements	44,756		41,920
Initial capital expenditures	15,250		12,807
Casualty	4,646		10,828
Entitlement and planning	133		1,027
Total capital additions	$	88,037	$	86,353
Plus: additions related to apartment communities sold and held for sale	3,307		3,446
Consolidated capital additions	$	91,344	$	89,799
Plus: net change in accrued capital spending	(1,956)		800
Total capital expenditures per condensed consolidated statements of cash flows	$	89,388	$	90,599

For the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, we capitalized $0.7 million and ~~$1.1~~$0.7 million of interest costs, respectively, and ~~$7.7~~$8.3 million and ~~$7.9~~$7.7 million of indirect costs, respectively.

Financing Activities

Net cash used in financing activities of $125.7 million for the six months ended June 30, 2023 consisted primarily of net repayments on our revolving credit facility and the payment of dividends, partially offset by net proceeds from non-recourse property debt. Net cash used in financing activities of $768.0 million for the six months ended June 30, 2022 consisted primarily of repayments ofon non-recourse ~~property~~ debt and term loans, payment of dividends, and repurchases of common stock, offset partially by proceeds from the issuance of unsecured notes payable. ~~Net cash provided by financing activities~~

Table of $112.9 million for the same period in 2021 consisted primarily of proceeds from term loans and the issuance of common stock, offset partially by repayments of non-recourse property debt and term loans.Contents

Future Capital Needs

We expect to fund any future acquisitions, debt maturities, and other capital spending principally with proceeds from apartment community sales (including the formation of joint ventures), secured and unsecured borrowings, the issuance of equity securities (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 ~~2022~~2023 and beyond.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our chief market risks are refunding risk, that is the availability of property debt or other cash sources to refund maturing property debt, and repricing risk, that is the possibility of increases in base interest rates and credit risk spreads. We use short-term debt financing and working capital primarily to fund short-term uses and generally expect to refinance such borrowings with cash from operating activities, proceeds from apartment community sales, long-term debt, or equity financings. Our objective in managing these risks is to reduce fluctuations in earnings and cash flows associated with changes in interest rate movements. We use derivative financial instruments, principally interest rate swaps and treasury rate locks, to reduce our exposure to interest rate risk. We do not hold or issue derivatives for speculative purposes and closely monitor the credit quality of the institutions with which we transact.

As of June 30, ~~2022,~~2023, on a consolidated basis, we had ~~approximately~~ $800.0 million of outstanding borrowings on our term loans, ~~$88.5 million of variable-rate property-level debt outstanding,~~ and ~~$148.0~~$292.0 million of variable-rate borrowings under our revolving credit facility. WeAfter consideration of our interest rate swap derivatives, which reduce our total variable rate exposure by $350 million, we estimate that a change in the floating rate of ~~100 basis~~100-basis points with constant credit risk spreads would increase or decrease interest expense by ~~$2.1~~$7.4 million, net, on an annual ~~basis,~~basis. Subsequent to the Core JV close, our floating rate debt, after consideration of our interest rate ~~swaps.~~

swaps, is $125 million, or 4% of total leverage; we estimate that a change in the floating rate of 100-basis points with constant credit risk spreads would increase or decrease interest expense by $1.3 million, net, on an annual basis.

As of June 30, ~~2022,~~2023, we had ~~$100.9~~$129.9 million of cash and cash equivalents and restricted cash, a portion of which bears interest at variable rates, which may 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 approximately $3.4 billion as of June 30, 2023, inclusive of a $270.8 million mark-to-market asset, of which the amount attributable to AIR common stockholders is $219.0 million.

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

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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 second quarter of ~~2022~~2023 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

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procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Exchange)~~Exchange Act) 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 second quarter of ~~2022~~2023 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, ~~2021.~~

2022.

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.~~Units. 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 June 30, ~~2022,~~2023, we 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 June 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)

April 1 - April 30, 2022

—

$
—

—

$
500,000

May 1 - May 31, 2022

1,259,594

$
44.17

1,259,594

$
444,361

June 1 - June 30, 2022

1,652,167

$
41.98

1,652,167

$
375,000

Total

2,911,761

$
42.93

2,911,761

~~(1)~~

~~AIR's~~AIR’s Board of Directors has ~~from time to time,~~ authorized ~~AIR to~~a share repurchase ~~shares~~program of its outstanding capital ~~stock.~~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. As of June 30, 2023, there was $183.3 million remaining available for future share repurchases under this authorization. There were no share repurchases during the three months ended June 30, 2023.

The AIR Operating Partnership

Unregistered Sales of Equity Securities

The AIR Operating Partnership did not issue nor repurchase any unregistered OP Units during the three months ended June 30, ~~2022.~~

2023.

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 June 30, ~~2022,~~2023, no common OP Units were redeemed in exchange for Common Stock.

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

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)
April 1 - April 30, 2022

1,290

$
52.99

N/A

N/A
May 1 - May 31, 2022

10,087

$
53.00

N/A

N/A
June 1 - June 30, 2022

4,303

$
44.17

N/A

N/A
Total

15,680

$
53.12

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2023:


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)
April 1 – April 30, 2023	110,316	$	35.78	N/A	N/A
May 1 – May 31, 2023	35,624	$	35.20	N/A	N/A
June 1 – June 30, 2023	2,144	$	35.42	N/A	N/A
Total	148,084	$	35.63

(1)

The terms of the AIR Operating Partnership’s Partnership Agreement do not provide for a maximum number of ~~units~~OP 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 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 includes customary covenants, including a restriction on dividends and distributions and other restricted payments, but permits dividends and distributions during any

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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 6. EXHIBITS

The following exhibits are filed with this report:


EXHIBIT NO.			DESCRIPTION

~~1.1~~		Form of Equity Distribution Agreement, dated May 6, 2022, among Apartment Income REIT Corp., AIR OP, the Agents, the Forward Sellers and the Forward Purchasers (Exhibit 1.1 to AIR’s Current Report on Form 8-K dated May 6, 2022, is incorporated herein by this reference)

~~1.2~~	Form of Master Forward Confirmation, dated May 6, 2022, between Apartment Income REIT Corp. and each Forward Purchaser (Exhibit D to Exhibit 1.1 to AIR’s Current Report on Form 8-K dated May 6, 2022, is incorporated herein by this reference)

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~~3.1 to AIR’s Current Report on Form 8-K dated ~~December 15, 2020,~~May 22, 2023, is incorporated herein by this reference)

~~4.1~~		Note and Guarantee Agreement, dated June 29, 2022, by and among Apartment Income REIT, L.P., Apartment Income REIT Corp., and the Purchasers party thereto (Exhibit 4.1 to AIR's Current Report on Form 8-K dated June 29, 2022, is incorporated herein by this reference)

~~4.2~~	Affiliate Guarantee Agreement, dated June 29, 2022, by and among AIR REIT Sub 1, LLC, AIR REIT Sub 2, LLC, AIR Subsidiary REIT I, LLC and AIR/Bethesda Holdings, Inc. (Exhibit 4.2 to AIR's Current Report on Form 8-K dated June 29, 2022, 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 Quarterly Report on Form 10-Q dated May 4, 2022, is incorporated herein by this ~~reference~~reference))

~~10.2~~		Amendment to Master Leasing Agreement by and between Apartment Income REIT, L.P. and Aimco Development Company, LLC, dated as of May 19, 2022 (Exhibit 10.1 to AIR’s Current Report on Form 8-K dated May 19, 2022, is incorporated herein by this reference)

~~10.3~~	Amendment to Master Leasing Agreement by and between Apartment Income REIT, L.P. and Aimco Development Company, LLC, dated as of June 14, 2022 (Exhibit 10.1 to AIR's Current Report on Form 8-K dated June 14, 2022, is incorporated herein by this reference)

~~10.4~~	Amendment to Mezzanine Note Agreement by and between Apartment Income REIT, L.P. and Aimco Development Company, LLC, dated as of June 17, 2022 (Exhibit 10.2 to AIR's Current Report on Form 8-K dated June 14, 2022, 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

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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 June 30, ~~2022,~~2023, 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; (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.

	~~APARTMENT INCOME REIT CORP.~~By:	/s/ Molly H.N. Syke
		Molly H.N. Syke
	~~By:~~	~~/s/ Paul Beldin~~
~~Paul Beldin~~
~~Executive~~ Vice President and Chief ~~Financial~~Accounting Officer
~~(principal financial and accounting officer)~~




	APARTMENT INCOME REIT, L.P.

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

	By:	/s/ ~~Paul Beldin~~Molly H.N. Syke
		~~Paul Beldin~~Molly H.N. Syke
		~~Executive~~ Vice President and Chief ~~Financial~~Accounting Officer
		~~(principal financial and accounting officer)~~
Date: July 28, 2023

~~Date: July 29, 2022~~


	June 30,			December 31,
	2022			2021
ASSETS
Buildings and improvements	$	6,179,325		$	5,720,267
Land		1,200,540			1,164,814
Total real estate		7,379,865			6,885,081
Accumulated depreciation		(2,400,722	)		(2,284,793	)
Net real estate		4,979,143			4,600,288
Cash and cash equivalents		74,949			67,320
Restricted cash		25,942			25,441
Note receivable from Aimco		147,039			534,127
Leased real estate assets		466,013			466,355
Goodwill		32,286			32,286
Other assets, net		707,913			568,051
Assets held for sale		0			146,492
Total assets	$	6,433,285		$	6,440,360

LIABILITIES AND EQUITY
Non-recourse property debt, net	$	2,026,513		$	2,294,739
Term loans, net		795,905			1,144,547
Revolving credit facility borrowings		148,000			304,000
Unsecured notes payable, net		398,039			0
Total indebtedness		3,368,457			3,743,286
Accrued liabilities and other		696,673			592,774
Liabilities related to assets held for sale		0			85,775
Total liabilities		4,065,130			4,421,835

Commitments and contingencies (Note 6)

Preferred noncontrolling interests in AIR Operating Partnership		79,330			79,370

Equity:
Perpetual preferred stock		2,000			2,129
Common Stock, $0.01 par value, 1,021,175,000 shares authorized at June 30, 2022 and December 31, 2021, and 154,187,241 and 156,998,367 shares issued/outstanding at June 30, 2022 and December 31, 2021, respectively		1,542			1,570
Additional paid-in capital		3,636,906			3,763,105
Accumulated other comprehensive income		13,750			0
Distributions in excess of earnings		(1,521,749	)		(1,953,779	)
Total AIR equity		2,132,449			1,813,025
Noncontrolling interests in consolidated real estate partnerships		(70,609	)		(70,883	)
Common noncontrolling interests in AIR Operating Partnership		226,985			197,013
Total equity		2,288,825			1,939,155
Total liabilities, preferred noncontrolling interests in AIR Operating Partnership, and equity	$	6,433,285		$	6,440,360


	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 (Loss)			Distributions in Excess of Earnings			Total AIR Equity			Consolidated Real Estate Partnerships			AIR Operating Partnership			Total Equity
Balances at March 31, 2021		20	$	2,000		148,974,839		$	1,490		$	3,430,694		$	1,100		$	(2,112,381	)	$	1,322,903		$	(64,619	)	$	63,812		$	1,322,096
Issuance of Common Stock, net		—		—		7,825,000			79			342,084			—			—			342,163			—			—			342,163
Issuance costs		—		—		—			—			(306	)		—			—			(306	)		—			—			(306	)
Redemption of AIR Operating Partnership units		—		—		—			—			—			—			—			—			—			(327	)		(327	)
Conversion of AIR Operating Partnership units		—		—		43,363			2			1,957			—			—			1,959			—			(1,959	)		-
Amortization of share-based compensation cost		—		—		—			—			629			—			—			629			—			1,260			1,889
Effect of changes in ownership of consolidated entities		—		—		—			—			(1,833	)		—			—			(1,833	)		—			1,833			—
Contributions from noncontrolling interests in consolidated real estate partnerships		—		—		—			—			—			—			—			—			1,998			—			1,998
Change in accumulated other comprehensive income (loss)		—		—		—			—			—			(1,100	)		—			(1,100	)		—			(80	)		(1,180	)
Net loss		—		—		—			—			—			—			(17,948	)		(17,948	)		(2,397	)		(945	)		(21,290	)
Common Stock dividends		—		—		—			—			—			—			(67,418	)		(67,418	)		—			—			(67,418	)
Preferred Stock dividends		—		—		—			—			—			—			(43	)		(43	)		—			—			(43	)
Distributions to noncontrolling interests		—		—		—			—			—			—			—			—			(3,432	)		(3,436	)		(6,868	)
Other, net		—		—		13,750			(2	)		(52	)		—			(53	)		(107	)		919			230			1,042
Balances at June 30, 2021		20	$	2,000		156,856,952		$	1,569		$	3,773,173		$	0		$	(2,197,843	)	$	1,578,899		$	(67,531	)	$	60,388		$	1,571,756

Balances at March 31, 2022		20	$	2,000		157,082,823		$	1,571		$	3,762,457		$	(783	)	$	(1,648,077	)	$	2,117,168		$	(70,157	)	$	216,827		$	2,263,838
Redemption of AIR Operating Partnership units		—		—		—			—			—			—			—			—			—			(793	)		(793	)
Repurchase of common stock, net		—		—		(2,911,761	)		(29	)		(124,971	)		—			—			(125,000	)		—			—			(125,000	)
Amortization of share-based compensation cost		—		—		—			—			751			—			—			751			—			950			1,701
Effect of changes in ownership of consolidated entities		—		—		—			—			(578	)		—			—			(578	)		—			578			—
Contributions from noncontrolling interests in consolidated real estate partnerships		—		—		—			—			—			—			—			—			3,483			—			3,483
Change in accumulated other comprehensive income (loss)		—		—		—			—			—			14,533			—			14,533			—			1,171			15,704
Net income		—		—		—			—			—			—			196,927			196,927			381			12,749			210,057
Common Stock dividends		—		—		—			—			—			—			(70,556	)		(70,556	)		—			—			(70,556	)
Distributions to noncontrolling interests		—		—		—			—			—			—			—			—			(4,188	)		(4,489	)		(8,677	)
Other, net		—		—		16,179			—			(753	)		—		��	(43	)		(796	)		(128	)		(8	)		(932	)
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


	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 March 31, 2021	$	2,000	$	1,320,903		$	63,812		$	1,386,715		$	(64,619	)	$	1,322,096
Issuance of common partnership units to AIR, net		—		342,163			—			342,163			—			342,163
Issuance costs		—		(306	)		—			(306	)		—			(306	)
Redemption of common partnership units		—		—			(327	)		(327	)		—			(327	)
Conversion of common partnership units		—		1,959			(1,959	)		—			—			—
Amortization of share-based compensation cost		—		629			1,260			1,889			—			1,889
Effect of changes in ownership of consolidated entities		—		(1,833	)		1,833			—			—			—
Contributions from noncontrolling interests in consolidated real estate partnerships		—		—			—			—			1,998			1,998
Change in accumulated other comprehensive income (loss)		—		(1,100	)		(80	)		(1,180	)		—			(1,180	)
Net loss		—		(17,948	)		(945	)		(18,893	)		(2,397	)		(21,290	)
Distributions to common unitholders		—		(67,418	)		(3,436	)		(70,854	)		—			(70,854	)
Distributions to preferred unitholders		—		(43	)		—			(43	)		—			(43	)
Distributions to noncontrolling interests		—		—			—			—			(3,432	)		(3,432	)
Other, net		—		(107	)		230			123			919			1,042
Balances at June 30, 2021	$	2,000	$	1,576,899		$	60,388		$	1,639,287		$	(67,531	)	$	1,571,756

Balances at March 31, 2022	$	2,000	$	2,115,168		$	216,827		$	2,333,995		$	(70,157	)	$	2,263,838
Redemption of common partnership units		—		—			(793	)		(793	)		—			(793	)
Repurchase of common partnership units		—		(125,000	)		—			(125,000	)		—			(125,000	)
Amortization of share-based compensation cost		—		751			950			1,701			—			1,701
Effect of changes in ownership of consolidated entities		—		(578	)		578			—			—			—
Contributions from noncontrolling interests in consolidated real estate partnerships		—		—			—			—			3,483			3,483
Change in accumulated other comprehensive income (loss)		—		14,533			1,171			15,704			—			15,704
Net income		—		196,927			12,749			209,676			381			210,057
Distributions to common unitholders		—		(70,556	)		—			(70,556	)		—			(70,556	)
Distributions to noncontrolling interests		—		—			(4,489	)		(4,489	)		(4,188	)		(8,677	)
Other, net		—		(796	)		(8	)		(804	)		(128	)		(932	)
Balances at June 30, 2022	$	2,000	$	2,130,449		$	226,985		$	2,359,434		$	(70,609	)	$	2,288,825


Balance at January 1, 2022	$	79,370
Preferred distributions		(3,221	)
Redemption of preferred units and other		(24	)
Net income allocated to preferred units		3,205
Balance at June 30, 2022	$	79,330


Number of apartment communities		3
Number of apartment homes		1,001

Purchase price	$	467,067
Capitalized transaction costs		5,250
Total consideration	$	472,317
Land	$	40,066
Building and improvements		419,023
Right of use lease asset		80,651
Intangible assets (1)		13,738
Lease liability		(80,651	)
Below-market lease liabilities (1)		(510	)
Total consideration	$	472,317


2022 (remaining)	$	324,862
2023		352,182
2024		62,478
2025		11,183
2026		9,470
Thereafter		42,416
Total	$	802,591


2022 (remaining)	$	12,632
2023		25,262
2024		25,262
2025		25,373
2026		25,966
Thereafter		704,267
Total lease receivable (1)	$	818,762
Add: Unguaranteed residual value		131,580
Less: Discount		484,329
Total leased real estate assets	$	466,013


	Outstanding Balance
	June 30, 2022			December 31, 2021
Secured debt:
Fixed-rate property debt due December 2022 to June 2032 (1)	$	1,947,527		$	2,217,256
Variable-rate property debt due October 2024 (2)		88,500			88,500
Total non-recourse property debt		2,036,027			2,305,756
Debt issuance costs, net of accumulated amortization		(9,514	)		(11,017	)
Total non-recourse property debt, net	$	2,026,513		$	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)		148,000			304,000
4.58% Notes payable due June 2027 (5)		100,000			0
4.77% Notes payable due June 2029 (5)		100,000			0
4.84% Notes payable due June 2032 (5)		200,000			0
Total unsecured debt		1,348,000			1,454,000
Debt issuance costs, net of accumulated amortization		(6,056	)		(5,453	)
Total unsecured debt, net	$	1,341,944		$	1,448,547
Total indebtedness	$	3,368,457		$	3,743,286


	As of June 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	$	47,990		$	—	$	47,990		$	—	$	21,699	$	—	$	21,699	$	—
Interest rate swap asset	$	4,052		$	—	$	4,052		$	—	$	—	$	—	$	—	$	—
Interest rate swap liability	$	(4,988	)	$	—	$	(4,988	)	$	—	$	—	$	—	$	—	$	—


	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Number of apartment communities sold		4		12
Gross proceeds	$	203.1	$	781.1
Net proceeds (1)	$	186.6	$	646.8


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)
April 1 - April 30, 2022		—	$	—		—	$	500,000
May 1 - May 31, 2022		1,259,594	$	44.17		1,259,594	$	444,361
June 1 - June 30, 2022		1,652,167	$	41.98		1,652,167	$	375,000
Total		2,911,761	$	42.93		2,911,761