QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Maryland (Apartment Income REIT Corp.) 84-1299717 Delaware (Apartment Income REIT, L.P.) 84-1275621 (State or other jurisdiction of (I.R.S. Employer 4582 South Ulster Street, Denver, 80237 (Address of principal executive offices) (Zip Code) Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Class A Common Stock (Apartment Income REIT Corp.) AIRC New York Stock Exchange Large accelerated filer Accelerated filer Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Non-accelerated filer Smaller reporting company Emerging growth company Emerging growth company Page March 31, December 31, 2023 2022 ASSETS Buildings and improvements $ 7,019,993 $ 6,784,965 Land 1,395,140 1,291,429 Total real estate 8,415,133 8,076,394 Accumulated depreciation (2,534,976 ) (2,449,883 ) Net real estate 5,880,157 5,626,511 Cash and cash equivalents 90,214 95,797 Restricted cash 24,872 205,608 Goodwill 32,286 32,286 Other assets, net 544,818 591,681 Total assets $ 6,572,347 $ 6,551,883 LIABILITIES AND EQUITY Non-recourse property debt, net $ 2,299,139 $ 1,985,430 Term loans, net 797,092 796,713 Revolving credit facility borrowings 245,000 462,000 Unsecured notes payable, net 397,577 397,486 Total indebtedness 3,738,808 3,641,629 Accrued liabilities and other 521,494 513,805 Total liabilities 4,260,302 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 March 31, 2023 and December 31, 2022, and 149,199,684 and 149,086,548 shares issued/outstanding at March 31, 2023 and December 31, 2022, respectively 1,492 1,491 Additional paid-in capital 3,432,573 3,436,635 Accumulated other comprehensive income 29,070 43,562 Distributions in excess of earnings (1,405,520 ) (1,327,271 ) Total AIR equity 2,059,615 2,156,417 Noncontrolling interests in consolidated real estate partnerships (79,017 ) (78,785 ) Common noncontrolling interests in AIR Operating Partnership 254,304 241,674 Total equity 2,234,902 2,319,306 Total liabilities, preferred noncontrolling interests in AIR Operating Partnership, and equity $ 6,572,347 $ 6,551,883 Three Months Ended March 31, 2023 2022 REVENUES Rental and other property revenues $ 209,923 $ 179,261 Other revenues 2,070 2,217 Total revenues 211,993 181,478 EXPENSES Property operating expenses 75,453 63,236 Depreciation and amortization 95,666 84,549 General and administrative expenses 7,180 6,597 Other expenses, net 5,798 4,018 184,097 158,400 Interest income 1,525 13,481 Interest expense (36,187 ) (22,107 ) Loss on extinguishment of debt (2,008 ) (23,636 ) Gain on dispositions of real estate — 412,003 Loss from unconsolidated real estate partnerships (1,035 ) (2,014 ) (Loss) income before income tax (expense) benefit (9,809 ) 400,805 Income tax (expense) benefit (139 ) 579 Net (loss) income (9,948 ) 401,384 Noncontrolling interests: Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships (685 ) 564 Net income attributable to preferred noncontrolling interests in AIR Operating Partnership (1,570 ) (1,603 ) Net loss (income) attributable to common noncontrolling interests in AIR Operating Partnership 826 (24,167 ) Net income attributable to noncontrolling interests (1,429 ) (25,206 ) Net (loss) income attributable to AIR (11,377 ) 376,178 Net income attributable to AIR preferred stockholders (43 ) (42 ) Net income attributable to participating securities (37 ) (255 ) Net (loss) income attributable to AIR common stockholders $ (11,457 ) $ 375,881 Net (loss) income attributable to AIR common stockholders per share – basic $ (0.08 ) $ 2.40 Net (loss) income attributable to AIR common stockholders per share – diluted $ (0.08 ) $ 2.39 Weighted-average common shares outstanding – basic 148,810 156,736 Weighted-average common shares outstanding – diluted 148,810 157,088 Three Months Ended March 31, 2023 2022 Net (loss) income $ (9,948 ) $ 401,384 Unrealized loss on derivative instruments (19,748 ) (783 ) Reclassification of interest rate derivative loss to net (loss) income 4,154 — Comprehensive (loss) income (25,542 ) 400,601 Comprehensive income attributable to noncontrolling interests (327 ) (25,206 ) Comprehensive (loss) income attributable to AIR $ (25,869 ) $ 375,395 Perpetual Preferred Stock Common Stock Accumulated Noncontrolling Common Shares Amount Shares Amount Additional Other Distributions Total AIR Consolidated AIR Total 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 — — — — — — — — — (3,452 ) (3,452 ) Amortization of share-based compensation cost — — — — 1,890 — — 1,890 — 860 2,750 Effect of changes in ownership of consolidated entities — — — — (2,686 ) — — (2,686 ) — 2,686 — Contributions from noncontrolling interests in consolidated real estate partnerships — — — — — — — — 4,325 — 4,325 Change in accumulated other comprehensive income — — — — — (783 ) — (783 ) — — (783 ) Net income (loss) — — — — — — 376,178 376,178 (564 ) 24,167 399,781 Common Stock dividends — — — — — — (70,428 ) (70,428 ) — — (70,428 ) Distributions to noncontrolling interests — — — — — — — — (3,147 ) (4,447 ) (7,594 ) Other, net (125 ) (129 ) 84,456 1 148 — (48 ) (28 ) 112 — 84 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 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 — — — — — — — — — (10,529 ) (10,529 ) Amortization of share-based compensation cost — — — — 1,971 — — 1,971 — 1,155 3,126 Effect of changes in ownership of consolidated entities — — — — (6,102 ) — — (6,102 ) — 6,102 — Contributions from noncontrolling interests in consolidated real estate partnerships — — — — — — — — 1,567 — 1,567 Change in accumulated other comprehensive income — — — — — (14,492 ) — (14,492 ) — (1,102 ) (15,594 ) Net (loss) income — — — — — — (11,377 ) (11,377 ) 685 (826 ) (11,518 ) Common Stock dividends — — — — — — (66,939 ) (66,939 ) — — (66,939 ) Distributions to noncontrolling interests — — — — — — — — (2,485 ) (4,552 ) (7,037 ) Other, net — — 113,136 1 69 — 67 137 1 (1 ) 137 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 EQUITY Three Months Ended March 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (9,948 ) $ 401,384 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 95,666 84,549 Loss on extinguishment of debt 2,008 23,636 Gain on dispositions of real estate — (412,003 ) Income tax expense (benefit) 139 (579 ) Other, net 5,955 5,485 Net changes in operating assets and operating liabilities (4,926 ) (29,765 ) Net cash provided by operating activities 88,894 72,707 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of real estate (180,673 ) — Capital expenditures (34,278 ) (37,302 ) Proceeds from dispositions of real estate — 559,093 Other investing activities, net 23,689 (8,532 ) Net cash (used in) provided by investing activities (191,262 ) 513,259 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from non-recourse property debt 320,000 — Principal repayments on non-recourse property debt (96,294 ) (346,298 ) Borrowings on revolving credit facility — 159,000 Repayments of revolving credit facility (217,000 ) (286,000 ) Payment of deferred loan costs (4,964 ) — Payment of debt extinguishment costs (1,115 ) (22,723 ) Payment of dividends to holders of Common Stock (67,121 ) (70,652 ) Redemptions of noncontrolling interests in the AIR Operating Partnership (10,529 ) (3,452 ) Other financing activities, net (6,928 ) (4,691 ) Net cash used in financing activities (83,951 ) (574,816 ) NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH (186,319 ) 11,150 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD 301,405 92,761 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 115,086 $ 103,911 CORP. STATEMENTS OF CASH FLOWS March 31, December 31, 2023 2022 ASSETS Buildings and improvements $ 7,019,993 $ 6,784,965 Land 1,395,140 1,291,429 Total real estate 8,415,133 8,076,394 Accumulated depreciation (2,534,976 ) (2,449,883 ) Net real estate 5,880,157 5,626,511 Cash and cash equivalents 90,214 95,797 Restricted cash 24,872 205,608 Goodwill 32,286 32,286 Other assets, net 544,818 591,681 Total assets $ 6,572,347 $ 6,551,883 LIABILITIES AND PARTNERS’ CAPITAL Non-recourse property debt, net $ 2,299,139 $ 1,985,430 Term loans, net 797,092 796,713 Revolving credit facility borrowings 245,000 462,000 Unsecured notes payable, net 397,577 397,486 Total indebtedness 3,738,808 3,641,629 Accrued liabilities and other 521,494 513,805 Total liabilities 4,260,302 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 2,057,615 2,154,417 Limited Partners 254,304 241,674 Partners’ capital attributable to the AIR Operating Partnership 2,313,919 2,398,091 Noncontrolling interests in consolidated real estate partnerships (79,017 ) (78,785 ) Total partners’ capital 2,234,902 2,319,306 Total liabilities, redeemable preferred units, and partners’ capital $ 6,572,347 $ 6,551,883 BALANCE SHEETS thousands) Three Months Ended March 31, 2023 2022 REVENUES Rental and other property revenues $ 209,923 $ 179,261 Other revenues 2,070 2,217 Total revenues 211,993 181,478 EXPENSES Property operating expenses 75,453 63,236 Depreciation and amortization 95,666 84,549 General and administrative expenses 7,180 6,597 Other expenses, net 5,798 4,018 184,097 158,400 Interest income 1,525 13,481 Interest expense (36,187 ) (22,107 ) Loss on extinguishment of debt (2,008 ) (23,636 ) Gain on dispositions of real estate — 412,003 Loss from unconsolidated real estate partnerships (1,035 ) (2,014 ) (Loss) income before income tax (expense) benefit (9,809 ) 400,805 Income tax (expense) benefit (139 ) 579 Net (loss) income (9,948 ) 401,384 Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships (685 ) 564 Net (loss) income attributable to the AIR Operating Partnership (10,633 ) 401,948 Net income attributable to the AIR Operating Partnership’s preferred unitholders (1,613 ) (1,645 ) Net income attributable to participating securities (37 ) (255 ) Net (loss) income attributable to the AIR Operating Partnership’s common unitholders $ (12,283 ) $ 400,048 Net (loss) income attributable to the AIR Operating Partnership common unitholders per unit – basic $ (0.08 ) $ 2.40 Net (loss) income attributable to the AIR Operating Partnership common unitholders per unit – diluted $ (0.08 ) $ 2.39 Weighted-average common units outstanding – basic 159,284 166,853 Weighted-average common units outstanding – diluted 159,284 167,205 OPERATIONS thousands, except per unit data) Three Months Ended March 31, 2023 2022 Net (loss) income $ (9,948 ) $ 401,384 Unrealized loss on derivative instruments (19,748 ) (783 ) Reclassification of interest rate derivative loss to net (loss) income 4,154 — Comprehensive (loss) income (25,542 ) 400,601 Comprehensive (income) loss attributable to noncontrolling interests (685 ) 564 Comprehensive (loss) income attributable to the AIR Operating Partnership $ (26,227 ) $ 401,165 COMPREHENSIVE INCOME (LOSS) Preferred General Partner Limited Partners’ Capital Noncontrolling Total 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 — — (3,452 ) (3,452 ) — (3,452 ) Amortization of share-based compensation cost — 1,890 860 2,750 — 2,750 Effect of changes in ownership of consolidated entities — (2,686 ) 2,686 — — — Contributions from noncontrolling interests in consolidated real estate partnerships — — — — 4,325 4,325 Change in other comprehensive loss — (783 ) — (783 ) — (783 ) Net income (loss) — 376,178 24,167 400,345 (564 ) 399,781 Distributions to common unitholders — (70,428 ) — (70,428 ) — (70,428 ) Distributions to noncontrolling interests — — (4,447 ) (4,447 ) (3,147 ) (7,594 ) Other, net (129 ) 101 — (28 ) 112 84 Balances at March 31, 2022 $ 2,000 $ 2,115,168 $ 216,827 $ 2,333,995 $ (70,157 ) $ 2,263,838 Balances at December 31, 2022 $ 2,000 $ 2,154,417 $ 241,674 $ 2,398,091 $ (78,785 ) $ 2,319,306 Redemption of common partnership units — — (10,529 ) (10,529 ) — (10,529 ) Issuance of common partnership units — — 22,383 22,383 — 22,383 Amortization of share-based compensation cost — 1,971 1,155 3,126 — 3,126 Effect of changes in ownership of consolidated entities — (6,102 ) 6,102 — — — Contributions from noncontrolling interests in consolidated real estate partnerships — — — — 1,567 1,567 Change in other comprehensive loss — (14,492 ) (1,102 ) (15,594 ) — (15,594 ) Net (loss) income — (11,377 ) (826 ) (12,203 ) 685 (11,518 ) Distributions to common unitholders — (66,939 ) (4,552 ) (71,491 ) — (71,491 ) Distributions to noncontrolling interests — — — — (2,485 ) (2,485 ) Other, net — 137 (1 ) 136 1 137 Balances at March 31, 2023 $ 2,000 $ 2,057,615 $ 254,304 $ 2,313,919 $ (79,017 ) $ 2,234,902 PARTNERS’ CAPITAL Three Months Ended March 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ (9,948 ) $ 401,384 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 95,666 84,549 Loss on extinguishment of debt 2,008 23,636 Gain on dispositions of real estate — (412,003 ) Income tax expense (benefit) 139 (579 ) Other, net 5,955 5,485 Net changes in operating assets and operating liabilities (4,926 ) (29,765 ) Net cash provided by operating activities 88,894 72,707 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of real estate (180,673 ) — Capital expenditures (34,278 ) (37,302 ) Proceeds from dispositions of real estate — 559,093 Other investing activities, net 23,689 (8,532 ) Net cash (used in) provided by investing activities (191,262 ) 513,259 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from non-recourse property debt 320,000 — Principal repayments on non-recourse property debt (96,294 ) (346,298 ) Borrowings on revolving credit facility — 159,000 Repayments of revolving credit facility (217,000 ) (286,000 ) Payment of deferred loan costs (4,964 ) — Payment of debt extinguishment costs (1,115 ) (22,723 ) Payment of distributions General Partner and Special Limited Partner (67,121 ) (70,652 ) Redemption of common and preferred units (10,529 ) (3,452 ) Other financing activities, net (6,928 ) (4,691 ) Net cash used in financing activities (83,951 ) (574,816 ) NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH (186,319 ) 11,150 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD 301,405 92,761 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 115,086 $ 103,911 Principles of Consolidation Redeemable Preferred OP Units The following table presents a rollforward of the AIR Operating Partnership’s preferred OP Units’ redemption value (in thousands): Balance at January 1, 2023 $ 77,143 Preferred distributions (1,570 ) Net income allocated to preferred units 1,570 Balance at March 31, 2023 $ 77,143 Use of Estimates Note 3 — Significant Transactions 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 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 a gain on disposition of $587.6 million. Impairment Three Months Ended March 31, 2023 2022 Fixed lease income $ 196,336 $ 168,230 Variable lease income 13,288 10,805 Total lease income $ 209,624 $ 179,035 2023 (remaining) $ 356,956 2024 152,226 2025 21,602 2026 11,215 2027 9,928 Thereafter 37,332 Total $ 589,259 19 Note 5 — Debt The following table summarizes March 31, 2023 December 31, 2022 Secured debt: Fixed-rate property debt due May 2025 to January 2055 (1) $ 2,312,196 $ 1,906,151 Variable-rate property debt — 88,500 Total non-recourse property debt 2,312,196 1,994,651 Debt issuance costs, net of accumulated amortization (13,057 ) (9,221 ) Total non-recourse property debt, net $ 2,299,139 $ 1,985,430 Unsecured debt: Term loans due December 2023 to April 2026 (2) (3) 800,000 800,000 Revolving credit facility borrowings due April 2025 (2) (4) 245,000 462,000 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 1,445,000 1,662,000 Debt issuance costs, net of accumulated amortization (5,331 ) (5,801 ) Total unsecured debt, net $ 1,439,669 $ 1,656,199 Total indebtedness $ 3,738,808 $ 3,641,629 Fannie Mae grid. After consideration of the secured credit facility, total liquidity is approximately $1.8 billion. 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. 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): Three Months Ended March 31, 2023 2022 Earnings per share Numerator: Net (loss) income attributable to AIR common stockholders $ (11,457 ) $ 375,881 Denominator – shares: Basic weighted-average common shares outstanding 148,810 156,736 Dilutive common share equivalents outstanding — 352 Dilutive weighted-average common shares outstanding 148,810 157,088 Earnings per share – basic $ (0.08 ) $ 2.40 Earnings per share – diluted $ (0.08 ) $ 2.39 Earnings per unit Numerator: Net (loss) income attributable to the AIR Operating Partnership’s common unitholders $ (12,283 ) $ 400,048 Denominator – units: Basic weighted-average common units outstanding 159,284 166,853 Dilutive common unit equivalents outstanding — 352 Dilutive weighted-average common units outstanding 159,284 167,205 Earnings per unit – basic $ (0.08 ) $ 2.40 Earnings per unit – diluted $ (0.08 ) $ 2.39 The following table summarizes investments measured at fair value on a recurring basis, which are presented in other assets, net, and accrued liabilities and other in our condensed consolidated balance sheets (in thousands): As of March 31, 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 $ 53,304 $ — $ 53,304 $ — $ 53,481 $ — $ 53,481 $ — Interest rate swaps $ 19,386 $ — $ 19,386 $ — $ 32,222 $ — $ 32,222 $ — Treasury rate locks $ (1,908 ) $ — $ (1,908 ) $ — $ 319 $ — $ 319 $ — 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 March 31, 2023 As of December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Non-recourse property debt $ 2,312,196 $ 2,121,819 $ 1,994,651 $ 1,753,222 Unsecured notes payable $ 400,000 $ 373,290 $ 400,000 $ 371,368 Seller financing note receivable, net (1) $ 31,820 $ 33,370 $ 31,611 $ 32,286 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. The following table summarizes our derivative financial instruments Number of Aggregate Notional Derivative Assets Derivative Liabilities Instruments Amount Fair Value Fair Value March 31, 2023 March 31, 2023 March 31, 2023 December 31, 2022 March 31, 2023 December 31, 2022 Derivatives designated as hedging instruments: Interest rate swaps 10 $ 830,000 $ 19,624 $ 32,222 $ (238 ) $ — Treasury rate locks 1 220,000 236 319 — — Derivatives not designated as hedging instruments: Treasury rate locks 4 $ 391,000 $ — $ — $ (2,144 ) $ — The table below summarizes apartment community information regarding VIEs consolidated by the AIR Operating Partnership: March 31, 2023 December 31, 2022 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 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. March 31, 2023 December 31, 2022 ASSETS: Net real estate $ 1,056,591 $ 1,066,482 Cash and cash equivalents 63,330 54,319 Restricted cash 1,886 2,378 Other assets, net 25,685 20,944 LIABILITIES: Non-recourse property debt, net $ 1,208,171 $ 1,212,065 Accrued liabilities and other 36,603 35,365 Note 3, during the three months ended June 30, 2023, we formed an unconsolidated joint venture with a global asset manager, by selling a 70% interest in our Huntington Gateway property, a 443-unit property located in Virginia. Our 30% interest and $28.0 million preferred interest in the joint venture meets the definition of a VIE; however, we are not the primary beneficiary and do not consolidate this community. As of June 30, 2023, the carrying value of AIR's interest is $34.6 million, which 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 $28.2 million of the joint venture's guarantor non-recourse liabilities, which represents 30%. represents 20%. separation from Apartment Investment and Management Company (“Aimco”), all risks and rewards of ownership are 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’ capital. sold. Same Other Proportionate Corporate and Consolidated Three months ended March 31, 2023: Total revenues $ 157,902 $ 30,075 $ 21,943 $ 2,073 $ 211,993 Property operating expenses 41,247 11,457 11,366 11,383 75,453 Other operating expenses not allocated to segments (3) — — — 108,644 108,644 Total operating expenses 41,247 11,457 11,366 120,027 184,097 Proportionate property net operating income (loss) 116,655 18,618 10,577 (117,954 ) 27,896 Other items included in (loss) income before income tax (expense) benefit (4) — — — (37,705 ) (37,705 ) (Loss) income before income tax (expense) benefit $ 116,655 $ 18,618 $ 10,577 $ (155,659 ) $ (9,809 ) Same Other Proportionate Corporate and Consolidated Three months ended March 31, 2022: Total revenues $ 143,330 $ 1,436 $ 19,534 $ 17,178 $ 181,478 Property operating expenses 39,887 1,113 9,873 12,363 63,236 Other operating expenses not allocated to segments (3) — — — 95,164 95,164 Total operating expenses 39,887 1,113 9,873 107,527 158,400 Proportionate property net operating income (loss) 103,443 323 9,661 (90,349 ) 23,078 Other items included in (loss) income before income tax (expense) benefit (4) — — — 377,727 377,727 (Loss) income before income tax (expense) benefit $ 103,443 $ 323 $ 9,661 $ 287,378 $ 400,805 The assets of our segments and the consolidated assets not allocated to our segments were as follows (in thousands): March 31, 2023 December 31, 2022 Same Store $ 4,603,938 $ 4,610,356 Other Real Estate 1,544,950 1,289,896 Corporate and other assets (1) 423,459 651,631 Total consolidated assets $ 6,572,347 $ 6,551,883 For the 2023 2022 Same Store $ 33,599 $ 35,760 Other Real Estate 3,392 293 Total capital additions $ 36,991 $ 36,053 We also have one land parcel and one indirect land interest that we lease to third parties. value. This enables AIR to sell properties AIR Aimco Q1 2023 Q4 2019 Change Residents Average Household Income $246,000 $165,000 49% Median Household Income $170,000 $116,000 47% CSAT Score (1) 4.29 4.30 (0.01) Resident Retention 61.9% 56.8% 5.1% Portfolio Properties 75 124 (40%) Apartment Homes 22,696 32,598 (30%) Average Revenue per Apartment Home $2,766 $2,272 22% Redevelopment and Development ($M) $— $230 ($230) Mezzanine Investments ($M) $— $280 ($280) Separation from Aimco. sold. Three Months Ended March 31, Historical Change Change Attributable to Changes in Ownership Change Excluding Changes in Ownership (dollars in thousands) 2023 2022 $ % $ % $ % Rental and other property revenues, before utility reimbursements: Same Store $ 157,902 $ 143,330 $ 14,572 10.2 % $ 121 0.1 % $ 14,451 10.1 % Other Real Estate 30,075 1,436 28,639 nm — — % 28,639 nm Total 187,977 144,766 43,211 29.8 % 121 0.1 % 43,090 29.7 % Property operating expenses, net of utility reimbursements: Same Store 41,247 39,887 1,360 3.4 % 39 0.1 % 1,321 3.3 % Other Real Estate 11,457 1,113 10,344 nm — — % 10,344 nm Total 52,704 41,000 11,704 28.5 % 39 0.1 % 11,665 28.4 % Proportionate property net operating income: Same Store 116,655 103,443 13,212 12.8 % 82 0.1 % 13,130 12.7 % Other Real Estate 18,618 323 18,295 nm — — % 18,295 nm Total $ 135,273 $ 103,766 $ 31,507 30.4 % $ 82 0.1 % $ 31,425 30.3 % rates, and a 1.0% increase in late fees and other, partially offset by a 1.1% decrease in ADO. (income), net the prior year. 2022 Number of apartment communities sold 8 Number of apartment homes sold 1,332 Gain on apartment community sales $ 412.0 $9.3 million, respectively, of gains on derivative instruments that are not designated as cash flow hedges. Of the $11.4 million, $5.3 million represents cash gains and $6.1 million represents non-cash gains. Of the $9.3 million, $5.3 million represents cash gains and $4.0 million represents non-cash gains, net. by recognizing that real estate assets generally appreciate over time or maintain residual value to Three Months Ended March 31, 2023 2022 Net (loss) income attributable to AIR common stockholders $ (11,457 ) $ 375,881 Adjustments: Real estate depreciation and amortization, net of noncontrolling partners’ interest 90,012 81,457 Gain on dispositions of real estate, net of noncontrolling partners’ interest — (412,003 ) Common noncontrolling interests in AIR OP’s share of above adjustments and amounts allocable to participating securities (5,922 ) 20,249 NAREIT FFO attributable to AIR common stockholders $ 72,633 $ 65,584 Adjustments: Non-cash straight-line rent (1) 3,090 642 Loss on derivative instruments (2) 2,144 — Loss on extinguishment of debt (3) 2,008 23,636 Business transformation and transition related costs (4) 213 869 Casualty losses and other (5) 1,846 356 Common noncontrolling interests in AIR OP’s share of above adjustments and amounts allocable to participating securities (626 ) (1,578 ) Pro forma FFO attributable to AIR common stockholders $ 81,308 $ 89,509 Weighted-average common shares outstanding – basic 148,810 156,736 Dilutive common share equivalents 74 352 Total shares and dilutive share equivalents 148,884 157,088 Net (loss) income attributable to AIR per share – diluted $ (0.08 ) $ 2.39 NAREIT FFO per share – diluted $ 0.49 $ 0.42 Pro forma FFO per share – diluted $ 0.55 $ 0.57 Annualized Current Quarter Proportionate Debt to Adjusted EBITDAre 6.3x Net Leverage to Adjusted EBITDAre 6.5x March 31, 2023 Total indebtedness $ 3,738,808 Adjustments: Debt issuance costs related to non-recourse property debt and term loans 18,388 Proportionate share adjustments related to debt obligations (388,748 ) Cash and restricted cash (115,086 ) Tenant security deposits included in restricted cash 10,895 Proportionate share adjustments related to cash and restricted cash 6,703 Proportionate Debt $ 3,270,960 Perpetual Preferred Stock 2,000 Preferred noncontrolling interests in AIR Operating Partnership 77,143 Net Leverage $ 3,350,103 Three Months Ended March 31, 2023 Net loss $ (9,948 ) Adjustments: Interest expense 36,187 Loss on extinguishment of debt 2,008 Income tax expense 139 Depreciation and amortization 95,666 Net income attributable to noncontrolling interests in consolidated real estate partnerships (685 ) EBITDAre adjustments attributable to noncontrolling interests and unconsolidated real estate partnerships (7,083 ) EBITDAre $ 116,284 Pro forma FFO and other adjustments, net (1) 7,019 Quarterly Adjusted EBITDAre $ 123,303 Adjusted EBITDAre $ 493,212 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. 7.2 years, inclusive of extension options. We have sufficient committed credit to repay all debt coming due through 2027. Three Months Ended March 31, 2023 2022 Capital replacements $ 6,752 $ 5,308 Capital improvements 3,532 1,788 Capital enhancements 16,341 13,380 Initial capital expenditures 7,054 5,660 Casualty 2,922 9,283 Entitlement and planning 390 634 Total capital additions $ 36,991 $ 36,053 Plus: additions related to apartment communities sold and held for sale — 1,108 Consolidated capital additions $ 36,991 $ 37,161 Plus: net change in accrued capital spending (2,713 ) 141 Total capital expenditures per condensed consolidated statements of cash flows $ 34,278 $ 37,302 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. 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. June 30, 2023. Fiscal period Total Average Total Number of Maximum Number January 1 - January 31, 2023 294,635 $ 35.14 N/A N/A February 1 - February 28, 2023 3,683 $ 36.93 N/A N/A March 1 - March 31, 2023 1,102 $ 37.24 N/A N/A Total 299,420 $ 35.17 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. DESCRIPTION 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 104 Cover Page Interactive Data File (embedded within the Inline XBRL document). Molly H.N. Syke By: AIR-GP, Inc., its General Partner By: /s/ Date: July 28, 2023☒xMarch 31, June 30, 2023☐o(I.R.S. Employer
incorporation or organization)
Identification No.), Suite 1700, Colorado(303) Yesx ☒ No ☐oYesx ☒ No ☐oYesx ☒ No ☐oYesx ☒ No ☐o☒x☐o☒x☐o☐o☐o☐o☐o☐o☐o☐o☐o☐o No ☒x☐o No ☒xApril 28,July 25, 2023: 149,223,527March 31,June 30, 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.all of the common equity, the general partner interest and special limited partner interest in the AIR Operating Partnership.March 31,June 30, 2023, AIR owned approximately 91.2%91.3% of the legal interest and 93.3%93.1% of the economic interest in the common partnership units of the AIR Operating Partnership, respectively. The remaining 8.8%8.7% legal interest is owned by third parties. A portion of the 8.8%8.7% owned by third parties is subject to vesting. If the vesting requirements are not met, the 8.8%8.7% ownership will be reduced to no less than 6.7%6.9%. The legal ownership percentage is based on the outstanding 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. consolidated notes899101011111212131315141614161517161816191720172018211822192320242125 2328354236423744374439464047June 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 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 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 INCOMEThree 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 March 31,June 30, 2023 and 2022
Interests in
Noncontrolling
Interests in
Issued
Issued
Paid-
in Capital
Comprehensive
Income
in Excess
of Earnings
Equity
Real Estate
Partnerships
Operating
Partnership
EquityPerpetual Preferred Stock Common Stock Additional
Paid-
in CapitalAccumulated
Other
Comprehensive
Income (Loss)Distributions
in Excess
of EarningsTotal AIR
EquityNoncontrolling Interests in Consolidated Real Estate Partnerships Common Noncontrolling Interests in AIR Operating Partnership Total
EquityShares
IssuedAmount Shares
IssuedAmount 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 CASH FLOWSthousands)thousands, except share data)Perpetual Preferred Stock Common Stock Additional
Paid-
in CapitalAccumulated
Other
Comprehensive
Income (Loss)Distributions
in Excess
of EarningsTotal AIR
EquityNoncontrolling Interests in Consolidated Real Estate Partnerships Common Noncontrolling Interests in AIR Operating Partnership Total
EquityShares
IssuedAmount Shares
IssuedAmount 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)L.P.BALANCE SHEETS(Unaudited))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 STATEMENTS OF OPERATIONSthousands, except per unit data)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 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 STATEMENTSSTATEMENTS OF COMPREHENSIVE (LOSS) INCOMEthousands)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 PARTNERS’ CAPITALFor the Three Months Ended March 31, 2023 and 2022
Units
and Special
Limited Partner
Partners
Attributable to the
AIR Operating
Partnership
Interests
in Consolidated Real
Estate Partnerships
Partners’
CapitalThree 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 CASH FLOWSPreferred Units General Partner
and Special
Limited PartnerLimited
PartnersPartners' Capital Attributable to the AIR Operating Partnership Noncontrolling Interests in Consolidated Real Estate Partnerships Total
Partners'
CapitalBalances 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 Preferred Units General Partner
and Special
Limited PartnerLimited
PartnersPartners' Capital Attributable to the AIR Operating Partnership Noncontrolling Interests in Consolidated Real Estate Partnerships Total
Partners'
CapitalBalances 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 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 March 31,March 31,June 30, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.stockholders’ equity or partners’ capital previously reported. all of the common equity, the general partner interest and special limited partner interest in AIR Operating 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.March 31,June 30, 2023, our portfolio included 7573 apartment communities with25,797Table of Contents88%87%. We also have one land parcel and one indirect land interest that we lease to third parties.14March 31,June 30, 2023, after elimination of units held by consolidated subsidiaries, the AIR Operating Partnership had 163,633,131163,508,889 common OP Units outstanding. As of March 31,June 30, 2023, AIR owned 149,199,684149,223,526 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 Stock. AIR’s ownership of the total common OP Units outstanding represents a 91.2%91.3% legal interest in the AIR Operating Partnership and a 93.3%93.1% economic interest.March 31,June 30, 2023 and December 31, 2022, AIR consolidated six and seven VIEs, respectively, including the AIR Operating Partnership.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 March 31,June 30, 2023 and December 31, 2022, the AIR Operating Partnership had 2,846,574 redeemable preferred OP Units 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.threesix months ended March 31,June 30, 2023, we acquired one apartment community in South Florida, with 495 apartment homes, and 29,000 square feet of commercial space. Summarized information regarding this acquisition is set forth in the table below (dollars in thousands):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 $101.2$101.2 million of debt assumed and the issuance of $22.4$22.4 million in common OP Units.March 31, 2023, we did not sell any apartment communities.During the three months ended March 31,June 30, 2022, we sold eightfour apartment communities with 1,332718 homes, three of which were included in our Same Store segment and one in our Other Real Estate segment, for a gain on dispositionsdisposition of $413.1$175.6 million.March 31,June 30, 2023, no communities were classified as held for sale.Three Months Ended Six Months Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Fixed lease income $ 196,718 $ 169,337 $ 393,054 $ 337,567 Variable lease income 15,253 11,216 28,541 22,021 Total lease income $ 211,971 $ 180,553 $ 421,595 $ 359,588 March 31,June 30, 2023, have an average remaining term of 14.017.1 months. In general, our commercial leases have options to extend for a certain period of time at the tenant’s option. As of March 31,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 (in thousands):2023 (remaining) $ 262,306 2024 258,690 2025 41,745 2026 11,214 2027 9,701 Thereafter 34,712 Total $ 618,368 debt as of March 31, 2023 and December 31, 2022our total indebtedness (in thousands):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 2.4%between 2.4% to 5.7%5.7%.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 4.1%. As of March 31, 2023, the weighted-average remaining term of these hedges was 4.2 years.(3)1-monthone-month Term Secured Overnight Financing Rate (“SOFR”) plus 1.00%1.00% and a SOFR adjustment of 10-basis points, based on our current credit rating. As of March 31,June 30, 2023, the weighted-average interest rate for our term loans which is fixed viabefore consideration of in place interest rate swaps was4.1 6.2%.%. The term loans mature on the following schedule: $150$150 million mature on December 15, 2023, with two one-year extension options; $300$300 million mature on December 15, 2024, with a one-year extension option; $150$150 million mature on December 15, 2025; and $200$200 million mature on April 14, 2026.(4)March 31,June 30, 2023, the weighted-average remaining term of the term loans was 2.5 years. Refer to Note 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.$750.7$703.7 million under our revolving credit facility after consideration of undrawn letters of credit. The revolving credit facility bears interest at a 1-monthone-month Term SOFR plus 0.89%0.89%, based on our current credit rating, and a SOFR adjustment of 10-basis points. As of March 31,June 30, 2023, the weighted-average interest rate for our revolving credit facility was 5.6%.6.1%March 31, 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. In AprilJune 30, 2023, we established a secured credit facility that provides for $1up to $1 billion of 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 access this financing forplace 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 next 10 years.0.450.40 to 1.00, through March 31, 2023, and 0.40 to 1.00 thereafter, a maximum unsecured leverage ratio no greater than 0.60 to 1.00, and a minimum unsecured interest coverage ratio no less than 1.50 to 1.00.17March 31,June 30, 2023, are immaterial to our condensed consolidated financial statements.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 March 31,June 30, 2023 and 2022, dividends and distributions paid per share of Common Stock and per common unit was $were $0.45 and $0.90, respectively.were was 2.2 million for the three and six months ended March 31, 2023.June 30, 2023, and 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.18As 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 $ — During the three months ended June 30, 2023, the interest rate swap option asset and offsetting liability associated with the Parkmerced mezzanine investment was settled, resulting in equal decreases in other assets and accrued liabilities and other.March 31,June 30, 2023 and December 31, 2022, due to their relatively short-term nature and high probability of realization. The carrying value of our 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 March 31,June 30, 2023 and December 31, 2022, as they bear interest at floating rates which approximate market rates.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 $40.0$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%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$8.5 million. The seller financing note and related discount are included in other assets, net in our condensed consolidated balance sheets.From time to time, we use derivative financial instruments, principally interest rate swaps and treasury rate locks, to reduce our exposure to interest rate risk. Our objective in managing these risks is to reduce fluctuations in earnings and cash flows associated with changes in interest rate movements. We also enter into derivative financial instruments to manage exposure to economic risks that may not qualify for hedge accounting treatment. We do not hold or issue derivatives for speculative purposes and closely monitor the credit quality of institutions with which we transact.Cash Flow Hedges of Interest Rate Riskstabilitypredictability 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.The changes the fair value of derivatives designated as cash flow hedges are recordedrecognized in accumulated other comprehensive income and subsequently reclassified into earnings as an increase or decrease to interest paymentsexpense. 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.maderecognized in gain on derivative instruments in our variable-rate debt. 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.March 31,June 30, 2023, we estimate that during the next twelve12 months, we will reclassify into earnings approximately $17.2$10.8 million of the unrealized gain in accumulated other comprehensive income. The not designated as cash flow hedges are recognized in other expense,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.and hedging activity (dollars in thousands):
(included in Other Assets, net)
(included in Accrued Liabilities and Other)During the three months ended March 31, 2023, we recognized a loss of $2.1 million related to the mark-to-market adjustment for derivatives not designated as cash flow hedges in other expense, net, in our condensed consolidated statements of operations.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 $ — thatthose of the AIR Operating Partnership.fivefour 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) one VIE related to a lessor entity that owns an interest in a property leased to a third party. The AIR Operating Partnership is the primary beneficiary in the limited partnerships in which it is the sole decision maker and has a substantial economic interest.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 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 20%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 March 31,June 30, 2023 and December 31, 2022, the carrying value of the investment of $20.3$19.4 million and $20.7$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 20%$79.0 million of Blackstone’s guarantor liabilities, which were $79.0 million as of March 31, 2023.March 31,June 30, 2023 and December 31, 2022, the investment balance of $158.7$158.5 million and $158.7 million, respectively, is included in other assets, net, in our condensed consolidated balance sheets. Subsequent to the December 202020three communitiesone community that do not meet the criteriais expected to be classified as Same Store.March 31,June 30, 2023, our Same Store segment included 63 apartment communities with 22,794 apartment homes and our Other Real Estate segment included 1210 apartment communities with 3,0032,945 apartment homes. income before income tax (expense) benefitexpense of our segments on a proportionate basis, excluding amountsMarch 31,June 30, 2023 (in thousands):
Store
Real Estate
and Other
Adjustments (1)
Amounts Not
Allocated to
Segments (2)
Store
Real Estate
and Other
Adjustments (1)
Amounts Not
Allocated to
Segments (2)Same
StoreOther
Real EstateProportionate
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
StoreOther
Real EstateProportionate
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
StoreOther
Real EstateProportionate
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
StoreOther
Real EstateProportionate
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 in our segments, which is included in the related consolidated amounts. Also includes the reclassification of utility reimbursements from revenues to property operatingprovision for real estate impairment loss and write-offs of deferred leasing commissions, which are not included in our measure of segment performance.21June 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 threesix months ended March 31,June 30, 2023 and 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 23point.point, in 10 states and the District of Columbia. As of March 31,June 30, 2023, our portfolio included 7573 apartment communities with 25,79725,739 apartment homes, in which we held an average ownership of approximately 88%87%.highlightsNOI margin was 74.2%, up 120-basis points year-over-year and an AIR record for the firstsecond quarter, of 2023 include:•Revenue increased by 10.1% and net operating income (“NOI”) increased by 12.7%, compared to the first quarter of 2022;Controllable operating expenses, which we define as property expenses less real estate taxes, insurance,8.8% growth in Residential Rents, and utility expenses, declined by 20-basis points compared to the first quarter of 2022;NOI margins were 73.9%, up 170-basis points compared to the firstSecond quarter of 2022; and•Our proportionate share of residential accounts receivable was $6.7 million as of March 31, 2023, a 10% reduction from the start of the year, and the number of residents delinquent by two or more months was 160, a 36% reduction from approximately 250 at the start of the year. During April 2023, the number of residents delinquent by two or more months declined further to 130; all of which are nowsigned lease rate growth is higher than assumed in the collection process.Same Store MarketsFirst quarter lease rates were consistent with the assumptions of 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 reflect a slowing pace of growth(ii) 70-basis points from capital enhancement activity.lower inflation. ADO declined 40 basis(i) normal and expected seasonality (110-basis points year-over-year and while demand was lower than 2022's record breaking levels, it was consistent with our expectations and in-line with historical norms. AIR's signed new leases and renewals were up 8.7% and 8.4%, respectively. Blended rates were up 8.6%, inclusive of a 20-basis point benefit from acquisition class of 2021, a 90-basis point benefit from revenue enhancing investments in capital improvements, and a 110-basis point benefit due to our allocation to the Southeast Florida market.InflationIn recent years, apartment investors benefited from declining cap rates, low cost of leverage, and inflation. As inflation eases and interest and cap rates normalize, investment results may be expected to be more influenced by such operational metrics as resident retention and cost control.24Recent AcquisitionsRecent acquisitions include ten properties acquired in 2021, 2022, and 2023. In aggregate, these acquisitions represent approximately 17% of AIR GAV. Operating results are improving significantlydecline) due to the frictional vacancy of the leasing season and (ii) increased move-outs of non-paying residents as COVID-related protections expired (60-basis points). ADO is anticipated to reach its low point in July, and then increase in the third and fourth quarters.Year-over-Year Variance (1) Year Apartment Communities % of Gross Asset Value Rev Exp NOI Class of 2021 (2) 5 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% Edge. The changes madeplatform. 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, to improveincreasing numbers of high quality residents renew their leases, and the resident profile, optimizedisturbance of property upgrades is in the rent roll, reduce costs, and make other income generating improvements. These changes are typically iterative with results lagging until earned in as leases expire and new leases made. The impacts ofpast.are generally most significant between the second and fourth year of ownership, during which time profitability increases much faster thanresults in Same Store. This outperformance contributes substantially to our ability to meet our investment targets of unlevered internal rates of return (“IRR”) above 10%, and more than 200-basis points above AIR’s cost of capital.The five properties acquired in 2021 represent 8% of GAV and are now included in the Same Store portfolio. In the first quarter, revenues increased 16.3% and expenses declined by 2.3%, providing 27.3%higher property NOI, growth. These results contributed an incremental 60-basis points to Same Store revenue growth, a negative 80-basis points to Same Store expense growth, and 130-basis points to Same Store NOI growth.The four properties acquired in 2022 represent 6% of GAV and are part of our Acquisition portfolio. In the first quarter, ADO increased by 100-basis points and revenue grew by 5.5% sequentially. The three Florida properties continue to perform in line with underwriting. The fourth property, Willard Towers, is located in Chevy Chase, MD. We have concluded that the strength of the submarket supports a more transformational capital program than originally planned. We expect this will generate an unlevered IRR higher than previously underwritten.Southgate Towers, acquired earlier this year, represents 3% of GAV and is also part of our Acquisition portfolio. In the first 90 days ofenabling AIR ownership, ADO increased by 120-basis points above underwriting, reflecting the continuing strong demand in South Beach.Portfolio ManagementWe measure the quality of apartment communities in our portfolio based on average rents of our apartment homes compared to local market average rents as reported by a third-party provider of commercial real estate performance data and analysis. Under this rating system, we classify as “A” quality apartment communities those earning rents greater than 125% of local market average; and as “B” quality apartment communities those earning rents between 90% and 125% of local market average. We classify as “B/B+” quality a portfolio that on average earns rents between 100% and 125% of local market average rents. Although some companies and analysts within the multi-family real estate industry use apartment community quality ratings of “A” and “B,” some of which are tied to local market rent averages, the metrics used to classify apartment community quality as well as the period for which local market rents are calculated may vary from company to company. Accordingly, our rating system for measuring apartment community quality is neither broadly nor consistently used in the multi-family real estate industry. Our portfolio of apartment communities is diversified across primarily “A” and “B” price points, averaging “A-” in quality, and also across eight core markets in the United States.Since the Separation at year-end 2020, AIR has sold properties for $4.1 billion, approximately 41% of AIR’s gross asset value, and used $2.2 billion to reduce leverage and $1.9 billion to acquire properties that improve the quality and expected profitability of our real estate portfolio. The $1.9 billion of acquisitions since 2021 represents 17% of AIR GAV and their incomes are growing faster than Same Store income. We expect to make further acquisitions and to increase our allocation to higher growth properties.AIR uses “paired trades” to fund acquisitions, basing our cost of capital on the anticipated unlevered IRR of the communities or joint venture interests sold. We require a spread, or accretion, also measured by an unlevered IRR, higher by 200-basis points or more from the communities acquired. This excess return is driven in part by what we calldeploy the AIR Edge the cumulative result of our focus on resident selection, satisfaction,to improve their profitability and retention, continuing property upgrades, and relentless innovation in delivering best-in-class property management.The chart below shows changes in portfolio quality based on customer incomes and apartment rents.25(1)Customer satisfaction (“CSAT”), as graded on a scale from zero to five.Over the same period, we have improved AIR’s portfolio by reducing our exposure to regulatory risk. We have achieved this through property sales in the New York City, Chicago, Seattle, California markets, as well as through a strategic joint venture in California. This has allowed AIR to reallocate capital into states such as Florida, with a more predictable rule of law, and into submarkets such as Miami-Dade and Broward counties with higher growth.As a paired trade investor, AIR is agnostic to market changes insofar as we buy and sell properties in the same market conditions, with focus on gaining an accretive “spread.” As market conditions change, AIR adjusts target returns and spreads to reflect our changed cost of capital. Our paired trade approach is intended to ensure that new acquisitions are accretive to earnings in the near-term and will generate attractive spreads to unlevered IRRs, and to reinvest capital in the long-term.As part of our portfolio strategy, we seekacquisition properties which generally enjoy accelerated growth in profitability relative to sell communities with lower expected free cash flow internal rates of return and reinvest the proceeds from such sales in accretive uses such as capital enhancements (where we expect sustained incremental NOI as a result of the investment providing investment returns averaging greater than a 10% IRR), share repurchases, and selective acquisitions of stabilized communities with projected free cash flow internal rates of return more than 200-basis points higher than expected from the communities being sold. When the cost of capitalgeneral market rates.favorable, we will look to grow through the acquisition of stabilized apartment communities that we believe we can operate more efficiently than their previous owners through application ofacquire properties, deploy the AIR Edge. Through this disciplined approach to capital allocation, we expect to increase the qualityEdge, and expected growth rate of our portfolio.TransactionsAcquisitionsAs previously announced, in January, 2023 AIR acquired for $298 million, Southgate Towers, a 495-unit luxury apartment community with 29,000 square feet of commercial space located in the South Beach neighborhood of Miami Beach. AIR’s presence in South Beach, a submarket with limited competitive supply, now comprises 1,630 apartment homes between Flamingo Towers and Southgate Towers. This transaction demonstrates AIR’s use of distinctive acquisition currencies including the cash proceeds from the fourth quarter 2022 sale of our New England portfolio, the assumption of $101.2 million of property debt maturing in 2036 with interest at 4.15%, and the issuance of $22.4 million of OP Units. The acquisition is expected to provide an unlevered IRRgenerate returns 200-basis points, or higher, than ourAIR’s cost of capital, drivenas measured by unlevered IRR. “Paired trades” make agnostic to changes in market conditions insofar as AIR is buying and selling at roughly the implementationsame 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.Edge.DispositionsDuringformed two joint ventures in the three months ended March 31,quarter, the first of which closed on June 30, 2023 we did notthrough 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 any apartment communities.Balance SheetWe seekfurther 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 12 3 10 1 Units 4,051 1,748 3,093 443 Average Revenue per Unit $3,389 $2,070 $2,534 $2,307 by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage and primarily long-dated debt. We target aAIR targets Net Leverage to Adjusted EBITDAre ratio between 5.0x andto 6.0x but anticipate the actual ratio will vary basedwith 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.26using partners’ capital when it enhances financial returns or reduces investment risk. We seek to minimize refunding and96% fixed-rate leverage with limited repricing risk.Components of LeverageOur leverage includes AIR’s share of long-term, non-recourse property debt secured by our apartment communities, together with outstanding borrowings under our revolving credit facility, term loans, unsecured notes payable, and preferred equity.During the three months ended March 31, 2023, and on a leverage neutral basis, AIR borrowed $320 million using 10-year fixed rate financing, bearing interest at 4.9%. We used the proceeds to refinance a floating-rate loan and to reduce by $230 million borrowings on our revolving credit facility. This transaction reduced floating-rate debt not subject to interest rate caps or swaps to $120 million, 4% of outstanding leverage, net of cash on-hand, and increased our weighted-average maturity by nine months. As a result of these transactions, AIR has no debt maturingrisk before the second quarter of 2025.2025;Please see•Limited refunding risk with the Liquidityability to fund all maturities through 2027 from cash on hand, 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.LiquidityWe use our revolving credit facility for working capital and other short-term purposes, anda 10-year commitment to secure letters of credit. As of March 31, 2023, our share of cash and restricted cash, excluding amounts related to tenant security deposits, was $97.5 million (invested in interests in federal government obligations) and we had the capacity to borrow up to $750.7 million on our $1 billion revolving credit facility.In April 2023, we established a secured credit facility with Fannie Mae that provides for up tomake $1 billion of committed property level financing, on an as needed basis. This facility has minimal upfront costs, aloans with up to 10-year duration, allows for the removal and substitutionmaturities.properties, and is priced based on the Fannie Mae grid, which usually and today is lower than public and private bond pricing. After consideration of the secured facility, total liquidity is approximately $1.8 billion.ContentsWe manage our financial flexibility by maintaining investment grade ratings that enhance access to debt capital markets, and holding communities unencumbered by property debt that provide access to secured lenders and, in particular, the attractive availability and pricing of Fannie Mae and Freddy Mac. As of March 31, 2023, we held apartment communities unencumbered by debt with an estimated fair market value of approximately $7.1 billion.AprilJuly 25, 2023, ourthe AIR Board of Directors declared a quarterly cash dividend of $0.45 per share of Common Stock. This amount isStock, payable on May 30,August 29, 2023 to shareholders of record on May 19,August 18, 2023. In setting AIR’s 2023 dividend, ourThe 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.We expect that the after-tax dividend will benefit from AIR's refreshed tax basis. In 2022, approximately 86% of our dividend was taxable at capital gain rates, with the remainder taxable at ordinary income rates. We believe thefor 2023, which is also expected to have favorable tax characteristics due to AIR’s tax basis refreshed at the time of our dividend makes our stock more attractive to taxable investors, such as foreign investors, taxable individuals, and corporations, than dividends paid by peer REITs whose dividends are taxed at higher rates. For example, AIR’s dividend characteristics in 2022 compare favorably to a peer average of approximately 19% at capital gains rates (versus AIR at 86%); 71% at ordinary income rates (versus AIR at 14%), and 10% treated as return of capital. As a result, an investor in AIR common shares would retain after tax approximately 39% more of its dividend than would be retained after tax by an investor in the average of peer shares.2710 time10-time winner of 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, DC.D.C. We take seriously our responsibility to care for our customers, our neighbors, and each other as teammates. We are grateful for these recognitions and consider them confirmation of our success.(loss) incomeloss attributable to common stockholders per common share, on a dilutive basis decreased $2.47was $0.01 and $0.09 for the three and six months ended March 31,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, respectively, due primarily toto:gaingains on dispositions of real estate, increasedoperations.operations, and$0.55$0.58 and $1.12 for the three and six months ended March 31,June 30, 2023, respectively, compared to $0.57$0.66 and $1.23 for the three and six months ended June 30, 2022, respectively, due primarily to anthe below factors. Before consideration of the impact from the Aimco note receivable contribution of $0.15 and $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.and a decrease in interest income,as noted above; offset partially by increasedMarch 31,June 30, 2023, Compared to 2022three communitiesone community that do not meet the criteriais expected to be classified as Same Store.March 31,June 30, 2023, our Same Store segment included 63 apartment communities with 22,794 apartment homes and our Other Real Estate segment included 1210 apartment communities with 3,0032,945 apartment homes.28Three 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 % March 31,June 30, 2023, compared to 2022, excluding changes attributable to changes in ownership, our Same Store proportionate property NOI increased by $13.1 million, or 12.7%10.6%. This increase was attributable primarily to a $14.5$12.9 million, or 10.1%8.8%, increase in rental and other property revenues due to a 10.0%an 8.8% increase in residential rental rates.March 31,June 30, 2023, compared to 2022, increased by $18.3$17.3 million, due primarily to contribution from one property acquired in 2023, four properties acquired in 2022, and NOI contribution from the four properties acquired on 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 % March 31,June 30, 2023, compared to 2022, non-segment real estate operations decreased by $14.1$6.6 million due primarily to $9.8$6.7 million of lower NOI attributable to sold properties.$3.5$2.6 million increase in casualty losses, and a $0.9$1.6 million increase in property management expenses, net.March 31,June 30, 2023, compared to 2022, depreciation and amortization expense increased $11.1$10.6 million, or 13.1%13.5%, and $21.7 million, or 13.3%, respectively, due primarily to properties acquired subsequent to March 31,June 30, 2022, offset partially by the reduction in depreciation associated with properties sold.General and Administrative ExpensesFor the three months ended March 31, 2023, compared to 2022, general and administrativeincreased $0.6 million due primarily to higher personnel costs.Other Expenses, NetForMarch 31,June 30, 2022, to expense of $2.5 million for the three months ended June 30, 2023, due primarily to fees 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 in the prior year.expenses,expense, net, increased $1.8$5.2 million, due primarily to ground lease expense atservices 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 property acquiredcost basis investment in 2022.29March 31,June 30, 2023, compared to 2022, interest income decreased by $12.0$24.1 million, or, 94.1%, and $36.1 million, or 92.3%, respectively, due primarily to lower interest income associated with our note receivable from Aimco, which was repaid in the second and third quarters of 2022, the $12.9 million prepayment penalty received from Aimco in connection with its partial repayment during the thirdsecond quarter of 2022, and lower interest income associated with properties leased to Aimco through September 1, 2022, when the leases were canceled. The decrease was offset partially by interest from the New England portfolio seller financing note.March 31,June 30, 2023, compared to 2022, interest expense increased $14.1$11.5 million, or 44.3%, and $25.6 million, or 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 second quarter of 2022, and higher outstanding property debt balances.ForMarch 31,June 30, 2023 or 2022, we did not incur a loss on extinguishment of debt.DuringMarch 31,June 30, 2023, no apartment communities were sold. The table below summarizeswe recognized $17.5 million of loss (gain) on dispositions and impairments of apartment communities fromreal estate due primarily to:portfolioOther Real Estate reporting segment. Given management's assessment of the likelihood of the sale of these assets, which occurred during the three months ended March 31, 2022 (dollarsJune 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;millions):Loss from Unconsolidatedour Other Real Estate Partnershipreporting 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 byMarch 31, 2023, compared toJune 30, 2022, loss from unconsolidatedwe recognized $175.6 million and $587.6 million, respectively, of gain on dispositions of real estate partnerships decreased by $1.0related to the sale of four and 12 apartment communities, respectively, and we did not recognize any real estate impairment losses.due primarily to lower depreciation and amortization expense at properties included in unconsolidated joint ventures.30Three 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 (2)During 2023, we entered into certain treasury locks in anticipation of future financing transactions that do not meet GAAP requirements for hedge accounting treatment. As such, we are required to mark-to-market the fair value of these derivatives quarterly through net income. We have excluded the fair value adjustment from Pro forma FFO as the loss is non-cash and currently unrealized.During 2023 and 2022, we incurred debt extinguishment costs related to the prepayment of debt. In 2023, these costs are related to the prepayment of high-cost, floating-rate debt. We excluded these costs from Pro forma FFO because we believe they are not representative of future cash flows.(4)(5)(4)casualty losses related to fire damage at our Palazzo East at Park La Brea apartment community. During 2021, we incurred casualty losses due to Hurricane Ida-induced flooding in downtown Philadelphia causing damage to our Park Towne Place apartment community, and31continued to incur incrementaldebt extinguishment costs related to its cleanup in 2022.the prepayment of debt. In 2023, these costs are related to the prepayment of high-cost, floating-rate debt. We excluded these costs from Pro forma FFO because we believe they are not representative of the unusual nature of the weather events.future cash flows.March 31,June 30, 2023, are presented below:Annualized Current Quarter Pro forma for the Core Joint Venture Transaction 6.6x5.7x6.8x5.9xJune 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 32lossincome to EBITDAre and Adjusted EBITDAre, as used in our leverage ratios, is as follows (in thousands):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 $0.1$0.8 million to reflect the acquisitiondisposition of one property,two properties and the Value-Add Joint Venture, as if the transactiontransactions closed on JanuaryApril 1, 2023.March 31,June 30, 2023, our available liquidity was $848.2 million,$1.8 billion, which consisted of:83.696.7 million of our share of cash and cash equivalents;13.912.5 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; and750.7703.7 million of available capacity to borrow under our revolving credit facility after consideration of letters of credit.credit; andIn April 2023, we established a secured credit facility with Fannie Mae that provides for up to $1•$1.0 billion of committed property level financing on an as needed basis. through our secured credit facility with Fannie Mae.secured facility,completion of the Core JV, total liquidity is approximately $1.8$2.3 billion.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 and33During the three months ended March 31, 2023, and on a leverage neutral basis, 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. This transaction reduced floating rate debt not subject to interest rate caps to $120 million, 4% of outstanding leverage, net of cash on-hand, and increased our weighted-average maturity by nine months. As a result of these transactions, AIR has no debt maturing before the second quarter of 2025.6.96.6 years as of March 31,June 30, 2023, inclusive of extension options, with a weighted-average interest rate of 4.1%4.3%. As of March 31, 2023,Subsequent to the Core JV transaction, the weighted-average interest rate on our fixed rate loansfor total leverage is 4.0% and floating rate loansthe average remaining term to maturity is 3.6% and 5.4%, respectively0.45 to 1.00 through March 31, 2023, and 0.40 to 1.00, thereafter, a maximum unsecured leverage ratio no greater than 0.60 to 1.00, and a minimum unsecured interest coverage ratio no less than 1.50 to 1.00. We believe we were in compliance with these covenants as of March 31,June 30, 2023 and expect to remain in compliance during the next 12 months.threesix months ended March 31,June 30, 2023, net cash provided by operating activities was $88.9$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 threesix months ended March 31,June 30, 2023, increaseddecreased by $16.2$18.8 million compared to the same period in 2022, due primarily to higher contribution from our Same Store portfolio and increasedlower net operating income associated with apartment communities sold, partially offset by an increase contribution from properties recently acquired.threesix months ended March 31,June 30, 2023, our net cash used in investing activities of $191.3$228.4 million consisted primarily of purchases of real estate and capital expenditures. Net cash provided by investing activities of $513.3$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.totaled $37.0totaled $88.0 million and $36.1 million$86.4 million during the threesix months ended March 31,June 30, 2023 and 2022, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of apartment communities.34Six 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 threesix months ended March 31,June 30, 2023 and 2022, we capitalized $0.4$0.7 million and $0.3$0.7 million of interest costs, respectively, and $4.0$8.3 million and $3.7$7.7 million of indirect costs, respectively.$84.0$125.7 million for the threesix months ended March 31,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 $574.8$768.0 million for the threesix months ended March 31,June 30, 2022 consisted primarily of repayments on non-recourse debt and net repayments on our revolving credit facility.term loans, payment of dividends, and repurchases of common stock, offset partially by proceeds from the issuance of unsecured notes payable.35March 31,June 30, 2023, on a consolidated basis, we had $800.0 million of outstanding borrowings on our term loans, and $245.0$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 points with constant credit risk spreads would increase or decrease interest expense by $2.2$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.March 31,June 30, 2023, we had $115.1$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.As of March 31, 2023, we had $391.0 million of treasury rate locks not designated as hedging instruments. We estimate that a change in the floating rate of 100-basis points would increase or decrease other expense, net by $3.9 million on an annual basis.$3.5$3.4 billion as of March 31,June 30, 2023, inclusive of a $217.1$270.8 million mark-to-market asset, of which the amount attributable to AIR common stockholders is $178.3$219.0 million.firstsecond quarter of 2023 that has materially affected, or is reasonably likely to materially affect, AIR’s internal control over financial reporting.firstsecond quarter of 2023 that has materially affected, or is reasonably likely to materially affect, the AIR Operating Partnership’s internal control over financial reporting.March 31,June 30, 2023, we did not issue any shares of Common Stock in exchange for OP Units or limited partnership interests in consolidated real estate partnerships.March 31,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 March 31,June 30, 2023.DuringMarch 31, 2023, the AIR Operating Partnership issued 653,820 common OP Units as partial consideration for the acquisition of one apartment community located in the South Beach neighborhood of Miami Beach. To neutralize the issuance of OP Units, in November and December 2022, AIR repurchased an equal number of shares of Common Stock. The common OP Units were exempt from registration pursuant to Section 4(a)(2) of the Securities Act.March 31,June 30, 2023, no common OP Units were redeemed in exchange for Common Stock.March 31,June 30, 2023:
Number of
Units
Repurchased
Price Paid
per Unit
Units Repurchased as Part
of Publicly Announced
Plans or Programs
of Units that May Yet
Be Repurchased Under
Plans or Programs (1)Fiscal period Total
Number of
Units
RepurchasedAverage
Price Paid
per UnitTotal Number of
Units Repurchased as Part
of Publicly Announced
Plans or ProgramsMaximum 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 37March 31,June 30, 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.APARTMENT INCOME REIT CORP. APARTMENT INCOME REIT CORP.By:/s/ Molly H.N. Syke By:/s/ Paul BeldinPaul BeldinExecutive Vice President and Chief FinancialAccounting Officer(principal financial and accounting officer)APARTMENT INCOME REIT, L.P. Paul BeldinMolly H.N. SykePaul BeldinMolly H.N. SykeExecutive Vice President and Chief FinancialAccounting Officer(principal financial and accounting officer)Date: May 2, 202340