~~ure~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


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

For the quarterly period ended September 30, ~~2020~~ 2021


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

For the transition period from to

Commission File Number: ~~1-13232~~1-39686 (Apartment ~~Investment and Management Company)~~Income REIT Corp.)

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

APARTMENT INCOME REIT CORP.

APARTMENT INCOME REIT, L.P.

(formerly AIMCO Properties, L.P.)

~~Apartment Investment and Management Company~~

~~AIMCO Properties, L.P.~~

(Exact name of registrant as specified in its charter)


Maryland (Apartment ~~Investment and Management Company)~~Income REIT Corp.)		~~84-1259577~~84-1299717
Delaware ~~(AIMCO Properties,~~ (Apartment Income REIT, L.P.)		84-1275621
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

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

~~(303)~~ (303) 757-8101

(Registrant’s telephone number, including area code)

~~Not Applicable~~

~~(Former name, former address, and former fiscal year, if changed since last report)~~

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


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Class A Common Stock ~~(Aimco Investment and Management Company)~~(Apartment Income REIT Corp.)	~~AIV~~AIRC	New York Stock Exchange

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


Apartment ~~Investment and Management Company~~Income REIT Corp.: ~~Yes~~ ☒Yes ☒ No ☐		~~AIMCO Properties,~~Apartment Income REIT, L.P.: ~~Yes~~ ☒Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Apartment ~~Investment and Management Company~~Income REIT Corp.: ~~Yes~~ ☒Yes ☒ No ☐		~~AIMCO Properties,~~Apartment Income REIT, L.P.: ~~Yes~~ ☒Yes ☒ No ☐

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

~~Apartment Investment and Management Company~~:


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

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

☐

~~AIMCO Properties, L.P.~~:

~~Large accelerated filer~~	☐	~~Accelerated filer~~	☒
~~Non-accelerated filer~~	☐	~~Smaller reporting company~~	☐
		Emerging growth company	☐

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


Apartment ~~Investment and Management Company~~Income REIT Corp.:	☐		~~AIMCO Properties,~~Apartment Income REIT, L.P.:	☐

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


Apartment ~~Investment and Management Company~~Income REIT Corp.: Yes ☐ No ☒		~~AIMCO Properties,~~Apartment Income REIT, L.P.: Yes ☐ No ☒

The number of shares of Apartment ~~Investment and Management Company~~Income REIT Corp. Class A Common Stock outstanding as of October ~~28, 2020: 148,865,947~~27, 2021: 156,985,422

Table of Contents

EXPLANATORY NOTE

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

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

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

This filing combines the quarterly reports on Form 10-Q for the quarterly period ended September 30, ~~2020,~~2021, of ~~Apartment Investment~~AIR, the AIR Operating Partnership, and ~~Management Company, or Aimco,~~their consolidated subsidiaries. The AIR Operating Partnership’s condensed consolidated financial statements include the accounts of the AIR Operating Partnership and ~~AIMCO Properties, L.P., or~~its consolidated subsidiaries. Except as the ~~Aimco Operating Partnership. Where it is important to distinguish between the two entities, we refer to them specifically. Otherwise, references to~~context otherwise requires, “we,” “us,” or “our” ~~mean, collectively, Aimco,~~refer to AIR, the ~~Aimco~~AIR Operating Partnership, and their consolidated ~~entities.~~subsidiaries, collectively.

~~Aimco,~~AIR, a Maryland corporation, is a self-administered and self-managed real estate investment ~~trust, or REIT. Aimco,~~trust. AIR, through wholly-owned ~~subsidiaries,~~subsidiaries, is the general and special limited partner of the ~~Aimco~~AIR Operating Partnership. As of September 30, ~~2020, Aimco~~2021, AIR owned approximately ~~93.5%~~ 93.3%of the legal interest in the common partnership units of the ~~Aimco~~AIR Operating Partnership and ~~94.9%~~95.2% of the economic interest in the ~~Aimco~~AIR Operating Partnership. The remaining ~~6.5% legal interest and 5.1% economic~~6.7% legal interest is owned by third-party limited partners. As the sole general partner of the ~~Aimco~~AIR Operating Partnership, ~~Aimco~~AIR has exclusive control of the ~~Aimco~~AIR Operating Partnership’s day-to-day management.

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

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



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



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



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

•

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

•

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

•

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

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

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

Equity, partners’ capital, and noncontrolling interests are the main areas of difference between the condensed consolidated financial statements of ~~Aimco~~AIR and those of the ~~Aimco~~AIR Operating Partnership. Interests in the ~~Aimco~~AIR Operating Partnership held by entities other than ~~Aimco,~~

Table of Contents

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

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

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

Table of Contents

APARTMENT ~~INVESTMENT AND MANAGEMENT COMPANY~~INCOME REIT CORP.

~~AIMCO PROPERTIES,~~APARTMENT INCOME REIT, L.P.

TABLE OF CONTENTS

FORM 10-Q


		Page
	PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)
	Apartment ~~Investment and Management Company:~~Income REIT Corp.:
	Condensed Consolidated Balance Sheets ~~(Unaudited)~~	34
	Condensed Consolidated Statements of Operations ~~(Unaudited)~~	45
	Condensed Consolidated Statements of Comprehensive Income ~~(Unaudited)~~(Loss)	56
	Condensed Consolidated Statements of Equity ~~(Unaudited)~~	67
	Condensed Consolidated Statements of Cash Flows ~~(Unaudited)~~	89
	~~AIMCO Properties,~~Apartment Income REIT, L.P.:
	Condensed Consolidated Balance Sheets ~~(Unaudited)~~	910
	Condensed Consolidated Statements of Operations ~~(Unaudited)~~	1011
	Condensed Consolidated Statements of Comprehensive Income ~~(Unaudited)~~(Loss)	1112
	Condensed Consolidated Statements of Partners’ Capital ~~(Unaudited)~~	1213
	Condensed Consolidated Statements of Cash Flows ~~(Unaudited)~~	1415
	Notes to the Condensed Consolidated Financial Statements of Apartment ~~Investment~~Income REIT Corp. and ~~Management Company and AIMCO Properties,~~Apartment Income REIT, L.P. ~~(Unaudited)~~	1516
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2629
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4745
ITEM 4.	CONTROLS AND PROCEDURES	4745
	PART II. OTHER INFORMATION
ITEM 1A.	RISK FACTORS	4846
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4946
ITEM 6.	EXHIBITS	5148
Signatures		5249

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

APARTMENT ~~INVESTMENT AND MANAGEMENT COMPANY~~INCOME REIT CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


							September 30,			December 31,
	September 30, 2020			December 31, 2019			2021			2020
ASSETS
Buildings and improvements	$	7,006,395		$	6,868,543		$	5,971,806		$	6,127,249
Land		1,891,763			1,869,048			1,329,521			1,341,615
Total real estate		8,898,158			8,737,591			7,301,327			7,468,864
Accumulated depreciation		(2,858,174	)		(2,718,284	)		(2,585,474	)		(2,455,505	)
Net real estate		6,039,984			6,019,307			4,715,853			5,013,359
Cash and cash equivalents		228,368			142,902			73,687			44,214
Restricted cash		40,123			34,800			23,440			29,266
Mezzanine investment		300,326			280,258
Notes receivable from Aimco								534,127			534,127
Leased real estate assets								466,448			0
Goodwill								32,286			32,286
Other assets		383,298			351,472			588,668			576,026
Assets held for sale		50,030			0
Total assets	$	7,042,129		$	6,828,739		$	6,434,509		$	6,229,278

LIABILITIES AND EQUITY
Non-recourse property debt, net	$	4,058,295		$	4,230,590		$	3,013,913		$	3,628,236
Term loan, net		348,502			0
Term loans, net								1,143,867			349,164
Revolving credit facility borrowings		0			275,000			78,200			265,600
Total indebtedness		4,406,797			4,505,590			4,235,980			4,243,000
Accrued liabilities and other		356,538			360,574			610,217			598,736
Liabilities related to assets held for sale		58,177			0
Total liabilities		4,821,512			4,866,164			4,846,197			4,841,736

Redeemable preferred OP Units		79,449			97,064
Redeemable noncontrolling interests in consolidated real estate partnership		4,371			4,716
Preferred noncontrolling interests in AIR Operating Partnership								79,377			79,449
Commitments and contingencies (Note 4)
Equity:
Common Stock, $0.01 par value, 510,587,500 shares authorized, 148,865,947 and 148,885,197 shares issued/outstanding at September 30, 2020 and December 31, 2019, respectively		1,489			1,489
Perpetual preferred stock								2,000			2,000
Common Stock, $0.01 par value, 1,021,175,000 shares authorized at September 30, 2021 and December 31, 2020, and 156,983,542 and 148,861,036 shares issued/outstanding at September 30, 2021 and December 31, 2020, respectively								1,570			1,489
Additional paid-in capital		4,000,925			3,497,367			3,773,936			3,432,121
Accumulated other comprehensive income		3,579			4,195			0			3,039
Distributions in excess of earnings		(1,884,602	)		(1,722,402	)		(2,257,562	)		(2,131,798	)
Total Aimco equity		2,121,391			1,780,649
Total AIR equity								1,519,944			1,306,851
Noncontrolling interests in consolidated real estate partnerships		(60,212	)		(3,296	)		(68,098	)		(61,943	)
Common noncontrolling interests in Aimco Operating Partnership		75,618			83,442
Common noncontrolling interests in AIR Operating Partnership								57,089			63,185
Total equity		2,136,797			1,860,795			1,508,935			1,308,093
Total liabilities and equity	$	7,042,129		$	6,828,739		$	6,434,509		$	6,229,278

See notes to condensed consolidated financial statements.

Table of Contents

APARTMENT ~~INVESTMENT AND MANAGEMENT COMPANY~~INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

REVENUES

Rental and other property revenues

$
215,455

$
229,827

$
658,815

$
684,262

OPERATING EXPENSES

Property operating expenses

74,929

77,484

224,532

232,090

Depreciation and amortization

98,249

97,538

296,414

283,027

General and administrative expenses

8,118

10,595

27,922

31,922

Investment management expenses

2,819

1,581

5,124

4,319

Other expenses, net

17,571

4,002

23,452

12,759

   Total operating expenses

201,686

191,200

577,444

564,117

Interest income

3,041

2,824

10,407

8,615

Interest expense

(50,519
)

(42,011
)

(140,657
)

(122,961
)
Gain on dispositions of real estate

0

1,146

47,204

356,929

Mezzanine investment income, net

6,870

0

20,553

0

Income from unconsolidated real estate partnerships

277

288

629

591

   (Loss) income before income tax benefit

(26,562
)

874

19,507

363,319

Income tax benefit

1,747

3,096

7,859

1,942

   Net (loss) income

(24,815
)

3,970

27,366

365,261

Noncontrolling interests:

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

154

58

153

(103
)
      Net income attributable to preferred noncontrolling interests
         in Aimco Operating Partnership

(1,687
)

(1,933
)

(5,415
)

(5,800
)
      Net loss (income) attributable to common noncontrolling
         interests in Aimco Operating Partnership

1,341

(116
)

(1,134
)

(18,787
)
   Net income attributable to noncontrolling interests

(192
)

(1,991
)

(6,396
)

(24,690
)
      Net (loss) income attributable to Aimco

(25,007
)

1,979

20,970

340,571

      Net income attributable to Aimco preferred stockholders

0

0

0

(7,335
)
      Net (income) loss attributable to participating securities

(39
)

24

(125
)

(431
)
   Net (loss) income attributable to Aimco common
      stockholders

$
(25,046
)

$
2,003

$
20,845

$
332,805

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

$
(0.17
)

$
0.01

$
0.14

$
2.26

   Weighted average common shares outstanding – basic

148,544

148,434

148,532

147,474

   Weighted average common shares outstanding – diluted

148,544

148,636

148,628

147,692


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
REVENUES
Rental and other property revenues	$	190,082		$	178,123		$	541,533		$	545,809
Other revenues		1,695			0			4,990			0
Total revenues		191,777			178,123			546,523			545,809

OPERATING EXPENSES
Property operating expenses		73,925			65,419			203,300			195,340
Depreciation and amortization		81,121			79,264			232,192			239,659
General and administrative expenses		5,875			7,676			15,510			22,731
Other expenses, net		3,816			17,492			9,207			23,139
Total operating expenses		164,737			169,851			460,209			480,869

Interest income		13,432			2,492			45,088			8,784
Interest expense		(37,203	)		(44,608	)		(145,045	)		(125,653	)
Gain on derecognition of leased properties and dispositions of real estate		7,127			0			94,512			47,295
Mezzanine investment income, net		0			6,870			0			20,553
Income (loss) from continuing operations before income tax (expense) benefit and discontinued operations		10,396			(26,974	)		80,869			15,919
Income tax (expense) benefit		275			(419	)		(770	)		1,678
Income (loss) from continuing operations		10,671			(27,393	)		80,099			17,597
Income from discontinued operations, net of tax		0			2,578			0			9,769
Net income (loss)		10,671			(24,815	)		80,099			27,366
Noncontrolling interests:
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships		785			154			3,417			153
Net income attributable to preferred noncontrolling interests in AIR Operating Partnership		(1,603	)		(1,687	)		(4,810	)		(5,415	)
Net (income) loss attributable to common noncontrolling interests in AIR Operating Partnership		(475	)		1,341			(3,966	)		(1,134	)
Net (income) loss attributable to noncontrolling interests		(1,293	)		(192	)		(5,359	)		(6,396	)
Net income (loss) attributable to AIR		9,378			(25,007	)		74,740			20,970
Net income attributable to AIR preferred stockholders		(43	)		0			(136	)		0
Net income attributable to participating securities		(46	)		(39	)		(149	)		(125	)
Net income (loss) attributable to AIR common stockholders	$	9,289		$	(25,046	)	$	74,455		$	20,845

Earnings (loss) per common share – basic
Income (loss) from continuing operations attributable to AIR per common share	$	0.06		$	(0.23	)	$	0.49		$	0.09
Income (loss) from discontinued operations attributable to AIR per common share		—			0.02			—			0.08
Net income (loss) attributable to AIR common stockholders per share – basic	$	0.06		$	(0.21	)	$	0.49		$	0.17

Earnings (loss) per common share – diluted
Income (loss) from continuing operations attributable to AIR per common share	$	0.06		$	(0.23	)	$	0.48		$	0.09
Income (loss) from discontinued operations attributable to AIR per common share		—			0.02			—			0.08
Net income (loss) attributable to AIR common stockholders per share – diluted	$	0.06		$	(0.21	)	$	0.48		$	0.17

Weighted-average common shares outstanding – basic		156,646			119,967			153,289			119,957
Weighted-average common shares outstanding – diluted		157,042			119,967			153,650			120,035

See notes to condensed consolidated financial statements.

Table of Contents

APARTMENT ~~INVESTMENT AND MANAGEMENT COMPANY~~INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Net (loss) income

$
(24,815
)

$
3,970

$
27,366

$
365,261

Unrealized losses on available for sale debt securities

(243
)

(402
)

(658
)

(325
)
Comprehensive (loss) income

(25,058
)

3,568

26,708

364,936

Comprehensive income attributable to noncontrolling
interests

(177
)

(1,967
)

(6,354
)

(24,671
)
Comprehensive (loss) income attributable to Aimco

$
(25,235
)

$
1,601

$
20,354

$
340,265


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income (loss)	$	10,671		$	(24,815	)	$	80,099		$	27,366
Unrealized losses on available for sale debt securities		0			(243	)		(3,251	)		(658	)
Comprehensive income (loss)		10,671			(25,058	)		76,848			26,708
Comprehensive (income) loss attributable to noncontrolling interests		(1,293	)		(177	)		(5,147	)		(6,354	)
Comprehensive income (loss) attributable to AIR	$	9,378		$	(25,235	)	$	71,701		$	20,354

See notes to condensed consolidated financial statements.

Table of Contents

APARTMENT ~~INVESTMENT AND MANAGEMENT COMPANY~~INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

(In thousands)

(Unaudited)

	Common Stock							Accumulated									Noncontrolling Interests in			Common Noncontrolling Interests in
	Shares Issued		Amount		Additional Paid- in Capital			Other Comprehensive Income (Loss)			Distributions in Excess of Earnings			Total Aimco Equity			Consolidated Real Estate Partnerships			Aimco Operating Partnership			Total Equity			Preferred Stock				Common Stock							Accumulated									Noncontrolling Interests in			Common Noncontrolling Interests in
Balances at June 30, 2019		148,827	$	1,488	$	3,498,629		$	4,866		$	(1,741,765	)	$	1,763,218		$	(2,718	)	$	82,366		$	1,842,866
Redemption of Aimco Operating Partnership units		57		1		2,820			—			—			2,821			0			(3,647	)		(826	)
Amortization of share-based compensation cost		—		—		1,163			—			—			1,163			—			795			1,958
Effect of changes in ownership for consolidated entities		—		—		(5,104	)		—			—			(5,104	)		2,315			2,789			0
Contribution from noncontrolling interest in consolidated real estate partnerships		—		—		—			—			—			—			4,911			—			4,911
Purchase of noncontrolling interest in consolidated real estate partnerships		—		—		—			—			—			—			(2,863	)		—			(2,863	)
Change in accumulated other comprehensive income		—		—		—			(378	)		—			(378	)		—			(24	)		(402	)
Net income		—		—		—			—			1,979			1,979			(58	)		116			2,037
Common Stock dividends		—		—		—			—			(58,065	)		(58,065	)		—			—			(58,065	)
Distributions to noncontrolling interests		—		—		—			—			—			—			(87	)		(3,280	)		(3,367	)
Other, net		1		—		(175	)		—			0			(175	)		—			—			(175	)
Balances at September 30, 2019		148,885	$	1,489	$	3,497,333		$	4,488		$	(1,797,851	)	$	1,705,459		$	1,500		$	79,115		$	1,786,074
																										Shares Issued		Amount		Shares Issued		Amount		Additional Paid- in Capital			Other Comprehensive Income			Distributions in Excess of Earnings			Total AIR Equity			Consolidated Real Estate Partnerships			AIR Operating Partnership			Total Equity
Balances at June 30, 2020		148,865	$	1,489	$	3,491,277		$	3,807		$	(1,798,561	)	$	1,698,012		$	(3,190	)	$	79,414		$	1,774,236			0	$	0		120,225	$	1,201	$	3,491,565		$	3,807		$	(1,798,561	)	$	1,698,012		$	(3,190	)	$	79,414		$	1,774,236
Redemption of Aimco Operating Partnership units		—		—		—			—			—			0			0			(484	)		(484	)
Redemption of AIR Operating Partnership units																											—		—		—		—		—			—			—			—			—			(484	)		(484	)
Amortization of share-based compensation cost		—		—		902			—			—			902			—			1,052			1,954			—		—		—		—		902			—			—			902			—			1,052			1,954
Effect of changes in ownership of consolidated entities		—		—		508,709			—			—			508,709			(61,356	)		335			447,688			—		—		—		—		508,716			—			—			508,716			(61,356	)		335			447,695
Contribution from noncontrolling interest in consolidated real estate partnerships		—		—		—			—			—			—			4,701			—			4,701			—		—		—		—		—			—			—			—			4,701			—			4,701
Change in accumulated other comprehensive income		—		—		—			(228	)		—			(228	)		—			(15	)		(243	)
Net loss		—		—		—			—			(25,007	)		(25,007	)		(31	)		(1,341	)		(26,379	)
Change in accumulated other comprehensive income (loss)																											—		—		—		—		—			(228	)		—			(228	)		—			(15	)		(243	)
Net income (loss)																											—		—		—		—		—			—			(25,007	)		(25,007	)		(31	)		(1,341	)		(26,379	)
Common Stock dividends		—		—		—			—			(61,034	)		(61,034	)		—			—			(61,034	)		—		—		—		—		—			—			(61,034	)		(61,034	)		—			—			(61,034	)
Distributions to noncontrolling interests		—		—		—			—			—			—			(70	)		(3,343	)		(3,413	)		—		—		—		—		—			—			—			—			(70	)		(3,343	)		(3,413	)
Other, net		1		—		37			—			0			37			(266	)		—			(229	)		—		—		1		—		30			—			—			30			(266	)		—			(236	)
Balances at September 30, 2020		148,866	$	1,489	$	4,000,925		$	3,579		$	(1,884,602	)	$	2,121,391		$	(60,212	)	$	75,618		$	2,136,797			0	$	0		120,226	$	1,201	$	4,001,213		$	3,579		$	(1,884,602	)	$	2,121,391		$	(60,212	)	$	75,618		$	2,136,797

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

See notes to condensed consolidated financial statements.

Table of Contents

APARTMENT ~~INVESTMENT AND MANAGEMENT COMPANY~~INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

(In thousands)

(Unaudited)

	Preferred Stock						Common Stock									Accumulated									Noncontrolling Interests in			Common Noncontrolling Interests in
	Shares Issued			Amount			Shares Issued			Amount			Additional Paid- in Capital			Other Comprehensive Income (Loss)			Distributions in Excess of Earnings			Total Aimco Equity			Consolidated Real Estate Partnerships			Aimco Operating Partnership			Total Equity			Preferred Stock				Common Stock									Accumulated									Noncontrolling Interests in			Common Noncontrolling Interests in
Balances at December 31, 2018		5,000		$	125,000			144,623		$	1,446		$	3,515,686		$	4,794		$	(1,947,507	)	$	1,699,419		$	(2,967	)	$	67,189		$	1,763,641
Repurchases of Common Stock		—			—			(461	)		(5	)		(20,677	)		—			—			(20,682	)		—			—			(20,682	)
Redemption of Preferred Stock		(5,000	)		(125,000	)		—			—			4,089			—			(4,089	)		(125,000	)		—			—			(125,000	)
Issuance of Aimco Operating Partnership units		—			—			—			—			—			—			—			—			—			3,034			3,034
Redemption of Aimco Operating Partnership units		—			—			127			2			6,242			—			—			6,244			0			(11,202	)		(4,958	)
Amortization of share-based compensation cost		—			—			22			—			4,795			—			—			4,795			—			2,387			7,182
Effect of changes in ownership for consolidated entities		—			—			—			—			(12,123	)		—			—			(12,123	)		3,357			8,766			0
Contribution from noncontrolling interest in consolidated real estate partnerships		—			—			—			—			—			—			—			—			4,911			—			4,911
Purchase of noncontrolling interest in consolidated real estate partnerships		—			—			—			—			—			—			—			—			(3,780	)		—			(3,780	)
Change in accumulated other comprehensive income		—			—			—			—			—			(306	)		—			(306	)		—			(19	)		(325	)
Net income		—			—			—			—			—			—			340,571			340,571			103			18,787			359,461
Common Stock dividends		—			—			—			—			—			—			(183,579	)		(183,579	)		—			—			(183,579	)
Common Stock issued to Common Stockholders in special dividend		—			—			4,492			45			(561	)		—			—			(516	)		—			—			(516	)
Preferred Stock dividends		—			—			—			—			—			—			(3,247	)		(3,247	)		—			—			(3,247	)
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			(143	)		(9,827	)		(9,970	)
Other, net		—			—			82			1			(118	)		—			0			(117	)		19			—			(98	)
Balances at September 30, 2019		0		$	0			148,885		$	1,489		$	3,497,333		$	4,488		$	(1,797,851	)	$	1,705,459		$	1,500		$	79,115		$	1,786,074
																																		Shares Issued		Amount		Shares Issued			Amount			Additional Paid- in Capital			Other Comprehensive Income			Distributions in Excess of Earnings			Total AIR Equity			Consolidated Real Estate Partnerships			AIR Operating Partnership			Total Equity
Balances at December 31, 2019		0		$	0			148,885		$	1,489		$	3,497,367		$	4,195		$	(1,722,402	)	$	1,780,649		$	(3,296	)	$	83,442		$	1,860,795			0	$	0		120,242		$	1,202		$	3,497,654		$	4,195		$	(1,722,402	)	$	1,780,649		$	(3,296	)	$	83,442		$	1,860,795
Repurchases of Common Stock		—			0			(234	)		(2	)		(10,002	)		—			—			(10,004	)		—			—			(10,004	)		—		—		(189	)		(2	)		(10,002	)		—			—			(10,004	)		—			—			(10,004	)
Redemption of Aimco Operating Partnership units		—			—			159			2			5,135			—			—			5,137			—			(6,876	)		(1,739	)
Redemption of AIR Operating Partnership units																																			—		—		128			1			5,135			—			—			5,136			—			(6,876	)		(1,740	)
Amortization of share-based compensation cost		—			—			25			—			3,911			—			—			3,911			—			3,154			7,065			—		—		20			—			3,911			—			—			3,911			—			3,154			7,065
Effect of changes in ownership of consolidated entities		—			—			—			—			504,361			—			—			504,361			(61,320	)		4,647			447,688			—		—		—			—			504,361			—			—			504,361			(61,320	)		4,647			447,688
Cumulative effect of a change in accounting principle																																			—		—		—			—			—			—			(277	)		(277	)		—			—			(277	)
Contribution from noncontrolling interest in consolidated real estate partnerships		—			—			—			—			—			—			—			—			4,701			—			4,701			—		—		—			—			—			—			—			—			4,701			—			4,701
Cumulative effect of a change in accounting principle		—			—			—			—			—			—			(277	)		(277	)		—			—			(277	)
Change in accumulated other comprehensive income		—			—			—			—			—			(616	)		—			(616	)		—			(42	)		(658	)
Net income		—			—			—			—			—			—			20,970			20,970			194			1,134			22,298
Change in accumulated other comprehensive income (loss)																																			—		—		—			—			—			(616	)		—			(616	)		—			(42	)		(658	)
Net income (loss)																																			—		—		—			—			—			—			20,970			20,970			194			1,134			22,298
Common Stock dividends		—			—			—			—			—			—			(182,893	)		(182,893	)		—			—			(182,893	)		—		—		—			—			—			—			(182,893	)		(182,893	)		—			—			(182,893	)
Distributions to noncontrolling interests		—			—			—			—			—			—			—			—			(178	)		(9,841	)		(10,019	)		—		—		—			—			—			—			—			—			(178	)		(9,841	)		(10,019	)
Other, net		—			—			31			—			153			—			0			153			(313	)		—			(160	)		—		—		25			—			154			—			—			154			(313	)		—			(159	)
Balances at September 30, 2020		0		$	0			148,866		$	1,489		$	4,000,925		$	3,579		$	(1,884,602	)	$	2,121,391		$	(60,212	)	$	75,618		$	2,136,797			0	$	0		120,226		$	1,201		$	4,001,213		$	3,579		$	(1,884,602	)	$	2,121,391		$	(60,212	)	$	75,618		$	2,136,797

Balances at December 31, 2020																																			20	$	2,000		148,861		$	1,489		$	3,432,121		$	3,039		$	(2,131,798	)	$	1,306,851		$	(61,943	)	$	63,185		$	1,308,093
Issuance of Common Stock, net																																			—		—		7,825			79			342,053			—			—			342,132			—			—			342,132
Redemption of AIR Operating Partnership units																																			—		—		169			1			8,239			—			—			8,240			—			(12,217	)		(3,977	)
Amortization of share-based compensation cost																																			—		—		33			—			2,953			—			—			2,953			—			2,975			5,928
Effect of changes in ownership of consolidated entities																																			—		—		—			—			(9,846	)		—			—			(9,846	)		—			10,076			230
Contribution from noncontrolling interest in consolidated real estate partnerships																																			—		—		—			—			—			—			—			—			6,126			—			6,126
Change in accumulated other comprehensive income (loss)																																			—		—		—			—			—			(3,039	)		—			(3,039	)		—			(212	)		(3,251	)
Net income (loss)																																			—		—		—			—			—			—			74,740			74,740			(3,417	)		3,966			75,289
Common Stock dividends																																			—		—		—			—			—			—			(200,327	)		(200,327	)		—			—			(200,327	)
Preferred Stock dividends																																			—		—		—			—			—			—			(136	)		(136	)		—			—			(136	)
Distributions to noncontrolling interests																																			—		—		—			—			—			—			—			—			(8,744	)		(10,684	)		(19,428	)
Other, net																																			—		—		96			1			(1,584	)		—			(41	)		(1,624	)		(120	)		—			(1,744	)
Balances at September 30, 2021																																			20	$	2,000		156,984		$	1,570		$	3,773,936		$	0		$	(2,257,562	)	$	1,519,944		$	(68,098	)	$	57,089		$	1,508,935

See notes to condensed consolidated financial statements.

Table of Contents

APARTMENT ~~INVESTMENT AND MANAGEMENT COMPANY~~INCOME REIT CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	27,366		$	365,261
Net income (loss)							$	80,099		$	27,366
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		296,414			283,027			232,192			239,659
Gain on dispositions of real estate		(47,204	)		(356,929	)
Gain on derecognition of leased properties and dispositions of real estate								(94,512	)		(47,295	)
Income tax expense (benefit)								770			(1,678	)
Other non-cash adjustments, net								10,645			10,988
Discontinued operations:
Depreciation and amortization								—			56,755
Income tax benefit		(7,859	)		(1,942	)		—			(6,181	)
Other adjustments		11,617			10,429
Other non-cash adjustments, net								—			720
Net changes in operating assets and operating liabilities		(14,458	)		(21,098	)		(41,286	)		(14,458	)
Loss on extinguishment of debt								44,833			—
Net cash provided by operating activities		265,876			278,748			232,741			265,876
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate and deposits related to purchases of real estate		(98,573	)		(131,613	)		(225,526	)		(6,287	)
Capital expenditures		(272,269	)		(292,749	)		(130,877	)		(256,952	)
Proceeds from dispositions of real estate		36,869			422,463			45,752			36,869
Purchases of corporate assets		(13,539	)		(14,825	)		(4,915	)		(13,539	)
Maturation of debt investments								100,852			—
Other investing activities		(8,457	)		719			(35,877	)		(8,457	)
Discontinued operations:
Purchases of real estate and deposits related to purchases of real estate								—			(92,286	)
Capital expenditures								—			(15,317	)
Net cash used in investing activities		(355,969	)		(16,005	)		(250,591	)		(355,969	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt		608,756			667,965
Principal repayments on non-recourse property debt		(702,354	)		(390,346	)
Proceeds from term loan		350,000			0
Proceeds from non-recourse property debt of continuing operations								—			608,756
Principal repayments on non-recourse property debt of continuing operations								(618,111	)		(659,538	)
Proceeds from term loans								1,150,000			350,000
Repayment of term loan								(350,000	)		—
Net repayments of revolving credit facility		(275,000	)		(160,360	)		(206,144	)		(275,000	)
Payment of debt issuance costs		(7,663	)		(3,625	)		(11,124	)		(7,197	)
Payment of debt extinguishment costs		(13,175	)		(840	)		(42,760	)		(11,792	)
Repurchases of Common Stock		(10,004	)		(20,682	)		—			(10,004	)
Repurchases of Preferred Stock		0			(125,000	)
Proceeds from issuance of Common Stock, net								342,132			—
Payment of dividends to holders of Common Stock		(183,003	)		(183,319	)		(200,624	)		(183,003	)
Payment of dividends to holders of Preferred Stock		0			(3,247	)		(122	)		—
Payment of distributions to noncontrolling interests		(15,863	)		(16,320	)		(24,287	)		(15,863	)
Redemptions of noncontrolling interests in the Aimco Operating Partnership		(19,355	)		(5,071	)
Redemptions of noncontrolling interests in the AIR Operating Partnership								(4,045	)		(19,355	)
Contribution from noncontrolling interests in consolidated real estate partnerships		463,523			4,911			6,126			463,523
Purchases of noncontrolling interests in consolidated real estate partnerships		0			(3,780	)
Other financing activities		(14,980	)		(2,399	)		456			(14,980	)
Net cash provided by (used in) financing activities		180,882			(242,113	)
Discontinued operations:
Principal repayments on non-recourse property debt								—			(42,816	)
Other financing activities								—			(1,849	)
Net cash provided by financing activities								41,497			180,882
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		90,789			20,630			23,647			90,789
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF DISCONTINUED OPERATIONS								—			1,995
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF CONTINUING OPERATIONS								23,647			92,784
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD		177,702			72,595			73,480			166,541
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	268,491		$	93,225		$	97,127		$	259,325

See notes to condensed consolidated financial statements.

Table of Contents

~~AIMCO PROPERTIES,~~APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)


							September 30,			December 31,
	September 30, 2020			December 31, 2019			2021			2020
ASSETS
Buildings and improvements	$	7,006,395		$	6,868,543		$	5,971,806		$	6,127,249
Land		1,891,763			1,869,048			1,329,521			1,341,615
Total real estate		8,898,158			8,737,591			7,301,327			7,468,864
Accumulated depreciation		(2,858,174	)		(2,718,284	)		(2,585,474	)		(2,455,505	)
Net real estate		6,039,984			6,019,307			4,715,853			5,013,359
Cash and cash equivalents		228,368			142,902			73,687			44,214
Restricted cash		40,123			34,800			23,440			29,266
Mezzanine investment		300,326			280,258
Notes receivable from Aimco								534,127			534,127
Leased real estate assets								466,448			—
Goodwill								32,286			32,286
Other assets		383,298			351,472			588,668			576,026
Assets held for sale		50,030			0
Total assets	$	7,042,129		$	6,828,739		$	6,434,509		$	6,229,278

LIABILITIES AND EQUITY
Non-recourse property debt, net	$	4,058,295		$	4,230,590		$	3,013,913		$	3,628,236
Term loan, net		348,502			0
Term loans, net								1,143,867			349,164
Revolving credit facility borrowings		0			275,000			78,200			265,600
Total indebtedness		4,406,797			4,505,590			4,235,980			4,243,000
Accrued liabilities and other		356,538			360,574			610,217			598,736
Liabilities related to assets held for sale		58,177			0
Total liabilities		4,821,512			4,866,164			4,846,197			4,841,736

Redeemable preferred OP Units		79,449			97,064
Redeemable noncontrolling interests in consolidated real estate partnership		4,371			4,716
Redeemable preferred units								79,377			79,449
Commitments and contingencies (Note 4)
Partners’ capital:
Preferred units								2,000			2,000
General Partner and Special Limited Partner		2,121,391			1,780,649			1,517,944			1,304,851
Limited Partners		75,618			83,442			57,089			63,185
Partners’ capital attributable to the Aimco Operating Partnership		2,197,009			1,864,091
Partners’ capital attributable to the AIR Operating Partnership								1,577,033			1,370,036
Noncontrolling interests in consolidated real estate partnerships		(60,212	)		(3,296	)		(68,098	)		(61,943	)
Total partners’ capital		2,136,797			1,860,795			1,508,935			1,308,093
Total liabilities and partners’ capital	$	7,042,129		$	6,828,739		$	6,434,509		$	6,229,278

See notes to condensed consolidated financial statements.

910

Table of Contents

~~AIMCO PROPERTIES,~~APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
REVENUES
Rental and other property revenues	$	215,455		$	229,827		$	658,815		$	684,262		$	190,082		$	178,123		$	541,533		$	545,809
Other revenues														1,695			0			4,990			0
Total revenues														191,777			178,123			546,523			545,809

OPERATING EXPENSES
Property operating expenses		74,929			77,484			224,532			232,090			73,925			65,419			203,300			195,340
Depreciation and amortization		98,249			97,538			296,414			283,027			81,121			79,264			232,192			239,659
General and administrative expenses		8,118			10,595			27,922			31,922			5,875			7,676			15,510			22,731
Investment management expenses		2,819			1,581			5,124			4,319
Other expenses, net		17,571			4,002			23,452			12,759			3,816			17,492			9,207			23,139
Total operating expenses		201,686			191,200			577,444			564,117			164,737			169,851			460,209			480,869

Interest income		3,041			2,824			10,407			8,615			13,432			2,492			45,088			8,784
Interest expense		(50,519	)		(42,011	)		(140,657	)		(122,961	)		(37,203	)		(44,608	)		(145,045	)		(125,653	)
Gain on dispositions of real estate		0			1,146			47,204			356,929
Gain on derecognition of leased properties and dispositions of real estate														7,127			0			94,512			47,295
Mezzanine investment income, net		6,870			0			20,553			0			0			6,870			0			20,553
Income from unconsolidated real estate partnerships		277			288			629			591
(Loss) income before income tax benefit		(26,562	)		874			19,507			363,319
Income tax benefit		1,747			3,096			7,859			1,942
Net (loss) income		(24,815	)		3,970			27,366			365,261
Net loss (income) attributable to noncontrolling interests in consolidated real estate partnerships		154			58			153			(103	)
Net (loss) income attributable to the Aimco Operating Partnership		(24,661	)		4,028			27,519			365,158
Net income attributable to the Aimco Operating Partnership’s preferred unitholders		(1,687	)		(1,933	)		(5,415	)		(13,135	)
Net (income) loss attributable to participating securities		(39	)		43			(125	)		(429	)
Net (loss) income attributable to the Aimco Operating Partnership’s common unitholders	$	(26,387	)	$	2,138		$	21,979		$	351,594
Net (loss) income attributable to the Aimco Operating Partnership per common unit – basic and diluted	$	(0.17	)	$	0.01		$	0.14		$	2.26
Income (loss) from continuing operations before income tax (expense) benefit and discontinued operations														10,396			(26,974	)		80,869			15,919
Income tax (expense) benefit														275			(419	)		(770	)		1,678
Income (loss) from continuing operations														10,671			(27,393	)		80,099			17,597
Income from discontinued operations, net of tax														0			2,578			0			9,769
Net income (loss)														10,671			(24,815	)		80,099			27,366
Net (income) loss attributable to noncontrolling interests in consolidated real estate partnerships														785			154			3,417			153
Net income (loss) attributable to the AIR Operating Partnership														11,456			(24,661	)		83,516			27,519
Net income attributable to the AIR Operating Partnership’s preferred unitholders														(1,646	)		(1,687	)		(4,946	)		(5,415	)
Net income attributable to participating securities														(46	)		(39	)		(149	)		(125	)
Net income (loss) attributable to the AIR Operating Partnership’s common unitholders													$	9,764		$	(26,387	)	$	78,421		$	21,979

Earnings (loss) per common unit - basic:
Income (loss) from continuing operations attributable to the AIR Operating Partnership per common unit													$	0.06		$	(0.23	)	$	0.49		$	0.09
Income (loss) from discontinued operations attributable to the AIR Operating Partnership per common unit														—			0.02			—			0.08
Net income (loss) attributable to the AIR Operating Partnership common unitholders per unit - basic													$	0.06		$	(0.21	)	$	0.49		$	0.17

Earnings (loss) per common unit - diluted:
Income (loss) from continuing operations attributable to the AIR Operating Partnership per common unit													$	0.06		$	(0.23	)	$	0.48		$	0.09
Income (loss) from discontinued operations attributable to the AIR Operating Partnership per common unit														—			0.02			—			0.08
Net income (loss) attributable to the AIR Operating Partnership common unitholders per unit - diluted													$	0.06		$	(0.21	)	$	0.48		$	0.17

Weighted-average common units outstanding – basic		156,508			156,618			156,559			155,644			164,603			126,399			161,336			126,440
Weighted-average common units outstanding – diluted		156,508			156,879			156,692			155,971			164,999			126,399			161,697			126,547

See notes to condensed consolidated financial statements.

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~~AIMCO PROPERTIES,~~APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Net (loss) income

$
(24,815
)

$
3,970

$
27,366

$
365,261

     Unrealized losses on available for sale debt securities

(243
)

(402
)

(658
)

(325
)
Comprehensive (loss) income

(25,058
)

3,568

26,708

364,936

Comprehensive loss (income) attributable to noncontrolling
     interests

154

58

153

(103
)
Comprehensive (loss) income attributable to the Aimco
     Operating Partnership

$
(24,904
)

$
3,626

$
26,861

$
364,833


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020			2021			2020
Net income (loss)	$	10,671	$	(24,815	)	$	80,099		$	27,366
Unrealized losses on available for sale debt securities		0		(243	)		(3,251	)		(658	)
Comprehensive income (loss)		10,671		(25,058	)		76,848			26,708
Comprehensive (income) loss attributable to noncontrolling interests		785		154			3,417			153
Comprehensive income (loss) attributable to the AIR Operating Partnership	$	11,456	$	(24,904	)	$	80,265		$	26,861

See notes to condensed consolidated financial statements.

1112

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~~AIMCO PROPERTIES,~~APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

(In thousands)

(Unaudited)

General Partner
and Special
Limited Partner

Limited Partners

Partners’ Capital
Attributable to
the Aimco
Operating
Partnership

Noncontrolling
Interests in
Consolidated
Real Estate
Partnerships

Total Partners’
Capital

Balances at June 30, 2019

$
1,763,218

$
82,366

$
1,845,584

$
(2,718
)

$
1,842,866

Redemption of Aimco Operating Partnership units

2,821

(3,647
)

(826
)

—

(826
)
Amortization of share-based compensation cost

1,163

795

1,958

—

1,958

Effect of changes in ownership of consolidated entities

(5,104
)

2,789

(2,315
)

2,315

—

Contribution from noncontrolling interest in consolidated real
   estate partnerships

—

—

—

4,911

4,911

Purchase of noncontrolling interest in consolidated real estate
   partnerships

—

—

—

(2,863
)

(2,863
)
Change in accumulated other comprehensive income

(378
)

(24
)

(402
)

—

(402
)
Net income

1,979

116

2,095

(58
)

2,037

Distributions to common unitholders

(58,065
)

(3,280
)

(61,345
)

—

(61,345
)
Distributions paid to noncontrolling interests in
   consolidated real estate partnerships

—

—

—

(87
)

(87
)
Other, net

(175
)

—

(175
)

—

(175
)
Balances at September 30, 2019

$
1,705,459

$
79,115

$
1,784,574

$
1,500

$
1,786,074

Balances at June 30, 2020

$
1,698,012

$
79,414

$
1,777,426

$
(3,190
)

$
1,774,236

Redemption of Aimco Operating Partnership units

—

(484
)

(484
)

—

(484
)
Amortization of share-based compensation cost

902

1,052

1,954

—

1,954

Effect of changes in ownership of consolidated entities

508,709

335

509,044

(61,356
)

447,688

Contribution from noncontrolling interest in consolidated
   real estate partnerships

—

—

—

4,701

4,701

Change in accumulated other comprehensive income

(228
)

(15
)

(243
)

—

(243
)
Net loss

(25,007
)

(1,341
)

(26,348
)

(31
)

(26,379
)
Distributions to common unitholders

(61,034
)

(3,343
)

(64,377
)

—

(64,377
)
Distributions to noncontrolling interests

—

—

—

(70
)

(70
)
Other, net

37

—

37

(266
)

(229
)
Balances at September 30, 2020

$
2,121,391

$
75,618

$
2,197,009

$
(60,212
)

$
2,136,797


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

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

See notes to condensed consolidated financial statements.

1213

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~~AIMCO PROPERTIES,~~APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

For the Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

(In thousands)

(Unaudited)

Preferred Units

General Partner
and Special
Limited Partner

Limited Partners

Partners’ Capital
Attributable to
the Aimco
Operating
Partnership

Noncontrolling
Interests in
Consolidated
Real Estate
Partnerships

Total Partners’
Capital

Balances at December 31, 2018

$
125,000

$
1,574,419

$
67,189

$
1,766,608

$
(2,967
)

$
1,763,641

Repurchases of common partnership units

—

(20,682
)

—

(20,682
)

—

(20,682
)
Redemption of preferred units

(125,000
)

—

—

(125,000
)

—

(125,000
)
Issuance of Aimco Operating Partnership units

—

—

3,034

3,034

—

3,034

Redemption of Aimco Operating Partnership units

—

6,244

(11,202
)

(4,958
)

—

(4,958
)
Amortization of share-based compensation cost

—

4,795

2,387

7,182

—

7,182

Effect of changes in ownership of consolidated entities

—

(12,123
)

8,766

(3,357
)

3,357

—

Contribution from noncontrolling interest in consolidated
   real estate partnerships

—

—

—

—

4,911

4,911

Purchase of noncontrolling interest in consolidated
   real estate partnerships

—

—

—

—

(3,780
)

(3,780
)
Change in accumulated other comprehensive income

—

(306
)

(19
)

(325
)

—

(325
)
Net income

—

340,571

18,787

359,358

103

359,461

Distributions to common unitholders

—

(183,579
)

(9,827
)

(193,406
)

—

(193,406
)
Common partnership units issued to common unitholders
   in special distribution

—

(516
)

—

(516
)

—

(516
)
Distributions to preferred unitholders

—

(3,247
)

—

(3,247
)

—

(3,247
)
Distributions paid to noncontrolling interests in
   consolidated real estate partnerships

—

—

—

—

(143
)

(143
)
Other, net

—

(117
)

—

(117
)

19

(98
)
Balances at September 30, 2019

$
—

$
1,705,459

$
79,115

$
1,784,574

$
1,500

$
1,786,074

Balances at December 31, 2019

$
—

$
1,780,649

$
83,442

$
1,864,091

$
(3,296
)

$
1,860,795

Repurchases of common partnership units

—

(10,004
)

—

(10,004
)

—

(10,004
)
Redemption of Aimco Operating Partnership units

—

5,137

(6,876
)

(1,739
)

—

(1,739
)
Amortization of share-based compensation cost

—

3,911

3,154

7,065

—

7,065

Effect of changes in ownership of consolidated entities

—

504,361

4,647

509,008

(61,320
)

447,688

Contribution from noncontrolling interest in consolidated
   real estate partnerships

—

—

—

—

4,701

4,701

Cumulative effect of a change in accounting principle

—

(277
)

—

(277
)

—

(277
)
Change in accumulated other comprehensive income

—

(616
)

(42
)

(658
)

—

(658
)
Net income

—

20,970

1,134

22,104

194

22,298

Distributions to common unitholders

—

(182,893
)

(9,841
)

(192,734
)

—

(192,734
)
Distributions to noncontrolling interests

—

—

—

—

(178
)

(178
)
Other, net

—

153

—

153

(313
)

(160
)
Balances at September 30, 2020

$
—

$
2,121,391

$
75,618

$
2,197,009

$
(60,212
)

$
2,136,797


	Preferred Units		General Partner and Special Limited Partner			Limited Partners			Partners’ Capital Attributable to the AIR Operating Partnership			Noncontrolling Interests in Consolidated Real Estate Partnerships			Total Partners’ Capital
Balances at December 31, 2019	$	—	$	1,780,649		$	83,442		$	1,864,091		$	(3,296	)	$	1,860,795
Repurchases of common partnership units held by AIR's Predecessor		—		(10,004	)		—			(10,004	)		—			(10,004	)
Redemption of common partnership units		—		5,137			(6,876	)		(1,739	)		—			(1,739	)
Amortization of share-based compensation cost		—		3,911			3,154			7,065			—			7,065
Effect of changes in ownership of consolidated entities		—		504,361			4,647			509,008			(61,320	)		447,688
Contribution from noncontrolling interest in consolidated real estate partnerships		—		—			—			—			4,701			4,701
Cumulative effect of a change in accounting principle		—		(277	)		—			(277	)		—			(277	)
Change in accumulated other comprehensive income (loss)		—		(616	)		(42	)		(658	)		—			(658	)
Net income (loss)		—		20,970			1,134			22,104			194			22,298
Distributions to common unitholders		—		(182,893	)		(9,841	)		(192,734	)		—			(192,734	)
Distributions to noncontrolling interests		—		—			—			—			(178	)		(178	)
Other, net		—		153			—			153			(313	)		(160	)
Balances at September 30, 2020	$	—	$	2,121,391		$	75,618		$	2,197,009		$	(60,212	)	$	2,136,797

Balances at December 31, 2020	$	2,000	$	1,304,851		$	63,185		$	1,370,036		$	(61,943	)	$	1,308,093
Issuance of common partnership units to AIR, net		—		342,132			—			342,132			—			342,132
Redemption of AIR Operating Partnership units		—		8,240			(12,217	)		(3,977	)		—			(3,977	)
Amortization of share-based compensation cost		—		2,953			2,975			5,928			—			5,928
Effect of changes in ownership of consolidated entities		—		(9,846	)		10,076			230			—			230
Contribution from noncontrolling interest in consolidated real estate partnerships		—		—			—			—			6,126			6,126
Change in accumulated other comprehensive income (loss)		—		(3,039	)		(212	)		(3,251	)		—			(3,251	)
Net income (loss)		—		74,740			3,966			78,706			(3,417	)		75,289
Distributions to common unitholders		—		(200,327	)		(10,684	)		(211,011	)		—			(211,011	)
Distributions to preferred unitholders		—		(136	)		—			(136	)		—			(136	)
Distributions to noncontrolling interests		—		—			—			—			(8,744	)		(8,744	)
Other, net		—		(1,624	)		—			(1,624	)		(120	)		(1,744	)
Balances at September 30, 2021	$	2,000	$	1,517,944		$	57,089		$	1,577,033		$	(68,098	)	$	1,508,935

See notes to condensed consolidated financial statements.

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Table of Contents

~~AIMCO PROPERTIES,~~APARTMENT INCOME REIT, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	27,366		$	365,261
Net income (loss)							$	80,099		$	27,366
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		296,414			283,027			232,192			239,659
Gain on dispositions of real estate		(47,204	)		(356,929	)
Gain on derecognition of leased properties and dispositions of real estate								(94,512	)		(47,295	)
Income tax expense (benefit)								770			(1,678	)
Other non-cash adjustments, net								10,645			10,988
Discontinued operations:
Depreciation and amortization								0			56,755
Income tax benefit		(7,859	)		(1,942	)		0			(6,181	)
Other adjustments		11,617			10,429
Other non-cash adjustments, net								0			720
Net changes in operating assets and operating liabilities		(14,458	)		(21,098	)		(41,286	)		(14,458	)
Loss on extinguishment of debt								44,833			—
Net cash provided by operating activities		265,876			278,748			232,741			265,876
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate and deposits related to purchases of real estate		(98,573	)		(131,613	)		(225,526	)		(6,287	)
Capital expenditures		(272,269	)		(292,749	)		(130,877	)		(256,952	)
Proceeds from dispositions of real estate		36,869			422,463			45,752			36,869
Purchases of corporate assets		(13,539	)		(14,825	)		(4,915	)		(13,539	)
Maturation of debt investments								100,852			—
Other investing activities		(8,457	)		719			(35,877	)		(8,457	)
Discontinued operations:
Purchases of real estate and deposits related to purchases of real estate								—			(92,286	)
Capital expenditures								—			(15,317	)
Net cash used in investing activities		(355,969	)		(16,005	)		(250,591	)		(355,969	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from non-recourse property debt		608,756			667,965
Principal repayments on non-recourse property debt		(702,354	)		(390,346	)
Proceeds from term loan		350,000			0
Proceeds from non-recourse property debt of continuing operations								—			608,756
Principal repayments on non-recourse property debt of continuing operations								(618,111	)		(659,538	)
Proceeds from term loans								1,150,000			350,000
Repayment of term loan								(350,000	)		—
Net repayments of revolving credit facility		(275,000	)		(160,360	)		(206,144	)		(275,000	)
Payment of debt issuance costs		(7,663	)		(3,625	)		(11,124	)		(7,197	)
Payment of debt extinguishment costs		(13,175	)		(840	)		(42,760	)		(11,792	)
Repurchases of common partnership units held by General Partner and Special Limited Partner		(10,004	)		(20,682	)		—			(10,004	)
Redemption of preferred units from Aimco		0			(125,000	)
Proceeds from issuance of common partnership units to AIR, net								342,132			—
Payment of distributions to General Partner and Special Limited Partner		(183,003	)		(183,319	)		(200,624	)		(183,003	)
Payment of distributions to Limited Partners		(10,136	)		(10,211	)		(10,739	)		(10,136	)
Payment of distributions to preferred OP Units		(5,415	)		(9,047	)
Payment of distributions to preferred units								(4,932	)		(5,415	)
Payment of distributions to noncontrolling interests		(312	)		(309	)		(8,738	)		(312	)
Redemption of common and preferred OP Units		(19,355	)		(5,071	)
Redemption of common and preferred units								(4,045	)		(19,355	)
Contributions from noncontrolling interests in consolidated real estate partnerships		463,523			4,911			6,126			463,523
Purchases of noncontrolling interests in consolidated real estate partnerships		0			(3,780	)
Other financing activities		(14,980	)		(2,399	)		456			(14,980	)
Net cash provided by (used in) financing activities		180,882			(242,113	)
Discontinued operations:
Principal repayments on non-recourse property debt								—			(42,816	)
Other financing activities								—			(1,849	)
Net cash provided by financing activities								41,497			180,882
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		90,789			20,630			23,647			90,789
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF DISCONTINUED OPERATIONS								—			1,995
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH OF CONTINUING OPERATIONS								23,647			92,784
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD		177,702			72,595			73,480			166,541
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	268,491		$	93,225		$	97,127		$	259,325

See notes to condensed consolidated financial statements.

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APARTMENT ~~INVESTMENT AND MANAGEMENT COMPANY~~INCOME REIT CORP.

~~AIMCO PROPERTIES,~~APARTMENT INCOME REIT, L.P.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2020~~2021

(Unaudited)

Note 1 — Basis of Presentation and Organization

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Apartment ~~Investment~~Income REIT Corp. (“AIR”), Apartment Income REIT, L.P. (“AIR Operating Partnership”) and ~~Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-administered and self-managed real estate investment trust, or REIT. AIMCO~~their consolidated subsidiaries. On July 7, 2021, AIR Operating Partnership changed its name from “AIMCO Properties, L.P.~~, or~~” to “Apartment Income REIT, L.P.” The AIR Operating Partnership’s condensed consolidated financial statements include the ~~Aimco~~accounts of the AIR Operating Partnership isand its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

As used herein, and except where the context otherwise requires, “partnership” refers to a ~~Delaware~~ limited partnership ~~formed on May 16, 1994,~~or a limited liability company and “partner” refers to ~~conduct our business, which is focused on the ownership, management, redevelopment, and some development~~a partner in a limited partnership or a member of ~~quality apartment communities located in several of the largest markets in the United States.~~

~~Aimco, through its wholly-owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, holds~~ a ~~majority of the ownership interests in the Aimco Operating Partnership. Aimco conducts all of its business and owns all of its assets through the Aimco Operating Partnership.~~limited liability company. Interests in the ~~Aimco~~AIR Operating Partnership that are held by limited partners other than ~~Aimco~~AIR are ~~referred to~~reflected in AIR’s accompanying condensed consolidated balance sheets as OP Units. OP Units include common partnership units, which we refer to as common OP Units, as well as preferred partnership units, which we refer to as preferred OP Units. As of September 30, 2020, after elimination of unitsnoncontrolling interests in the AIR Operating Partnership. Interests in partnerships consolidated by the AIR Operating Partnership that are held by third parties are reflected in AIR’s accompanying condensed consolidated subsidiaries, the Aimco Operating Partnership had 159,182,513 common OP Units outstanding. As of September 30, 2020, Aimco owned 148,865,947 of the common OP Units of the Aimco Operating Partnership and Aimco had an equal number of shares of its Class A Common Stock outstanding, which we refer tobalance sheets as ~~Common Stock. Aimco’s ownership of the total common OP units outstanding represents a 93.5% legal interest~~noncontrolling interests in ~~the Aimco Operating Partnership and a 94.9% economic interest.~~consolidated real estate partnerships.

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

We own and operate a portfolio of apartment communities, diversified by both geography and price point, in 17 states and the District of Columbia. As of September 30, 2020, our portfolio included 126 apartment communities with 33,209 apartment homes in which we held an average ownership of approximately 95%. We consolidated 122 of these apartment communities with 33,067 apartment homes.

On September 14, 2020, we announced a Board-led plan, informed by active and regular engagement with shareholders, to reduce financial risk and execution risk, and to increase shareholder value by division of our business between two public entities. The first, with approximately 90% of our estimated fair value, will be known as Apartment Income REIT, or AIR. The second entity, with 10% of our estimated fair value, will be known as Aimco, or sometimes for clarity, as “new” Aimco, and is expected to hold the non-traditional assets, specified below. Separation costs for the three and nine months ended September 30, 2020, totaled $11.9 million and $12.6 million, respectively, are reflected in other expenses, net on our condensed consolidated statement of operations.

Following the completion of the separation, we expect to retain the redevelopment and development business, 25 consolidated communities including 16 multi-family communities securing a $534 million note payable due to AIR, and four non-100% owned communities that we do not consolidate. In addition, we expect to hold non-traditional assets such as other investments including 1001 Brickell Bay Tower and our loan to, and equity option in, the partnership that owns Parkmerced Apartments.

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

~~Basis of Presentation~~

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~GAAP~~generally accepted accounting principles in the U.S. (“GAAP”), have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, ~~2020,~~2021, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~

~~Table of Contents~~2021.

The condensed consolidated balance sheets of ~~Aimco~~AIR, the AIR Operating Partnership, and ~~the Aimco Operating Partnership~~their consolidated subsidiaries as of December 31, ~~2019,~~2020, have been derived from their respective audited financial statements at that date, but do not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in ~~Aimco’s~~AIR’s and the ~~Aimco~~AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. Except where indicated, the footnotes refer to ~~both Aimco and~~AIR, the ~~Aimco Operating Partnership.~~

~~Principles of Consolidation~~

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

The Separation

On December 15, 2020, Apartment Investment and Management Company (“Aimco”) completed the separation of its business into two, separate and distinct, publicly traded companies, AIR and Aimco ~~Operating Partnership’s~~(the “Separation”).

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

The financial results and cash flows attributable to the apartment communities retained by Aimco in the Separation are presented as discontinued operations. Unless otherwise noted, all disclosures in the notes accompanying the condensed consolidated financial statements ~~include the accounts~~reflect only continuing operations. Please see Note 9 for further details regarding our discontinued operations.

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Organization and Business

AIR is a self-administered and self-managed real estate investment trust (“REIT”). AIR owns, through its wholly-owned subsidiaries, all of the common equity, the general partner interest, and special limited partner interest in AIR Operating Partnership, a Delaware limited partnership originally incorporated on May 16, 1994. 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; Greater Washington D.C.; Miami; Denver; the San Francisco Bay Area; Los Angeles; and San Diego.

We own and operate a portfolio of apartment communities, diversified by both geography and price point, in 12 states and the District of Columbia. As of September 30, 2021, our portfolio included 95 apartment communities with 26,364 apartment homes in which we held an average ownership of approximately 93%. We also have 4 properties leased to Aimco for redevelopment and development.

Interests in the AIR Operating Partnership that are held by limited partners other than AIR are referred to as OP Units. OP Units include common partnership units, which we refer to as common OP Units, as well as preferred partnership units, which we refer to as preferred OP Units. As of September 30, 2021, after elimination of units held by consolidated subsidiaries, the AIR Operating Partnership had 168,215,225 common OP Units outstanding. As of September 30, 2021, AIR owned 156,983,542 of the common OP Units of the AIR Operating Partnership and AIR had an equal number of shares of its ~~consolidated subsidiaries. All significant intercompany balances~~Class A Common Stock outstanding, which we refer to as Common Stock. AIR’s ownership of the total common OP Units outstanding represents a 93.3% legal interest in the AIR Operating Partnership and ~~transactions have been eliminated in consolidation.~~a 95.2% economic interest.

Note 2 — Summary of Significant Accounting Policies

Principles of Consolidation

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

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

Redeemable Preferred OP Units

As described in Note 5, the preferred OP Units may be redeemed at the holder’s option and are therefore presented within temporary equity in ~~Aimco’s~~AIR’s condensed consolidated balance sheets and within temporary capital in the ~~Aimco~~AIR Operating Partnership’s condensed consolidated balance sheets. The following table presents a ~~reconciliation~~rollforward of the ~~Aimco~~AIR Operating Partnership’s preferred OP Units ~~from December 31, 2019, to September 30, 2020~~ (in thousands):

Balance at December 31, 2019

$
97,064

Preferred distributions

(5,415
)
Redemption of preferred units

(17,615
)
Net income

5,415

Balance at September 30, 2020

$
79,449


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

The ~~Aimco~~AIR Operating Partnership has outstanding various classes of redeemable preferred OP Units. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the ~~Aimco~~AIR Operating Partnership had ~~2,938,802~~2,935,920 and ~~3,643,399~~2,938,802 redeemable preferred OP Units, respectively, issued and outstanding. Distributions per annum range from ~~1.92%~~1.92% to ~~8.75%~~8.75% per class and ~~$0.48~~$0.48 to ~~$8.00~~$8.00 per unit.

Revenue from Leases

The majority of lease payments we receive from our residents and tenants are fixed. We receive variable payments from our residents and ~~commercial~~ tenants primarily for utility reimbursements. ~~For the three and nine months ended September 30, 2020 and 2019, our~~Our total lease income, included in continuing operations, was comprised of the following amounts for all operating leases (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Fixed lease income

$
200,295

$
213,945

$
619,447

$
639,359

Variable lease income

14,578

15,005

40,842

42,814

Straight-line rent write-off (1)

—

—

(2,927
)

—

Total lease income

$
214,873

$
228,950

$
657,362

$
682,173

~~(1)~~

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Fixed lease income

$
176,388

$
165,559

$
505,400

$
514,640

Variable lease income

12,953

11,995

34,589

32,829

Straight-line rent write-off (1)

0

0

0

(2,850
)
Total lease income

$
189,341

$
177,554

$
539,989

$
544,619

We monitor the collectability of all unpaid rent amounts. The onset of COVID-19 and the anticipated economic slowdown resulted in a $2.9 million write-off of accrued straight-line rent during the nine months ended September 30, 2020. Additionally, we wrote-off the related deferred leasing costs of $2.4 million during the nine months ended September 30, 2020. The write-offs of deferred leasing costs are recorded in depreciation and amortization in our condensed consolidated statements of operations.

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~~In response to~~(1)

We monitor the collectability of all unpaid rent amounts. The onset of COVID-19 and the anticipated economic ~~effects~~slowdown resulted in a $2.9 million write-off of accrued straight-line rent during the COVID-19 pandemic and governmental lockdown, many jurisdictions where our communities are located have enacted protections for residents and commercial tenants, including government-mandated rent deferrals, rent freezes, repayment extensions, fee abatement measures or concessions, and prohibitions on lease terminations or evictions for tenants. Some states and municipalities are also implementing rental assistance programs and encouraging landlord-tenant negotiations.

On April 10, 2020, the Financial Accounting Standards Board, or FASB, issued a Staff Q&A to respond to some frequently asked questions about accounting for lease concessions, including deferrals or reductions of future lease payments. Consequently, in accordance with the Staff Q&A issued by the FASB, we may elect to record rent relief when granted rather than over the remaining term of the lease. Our residential tenants represent approximately 97% of revenue and our commercial tenants represent approximately 3% of revenue for the threenine months ended September 30, 2020. ~~For the three and nine months ended September 30, 2020, we granted to commercial tenants $0.6 million and $1.0 million in rent relief, respectively, and elected to record these as a reduction~~

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

Use of Estimates

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

Reclassifications and Revisions

~~For~~As previously stated in Note 1, the financial results for the three and nine months ended September 30, 2020, ~~presentation~~include the financial results of ~~our condensed consolidated statements of operations, we have added a caption for investment management expenses. We have reclassified certain items from property operating expenses, general~~AIR’s Predecessor, and ~~administrative expenses, and other expenses, net, in our 2019 presentation to conform~~the financial results attributable to the ~~current presentation.~~

~~Accounting Pronouncements Adopted~~apartment communities retained by Aimco in the ~~Current Year~~Separation are presented as discontinued operations.

Recent Accounting Pronouncements

On August 5, 2020, the Financial Accounting Standards Board issued ASU 2020-06, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, and affects the diluted earnings per share calculation for instruments that may be settled in cash or shares, which is effective for us on January 1, ~~2020, we adopted ASC 326,~~ ~~Financial Instruments – Credit Losses, issued by the FASB which changes the method and timing~~2022. Adoption of the ~~recognition of credit losses on financial assets. The~~ standard requires uschanges to ~~estimate and record credit losses over the life of a financial instrument, including receivables, at its inception.~~be made retrospectively. Our ~~notes receivable and investments in available for sale, or AFS, debt securities~~preferred OP Units are subject to the new ~~standard. For AFS debt securities, the new~~ standard, ~~requires~~which will require us to ~~estimate~~include our preferred OP Units in the calculation of dilutive securities. We have evaluated the impact of this standard and do not anticipate the adoption will have a ~~credit loss if the fair value of the instruments is less than the carrying value of the instruments.~~

~~We adopted the credit loss standard using the modified-retrospective approach. We recorded a cumulative-effect adjustment for the estimated credit loss associated with~~material impact to our ~~notes receivable of $0.3 million in distributions in excess of earnings and partners’ capital in our condensed~~ consolidated balance sheets as of January 1, 2020. As of the date of adoption, the fair value of our AFS debt securities exceeded their carrying value and 0 estimate of credit loss was required for these instruments.financial statements.

Note 3 — Significant Transactions

~~Joint Venture Transaction~~

On September 8, 2020, we formed a joint venture with a passive institutional investor, to own a portfolio of 12 multi-family apartment communities with 4,051 homes located in California. The communities included in the joint venture were valued at $2.4 billion, or approximately $592,000 per apartment home. The joint venture has existing property debt of $1.22 billion and an implied equity value of $1.18 billion. In exchange for a 39% interest subject to $475 million of property debt, we received $461 million. We retain ownership of 61% of the joint venture and will control and operate the communities in exchange for property and asset management fees.

We evaluated the joint venture and concluded that we will continue to consolidate these communities. The difference between the consideration received and the carrying value of the interest sold was recognized in additional paid-in capital.

~~Table of Contents~~

~~Acquisition of Hamilton on the Bay~~Apartment Community Acquisitions

On ~~August 25, 2020,~~June 17, 2021, we acquired ~~Hamilton on the Bay,~~ an apartment community ~~and an adjacent land parcel~~ located in ~~Miami,~~Pembroke Pines, Florida. Summarized information regarding this acquisition is set forth in the table below (dollars in thousands):


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

Number of apartment homes

271

Purchase price
$
89,600

Capitalized transaction costs

2,506

Total consideration
$
92,106

Consideration allocated to land
$
56,251

Consideration allocated to building and improvements

34,645

Consideration allocated to intangible assets (1)

1,506

Consideration allocated to below-market lease liabilities (2)

(296
)
Total consideration
$
92,106

(1)

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

(2)

Intangible assets include in-place leases and leasing costs with a weighted-average term of less than one year.

(3)

Below-market leases have a weighted-average term of less than one year.

In October of 2021, we acquired a portfolio of 4 properties located in the Washington, D.C. area, with 1,400 apartment homes and 84,000 square feet of office and commercial space, for an expected purchase price of approximately $510 million, consisting of $259 million of existing property debt, an expected issuance of $128 million in OP Units, and $122 million borrowed on the revolving credit facility.

Apartment Community Dispositions

~~(1)~~

~~Intangible assets include in-place leases and leasing costs with a weighted-average term of~~ ~~0.5~~ ~~years~~.

~~(2)~~

~~Below-market leases have a weighted-average term of~~ ~~0.8~~ ~~years~~.

~~Dispositions of Apartment Communities~~

During the three ~~months ended September 30, 2020~~ and ~~2019, 0 apartment communities were sold. During the~~ nine months ended September 30, ~~2020 and 2019,~~2021, we sold 1 apartment community with ~~219 apartment~~58 homes for a gain on disposition of $47.2 million and sold 8 apartment communities with 2,605 apartment homes for a gain on dispositions of $356.9 million, respectively. The apartment communities sold were in lower-rated locations within our primary markets and had average revenues per apartment home significantly below those of our retained portfolio.$7.1 million.

From time to time we may be marketing for sale certain apartment communities that are inconsistent with our long-term investment strategy. At the end of each reporting period we evaluate whether such communities meet the criteria to be classified as held for sale. As of September 30, 2020, we classified a 266-apartment home community as held for sale that is expected to be sold for gross proceeds of approximately $126 million later in 2020.

~~Term Loan~~

~~On April 20, 2020, we secured a $350.0 million term loan. The loan matures on April 20, 2021, includes a~~ ~~one-year~~ extension option, and currently bears interest at a 30-day LIBOR plus 1.85%, with a 50-basis point LIBOR floor. Proceeds from the loan were used primarily to repay borrowings on our revolving credit facility.

~~Life Science Developer Investment~~

During the three months ended September 30, 2020, we ~~made~~sold 0 apartment communities. During the nine months ended September 30, 2020, we sold one apartment community with 219 apartment homes for a ~~$50~~gain on disposition of $47.2 million.

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Subsequent to September 30, 2021, we received $32.2 million ~~commitment~~in non-refundable deposits on 15 communities expected to ~~IQHQ,~~be sold for approximately $470 million in the fourth quarter.

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

New Credit Facility

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

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

Proceeds from the term loans were used to repay our previous $350 million term loan; to repay $213 million of property debt; and to reduce borrowings on our revolving credit facility. The term loans bear interest at a 30-day LIBOR plus 1.00%, with a LIBOR floor of 0.00%. The effective interest on outstanding borrowings on our term loans was 1.6%.

The term loans mature on the following schedule:



$150 million maturing on December 15, 2023, with two one-year extension options;



$300 million maturing on December 15, 2024, with a one-year extension option;



$150 million maturing on December 15, 2025; and



$200 million maturing on April 14, 2026.

Under our revolving credit facility we have agreed to maintain certain financial covenants, as well as other covenants customary for similar credit arrangements. We believe we are in compliance with these covenants as of September 30, 2021.

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

Equity Issuance

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

July Term Loan

On July 15, 2021, we ~~gained~~secured a new $350.0 million term loan. The loan matures on July 14, 2022, includes a six month extension option, and currently bears interest at a 30-day LIBOR plus 0.95% with a 0.00% LIBOR floor. Proceeds from the ~~right~~loan were used to ~~collaborate with IQHQ~~repay borrowings on ~~any multifamily component at its future development sites.~~our revolving credit facility.

Note 4 — Commitments and Contingencies

~~Commitments~~

In connection with our redevelopment, development, and other capital additions activities, we have entered into various construction-related contracts and we have made commitments to complete redevelopment and development of certain apartment communities, pursuant to financing or other arrangements. As ofDuring the three months ended September 30, ~~2020, our commitments related~~2021, we incurred casualty losses due to ~~these capital activities totaled approximately $184 million, most of which we expect to incur during the next 12 months.~~

~~We enter into certain commitments for future purchases of goods and services~~Hurricane Ida induced flooding in ~~connection with the operations of our apartment communities. Those commitments generally have terms of one year or less and reflect expenditure levels comparable~~downtown Philadelphia causing damage to our ~~historical expenditures.~~Park Towne Place apartment community. The loss is currently estimated to be $5.1 million and is included in property operating expenses in our condensed consolidated statements of operations. We anticipate this loss will be covered by our third-party insurance coverage.

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Legal Matters

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

~~Table~~For claims arising from matters that occurred prior to the Separation, Aimco is responsible for the first $17.5 million of ~~Contents~~cumulative legal and environmental liabilities incurred and the AIR Operating Partnership is responsible for any such liabilities in excess of $

17.5 million. As of September 30, 2021, we have a receivable from Aimco related to the indemnification of approximately $7 million.

Environmental

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

We are engaged in discussions with the Environmental Protection Agency, or EPA, regarding contaminated groundwater near an Indiana apartment community that has not been owned by us since 2008. The contamination allegedly derives from a dry cleaner that operated on our former property, prior to our ownership. We undertook a voluntary remediation of the dry cleaner contamination under state oversight. In 2016, EPA listed our former community and a number of residential communities in the vicinity on the National Priorities List, or NPL (i.e., as a Superfund site). In May 2018, we prevailed on our federal judicial appeal vacating the Superfund listing. We continue to work with EPA to formulate an agreed order to reimburse EPA costs and finish clean up of the site outside the Superfund program. Although the outcome of this process is uncertain, we do not expect the resolution to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

We also have a contingent environmental liability related to a property in Lake Tahoe, California. An entity owned by us was the former general partner of a now-dissolved partnership that previously owned a site where a laundromat, with a self-service dry-cleaning machine, operated. That entity and the current property owner have been remediating the site since 2009, under the oversight of the Lahontan Regional Water Quality Control Board, or Lahontan. In May 2017, Lahontan issued a final cleanup and abatement order that names 4 potentially-responsible parties, acknowledges that there may be additional responsible parties, and requires the named parties to perform additional groundwater investigation and corrective actions with respect to onsite and offsite contamination. We appealed the final order, and on June 1, 2020, the court vacated the Order against us. However, there are still civil suits pending related to this contingent liability. Although the outcome of this process is uncertain, we do not expect the resolution to have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

We have determined that our legal obligations to remove or remediate certain potentially hazardous materials may be conditional asset retirement obligations (“AROs”), as defined by GAAP. Except in limited circumstances where the asset retirement activities are expected to be performed in connection with a planned construction project or apartment community casualty, we believe that the fair value of our ~~asset retirement obligations~~AROs cannot be reasonably estimated due to significant uncertainties in the timing and manner of settlement of those obligations. ~~Asset retirement obligations~~AROs that are reasonably estimable as of September 30, ~~2020,~~2021, are immaterial to our condensed consolidated financial ~~condition, results of operations, and cash flows.~~statements.

Note 5 — Earnings and Dividends per Share and Unit

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

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

Our restricted stock awards that are subject to time-based vesting receive non-forfeitable dividends similar to shares of Common Stock and common partnership units prior to vesting, and our TSR long-term incentive partnership units receive non-forfeitable distributions based on specified percentages of the distributions paid to common partnership units prior to vesting

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and conversion. The unvested restricted shares and units related to these awards are participating securities. We include the effect of participating securities in basic and diluted earnings (loss) per share and unit computations using the two-class method of allocating distributed and undistributed earnings when the two-class method is more dilutive than the treasury stock method.

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

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Reconciliations of the numerator and denominator in the calculations of basic and diluted earnings (loss) per share and per unit ~~for the three and nine months ended September 30, 2020 and 2019,~~ are as follows (in thousands, except per share and per unit data):

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Earnings per share

Numerator:

Basic and dilutive net (loss) income attributable to Aimco common
   stockholders
$
(25,046
)

$
2,003

$
20,845

$
332,805

Denominator – shares:

   Basic weighted-average Common Stock outstanding

148,544

148,434

148,532

147,474

   Dilutive share equivalents outstanding

—

202

96

218

Dilutive weighted-average Common Stock outstanding

148,544

148,636

148,628

147,692

Earnings per share – basic and diluted
$
(0.17
)

$
0.01

$
0.14

$
2.26

Non-dilutive share equivalents outstanding

9,007

—

8,337

—

Earnings per unit

Numerator:

Basic and dilutive net (loss) income attributable to the Aimco
   Operating Partnership's common unitholders
$
(26,387
)

$
2,138

$
21,979

$
351,594

Denominator – units

   Basic weighted-average common partnership units outstanding

156,508

156,618

156,559

155,644

   Dilutive partnership unit equivalents outstanding

—

261

133

327

Dilutive weighted-average common partnership units
   outstanding

156,508

156,879

156,692

155,971

Earnings per unit – basic and diluted
$
(0.17
)

$
0.01

$
0.14

$
2.26

Non-dilutive partnership unit equivalents outstanding

2,220

—

1,596

—


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

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


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

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


	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Income (Numerator)		Units (Denominator)		Per Unit Amount		Income (Numerator)		Units (Denominator)		Per Unit Amount
Basic earnings (loss) per unit:
Net income (loss) attributable to the AIR Operating Partnership's common unitholders	$	9,764		164,603	$	0.06	$	78,421		161,336	$	0.49
Diluted earnings (loss) per unit:
Effect of dilutive securities		0		396		—		0		361		(0.01	)
Net income (loss) attributable to the AIR Operating Partnership's common unitholders	$	9,764		164,999	$	0.06	$	78,421		161,697	$	0.48

Non-dilutive partnership unit equivalents outstanding				45						615


	Three Months Ended September 30, 2020								Nine Months Ended September 30, 2020
	Income (Numerator)			Units (Denominator)		Per Unit Amount			Income (Numerator)		Units (Denominator)		Per Unit Amount
Basic earnings (loss) per unit:
Income from continuing operations attributable to the AIR Operating Partnership	$	(29,087	)		126,399	$	(0.23	)	$	11,869		126,440	$	0.09
Income from discontinued operations attributable to the AIR Operating Partnership		2,700			126,399		0.02			10,110		126,440		0.08
Net income attributable to the AIR Operating Partnership's common unitholders	$	(26,387	)		126,399	$	(0.21	)	$	21,979		126,440	$	0.17
Diluted earnings (loss) per unit:
Effect of dilutive securities		0			0		0			0		107		0
Net income (loss) attributable to the AIR Operating Partnership's common unitholders	$	(26,387	)		126,399	$	(0.21	)	$	21,979		126,547	$	0.17

Non-dilutive partnership unit equivalents outstanding					2,220							1,596

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The ~~Aimco~~AIR Operating Partnership has various classes of preferred OP Units, which may be redeemed at the holders’ option. The ~~Aimco~~AIR Operating Partnership may redeem these units for cash, or at its option, shares of Common Stock. As of September 30, ~~2020,~~2021, these preferred OP Units were potentially redeemable for approximately ~~2.4~~ 1.6million shares of Common Stock (based on the period end market price), or cash. The ~~Aimco~~AIR Operating Partnership has a redemption policy that requires cash settlement of redemption requests for the preferred OP Units, subject to limited exceptions. Accordingly, we have excluded these securities from earnings per share and unit computations for the periods presented ~~above, and we expect to exclude them in future periods.~~above.

Dividends and distributions paid ~~during the three~~per share of Common Stock and ~~nine months ended September 30, 2020 and 2019,~~per common unit were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Dividends and distributions paid	$	0.44	$	0.41	$	1.30	$	1.23

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Dividends and distributions paid
$
0.41

$
0.39

$
1.23

$
2.80

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In the first quarter of 2019, the Board of Directors authorized a special dividend and special distribution of $2.02, which is included in the $2.80 in the table above. The special dividend and distribution in the first quarter of 2019 consisted of the below (in millions):

Aimco Special Dividend:

Cash
$
67.1

Shares of Common Stock

4.5

Cash paid in lieu of issuing fractional shares
$
0.4

Aimco Operating Partnership Special Distribution:

Cash
$
72.7

Common partnership units

4.8

Cash paid in lieu of issuing fractional units
$
0.4

In connection with the 2019 special dividend and distribution, the Board of Directors authorized a reverse stock split during the three months ended March 31, 2019. The reverse split combined every 1.03119 common shares and common partnership units into one common share or common partnership unit and was intended to neutralize the dilutive impact of the shares and units issued in the special dividend and distribution. As a result, the number of shares and units outstanding after the dividend/distribution and reverse split was unchanged from the number outstanding immediately prior to the two actions.

Note 6 — Fair Value Measurements

Recurring Fair Value Measurements

We ~~measure~~measured at fair value on a recurring basis our investments in the securitization trust that ~~holds~~held certain of our property debt, which we ~~classify~~classified as ~~AFS~~available for sale (“AFS”) debt securities. These investments ~~are~~were presented within other assets in the condensed consolidated balance sheets. We ~~hold~~held several positions in the securitization trust that ~~pay~~paid interest ~~currently~~ and we also ~~hold~~held the first loss position in the securitization trust, which ~~accrues~~accrued interest over the term of the investment. These investments were acquired at a discount to face value and ~~we are accreting the discount~~accreted to the ~~$100.9~~$100.9 million face value of the investments through interest income using the effective interest method over the ~~remaining expected~~ term of the investments. During the second quarter of 2021, these investments ~~which as of September 30, 2020, was approximately 0.8 years.~~were settled in cash at the face value. Our amortized cost basis for these investments, which ~~represents~~represented the original cost adjusted for interest accretion less interest payments received, was ~~$95.3 million and $90.0~~$97.1 million as of ~~September 30, 2020, and~~ December 31, ~~2019, respectively.~~2020.

Our investments in AFS debt securities ~~are~~were classified within Level 2 of the GAAP fair value hierarchy. We ~~estimate~~estimated the fair value of these investments using an income and market approach with primarily observable inputs, including yields and other information regarding similar types of investments, and adjusted for certain unobservable inputs specific to these investments. The fair value of the positions that ~~pay~~paid interest ~~currently~~ typically ~~moves~~moved in an inverse relationship with movements in interest rates. The fair value of the first loss position iswas primarily correlated to collateral quality and demand for similar subordinate commercial mortgage-backed securities.

During ~~the nine months ended September 30,~~ 2020, we paid an upfront premium of ~~$12.1~~$12.1 million for the option to enter into an interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against our refinancing interest rate risk and is intended to mitigate interest rate increases between now and 2024. We receive a cash settlement in the future if the prevailing interest rate is higher than the ~~1.68%~~1.68% strike price. The amount of future cash settlement is limited if the prevailing interest rate exceeds ~~2.78%~~2.78%. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement. In connection with the Separation, AIR assigned all of the risks and rewards of ownership to Aimco, with an offsetting and equal asset or liability recognized for the amount of gain or loss recognized.

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

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


	As of September 30, 2020								As of December 31, 2019								As of September 30, 2021								As of December 31, 2020
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3
AFS debt securities	$	98,874	$	0	$	98,874	$	0	$	94,251	$	0	$	94,251	$	0	$	0	$	0	$	0	$	0	$	100,151	$	0	$	100,151	$	0
Interest rate option		10,026		0		10,026		0		0		0		—		0	$	25,617	$	0	$	25,617	$	0	$	13,177	$	0	$	13,177	$	0

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Nonrecurring Fair Value ~~Disclosures~~Measurements

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

Financial Assets and Liabilities Not Measured at Fair Value

We believe that the carrying value of the consolidated amounts of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable approximated their fair value as of September 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, due to their relatively short-term nature and high probability of realization. The carrying amounts of notes receivable from Aimco, the term ~~loan,~~loans, and the revolving credit facility borrowings also approximated their estimated fair value as of September 30, ~~2020,~~2021, and December 31, ~~2019.~~2020. We estimate the fair value of our non-recourse property debt using an income and market approach, including comparison of the contractual terms to observable and unobservable inputs such as market interest rate risk spreads, contractual interest rates, remaining periods to maturity, collateral quality, and loan to value ratios on similarly encumbered apartment communities within our portfolio. We classify the fair value of our non-recourse property debt within Level 2 of the GAAP fair value hierarchy based on the significance of certain of the unobservable inputs used to estimate its fair value.

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


	As of September 30, 2021				As of December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Non-recourse property debt	$	3,027,991	$	3,128,441	$	3,646,093	$	3,730,621

As of September 30, 2020

As of December 31, 2019

Carrying Value

Fair Value

Carrying Value

Fair Value

Non-recourse property debt
$
4,079,251

$
4,206,702

$
4,251,339

$
4,298,630

Note 7 — Variable Interest Entities

Consolidated Entities

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

~~All of the VIEs the Aimco~~The AIR Operating Partnership consolidates (i) five VIEs that own ~~interests~~interest 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.~~communities and (ii) five VIEs related to lessor entities that own interest in the properties leased to Aimco. The ~~Aimco~~assets and liabilities of the VIEs associated with the leased properties consists of our net investment in the leases. The AIR Operating Partnership is the primary beneficiary in the limited partnerships in which it is the sole decision maker and has a substantial economic interest. The table below summarizes apartment community information regarding VIEs consolidated by the ~~Aimco~~AIR Operating ~~Partnership, excluding 1001 Brickell Bay Drive as it is not an apartment community:~~Partnership:


	September 30, 2021		December 31, 2020
VIEs with interests in apartment communities		5		5
Apartment communities owned by VIEs		16		16
Apartment homes in communities owned by VIEs		5,369		5,369

September 30, 2020

December 31, 2019

VIEs with interests in apartment communities

6

6

Apartment communities owned by VIEs

17

6

Apartment homes in communities owned by VIEs

5,409

2,056

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

	September 30, 2020		December 31, 2019
Assets (1)
					September 30, 2021		December 31, 2020
ASSETS:
Net real estate	$	1,424,820	$	501,272	$	1,103,337	$	1,125,315
Cash and cash equivalents		15,908		11,600		30,354		10,548
Restricted cash		8,648		2,063		2,184		8,818
Other assets		38,815		40,459		22,927		23,870
Liabilities (1)
Non-recourse property debt, net, secured by Aimco communities		1,284,252		175,842
Deferred tax liability		136,968		147,722
LIABILITIES:
Non-recourse property debt secured by AIR communities, net					$	1,231,083	$	1,278,318
Accrued liabilities and other		42,845		36,107		38,768		34,038

~~(1)~~

VIEs as of September 30, 2020 and December 31, 2019, include 1 VIE that owns an interest in 1001 Brickell Bay Drive. Assets and liabilities include those of the VIE, but it is not included in the apartment counts above as it is not an apartment community.

Unconsolidated Entities

We have an interest in a partnership that owns Parkmerced Apartments, which meets the definition of a VIE. However, we are not the primary beneficiary and do not consolidate this partnership. ~~We loaned $275.0~~In connection with the Separation, Aimco was allocated economic ownership of the $275.0 million mezzanine loan investment and option to acquire a 30% equity interest in the ~~partnership, which~~partnership. The investment accrues interest at ~~10%~~10% per annum with a five-year term and the right to extend for a second five-year term. ~~Our~~Subsequent to the Separation, all risks and rewards of ownership are Aimco’s. As of September 30, 2021, and December 31, 2020, the investment

~~Table of Contents~~

balance of ~~$300.3~~$355.7 million ~~reflected~~and $307.4 million, respectively, primarily consisting of notes receivable, is included in ~~mezzanine investment~~other assets in ~~our~~AIR’s condensed consolidated balance sheets, ~~consists primarily~~as legal transfer is not complete. Since AIR has legally assigned all risks and rewards of ~~notes receivable~~ownership to Aimco, there is an equal and ~~represents our maximum exposure~~offsetting liability included in accrued liabilities and other in AIR’s condensed consolidated balance sheets. Accordingly, there is no net effect on AIR’s shareholders’ equity. During the three and nine months ended September 30, 2020, we recognized $6.9 million and$20.6 million, respectively, of income in connection with the mezzanine loan. The mezzanine investment income was entirely offset by an expense to ~~loss in~~recognize the requirement that this ~~VIE.~~income be contributed to Aimco.

Note 8 — Business Segments

We have 32 segments: ~~(i)~~ Same Store ~~(ii) Redevelopment and Development, and (iii) Acquisition~~ and Other Real Estate.

Our Same Store segment includes communities ~~that have~~that: (i) are owned and managed by AIR and (ii) had reached a stabilized level of ~~operations as of the beginning of a two-year comparable period and maintained it throughout the current and comparable prior year and are not expected to be sold within 12 months.~~operations. Our Redevelopment and Development segment includes apartment communities that are currently under construction, and those that have been completed in recent years that have not achieved and maintained stabilized operations for both the current and comparable prior year. Our Acquisition and Other Real Estate segment ~~includes: (i)~~includes communities that ~~we have acquired since the beginning of a two-year comparable period; (ii) communities that are subject to limitations on rent increases; (iii) communities that we expect to sell within 12 months but~~ do not ~~yet~~ meet the criteria to be classified as ~~held for sale; (iv) communities that we expect to redevelop; and (v) certain commercial spaces.~~

~~Our~~Same Store. Communities included in discontinued operations are excluded from our evaluation of segment performance, as they are no longer included in information used by our chief operating decision maker (“CODM”).

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

As of September 30, ~~2020,~~2021, our Same Store segment included ~~93 consolidated~~92 apartment communities with ~~27,610~~25,427 apartment ~~homes; our Redevelopment and Development segment included 8 consolidated communities with 2,521 homes;~~homes, and our ~~Acquisition and~~ Other Real Estate segment included 203 apartment communities with ~~2,670 homes and 1 office building.~~937 apartment homes.

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


	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Three months ended September 30, 2021:
Total revenues	$	162,535	$	5,456	$	21,647	$	2,139		$	191,777
Property operating expenses		44,901		2,920		11,643		14,461			73,925
Other operating expenses not allocated to segments (3)		0		0		0		90,812			90,812
Total operating expenses		44,901		2,920		11,643		105,273			164,737
Proportionate property net operating income (loss)		117,634		2,536		10,004		(103,134	)		27,040
Other items included in income before income tax benefit (expense) (4)		0		0		0		(16,644	)		(16,644	)
Income (loss) from continuing operations before income tax benefit (expense)	$	117,634	$	2,536	$	10,004	$	(119,778	)	$	10,396

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	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Nine months ended September 30, 2021:
Total revenues	$	469,686	$	8,255	$	61,787	$	6,795		$	546,523
Property operating expenses		133,983		5,191		32,974		31,152			203,300
Other operating expenses not allocated to segments (3)		0		0		0		256,909			256,909
Total operating expenses		133,983		5,191		32,974		288,061			460,209
Proportionate property net operating income (loss)		335,703		3,064		28,813		(281,266	)		86,314
Other items included in income before income tax benefit (expense) (4)		0		0		0		(5,445	)		(5,445	)
Income (loss) from continuing operations before income tax benefit (expense)	$	335,703	$	3,064	$	28,813	$	(286,711	)	$	80,869


	Same Store		Other Real Estate			Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Three months ended September 30, 2020:
Total revenues	$	163,003	$	1,106		$	11,026	$	2,988		$	178,123
Property operating expenses		47,732		1,242			8,311		8,134			65,419
Other operating expenses not allocated to segments (3)		0		0			0		104,432			104,432
Total operating expenses		47,732		1,242			8,311		112,566			169,851
Proportionate property net operating income (loss)		115,271		(136	)		2,715		(109,578	)		8,272
Other items included in income before income tax benefit (expense) (4)		0		0			0		(35,246	)		(35,246	)
Income (loss) from continuing operations before income tax benefit (expense)	$	115,271	$	(136	)	$	2,715	$	(144,824	)	$	(26,974	)


	Same Store		Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Nine months ended September 30, 2020:
Total revenues	$	510,151	$	4,274	$	24,986	$	6,398		$	545,809
Property operating expenses		140,115		3,400		21,302		30,523			195,340
Other operating expenses not allocated to segments (3)		0		0		0		285,529			285,529
Total operating expenses		140,115		3,400		21,302		316,052			480,869
Proportionate property net operating income (loss)		370,036		874		3,684		(309,654	)		64,940
Other items included in income before income tax benefit (expense) (4)		0		0		0		(49,021	)		(49,021	)
Income (loss) from continuing operations before income tax benefit (expense)	$	370,036	$	874	$	3,684	$	(358,675	)	$	15,919

(1)

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

(2)

Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any. Also includes property management revenues, which are not part of our segment performance measure and property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our ~~proportionate share~~segment performance measure. The write-off of ~~4 apartment communities with 142 apartment homes that we neither manage nor consolidate,~~straight-line rent receivables, recognized due to the impact of COVID-19 and the resulting economic impact on our commercial tenants, are included in consolidated rental and property revenues and are not included in our measurement of segment performance for the three and nine months ended September 30, ~~2020~~2020.

(3)

Includes depreciation and ~~2019 (in thousands):~~

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

Same Store

Redevelopment
and
Development

Acquisition
and Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Three months ended September 30, 2020:

Rental and other property revenues
$
171,033

$
12,498

$
17,311

$
12,531

$
2,082

$
215,455

Property operating expenses

49,146

4,919

7,103

9,706

4,055

74,929

Other operating expenses not allocated
   to segments (3)

—

—

—

—

126,757

126,757

Total operating expenses

49,146

4,919

7,103

9,706

130,812

201,686

Proportionate property net operating
   income (loss)

121,887

7,579

10,208

2,825

(128,730
)

13,769

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

—

—

—

—

(40,331
)

(40,331
)
Income (loss) before income tax benefit
$
121,887

$
7,579

$
10,208

$
2,825

$
(169,061
)

$
(26,562
)
(4)

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

Same Store

Redevelopment
and
Development

Acquisition
and Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Three months ended September 30, 2019:

Rental and other property revenues
$
183,552

$
11,131

$
18,670

$
8,390

$
8,084

$
229,827

Property operating expenses

50,424

4,484

6,862

7,790

7,924

77,484

Other operating expenses not allocated
   to segments (3)

—

—

—

—

113,716

113,716

Total operating expenses

50,424

4,484

6,862

7,790

121,640

191,200

Proportionate property net operating
   income (loss)

133,128

6,647

11,808

600

(113,556
)

38,627

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

—

—

—

—

(37,753
)

(37,753
)
Income (loss) before income tax benefit
$
133,128

$
6,647

$
11,808

$
600

$
(151,309
)

$
874

2325

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Same
Store

Redevelopment
and
Development

Acquisition
and Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Nine months ended September 30, 2020:

Rental and other property revenues
$
534,395

$
36,001

$
53,485

$
29,668

$
5,266

$
658,815

Property operating expenses

145,259

14,636

20,045

25,617

18,975

224,532

Other operating expenses not allocated
   to segments (3)

—

—

—

—

352,912

352,912

Total operating expenses

145,259

14,636

20,045

25,617

371,887

577,444

Proportionate property net operating
   income (loss)

389,136

21,365

33,440

4,051

(366,621
)

81,371

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

—

—

—

—

(61,864
)

(61,864
)
   Income (loss) before income tax benefit
$
389,136

$
21,365

$
33,440

$
4,051

$
(428,485
)

$
19,507

Same
Store

Redevelopment
and
Development

Acquisition
and Other
Real Estate

Proportionate
and Other
Adjustments (1)

Corporate and
Amounts Not
Allocated to
Segments (2)

Consolidated

Nine months ended September 30, 2019:

Rental and other property revenues
$
542,624

$
37,839

$
46,881

$
24,389

$
32,529

$
684,262

Property operating expenses

146,895

14,736

17,403

22,704

30,352

232,090

Other operating expenses not allocated
   to segments (3)

—

—

—

—

332,027

332,027

Total operating expenses

146,895

14,736

17,403

22,704

362,379

564,117

Proportionate property net operating
   income (loss)

395,729

23,103

29,478

1,685

(329,850
)

120,145

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

—

—

—

—

243,174

243,174

   Income (loss) before income tax benefit
$
395,729

$
23,103

$
29,478

$
1,685

$
(86,676
)

$
363,319

~~(1)~~

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

~~(2)~~

Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any. Also includes property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure. The write-off of straight-line rent receivables, recognized due to the impact of COVID-19 and the resulting economic impact on our commercial tenants, are included in consolidated rental and property revenues and are not included in our measurement of segment performance for the three and nine months ended September 30, 2020.

~~(3)~~

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

~~(4)~~

~~Includes gain on dispositions of real estate, mezzanine investment income, income from unconsolidated communities, interest income, and interest expense.~~

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

September 30, 2020

December 31, 2019

Same Store
$
4,491,989

$
4,618,108

Redevelopment and Development

859,214

716,750

Acquisition and Other Real Estate

881,824

803,777

Corporate and other assets (1)

809,102

690,104

Total consolidated assets
$
7,042,129

$
6,828,739

~~(1)~~

~~Includes the assets not allocated to our segments, primarily corporate assets, our mezzanine investment,~~

September 30, 2021

December 31, 2020

Same Store
$
4,630,357

$
4,664,291

Other Real Estate

285,298

82,010

Corporate and other assets (1)

1,518,854

1,482,977

Total consolidated assets
$
6,434,509

$
6,229,278

(1) Includes the assets not allocated to our segments including: (i) corporate assets; (ii) our notes receivable from Aimco; (iii) our mezzanine loan investment; and (iv) assets of apartment communities which were leased to Aimco, sold, or classified as held for sale as of ~~September 30, 2020.~~

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~~For the nine months ended~~ September 30, ~~2020 and 2019, capital~~2021.

Capital additions related to our segments were as follows (in thousands):


	Nine Months Ended September 30,
	2021		2020
Same Store	$	116,745	$	90,838
Other Real Estate (1)		9,583		135,389
Total capital additions	$	126,328	$	226,227

2020

2019

Same Store
$
73,681

$
130,967

Redevelopment and Development

168,247

144,210

Acquisition and Other Real Estate

18,796

25,160

Total capital additions
$
260,724

$
300,337

(1)

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

Note 9 – ~~Subsequent Events~~Discontinued Operations

~~On October 21, 2020,~~The financial results attributable to apartment communities retained by the Spinnee for the prior year comparative period have been classified as discontinued operations within the condensed consolidated financial statements.

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


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

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

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

We entered into various separation and transition services agreements with the Spinnee that provide for a framework of our ~~Board of Directors declared~~relationship with the Spinnee after the Separation, including: (i) a ~~$8.20 special dividend in~~separation agreement setting forth the ~~form of cash and stock. The special dividend includes the next two quarterly cash dividends, or $0.82 per share in the aggregate, accelerating the payment~~mechanics of the ~~regular dividend expected in February~~Separation, the key provisions relating to the Separation of ~~2021. Additionally, shareholders in~~our assets and liabilities from those of the ~~aggregate will receive $7.38 per share in stock. The dividend will be payable~~Spinnee, and certain organizational matters and conditions; (ii) an employee matters agreement to ~~shareholders~~allocate liabilities and responsibilities relating to employment matters, teammate compensation, and benefits plans and programs, and other related matters; (iii) Property Management Agreements pursuant to which we provide property management and related services at a majority of ~~record on~~ the ~~close of business on November 4, 2020, with shareholders having the opportunity to elect to receive the special dividend in the form of all stock~~properties owned or ~~prorated cash and stock, and will be paid on November 30, 2020, after trading hours. The number of shares distributed in the special dividend will be determined~~leased by the ~~volume weighted average price (“VWAP”)~~Spinnee in exchange for a fee based on an agreed percentage of ~~our shares during~~revenue collected; (iv) Master Services Agreement pursuant to which we provide the ~~10-trading day period ending~~Spinnee with customary administrative and support services on ~~November 24, 2020.~~

~~In order~~an ongoing basis in exchange for payment for the fully-burdened costs (including internal allocated costs); and (v) a Master Leasing Agreement pursuant to ~~neutralize~~which the ~~dilutive impact of~~Spinnee may enter into leases with us pursuant to which the ~~stock issued in~~Spinnee, at its option, may redevelop, develop, or lease-up apartment communities. The Property Management Agreement, the special dividend, our Board also authorized a reverse stock split, effective on November 30, 2020, immediately following the special dividend. As a result, total shares outstanding following completion of both the special dividendMaster Services Agreement, and the ~~reverse stock split are expected to~~Master Leasing Agreement may be ~~unchanged from~~terminated in accordance with the total shares outstanding immediately prior to the dividend. Some stockholders may have more shares and some may have fewer based on their individual elections. The reverse split will ensure comparability of per share results before and after these transactions.respective agreements.

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

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

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

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


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

(1)

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

(2)

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

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

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

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

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Forward Looking~~Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. ~~Certain information included in this~~This Quarterly Report on Form 10-Q contains ~~or may contain~~ information that is forward-looking within the meaning of the federal securities laws, including, without limitation, statements regarding: the ~~separation of Aimco into two entities (“the Separate Entities”), including our portfolio composition and~~ongoing relationship between ~~the Separate Entities~~AIR and Aimco following the ~~separation and the anticipated timing, structure and costs and benefits of the separation;~~Separation; the payment of dividends and distributions in the future; the impact of the COVID-19 pandemic, including on our ability to maintain current or meet projected occupancy, rental rate and property operating results; expectations regarding consumer demand, growth in revenue and strength of other performance metrics and models; the effect of acquisitions ~~dispositions, redevelopments,~~ and ~~developments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our redevelopment and development investments;~~dispositions; expectations regarding sales of our apartment communities and the use of proceeds thereof; the availability and cost of corporate debt; ~~and~~ our ability to comply with debt ~~covenants, including financial coverage ratios.~~covenants; risks related to the provision of property management services to Aimco and our ability to collect property management related fees; and risks related to the inability to fully collect the notes receivable due from Aimco.

These forward-looking statements are based on management’s ~~judgment as of this date, which is~~current expectations, estimates and assumptions and subject to risks ~~and uncertainties. Risks~~ and uncertainties, that could cause actual results to differ materially from ~~our expectations include,~~such forward-looking statements, including, but ~~are~~ not limited to: ~~whether or not Aimco completes the separation on the anticipated terms, timeline, or at all;~~ the effects of the coronavirus pandemic on ~~Aimco’s~~AIR’s business and on the global and U.S. economies generally, and the ongoing, dynamic and uncertain nature and duration of the pandemic, all of which heightens the impact of the other risks and factors described herein, and the impact on entities in which Aimco holds a partial interest, including its interest in the partnership that owns Parkmerced Apartments, and the impact of the lockdown on Aimco’s residents, commercial tenants, and operations;herein; real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing and effects of acquisitions ~~dispositions, redevelopments~~ and ~~developments;~~dispositions; changes in operating costs, including energy costs; negative economic conditions in our geographies of operation; loss of key personnel; AIR’s ability to maintain current or meet projected occupancy, rental rate and property operating results; ~~ability to meet budgeted costs and timelines, and, if applicable, achieve budgeted rental rates related to redevelopment and development investments;~~ expectations regarding sales of apartment communities and the use of proceeds thereof; ~~the ability to successfully operate as two separate companies each with more narrowed focus;~~ insurance risks, including the cost of insurance, and natural disasters and severe weather such as hurricanes; financing risks, including the availability and cost of financing; the risk that cash flows from operations may be insufficient to meet required payments of principal and interest; the risk that earnings may not be sufficient to maintain compliance with debt covenants, including financial coverage ratios; legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of laws and governmental regulations that affect us and interpretations of those laws and regulations; possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by ~~Aimco; the~~AIR; our relationship ~~between the Separate Entities~~with AIMCO after the ~~consummation of the separation;~~Separation; the ability and willingness of the ~~Separate Entities and their subsidiaries~~parties to the Separation to meet and/or perform their obligations under ~~any~~the related contractual arrangements ~~that are entered into among the parties in connection with the separation~~ and any of their obligations to indemnify, defend and hold the other party harmless from and against various claims, litigation and liabilities; and the ability to achieve ~~some or all~~ the expected benefits ~~that we expect to achieve~~ from the ~~business separation; and such other~~Separation. Other risks and uncertainties are described ~~from time to time~~ in ~~filings by Aimco or~~this Quarterly Report on Form 10-Q, as well as “Risk Factors” in Item 1A of AIR’s and AIR Operating Partnership’s combined Annual Report on Form 10-K for the ~~Separate Entities~~year ended December 31, 2020, and subsequent filings with the ~~Securities and Exchange Commission.~~SEC. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code of 1986, as amended (the “Code”) and depends on our ability to meet the various requirements imposed by the Code, through actual operating results, distribution levels and diversity of stock ownership.

Readers should carefully review our financial statements and the notes thereto, as well as Item 1A. Risk Factors in Part II of this report. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included elsewhere in this Quarterly Report on Form 10-Q. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Readers should also carefully review the section entitled “Risk Factors” described in Item 1A of Apartment Investment and Management Company’s and AIMCO Properties, L.P.’s combined Annual Report on Form 10-K for the year ended December 31, 2019, and the other documents we file from time to time with the Securities and Exchange Commission. Readers should also carefully review the “Risk Factors” section of the registration statements relating to the business separation, which are expected to be filed with the Securities and Exchange Commission. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements.

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

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

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Executive Overview

~~We are focused on~~AIR provides investors with a simple and transparent way to invest in the ~~ownership, management, redevelopment,~~multi-family sector with public market liquidity.

AIR is distinctive in five important respects:



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



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



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



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



ESG: AIR has been named a Top Workplace in Colorado for nine consecutive years. Assuming the election of the ~~largest markets in the United States.~~

three new nominees, AIR’s Board of Directors will be refreshed and diverse. The eight independent directors will have an average tenure of three years.

Our principal financial objective is to ~~provide predictable~~be a low-cost and ~~attractive returns~~efficient way to ~~our equity holders. We measure our long-term total return using Economic Income, defined as changes~~invest in ~~the per share Net Asset Value, or NAV, growth plus dividends. NAV is used by many investors because the value~~U.S. multi-family real estate. Many of company assets can be readily estimated, even for non-earning assets such as land or properties under development. NAV has the advantage of incorporating the investment decisions of thousands of real estate investors, enhancing comparability among companies that have differences in their accounting and avoiding disparity that can result from application of GAAP to investment properties and various ownership structures. NAV also provides real estate investors a basis for the perceived quality and predictability of future cash flows as well as their expected growth. Someour investors focus on multiples of ~~Adjusted~~ Funds ~~from~~From Operations ~~or AFFO, and Funds from Operations~~(“FFO”) as defined by the National Association of Real Estate Investment Trusts ~~or Nareit~~(“NAREIT”), referred to herein as “NAREIT FFO. ~~Our disclosure of AFFO, a measure of current return, complements our~~” These investors also focus on ~~Economic Income.~~NAREIT FFO, as adjusted for non-cash, unusual or non-recurring items. We ~~also use~~refer to this metric as Pro forma ~~FFO~~Funds From Operations (“Pro forma FFO”) and use it as a secondary measure of operational performance.

Our ~~Economic Income~~business is ~~the result~~organized around four areas of ~~performance in five key business areas:~~

•

~~increase revenue based on high levels of resident retention, through superior customer selection~~strategic focus: operational excellence; portfolio management; balance sheet; and ~~satisfaction, coupled with innovation resulting in sustained cost control, to further improve net operating income margins;~~

•

~~create value and future earnings growth by the renovation and repositioning of apartment communities through short-cycle and long-cycle redevelopments;~~

•

own an apartment portfolio diversified by geography and price point with a focus on properties with high land value located in submarkets with outsized future growth prospects, and diversify the portfolio by maintaining allocation to both “income” properties (high quality properties with predictable, “low beta” AFFO returns, usually with B or C+ rents) where we expect appreciation of the substantial land value will create opportunities for “high alpha” value creation through profitable redevelopment;

•

~~primarily utilize safe property debt that is low-cost, long-dated, amortizing, and non-recourse, limiting entity and refunding risk while maintaining flexibility to sell or redevelop properties; and~~

•

emphasize an intentional culture that is collaborative and productive, based on respect for others and personal responsibility, strengthened by a preference for promotion from within and explicit talent development and succession planning to produce the strong, stable team that is the enduring foundation of our success.

~~Over our first 25 years as a public company, our Economic Income compounded at an annual rate of 14%.~~

On September 14, 2020, we announced a Board-led plan, informed by active and regular engagement with shareholders, to reduce financial risk and execution risk, and to increase FFO per share by division of the business between two public entities. The first with 90% of our estimated fair value will be known as Apartment Income REIT or “AIR”. It will own only stabilized apartment communities, eliminating vacancy loss during redevelopment and allowing substantial reduction in execution risk and offsite costs. The second entity with 10% of our estimated fair value will be known as Aimco, or sometimes for clarity, as “new” Aimco. It expects to hold the non-traditional assets, such as the Parkmerced loan and the Brickell land assembly. New Aimco will continue and seek to grow the development and redevelopment business, including collaboration with IQHQ on multifamily opportunities, and it will complete the redevelopment projects now underway or about to be started. After a defined transition period, the two businesses will be wholly separate. From the start, each will have separate boards of directors and separate management teams. The separation has been structured to refresh the tax basis of the properties to be held by AIR, eliminating or reducing the need for future stock dividends. Shareholders will own the same assets before and after the separation transaction but will gain the opportunity to make individual allocations between the two businesses.

~~Impacts of COVID-19 and Governmental Lockdown~~

The impact of the COVID-19 pandemic and governmental lockdown continued into the third quarter of 2020. As discussed in our Quarterly Report on Form 10-Q for the three months ended March 31, 2020, we formed a cross-functional committee that meets weekly to adjust to the changing conditions in order to keep our team and our residents safe. We continued our commitment to employees by allowing flexible work arrangements, undertook to pay all costs associated with COVID-19 testing and treatment, kept our team intact without layoffs or pay cuts, and continued clear and frequent communication. Utilizing our previous investment in technology and artificial intelligence, paired with policies providing flexibility, our team continued to lease apartments and fulfill service requests in a safe environment for both the team and our residents.

~~Table of Contents~~

Our top priority is the health and safety of our residents and teammates. Accordingly, we implemented enhanced cleaning procedures as well as physical distancing and remote working guidelines at our communities and corporate offices. Additionally, seeing residents as individuals, each impacted differently by the pandemic and lockdown, our teammates have undertaken to speak to every resident in need, to listen, and to help each to solve his or her problems. We also seek to assist the communities where our residents and employees live and work.

During the three and nine months ended September 30, 2020 we estimate that, in addition to decreased occupancy and lower rental rates, we incurred $9.5 million and $22.6 million of incremental costs, respectively. The table below provides additional detail (in millions, except per share data):

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2020

Incremental bad debt expense
$
3.7

$
0.02

$
6.2

$
0.04

Lower commercial revenue

2.2

0.01

3.7

0.02

Lower other income, due to local restrictions on charging late fees

0.4

—

1.0

0.01

Other COVID-related amounts

0.2

—

1.0

0.01

Property Level Impact
$
6.5

$
0.03

$
11.9

$
0.08

Net incremental interest expense

2.8

0.02

5.4

0.04

Write-off of commercial straight-line rent receivables

—

—

2.9

0.02

FFO Impact
$
9.3

$
0.05

$
20.2

$
0.14

Deferred broker commissions

0.2

—

2.4

0.02

Total AFFO Impact
$
9.5

$
0.05

$
22.6

$
0.16

~~Residential Rent Collection Update~~

In response to the economic effects of the COVID-19 pandemic and governmental lockdown, most jurisdictions where our communities are located have enacted protections for residents and commercial tenants, including government-mandated rent deferrals, rent freezes, repayment extensions, fee abatement measures or concessions, and prohibitions on lease terminations or evictions for tenants. Some states and municipalities are also implementing rental assistance programs and encouraging landlord-tenant negotiations.

We measure residential rent collection as the amount of payments received as a percentage of all residential amounts owed. The table below represents the percentage of residential billed amounts for the three months ended June 30, 2020 and September 30, 2020.

Three months ended

2020

June 30, 2020

September 30, 2020

July

August

September

Payments received during the period

95.3
%

95.6
%

95.8
%

95.3
%

95.7
%
Payments received after period close

2.4
%

1.1
%

1.5
%

1.2
%

0.7
%
Total payments received as of
October 23, 2020

97.7
%

96.7
%

97.3
%

96.5
%

96.4
%

During the three months ended September 30, 2020, we recognized 98.1% of all residential revenue, treating the balance of 1.9% as bad debt. Of the 98.1% of residential revenue recognized, we collected in cash all but 140 basis points. The amounts uncollected and not reserved as bad debt include balances collateralized by security deposits, of approximately 60 basis points, and those considered collectable based on our review of individual customers’ credit, of approximately 80 basis points, or $1.6 million.

Of the 190 basis points of bad debt the majority, or approximately 130 basis points, is attributed to residents who have not paid April and subsequent rents. Prior to the enactment of restrictive city ordinances and closed court houses, these residents would have paid rent or faced eviction in ordinary course. The remaining amount, approximately 60 basis points, is attributed to non-payment of rent and other charges as might be expected in a difficult economy. The bad debt associated with this latter category started to slow in August and has declined in each subsequent month. Looking forward, we expect the decline to continue until reaching a more normal level of approximately 30 basis points in 2021. We also expect the emergency ordinances that allow residents to live rent free to unwind providing the opportunity to re-rent these apartments to rent-paying residents.

~~October rent collections have been consistent with September collections at the same day of the month.~~

~~Table of Contents~~

~~Results for the Three Months Ended September 30, 2020~~

culture. The results from the execution of our business plan ~~during the three months ended September 30, 2020,~~ are further described ~~below.~~in the sections that follow.

~~Operations~~The Separation

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

Operational Excellence

We own and operate a portfolio of stabilized apartment communities, diversified by both geography and price point. As of September 30, ~~2020,~~2021, our portfolio included ~~126~~95 apartment communities with ~~33,209~~26,364 apartment homes in which we held an average ownership of approximately ~~95%~~93%.

~~Aimco’s Same Store portfolio includes 93 apartment communities with 27,610 apartment homes.~~ Same Store highlights for the third quarter include:

•

~~Average revenue per home decreased approximately 200 basis points year-over-year due to an approximate 30 basis point year-over-year decrease in rental rates;~~



Recognition of 98.6% of all residential revenue billed during the quarter;

•

~~Average daily occupancy of 93.9%, a year-over-year decline of approximately 280 basis points due primarily to reduced demand resulting from COVID-19 and the governmental lockdown; and~~



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

•

~~Elevated bad debt expense, resulting in a 140-basis point decline to same-store revenues, due primarily to COVID-19 and the governmental lockdown.~~



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



For leases becoming effective during the quarter (“transacted leases”), renewal rents increased by 7.1% and signed new lease rents increased by 8.0%, for a weighted-average increase of 7.6%.

Aimco’s third quarter Same Store revenue declined 5%. Our portfolio is intentionally diversified by geography and price point, it is also diversified with a mix of urban and suburban communities. Revenue growth for the three months ended September 30 ~~2020, compared to the three months ended September 30, 2019, differed significantly based on geography and the density of the area surrounding the community.~~

Suburban properties include 19,083 units, or approximately 70% of our Same Store portfolio. In these communities ADO was 95.7%, turnover was 39.6%, blended rates were near flat, and residential net rental income was up 0.6%.

~~Urban markets include 8,527 units of our Same Store portfolio. In these communities ADO was 89.5%, turnover was 47.0%, blended rates were down 6.7%, and residential net rental income was down 7.1%.~~

Specifically, in Center City and University City Philadelphia, our communities have faced a sharp decline in demand from local universities announcing virtual learning for the fall semester; fewer workers in downtown office buildings, including both Comcast towers, due to work from home policies; and disruption to leasing activity from social unrest.

In Mid-Wilshire and West Los Angeles, bad debt has been elevated due to local regulations which have the effect of permitting residents to live rent-free. Demand from the recovering entertainment industry is returning and leasing pace was up 44% year-over-year in the third quarter.

On the San Francisco Peninsula in Northern California, work from home policies at major tech companies disrupted demand in San Mateo and Redwood City. The Pacifica neighborhood was impacted but has stabilized and our communities in San Jose, Marin County, and the East Bay have performed well.

Our focus on efficient operations through productivity initiatives such as centralization of administrative tasks, optimization of economies of scale at the corporate level, and increased automation has helped us control operating expenses. These and other innovations contributed to a growth rate in Same Store controllable operating expense, which we define as property expenses less taxes, insurance, and utility expenses, compounding for the 12 years ended December 31, 2019, at an annual rate of negative 0.2%. During the three months ended September 30, 2020, Same Store controllable operating expenses for the portfolio increased 0.3% compared to the three months ended September 30, 2019.

~~Redevelopment and Development~~

Our second line of business is the redevelopment and some development of apartment communities. Through redevelopment activities, we expect to create value by repositioning communities within our portfolio. We undertake ground-up development when warranted by risk-adjusted investment returns, either directly or in connection with the redevelopment of an existing apartment community. When warranted, we rely on the expertise and credit of a third-party developer familiar with the local market to limit our exposure to construction risk. We invest to earn risk-adjusted returns in excess of those expected from the apartment communities sold in “paired trades” to fund the redevelopment or development. Of these two activities, we generally favor redevelopment because it permits adjustment of the scope and timing of spending to align with changing market conditions and customer preferences.

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~~We execute redevelopments using~~Same Store Markets

Market conditions continued to be strong in the third quarter, exceeding our expectations from the beginning of the year, and our revised expectations after a ~~range~~strong second quarter. The trend of ~~approaches. We prefer~~strengthening lease growth rates continued through the third quarter, as weighted-average signed lease changes have trended upwards for 12 consecutive months.

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

In addition to average daily occupancy, we also use “leased percentage” as a ~~short-cycle approach, in which we renovate an~~metric predictive of future occupancy. “Leased percentage” is defined as occupied apartments plus apartments leased but not yet occupied and less apartments occupied where the resident has given notice of intent to vacate the apartment. During the quarter, the percentage of apartment ~~community in stages. These short-cycle redevelopments can be completed one apartment home at a time, when that home~~homes currently leased increased from 93.1% to 97.5%. Our leased percentage is ~~vacated~~now 600 basis points ahead of 2020 and ~~available for renovation, or one floor at a time, thereby limiting~~300 basis points ahead of the ~~number~~third quarter of ~~down homes and lease-up risk.~~2019. As a result, ~~short-cycle redevelopments provide us~~we see occupancy remaining at or above current levels through the ~~flexibility to maintain current earnings while aligning the timing~~first quarter of the completed apartment homes with market demand. When short-cycle redevelopments are not possible, we may engage in redevelopment activities where an entire building or community is vacated. We refer to these as long-cycle redevelopments. Redevelopment work may include seeking entitlements from local governments, which enhance the value of our existing portfolio by increasing density; that is, the right to add apartment homes to a site.2022.

During the three months ended September 30, 2020, we invested $56.7 million in redevelopment and development. We continued five long-cycle redevelopment and development projects already under construction, including the full redevelopment of the North Tower at Flamingo Point and 707 Leahy; and ground-up construction at The Fremont on the Anschutz Medical Campus; Eldridge Townhomes; and Prism. Our estimated cost to complete these projects is $109.9 million, an amount readily funded from our liquidity.

~~We have continued construction on two resumed short-cycle redevelopments at Bay Parc and the Center Tower at Flamingo Point. Our estimated cost to complete these projects is $9.6 million.~~

~~The following table summarizes our significant redevelopment and development communities as of September 30, 2020 (dollars in millions):~~

Location

Homes
Approved for
Redevelopment

Homes Completed

Homes Leased

Total Planned Investment
(1)

Investment to Date

Expected Initial Occupancy (2)

Expected NOI
Stabilization
(2) (3)
Short-cycle:

Bay Parc
Miami, FL

90

75

69

$
27.7

$
26.6

N/A

N/A
Flamingo Point Center Tower
Miami Beach, FL

58

18

20

16.0

7.5

N/A

N/A
Long-cycle:

707 Leahy (4)
Redwood City, CA

110

60

53

26.5

25.2

1Q 2020

2Q 2022
Eldridge Townhomes (5)
Elmhurst, IL

58

54

57

35.1

33.9

2Q 2020

1Q 2022
Flamingo Point North Tower
Miami Beach, FL

366

—

—

171.0

86.7

4Q 2021

2Q 2024
The Fremont (6)
Denver, CO (MSA)

253

98

85

87.0

85.5

3Q 2020

1Q 2023
Parc Mosaic (7)
Boulder, CO

226

226

215

124.6

123.8

3Q 2019

1Q 2022
Prism (8)
Cambridge, MA

136

—

—

73.2

51.6

1Q 2021

3Q 2023
Total

1,297

531

499

$
561.1

$
440.8

~~(1)~~

~~Planned investment relates to the current phase of the redevelopment or development.~~

~~(2)~~

~~Delivery timing and stabilization is subject to change and are based on the best estimate at this time.~~

~~(3)~~

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

~~(4)~~

~~As of October 28, 2020, this community is 82% leased.~~

~~(5)~~

~~As of October 28, 2020, construction is complete and we have leased 57 out of 58 homes.~~

~~(6)~~

~~As of October 28, 2020, just over 100 apartment homes have been delivered and 82% have been leased. Completion of this community is expected in the fourth quarter 2020.~~

~~(7)~~

~~Construction is complete and, as of October 28, 2020, we have leased 97% of the apartment homes at rents consistent with underwriting.~~

~~(8)~~

~~Completion of this community is expected in the first quarter of 2021.~~

As of September 30, 2020, our total estimated net investment at redevelopment and development communities is $561.1 million, of which we have funded $440.8 million. We expect to fund the remaining estimated net investment of $120.3 million on these communities in 2020 and future years, on a leverage-neutral basis, with proceeds from sales of apartment communities with lower forecasted free cash flow, or FCF, internal rates of return.

During the three months ended September 30, 2020, we leased 144 redeveloped or newly developed apartment homes. As of September 30, 2020, our exposure to lease-up at long-cycle redevelopment and development communities was 684 apartment homes; 36 homes where construction is complete, 171 homes expected to be completed before year-end, and 477 homes expected to be delivered in 2021.

Portfolio Management ~~and Capital Allocation~~

Our portfolio of apartment communities is diversified across ~~“A,” “B,”~~primarily “A” and ~~“C+”~~“B” price points, averaging “B/B+” in quality, and is also diversified across several of the largest markets in the United States. After the properties being sold and the properties acquired this year, our portfolio will be higher quality, require lower recurring capital replacement spending, and have a greater allocation to states with greater economic growth and a more reliable rule of law. We measure the quality of apartment

~~Table of Contents~~

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; as “C+” quality apartment communities those earning rents greater than $1,100 per month, but lower than 90% of local market average; and as “C” quality apartment communities those earning rents less than $1,100 per month and lower than 90% 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 ~~multifamily~~multi-family real estate industry use apartment community quality ratings of ~~“A,”~~“A” and “B,~~” and “C,”~~ 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 ~~multifamily~~multi-family real estate industry.

~~The following table summarizes information about~~We expect to improve the quality of our portfolio ~~relative~~by allocating investment capital to ~~the market for the three months ended September 30, 2020:~~enhance rent growth and increase long-term capital values through routine investments in property upgrades (such as upgrading kitchens, bathrooms and other interior design aspects) and through portfolio design, emphasizing land value as well as location and submarket.

Average revenue per Aimco apartment home (1)

$
2,212

Portfolio average rents as a percentage of local market average rents

112
%
Percentage A (average revenue per Aimco apartment home $2,872)

53
%
Percentage B (average revenue per Aimco apartment home $1,951)

29
%
Percentage C+ (average revenue per Aimco apartment home $1,771)

18
%

~~(1)~~

~~Represents average monthly rental and other property revenues (excluding resident reimbursement of utility cost) divided by the number of occupied apartment homes as of the end of the period.~~

~~Our average monthly revenue per apartment home was $2,212 for the three months ended September 30, 2020, representing a decrease of approximately 2% compared to the same period in 2019.~~

~~We follow a disciplined paired trade policy in making investments.~~ As part of our portfolio strategy, we seek to sell ~~up to 10%~~communities with lower expected free cash flow internal rates of ~~our portfolio annually~~return and to reinvest the proceeds from such sales in accretive uses such as capital enhancements, ~~redevelopments, some developments,~~share repurchases, and selective acquisitions of stabilized communities with projected ~~FCF~~free cash flow internal rates of return higher than expected from the communities being sold. ~~We prefer well-located real estate where land~~When the cost of capital is ~~a significant percentage~~favorable, we will look to grow through the acquisition of ~~total value and provides potential upside from development or redevelopment.~~stabilized apartment communities that we believe we can operate better than their previous owners. Through this disciplined approach to capital ~~recycling,~~allocation, we expect to increase the quality and expected growth rate of our portfolio.

As we execute our portfolio strategy, we expect to increase average revenue per Aimco apartment home at a rate greater than market rent growth, increase FCF margins, and maintain sufficient geographic and price point diversification to limit volatility and concentration risk.Transactions

~~Acquisitions~~Dispositions

During the three months ended September 30, ~~2020,~~2021, we ~~acquired for $89.6 million Hamilton on the Bay,~~sold one apartment community located in Miami’s Edgewater neighborhood. The acquisition includes a 271-apartment home community located on the waterfront, approximately one mile north of our Bay Parc apartments, plus an adjacent development site. Current zoning allows for the construction of more than 380 additionalElmhurst, Illinois, with 58 apartment homes ~~on the combined sites. We are now in planning to invest as much as $50 million in a substantial renovation of the existing building.~~

~~We continue to search for accretive acquisitions, including development opportunities.~~

~~Dispositions~~

During the three months ended September 30, 2020, we sold no apartment communities. During the three months ended September 30, 2020, we received a non-refundable deposit securing a contract to purchase an apartment community, which is expected to be sold later in the fourth quarter at a price of ~~approximately $126 million, 3% better than its estimated gross asset value at December 31, 2019. Proceeds~~$40 million. Net sales proceeds from this transaction were $39.9 million.

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

Subsequent to ~~reduce leverage. As of September 30, 2020,~~quarter end, we ~~classified the apartment community as held for sale.~~

~~Joint Venture Transaction~~

~~On September 8, 2020, we formed~~entered into a joint venture with ~~a passive institutional investor~~an affiliate of Blackstone to ~~own a portfolio of 12~~sell, for approximately $408 million, an expected 80% interest in three multi-family ~~communities~~properties with ~~4,051 apartment homes~~1,748 units located in ~~California. The communities were valued at $2.4 billion, or approximately $592,000 per unit, equivalent to~~Virginia. AIR is the general partner with an ~~implied NOI cap rate~~expected 20% ownership, and earns various fees for providing property management and corporate services.

Additionally, we are in contract negotiations on an additional $800 million of ~~approximately 4.2%. The valuation is equal to 97% of our pre-COVID-19 valuation of the communities and confirms our previously published NAV. The joint venture has existing property~~properties located primarily in select markets in California.

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~~debt~~In aggregate, the completed and under contract sales are expected to generate gross proceeds of ~~$1.22~~approximately $1.7 billion and are valued at an implied ~~equity~~NOI cap rate of 4.36%, based on forecasted 2021 NOI and inclusive of fees expected to be earned from the joint venture. The communities are being sold at a 15% premium to their estimated 2020 fair market value, pre-COVID.

Acquisitions

Subsequent to quarter end, we acquired a portfolio of ~~$1.18 billion. In exchange~~four properties located in the Washington, D.C. area, with 1,400 apartment homes and 84,000 square feet of office and commercial space, for ~~a 39% interest~~an expected purchase price of approximately $510 million. The communities acquired are:



Vaughan Place, located in Washington, D.C., with 389 apartment homes and 52,000 square feet of office and commercial space. Sixteen of these homes remain subject to ~~$475~~the Tenant Opportunity to Purchase Act ("TOPA"); if not ultimately acquired, our purchase price will be reduced by approximately $6.4 million;



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



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



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



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

The acquisition was initially funded with $259 million of existing property debt, ~~we received $461 million. We retain ownership~~an expected issuance of ~~61%~~$128 million in OP Units, and $122 million borrowed on the AIR revolving credit facility. On a permanent basis, AIR expects to fund the acquisition with approximately 75% equity and 25% debt.

The paired trade of ~~the joint venture and will control and operate the~~selling communities in ~~exchange for property~~New York and ~~asset management fees.~~

~~Life Science Developer Investment~~

~~During~~locations in the ~~three months ended September 30, 2020, we made a $50 million commitment~~suburban Washington, D.C. area to ~~IQHQ, a privately-held life-sciences real estate development company. In addition, we gained the right~~acquire these four communities is expected to ~~collaborate with IQHQ on any multifamily component at its future development sites.~~be somewhat accretive to FFO per share in 2022.

Balance Sheet

Components of Leverage

We seek to increase financial returns by using leverage with appropriate caution. We limit risk through our balance sheet structure, employing low leverage, primarily ~~non-recourse~~long-dated debt; and ~~long-dated property debt;~~we build financial flexibility by maintaining ample unused and available credit; holding properties with substantial value unencumbered by property debt; maintaining an investment grade rating; and using partners’ capital when it enhances financial returns or reduces investment risk.

Our leverage includes our share of long-term, non-recourse property debt encumbering our apartment communities, together with outstanding borrowings onunder our revolving credit facility, our term loans, and our preferred equity. We have notes receivable from Aimco with an aggregate principal amount of $534 million. The notes will mature on January 31, 2024, and are secured by a pool of properties owned by Aimco. We consider the notes a reduction of leverage as we expect proceeds to be used to repay loan ~~and other leverage.~~ amounts currently outstanding.

Please ~~refer to~~see the Liquidity and Capital Resources section for additional information regarding our leverage. ~~Other leverage includes mezzanine equity instruments, including preferred OP Units and redeemable noncontrolling interests in a consolidated real estate partnership.~~

~~Our~~On Track Leverage Reduction

We target ~~leverage ratios are~~ Net Leverage to Adjusted EBITDAre ~~below 7.0x~~at 5.5x, with a range between 5.0x and Adjusted EBITDAre to Adjusted Interest Expense and Preferred Distributions greater than 2.5x. We calculate Adjusted EBITDAre and Adjusted Interest Expense used in our leverage ratios based on the most recent three-month amounts, annualized, and trailing twelve months. 6.0x.

Our leverage ratios for the three months ended September 30, ~~2020 and trailing twelve months ended September 30, 2020,~~2021 are presented below:


	Annualized Current Quarter	~~Trailing Twelve Months~~
Proportionate Debt to Adjusted EBITDAre	~~7.2x~~	~~6.8x~~6.9x
Net Leverage to Adjusted EBITDAre	~~7.4x~~	~~7.0x~~
~~Adjusted EBITDAre to Adjusted Interest Expense~~	~~3.1x~~	~~3.4x~~
~~Adjusted EBITDAre to Adjusted Interest Expense and Preferred Distributions~~	~~3.0x~~	~~3.2x~~7.1x

~~Under our revolving credit facility and term loan, we have agreed to maintain a fixed charge coverage ratio~~

Table of 1.40x, as well as other covenants customary for similar revolving credit arrangements. For the trailing twelve months ended September 30, 2020, our fixed charge coverage ratio was 1.93x. We expect to remain in compliance with these covenants.Contents

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

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

~~Our $1.0~~


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

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

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

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

(1)

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

(2)

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

(3)

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

(4)

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

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

Liquidity

We use our revolving credit facility for working capital and other short-term purposes and to secure letters of credit. As of September 30, 2021, our share of cash and restricted cash ~~balances~~was $80.0 million and ~~available capacity on our revolving credit facility. As of September 30, 2020,~~ we ~~had cash and restricted cash, excluding amounts related to tenant security deposits, of $255.5 million and~~ had the capacity to borrow up to ~~$793.4~~$517.8 million onunder our revolving credit facility, ~~after consideration of $6.6 million of letters of credit backed by the facility.~~bringing total liquidity to $597.8 million.

We manage our financial flexibility by maintaining an investment grade rating and holding ~~apartment~~ communities that are unencumbered by property debt. AIR has been rated BBB by Standard & Poor’s. As of September 30, ~~2020,~~2021, we held unencumbered communities with property debt with an estimated fair market value of approximately ~~$3.6~~$4.2 billion; an increase of 50% from December 31, 2020; pro forma expected sales activity, the value of properties unencumbered by property debt is anticipated to increase to approximately $6.0 billion.

~~Financing Activity~~

~~During~~We anticipate seeking an investment grade credit rating from Moody’s. In assigning ratings, Moody’s places significant emphasis on the ~~three months ended September 30, 2020,~~amount of non-recourse property debt as percentage of the undepreciated book value of a company’s assets. To achieve Moody’s required thresholds, we ~~prepaid $405 million~~estimate that a Moody’s investment grade rating will require property debt to approximate $1.8 billion. Pro forma the leverage activities described above; we anticipate that our share of property debt ~~using proceeds from~~will approximate this target level.

Dividend

On October 26, 2021, our ~~joint venture, incurring $7.8 million in prepayment penalties that have been excluded from Pro forma FFO. The loans had~~Board of Directors declared a ~~weighted-average interest rate~~quarterly cash dividend of ~~5.3%, lowering our weighted-average cost~~$0.44 per share of ~~leverage by 15 basis points. The prepayment~~AIR Common Stock. This amount is payable on November 30, 2021, to stockholders of ~~property debt lowers our interest expense such that the costs associated with the prepayment will be recovered in the first quarter of~~record on November 12, 2021. ~~We have no remaining debt maturities in 2020.~~

3233

Table of Contents

~~Equity Capital Activities~~

2020 property sales, including the California Joint Venture, generated taxable gains in excess of our regular quarterly dividend. On October 21, 2020 our Board of Directors declared a $8.20 special dividend in the form of cash and stock.

The special dividend includes the next two quarterly cash dividends, or $0.82 per share in the aggregate, accelerating the payment of the regular dividend expected in February of 2021. Additionally, shareholders in the aggregate will receive $7.38 per share in stock.

The dividend will be payable to shareholders of record on the close of business on November 4, 2020, with shareholders having the opportunity to elect to receive the special dividend in the form of all stock or prorated cash and stock, and will be paid on November 30, 2020, after trading hours. The number of shares distributed in the special dividend will be determined by the volume weighted average price (“VWAP”) of Aimco shares during the 10-trading day period ending on November 24, 2020.

In order to neutralize the dilutive impact of the stock issued in the special dividend, our Board also authorized a reverse stock split, effective on November 30, 2020, immediately following the special dividend. As a result, total shares outstanding following completion of both the special dividend and the reverse stock split are expected to be unchanged from the total shares outstanding immediately prior to the dividend. Some stockholders may have more shares and some may have fewer based on their individual elections. The reverse split will ensure comparability of per share results before and after these transactions.

Team and Culture

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

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

Our focus on our team and our culture is recognized externally, as well. Out of hundreds of participating companies in ~~2020, we were~~2021, AIR was one of only six recognized as a “Top Workplace” in Colorado for each of the past ~~eight~~nine years, and ~~were~~was one of only two real estate companies to receive a BEST award from the Association for Talent Development in recognition of our company-wide success in talent development, marking ~~our~~its third consecutive year receiving this ~~award.~~award, and received for the first time the “Top Workplaces 2021” honor from the Washington Post.

Results of Operations

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

The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with the accompanying condensed consolidated financial statements included in Item 1.

Financial Highlights

Net income (loss) from continuing operations attributable to common stockholders per common share, on a dilutive basis, ~~decreased by $0.18 during~~increased $0.29 for the three months ended September 30, ~~2020, compared to 2019,~~2021, due primarily to an increase in interest income, including income earned from leased properties. Net income (loss) from continuing operations attributable to common stockholders per common share, on a dilutive basis, increased $0.40 for the nine months ended September 30, 2021, due primarily to a gain on derecognition of leased properties and higher interest income, offset partially by increased prepayment ~~penalties incurred due to third quarter 2020 payoff activity and higher other expenses due to costs incurred on the previously announced planned separation of our development activities.~~penalties.

Pro forma FFO per share ~~decreased $0.03, or 5%, during~~was $0.56 and $1.58, respectively, for the three and nine months ended September 30, ~~2020, compared~~2021.

Residential Rent Collection Update

We measure residential rent collection as the amount of payments received as a percentage of all residential amounts owed. In the third quarter, we recognized 98.6% of all residential revenue owed during the quarter, treating the balance of 1.4% as bad debt. 2.8% of our residents have extended delinquencies, much of which we expect to ~~2019. Increased income~~collect from the ~~Parkmerced mezzanine loan~~residents based on their high credit scores or to be reimbursed by the State of California. 97.2% of our residents pay rent timely with bad debt under 30 basis points of revenue, a level still somewhat elevated from our historic experience.

As of September 30, 2021, our proportionate share of gross residential accounts receivable was $13.3 million. After consideration of tenant security deposits and ~~lower offsite costs was more than offset by lower occupancy and COVID-19 related impacts.~~reserves for uncollectible amounts, our net exposure is $1.3 million, an amount expected to be collected during the fourth quarter.

~~Further details regarding our~~73% of the $13.3 million of uncollected accounts receivable relate to California residents. During the quarter, we received $2.7 million from California’s rent relief program. We await the state’s response to ~~COVID-19 pandemic, its impacts on Pro Forma FFO, and~~an additional $5.2 million of rent relief requests made. We are working with residents to file an additional $3.6 million of claims.

We remain cautiously optimistic that this program will allow us to recover rents uncollected in 2020 or 2021. We expect bad debt expense to decline with the ~~related governmental lockdown, is discussed in the Executive Overview section above.~~end of emergency ordinances that suspend contractual remedies for non-payment of rent.

Table of Contents

Detailed Results of Operations for the Three and Nine Months Ended September 30, ~~2020,~~2021, Compared to ~~September 30, 2019~~2020

Net income ~~decreased~~(loss) from continuing operations increased by ~~$28.8~~$38.1 million and ~~$337.9~~increased by $62.5 million during the three and nine months ended September 30, ~~2020,~~2021, respectively, compared to ~~2019, respectively,~~2020, as ~~described~~ more fully described below.

~~Table of Contents~~

Property Operations

We have ~~three~~two segments: ~~(i)~~ Same Store ~~(ii) Redevelopment and Development, and (iii) Acquisition~~ and Other Real Estate. Our Same Store segment includes communities ~~that have~~that: (i) are owned and managed by AIR and (ii) had reached a stabilized level of ~~operations as of the beginning of a two-year comparable period and maintained it throughout the current and comparable prior year and are not expected to be sold within 12 months.~~operations. Our ~~Redevelopment and Development~~Other Real Estate segment includes communities that are currently under construction, and those that have been completed in recent years that have not achieved and maintained stabilized operations for both the current and comparable prior year. Our Acquisition and Other Real Estate segment includes: (i) communities that we have acquired since the beginning of a two-year comparable period; (ii) communities that are subject to limitations on rent increases; (iii) communities that we expect to sell within 12 months but do not ~~yet~~ meet the criteria to be classified as ~~held for sale; (iv) communities that we expect to redevelop; and (v) certain commercial spaces.~~Same Store.

As of September 30, ~~2020,~~2021, our Same Store segment included 9392 apartment communities with ~~27,610 apartment homes.~~

~~From December 31, 2019, to September 30, 2020, on a net basis, our Same Store segment increased by two apartment communities and 961 apartment homes. These changes consisted of:~~

•

~~the addition of one redeveloped apartment community with 940 apartment homes that was classified as Same Store upon maintaining stabilized operation for the entirety of the periods presented;~~

•

~~the addition of six acquired apartment communities with 1,480 apartment homes that were classified as Same Store because we have now owned them for the entirety of both periods presented;~~

•

~~the reduction of three apartment communities with 974 apartment homes that we have classified in Acquisition and Other Real Estate, as we are planning to redevelop these communities; and~~

•

~~the reduction of one apartment community with 219 apartment homes that was sold as of September 30, 2020; and~~

•

~~the reduction of one apartment community with 266 apartment homes due to it being classified as held for sale as of September 30, 2020.~~

~~As of September 30, 2020, our Redevelopment and Development segment included eight apartment communities with 2,521~~25,427 apartment homes and our ~~Acquisition and~~ Other Real Estate segment included 20three apartment communities with ~~2,670~~937 apartment ~~homes~~homes.

Proportionate Property Net Operating Income (Non-GAAP)

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

We use proportionate property ~~net operating income~~NOI to assess the operating performance of our ~~communities.~~communities, which excludes the results of properties retained by Aimco in connection with the Separation, which are included in discontinued operations. Proportionate property ~~net operating income~~NOI is a non-GAAP measure that reflects our share of rental and other property revenues, excluding utility reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities. Accordingly, the results of operations of our segments discussed below are presented on a proportionate ~~basis~~(“Ownership-Effected”) basis. In our condensed consolidated statements of operations, utility reimbursements are included in rental and ~~exclude the results of four apartment communities~~other property revenues in accordance with ~~142 apartment homes that we do not consolidate. During the three months ended~~GAAP. In September ~~30,~~ 2020, we formed a joint venture with a passive institutional investor to own a portfolio of 12 multi-family communities in California. WeIn order for both periods to be comparable, we have presented, in addition to the actual historical changes in results of operations of our segments, the property operating results as if the California joint venture had closed at the beginning of the earliest period presented.

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

Please ~~refer to~~see Note 8 to the condensed consolidated financial statements in Item 1 for further discussion regarding our segments, including a reconciliation of these proportionate amounts to consolidated rental and other property revenues and property operating expenses.


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

(1)

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

Table of Contents

~~Proportionate Property Net Operating Income~~

~~The results of our segments for the three months ended September 30, 2020 and 2019, as presented below, are based on segment classifications as of September 30, 2020.~~

Three Months Ended September 30,

Historical Change

Ownership-Effected
Change (1)

(in thousands)
2020

2019

$

%

$

%

Rental and other property revenues, before utility reimbursements:

   Same Store
$
171,033

$
183,552

$
(12,519
)

(6.8
%)

$
(8,326
)

(4.9
%)
   Redevelopment and Development

12,498

11,131

1,367

12.3
%

1,367

12.3
%
   Acquisition and Other Real Estate

17,311

18,670

(1,359
)

(7.3
%)

(1,359
)

(7.3
%)
      Total

200,842

213,353

(12,511
)

(5.9
%)

(8,318
)

(4.2
%)
Property operating expenses, net of utility reimbursements:

��

   Same Store

49,146

50,424

(1,278
)

(2.5
%)

(610
)

(1.3
%)
   Redevelopment and Development

4,919

4,484

435

9.7
%

435

9.7
%
   Acquisition and Other Real Estate

7,103

6,862

241

3.5
%

241

3.5
%
      Total

61,168

61,770

(602
)

(1.0
%)

66

0.1
%
Proportionate property net operating income:

   Same Store

121,887

133,128

(11,241
)

(8.4
%)

(7,716
)

(6.3
%)
   Redevelopment and Development

7,579

6,647

932

14.0
%

932

14.0
%
   Acquisition and Other Real Estate

10,208

11,808

(1,600
)

(13.6
%)

(1,600
)

(13.6
%)
      Total
$
139,674

$
151,583

$
(11,909
)

(7.9
%)

$
(8,384
)

(6.0
%)

~~(1)~~

~~Reflects the change for the three months ended September 30, 2020 and 2019, as if the California joint venture had closed on July 1, 2019.~~

For the three months ended September 30, ~~2020,~~2021, compared to ~~2019,~~2020, after giving effect to the sale of partial interest in certain Same Store communities in the California joint venture, our Same Store proportionate property ~~net operating income decreased~~NOI increased by ~~$7.7~~$9.4 million, or ~~6.3%~~8.6%. This ~~decrease~~increase was attributable primarily to a ~~$8.3~~$9.2 million, or ~~4.9%~~6.0%, ~~decrease~~increase in rental and other property revenues due to ~~an approximately 280~~a 330 basis point ~~decrease~~increase in average daily occupancy and a $2.4 million, or 140 basis point, increase in bad debt, and $0.5 million, or 20 basis point, reduction in other rental income due to local restrictions on our contractual right to charge late fees. The decrease in proportionate property net operating income was offset partially by a 3040 basis point increase in residential ~~rents and lower Same Store~~rental rates.

The increase in proportionate property ~~operating expenses~~NOI was partially offset by an increase of ~~$0.6 million. The change~~$0.2 million, or 0.4%, in Same Store property operating ~~expenses were driven by a decrease in insurance and real estate taxes.~~expenses.

~~Redevelopment and Development~~Other Real Estate proportionate property ~~net operating income was relatively flat~~NOI for the three months ended September 30, ~~2020,~~2021, compared to ~~2019.~~

~~Acquisition and Other Real Estate proportionate property net operating income decreased~~2020, increased by ~~$1.6~~$2.7 million, ~~or 13.6%, for the three months ended September 30, 2020, compared to 2019, due primarily to a decrease in revenues related to commercial tenants~~ due primarily to the ~~economic impacts~~June acquisition of ~~COVID-19 and~~City Center on 7th.


	Nine Months Ended September 30,				Historical Change						Ownership-Effected Change (1)
(in thousands)	2021		2020		$			%			$			%
Rental and other property revenues, before utility reimbursements:
Same Store	$	469,686	$	510,151	$	(40,465	)		(7.9	%)	$	(3,692	)		(0.8	%)
Other Real Estate		8,255		4,274		3,981			93.1	%		3,981			93.1	%
Total		477,941		514,425		(36,484	)		(7.1	%)		289			0.1	%
Property operating expenses, net of utility reimbursements:
Same Store		133,983		140,115		(6,132	)		(4.4	%)		3,229			2.5	%
Other Real Estate		5,191		3,400		1,791			52.7	%		1,791			52.7	%
Total		139,174		143,515		(4,341	)		(3.0	%)		5,020			3.7	%
Proportionate property net operating income:
Same Store		335,703		370,036		(34,333	)		(9.3	%)		(6,921	)		(2.0	%)
Other Real Estate		3,064		874		2,190			250.6	%		2,190			250.6	%
Total	$	338,767	$	370,910	$	(32,143	)		(8.7	%)	$	(4,731	)		(1.4	%)

(1)

Reflects the ~~governmental lockdown, offset partially by the lease-up of One Ardmore acquired in April 2019.~~

~~The results of our segments~~change for the nine months ended September 30, 2021and 2020, ~~and 2019,~~ as ~~presented below, are based~~if the California joint venture had closed on ~~segment classifications as of September 30,~~January 1, 2020.

Nine Months Ended September 30,

Historical Change

Ownership-Effected
Change (1)

(in thousands)
2020

2019

$

%

$

%

Rental and other property revenues, before utility reimbursements:

   Same Store
$
534,395

$
542,624

$
(8,229
)

(1.5
%)

$
(4,004
)

(0.8
%)
   Redevelopment and Development

36,001

37,839

(1,838
)

(4.9
%)

(1,838
)

(4.9
%)
   Acquisition and Other Real Estate

53,485

46,881

6,604

14.1
%

6,604

14.1
%
      Total

623,881

627,344

(3,463
)

(0.6
%)

762

0.1
%
Property operating expenses, net of utility reimbursements:

   Same Store

145,259

146,895

(1,636
)

(1.1
%)

(868
)

(0.6
%)
   Redevelopment and Development

14,636

14,736

(100
)

(0.7
%)

(100
)

(0.7
%)
   Acquisition and Other Real Estate

20,045

17,403

2,642

15.2
%

2,642

15.2
%
      Total

179,940

179,034

906

0.5
%

1,674

1.0
%
Proportionate property net operating income:

   Same Store

389,136

395,729

(6,593
)

(1.7
%)

(3,136
)

(0.9
%)
   Redevelopment and Development

21,365

23,103

(1,738
)

(7.5
%)

(1,738
)

(7.5
%)
   Acquisition and Other Real Estate

33,440

29,478

3,962

13.4
%

3,962

13.4
%
      Total
$
443,941

$
448,310

$
(4,369
)

(1.0
%)

$
(912
)

(0.2
%)

~~(1)~~

~~Reflects the change for the nine months ended September 30, 2020 and 2019, as if the California joint venture had closed on January 1, 2019.~~

~~Table of Contents~~

For the nine months ended September 30, ~~2020,~~2021, compared to ~~2019,~~2020, after giving effect to the sale of partial interest in certain Same Store communities in the California joint venture, our Same Store proportionate property ~~net operating income~~NOI decreased by ~~$3.1~~$6.9 million, or ~~0.9%~~2.0%. This decrease was attributable primarily to a ~~$4.0~~$3.7 million, or 0.8%, decrease in rental and other property revenues due ~~primarily~~ to a ~~110~~90 basis point decrease in ~~average daily occupancy,~~residential rental rates and a ~~$4.3 million, or 90~~60 basis point increase in bad debt, and a $1.2 million, or 20 basis point, reduction in other rental income due to local restrictions on our contractual right to charge late fees, offset partially by a 180 basis point increase in residential rents. Thisdebt.

The decrease in proportionate property ~~net operating income~~NOI was ~~offset partially by lower Same Store property operating expenses~~also attributable to an increase of ~~$0.9 million. The change~~$3.2 million, or 2.5%, in Same Store property operating expenses. Controllable operating expenses were ~~driven by a $2.2~~up $0.4 million, or ~~3.2%~~0.6%, ~~decrease in controllable operating expenses, offset partially by an increase in~~compared to the nine months ended September 30, 2020, while real estate taxes and ~~insurance.~~insurance costs increased by $1.4 million and $1.3 million, respectively.

~~Redevelopment and Development~~Other Real Estate proportionate property ~~net operating income was relatively flat~~NOI for the nine months ended September 30, ~~2020,~~2021, compared to ~~2019.~~

~~Acquisition and Other Real Estate proportionate property net operating income~~2020, increased by ~~$4.0~~$2.2 million, ~~or 13.4%, for the nine months ended September 30, 2020, compared to 2019,~~ due primarily to the ~~lease-up of One Ardmore acquired in April 2019 and the~~June acquisition of ~~1001 Brickell Bay Drive in July 2019, offset partially by a decrease in revenues related to commercial tenants due primarily to the economic impacts of COVID-19 and governmental lockdown.~~City Center on 7th.

Non-Segment Real Estate Operations

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

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



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



$1.4 million of lower NOI attributable to sold properties and properties leased to Aimco; and



$1.0 million of lower property management expenses; offset partially by



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

For the nine months ended September 30, 2020, we recognized $2.9 million of write-offs of straight-line rent receivables due to the impact of COVID-19 and governmental lockdown, and the resulting economic impact on our commercial tenants. No similar write-off was recognized in 2019.

~~Net operating income decreased for the three and nine months ended September 30, 2020,~~2021, compared to ~~2019, by $3.8 million and $15.4 million, respectively, due to the sale~~2020, non-segment real estate operations were relatively flat.

Table of ~~apartment communities in 2020 and 2019.~~Contents

Depreciation and Amortization

For the three and nine months ended September 30, 2021, compared to 2020, ~~and 2019,~~ depreciation and amortization expense was relatively flat.

General and Administrative Expenses

For the three and nine months ended September 30, ~~2020,~~2021, compared to ~~2019,~~2020, general and administrative expenses decreased by ~~$2.5~~$1.8 million, or ~~23.4%~~23.5%, and ~~$4.0~~$7.2 million, or ~~12.5%~~31.8%, respectively, due primarily to lower ~~incentive compensation.~~personnel costs and structural changes made to reflect AIR’s more focused business model.

~~Investment Management Expenses~~

For the three months ended September 30, 2020, compared to 2019, investment management expenses increased $1.2 million, or 78.3%, due primarily to costs related to the California joint venture. Investment management expenses for the nine months ended September 30, 2020, compared to 2019, were relatively flat.

Other Expenses, Net

Other expenses, net, includes costs associated with our risk management activities, partnership administration expenses, ~~ground lease rent expense,~~ and certain non-recurring items. For the three and nine months ended September 30, 2021, compared to 2020, other expenses, net decreased $13.7 million, or 78.2%, and $13.9 million, or 60.2%, respectively, due primarily to costs associated with the Separation included in the prior year and unrealized losses on an interest rate derivative recognized in the prior year.

Interest Income

For the three and nine months ended September 30, 2021, compared to 2020, interest income increased by $10.9 million and $36.3 million, respectively. Interest income for the three and nine months ended September 30, 2021 includes $6.9 million and $20.8 million, respectively, of income associated with our notes receivable from Aimco, and $6.5 million and $19.4 million, respectively, of interest income associated with properties leased to Aimco.

Interest Expense

For the three months ended September 30, ~~2020,~~2021, compared to ~~2019, other expenses, net, increased~~2020, interest expense decreased by ~~$13.6~~$7.4 million, or ~~339.1%~~16.6%, due primarily to ~~costs associated with the previously announced business separation~~lower interest expense on property-level debt following refinancing and ~~unrealized losses on our interest rate derivative, offset partially by restructuring costs incurred in 2019.~~debt payoff activity.

For the nine months ended September 30, ~~2020,~~2021, compared to ~~2019, other expenses, net~~2020, interest expense increased by ~~$10.7~~$19.4 million, or ~~83.8%~~15.4%, primarily due ~~primarily~~ to ~~costs associated~~$44.9 million of prepayment penalties from the early payment of property debt and the write-off of deferred financing costs. This was partially offset by $24.4 million of annual interest savings related to lower debt balances and interest rates.

Through September 30, 2021, we repaid $573.1 million of property debt with ~~the previously announced business separation and unrealized losses on our~~a weighted-average interest rate ~~derivative, offset partially by restructuring costs incurred in 2019, a favorable incremental cash receipt in the first quarter~~ of ~~2020 related to a previous settlement, and lower ground lease expense.~~

~~Table of Contents~~4.26%.

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

~~Interest income for~~During the three months ended September 30, ~~2020, compared to 2019, was relatively flat.~~

~~Interest income~~2021, we sold one apartment community with 58 apartment homes for ~~nine months ended September 30, 2020, compared to 2019, increased $1.8 million, or 20.8%, due primarily to~~ a gain ~~recognized~~ on ~~the early payoff~~disposition of ~~a seller financing note.~~

~~Interest Expense~~

~~For the three months ended September 30, 2020, compared to 2019, interest expense increased by $8.5~~$7.1 million ~~or 20.3%, due primarily to $7.9 million~~and net proceeds of prepayment penalties incurred as a result of our refinancing activity and an increase in interest expense related to our term loan and higher non-recourse property debt, offset partially by lower interest expense on our revolving credit facility.

For the nine months ended September 30, 2020, compared to 2019, interest expense increased by $17.7 million, or 14.4%, due primarily to refinancing activity and interest expense related to our term loan, offset partially by an increase in capitalized interest related to our active redevelopments and developments. As a result of our refinancing activity, we incurred $14.5 million of prepayment penalties, offset partially by more favorable interest rates on refinanced fixed rate debt.

~~Gain on Dispositions of Real Estate~~

$39.9 million. During the three months ended September 30, 2020, ~~and 2019,~~ we sold no apartment communities.

During the nine months ended September 30, 2021, we recognized $87.1 million of gain associated with the derecognition of the net book value of the properties leased to Aimco for redevelopment and development and $7.1 million of gain associated with the sale of one apartment community. During the nine months ended September 30, 2020, we sold one apartment community with 219 apartment homes for a gain on disposition of $47.2 million and net proceeds of $36.9 million. ~~During the nine months ended September 30, 2019, we sold eight apartment communities with 2,605 apartment homes for a gain on dispositions of $356.9 million and net proceeds of $418.3 million.~~

~~The apartment communities sold were in a lower-rated locations within our primary markets and had average revenues per apartment home significantly below those of our retained portfolio.~~

Mezzanine Investment Income, Net

~~On November 26, 2019, we loaned $275.0 million~~In connection with the Separation, Aimco was allocated economic ownership of the mezzanine loan investment and option to acquire a 30% equity interest in the partnership. Subsequent to the ~~partnership owning Parkmerced Apartments.~~Separation, all risks and rewards of ownership are Aimco’s, but legal transfer is not complete. During the three and nine months ended September 30, 2020, we recognized $6.9 million and $20.6 million, respectively, of income in connection with the mezzanine loan. For the three and nine months ended September 30, ~~2020, we have received a cash payment of $0.6 million.~~2021, the mezzanine investment income was offset by an expense to recognize the requirement that this income be contributed to Aimco.

We have accrued all interest amounts due as required by GAAP. Our loan is secured by approximately $300 million of borrower equity. In the event we determine that a portion of the loan or accrued interest is not collectable, we will cease income recognition and, if appropriate, recognize an impairment.

Income Tax (Expense) Benefit ~~(Expense)~~

Certain of our operations, including property management, ~~and risk management,~~ are conducted through taxable REIT subsidiaries or (“TRS ~~entities. Additionally, some of our apartment communities and 1001 Brickell Bay Drive are owned through TRS entities.~~entities”).

Our income tax (expense) benefit calculated in accordance with GAAP ~~includes: (a)~~includes income taxes associated with the income or loss of our TRS entities ~~including tax on gains on dispositions,~~ for which the tax consequences have been realized or will be realized in future periods; (b) low income housing tax credits generated prior to the sale of our Asset Management business that offset REIT taxable income, primarily from retained capital gains; and (c) historic tax credits that offset income tax obligations of our TRS entities.periods. Income taxes related to these

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items, as well as changes in valuation allowance, ~~and the establishment of incremental deferred tax items in conjunction with intercompany asset transfers (if applicable),~~ are included in income tax (expense) benefit in our condensed consolidated statements of operations.

For the three months ended September 30, 2021, compared to 2020, we recognized income tax benefit of ~~$1.7~~$0.3 million, compared to ~~$3.1~~an income tax provision of $0.4 million during the same period in 2019. The change is due primarily to income tax benefit associated with 1001 Brickell Bay Drive, offset partially by an increase in state tax expense and decreased benefit due to lower net operating losses at communities held by TRS entities. 2020.

For the nine months ended September 30, ~~2020,~~2021, we recognized income tax ~~benefit~~expense of ~~$7.9~~$0.8 million, compared to ~~$1.9~~an income tax benefit of $1.7 million during the same period in ~~2019. The change is due primarily to~~2020.

Income from Discontinued Operations, Net

For the three and nine months ended September 30, 2020, apartment communities that were included in discontinued operations generated net income ~~tax provision on the gain on dispositions~~ of ~~real~~

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

~~estate in 2019 and an income tax benefit associated with 1001 Brickell Bay Drive, offset partially by an increase in state tax expense.~~

Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions. We believe that the critical accounting policies that involve our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements relate to capitalized costs and the impairment of long-lived ~~assets and capitalized costs.~~assets.

Our critical accounting policies are described in more detail in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of ~~Aimco’s~~AIR’s and the ~~Aimco~~AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2019. There~~2020.

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

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

Other than stated above, there have been no other significant changes in our critical accounting policies from those reported in our Form 10-K and we believe that the related judgments and assessments have been consistently applied and produce financial information that fairly depicts the financial condition, results of operations, and cash flows for all periods presented.

Non-GAAP Measures

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

We measure our long-term total return using Economic Income, which is a non-GAAP financial measure. Economic Income represents stockholder value creation as measured by the per share change in estimated NAV plus cash dividends. We believe Economic Income is important to investors as it represents a measure of total return earned by our stockholders. We report and reconcile Economic Income annually. Please refer to the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019, for more information about Economic Income.

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

~~Nareit Funds From Operations, Pro forma Funds From Operations, and Adjusted Funds From Operations~~

~~Nareit~~NAREIT FFO is a non-GAAP ~~financial~~ measure that we believe, when considered with the financial statements determined in accordance with GAAP, is helpful to investors in understanding our performance because it captures features particular to real estate performance by recognizing that real estate assets generally ~~appreciates~~appreciate over time or ~~maintains~~maintain residual value to a much greater extent than do other depreciable assets such as machinery, computers, or other personal property. ~~Nareit~~NAREIT defines FFO as net income (loss) computed in accordance with GAAP, excluding: (i) depreciation and amortization related to real estate; (ii) gains and losses from sales and impairment of depreciable assets and land used in our primary business; and (iii) income taxes directly associated with a gain or loss on the sale of real estate, and including (iv) our share of the FFO of unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis to determine ~~Nareit~~NAREIT FFO. We calculate ~~Nareit~~NAREIT FFO

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

In addition to ~~Nareit~~NAREIT FFO, we ~~compute~~use Pro forma FFO ~~and AFFO, which are also non-GAAP financial measures that we believe are helpful~~ to ~~investors in understanding our~~measure short-term performance. Pro forma FFO represents ~~Nareit~~NAREIT FFO ~~attributable to~~as defined above, excluding the results of operations of properties retained by Aimco ~~common stockholders (diluted), excluding~~in the Separation and certain amounts that are unique or occur infrequently.

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In computing ~~2020~~ Pro forma FFO, we made the following adjustments to ~~Nareit~~NAREIT FFO:

•

~~Separation costs: we incurred costs in connection with the separation of our development platform. We excluded these~~

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

•

Transaction costs: we incurred certain transaction costs related to the California joint venture and other new business pursuits. We excluded these costs from Pro forma FFO because we believe they are not representative of ongoing operating performance.

•

Prepayment penalties: as a result of debt refinancing activity, we incurred debt extinguishment costs, net of income tax effect. We excluded these costs from Pro forma FFO because we believe these costs are not representative of ongoing operating performance.

•

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

•

Severance costs, litigation, and other, net: during the three months ended September 30, 2020, we incurred an unrealized loss on a derivative agreement and other non-recurring costs. We excluded these costs from Pro Forma FFO because we believe they are not representative of current operating performance. These costs are included in other expenses, net, on our Consolidated Statements of Operations.

~~In computing 2019~~ Pro forma FFO because we ~~made the following adjustments~~believe these costs are not representative of future cash flows.



Casualty losses: during 2021, we incurred casualty losses due to ~~Nareit FFO:~~

•

~~Preferred equity redemption related costs: on May 16, 2019, we redeemed our Class A Preferred Perpetual Stock. We excluded the redemption-related~~Hurricane Ida induced flooding in downtown Philadelphia causing damage to our Park Towne Place apartment community. We excluded these costs from Pro forma FFO because of the unusual nature of the weather event that caused the loss. We anticipate this loss will be covered by our third party insurance coverage.



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



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



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

NAREIT FFO and Pro forma FFO ~~because we believe these costs are not representative of operating performance.~~

•

~~Prepayment penalties: as described above.~~

•

~~Straight-line rent: as described above.~~

•

Severance costs, litigation, and other, net: in 2019, we incurred severance and restructuring costs, costs related to our litigation with Airbnb, and other non-recurring costs. We excluded these amounts from Pro forma FFO because we believe these costs are not representative of operating performance. These costs are included in other expenses, net, on our Consolidated Statements of Operations.

AFFO represents Pro forma FFO reduced by Capital Replacements, which represent our estimation of the actual capital additions made to replace capital assets consumed during our ownership period. When we make capital additions at an apartment community, we evaluate whether the additions extend the useful life of an asset as compared to its condition at the time we purchased the apartment community. We classify as Capital Improvements those capital additions that meet this criterion, and we classify as Capital Replacements those that do not. AFFO is a key financial indicator we use to evaluate our short-term operational performance and is one of the factors that we use to determine the amounts of our dividend payments.

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

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~~For the three~~NAREIT FFO and ~~nine months ended September 30, 2020 and 2019, Aimco’s Nareit FFO,~~ Pro forma FFO ~~and AFFO~~ are calculated as follows (in thousands, except per share data):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Net (loss) income attributable to Aimco common stockholders (1)

$
(25,046
)

$
2,003

$
20,845

$
332,805

Adjustments:

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

94,489

95,199

287,390

276,353

Gain on dispositions and other, net of noncontrolling
   partners’ interest

—

(1,146
)

(47,204
)

(356,929
)
Income tax adjustments related to gain on dispositions and other
   tax-related items

2,020

415

2,398

7,151

Common noncontrolling interests in Aimco Operating Partnership’s
   share of above adjustments

(4,911
)

(4,931
)

(12,453
)

3,962

Amounts allocable to participating securities

—

(142
)

(54
)

101

Nareit FFO attributable to Aimco common stockholders

$
66,552

$
91,398

$
250,922

$
263,443

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

Separation costs

11,218

—

11,930

—

Transaction costs

2,485

—

2,485

—

Prepayment penalties, net

7,311

1,604

13,514

1,604

Straight-line rent

634

635

1,902

3,590

Preferred equity redemption related amounts

—

—

—

3,864

Severance costs, litigation, and other

1,891

1,465

2,912

2,071

Pro forma FFO attributable to Aimco common stockholders

$
90,091

$
95,102

$
283,665

$
274,572

Capital Replacements, net of common noncontrolling interests in
   Aimco Operating Partnership and participating securities

(11,398
)

(11,434
)

(34,406
)

(34,273
)
AFFO attributable to Aimco common stockholders

$
78,693

$
83,668

$
249,259

$
240,299

Total share and dilutive share equivalents used to calculate Net
   income and Nareit FFO per share (2)

148,544

148,636

148,628

147,692

Adjustment to weight reverse stock split (3)

—

—

—

828

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

148,544

148,636

148,628

148,520

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

$
(0.17
)

$
0.01

$
0.14

$
2.26

Nareit FFO per share – diluted

$
0.45

$
0.61

$
1.69

$
1.78

Pro forma FFO per share – diluted

$
0.61

$
0.64

$
1.91

$
1.85

AFFO per share – diluted

$
0.53

$
0.56

$
1.68

$
1.62


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

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

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

~~(1)~~

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

~~(2)~~

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

~~(3)~~

During the three months ended March 31, 2019, we completed a reverse stock split and a special dividend paid primarily in stock. For stock splits, GAAP requires the restatement of weighted average shares as if the reverse stock split occurred at the beginning of the period presented; while shares issued in the special dividend are included in weighted average shares outstanding from the date issued. To minimize confusion and facilitate comparison of period-over-period Pro forma FFO and AFFO, we calculated pro forma weighted average shares for 2019 based on the effective date of the reverse stock split and ex-dividend date for the shares issued in the special dividend, thereby eliminating the per-share impact of the GAAP treatment to Aimco’s reported Pro forma FFO and AFFO.

Please ~~refer to Financial Highlights above~~see the Results of Operations section for discussion of the factors affecting our Pro forma FFO ~~and AFFO growth~~ for ~~2020, as compared to 2019.~~2021.

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

~~Table of Contents~~AIR.

Leverage Ratios

As discussed under the Balance Sheet heading, ~~our leverage strategy targets the ratio of~~we target Net Leverage to Adjusted EBITDAre ~~to be~~ below ~~7.0x and the ratio of Adjusted EBITDAre~~6.0x. We also focus on Proportionate Debt to Adjusted ~~Interest Expense and Preferred Distributions to be greater than 2.5x.~~EBITDAre. We believe these ratios, which are based in part on non-GAAP financial information, are commonly used by investors and analysts to assess the relative financial risk associated with balance sheets of companies within the same industry, and they are believed to be similar to measures used by rating agencies to assess entity credit quality.

Proportionate Debt, as used in our leverage ratios, is a non-GAAP measure and includes our share of the long-term, non-recourse property debt, outstanding borrowings under our revolving credit facility, and our term ~~loan.~~loans. Proportionate Debt excludes unamortized debt issuance costs because these amounts represent cash expended in earlier periods and do not reduce our contractual obligations. We reduce our recorded debt by the amounts of cash and restricted cash on-hand (which are primarily restricted under the terms of our property debt agreements), excluding tenant security deposits included in restricted cash, assuming the remaining amounts of cash and restricted cash would be used to reduce our outstanding leverage. We further reduce our recorded debt by our notes receivable from Aimco, the ~~value of our investment in a securitization trust that holds certain of our~~proceeds from which we expect will be used to pay down property ~~debt, as our payments of principal and interest associated with such property debt will ultimately repay our investments in the trust.~~debt.

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

Preferred ~~OP Units, as used in our leverage ratios,~~equity represents the redemption ~~amount~~amounts for AIR’s Preferred Stock and the ~~Aimco~~AIR Operating Partnership’s ~~preferred OP~~Preferred Partnership Units and, although perpetual in nature, isare another component of our overall leverage.

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The reconciliation of total indebtedness to Proportionate Debt and ~~Net Leverage,~~Preferred Equity, as used in our leverage ratios, ~~as of September 30, 2020,~~ is as follows (in thousands):


	September 30, 2020			September 30, 2021
Total indebtedness	$	4,406,797		$	4,235,980
Adjustments:
Debt issuance costs related to non-recourse property debt and term loan		22,454
Proportionate share adjustments related to debt obligations of consolidated and unconsolidated partnerships		(481,387	)
Debt issuance costs related to non-recourse property debt and term loans					20,211
Proportionate share adjustments related to debt obligations					(476,772	)
Cash and restricted cash		(268,491	)		(97,127	)
Tenant security deposits included in restricted cash		13,036			9,754
Proportionate share adjustments related to cash and restricted cash held by consolidated and unconsolidated partnerships		6,496
Securitization trust investment and other		(98,874	)
Proportionate share adjustments related to cash and restricted cash					7,338
Notes receivable from Aimco					(534,127	)
Proportionate Debt	$	3,600,031		$	3,165,257
Preferred OP Units		79,449
Redeemable noncontrolling interests in consolidated real estate partnership		4,371
Perpetual preferred stock					2,000
Preferred noncontrolling interests in AIR Operating Partnership					79,377
Net Leverage	$	3,683,851		$	3,246,634

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

•

~~gains and losses on the dispositions of depreciated property;~~



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

•

~~impairment write-downs of depreciated property;~~



impairment write-downs of depreciated property; and

•

~~impairment write-downs of investments in unconsolidated partnerships caused by a decrease in the value of the depreciated property in such partnerships; and~~

•

~~adjustments to reflect Aimco’s~~adjustments to reflect our share ~~of EBITDAre of investments in unconsolidated entities.~~

~~Table~~ of ~~Contents~~

EBITDAre of investments in unconsolidated entities.

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



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



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



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



the amount by which cash received exceeds GAAP lease income for the ~~reasons set forth below:~~properties leased to Aimco for redevelopment and development is included.

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•

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

•

the amount of interest income related to our investment in the subordinated tranches in a securitization trust holding primarily Aimco property debt, as we view our interest cost on this debt to be net of any interest income received from the investment; and

•

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

The reconciliation of net income to EBITDAre and Adjusted EBITDAre, ~~for the three months ended September 30, 2020 and twelve months ended September 30, 2020, as used in our leverage ratios, is as follows (in thousands):~~

Three Months Ended

Twelve Months Ended

September 30, 2020

September 30, 2020

Net income

$
(24,815
)

$
170,132

Adjustments:

Interest expense

50,519

186,503

Income tax benefit

(1,747
)

(9,052
)
Depreciation and amortization

98,249

393,558

Gain on disposition of real estate

—

(193,443
)
Recovery of losses on notes receivable

8

8

Adjustment related to EBITDAre of unconsolidated partnerships

212

846

EBITDAre

$
122,426

$
548,552

Net loss attributable to noncontrolling interests in consolidated real
   estate partnerships

154

69

EBITDAre adjustments attributable to noncontrolling interests

(2,771
)

(4,519
)
Interest income received on securitization investment

(2,265
)

(8,778
)
Non-cash straight-line rent

669

2,701

Pro forma adjustments, net (1)

6,828

(8,186
)
   Adjusted EBITDAre

$
125,041

$
529,839

   Annualized Adjusted EBITDAre

$
500,164

~~(1)~~

Pro forma adjustments, net, includes pro forma adjustments to Nareit FFO per the reconciliation above, as well as adjustments for which annualization would distort results, and adjustments to reflect the acquisition of Hamilton on the Bay and the California joint venture transaction as if both transactions closed on July 1, 2020, for the annualized current quarter, and October 1, 2019, for the trailing twelve months.

We calculated Adjusted Interest Expense, as used in our leverage ratios, based on the most recent three-month amounts, annualized, and trailing twelve months. Adjusted Interest Expense is a non-GAAP measure that we believe is meaningful for investors and analysts as it presents our share of current recurring interest requirements associated with leverage. Adjusted Interest Expense represents our proportionate share of interest expense on non-recourse property debt and interest expense on our revolving credit facility borrowings and term loan. We exclude from our calculation of Adjusted Interest Expense:

•

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

•

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

Preferred Distributions represents the distributions paid on the Aimco Operating Partnership’s preferred OP Units. We add Preferred Distributions to Adjusted Interest Expense for a more complete picture of the interest and dividend requirements of our leverage.

~~Table of Contents~~

~~The reconciliation of interest expense to Adjusted Interest Expense and Preferred Distributions for the three months ended September 30, 2020 and twelve months ended September 30, 2020,~~ as used in our leverage ratios, is as follows (in thousands):


	Three Months Ended
	September 30, 2021
Net income	$	10,671
Adjustments:
Interest expense		37,203
Income tax benefit		(275	)
Depreciation and amortization		81,121
Gain on derecognition of leased properties and dispositions of real estate		(7,127	)
EBITDAre	$	121,593
Net loss from continuing operations attributable to noncontrolling interests in consolidated real estate partnerships		785
EBITDAre adjustments attributable to noncontrolling interests		(9,257	)
Interest income on notes receivable from Aimco		(6,944	)
Pro forma FFO adjustments, net (1)		8,246
Adjusted EBITDAre	$	114,423
Annualized Adjusted EBITDAre	$	457,692

Three Months Ended

Twelve Months Ended

September 30, 2020

September 30, 2020

Interest expense

$
50,519

$
186,503

Adjustments:

Proportionate share adjustments related to interest of
   consolidated and unconsolidated partnerships

(1,043
)

(1,272
)
Debt prepayment penalties

(7,930
)

(19,506
)
Interest income earned on securitization trust investment

(2,265
)

(8,778
)
   Adjusted Interest Expense

$
39,281

$
156,947

Preferred distributions

1,687

7,323

   Adjusted Interest Expense and Preferred Distributions

$
40,968

$
164,270

Annualized Adjusted Interest Expense

$
157,124

Annualized Adjusted Interest Expense and Preferred Distributions

$
163,872

(1)

Pro forma adjustments, net, includes pro forma adjustments to NAREIT FFO under the heading NAREIT Funds From Operations and Pro forma Funds From Operations, excluding items that are not included in EBITDAre such as prepayment penalties, net and amounts attributable to noncontrolling interest share, a $1.0 million adjustment to normalize heightened short-term incentive compensation, and a $0.3 million adjustment to reflect the disposition of one apartment community during the period as if the transaction closed on July 1, 2021.

Liquidity and Capital Resources

Liquidity

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

As of September 30, ~~2020,~~2021, our available liquidity ~~exceeded $1.0 billion. We have commitments~~was $605.2 million, which consisted of:



$73.7 million in cash and cash equivalents;



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



$517.8 million of available capacity to ~~spend, approximately $111 million on long-cycle redevelopment and development projects underway.~~

~~Our available liquidity consists of:~~

borrow under our revolving credit facility after consideration of letters of credit.

•

~~$228.4~~ ~~million in cash and cash equivalents;~~

•

~~$27.1~~ ~~million of restricted cash, excluding amounts related to tenant security deposits, consists primarily of escrows held by lenders for capital additions, property taxes, and insurance; and~~

•

~~$793.4~~ ~~million of available capacity to borrow under our revolving credit facility after consideration of $6.6 million of letters of credit backed by the facility.~~

Additional liquidity may also be provided through property debt financing at properties unencumbered by ~~debt.~~debt and proceeds from our notes receivable from Aimco. As of September 30, ~~2020,~~2021, we held unencumbered communities with property debt with an estimated fair market value of approximately ~~$3.6 billion.~~$4.2 billion, an increase of 50% from December 31, 2020.

Uses for liquidity include normal operating activities, payments of principal and interest on outstanding property debt, capital expenditures, dividends paid to stockholders, distributions paid to noncontrolling interest partners, and acquisitions of apartment communities. We use our cash and cash equivalents and our cash provided by operating activities to meet short-term liquidity needs. In the event that our cash and cash equivalents and cash provided by operating activities are not sufficient to ~~cover~~meet our short-term liquidity needs, we have additional means, such as short-term borrowing availability and proceeds from apartment community sales and refinancings. We may use our revolving credit facility for working capital and other short-term purposes, such as funding investments on an interim basis. We expect to meet our long-term liquidity requirements, including ~~redevelopment spending and~~ apartment community acquisitions, through primarily non-recourse, long-term 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. ~~Our revolving credit facility matures on~~ ~~January 22, 2022, and our term loan matures on~~ ~~April 20, 2021, prior to consideration of its one-year extension option~~.

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~~The following table summarizes the payments due under our non-recourse property debt commitments, excluding debt issuance costs, as of September 30, 2020 (in thousands):~~

Total

Less than
One Year
(2020)

1-3 Years
(2021-2022)

3-5 Years
(2023-2024)

More than Five Years (2025 and Thereafter)

Non-recourse property debt

$
4,079,251

$
18,656

$
472,602

$
578,427

$
3,009,566

~~During the~~ ~~nine months ended September 30, 2020, we placed $688.5 million of new property debt~~ ~~for incremental proceeds of $370.2 million~~.

Leverage and Capital Resources

The availability of credit and its related effect on the overall economy may affect our liquidity and future financing activities, both through changes in interest rates and access to financing. Currently, interest rates are low compared to historical ~~levels. Recent events have increased volatility in interest rates, resulting in substantial movements, both up~~levels and ~~down, in short periods~~financing is

Table of ~~time. Capital is still available, but with fewer sources than in past periods.~~Contents

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

Historically, our primary source of leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt. As of September 30, ~~2020,~~2021, approximately ~~89%~~66.1% of our total leverage consisted of property-level, non-recourse, long-dated, amortizing debt. ~~Approximately 98%~~As of September 30, 2021, approximately 99.4% of our property-level debt is fixed-rate, which provides a hedge against increases in interest rates, capitalization rates, and inflation. The weighted-average remaining term to maturity of our property-level debt was ~~8.2~~8.7 years. On average, ~~5.0%~~1.8% of our unpaid principal balances will mature each year from 2021 through 2023.

~~While~~The following table summarizes the payments due under our ~~primary source~~debt commitments, excluding debt issuance costs, as of ~~leverage is property-level, non-recourse, long-dated, fixed-rate, amortizing debt, we also have a~~September 30, 2021 (in thousands):


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

(1)

Includes scheduled principal amortization and maturity payments.

(2)

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

(3)

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

As of September 30, ~~2020, we had no outstanding borrowings under~~2021, our ~~revolving credit facility and had capacity to borrow up to $793.4 million after consideration of $6.6 million of letters of credit backed by the facility.~~

During the nine months ended September 30, 2020, we amended our Second Amended and Restated Senior Secured Credit Agreement to include a $350.0 million term loan that matures on April 20, 2021. The term loan represents approximately 9% of our total leverage,preferred equity, which includes ~~a one-year extension option, and bears interest at 30-day LIBOR plus 185-basis points with a 50-basis point LIBOR floor.~~

~~As of September 30, 2020, our~~ outstanding preferred OP Units and outstanding perpetual preferred stock, represented approximately 2%2.1% of our total leverage. Preferred OP Units are redeemable at the holder’s ~~option; however, for~~option and our preferred stock is redeemable by AIR on or after December 15, 2025. For illustrative purposes, we compute the weighted-average maturity of our ~~total leverage~~preferred OP Units assuming a 10-year maturity onand our preferred stock assuming it is called at the ~~units.~~expiration of the no-call period.

The combination of non-recourse property-level debt, borrowings under our revolving credit facility, our term ~~loan,~~loans, our preferred OP Units, and our redeemable noncontrolling interests in a consolidated real estate partnership comprise our total leverage. The weighted-average remaining term to maturity for our total leverage ~~described above~~ was ~~7.6~~7.1 years as of September 30, ~~2020.~~2021.

Under ~~the~~our revolving credit facility ~~and term loan,~~ we have agreed to maintain ~~a Fixed Charge Coverage ratio of 1.40x,~~certain financial covenants, as well as other covenants customary for similar ~~revolving~~ credit arrangements. ~~For the trailing 12-month period ended September 30, 2020, our~~The financial covenants we are required to maintain include a Maximum Leverage ratio of no greater than 0.60 to 1.00; a Fixed Charge Coverage Ratio of greater than 1.5x, a Maximum Secured Indebtedness to Total Assets ratio ~~was 1.93x.~~of no greater than 0.45 to 1.00 through March 31, 2023, and 0.40 to 1.00 thereafter, and a Maximum Unsecured Leverage ratio no greater than 0.60 to 1.00. We were in compliance with these covenants as of September 30, 2021 and expect to remain in compliance ~~with this covenant~~ during the next 12 months.

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

Changes in Cash, Cash Equivalents, and Restricted Cash

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

~~Table of Contents~~

Operating Activities

For the nine months ended September 30, ~~2020,~~2021, net cash provided by operating activities was ~~$265.9~~$232.7 million. Our operating cash flow is affected primarily by rental rates, occupancy levels, and operating expenses related to our portfolio of apartment communities. Cash provided by operating activities for the nine months ended September 30, ~~2020,~~2021, decreased by ~~$12.9~~$33.1 million compared to ~~2019.~~the same period in 2020. The decrease was due primarily to lower contribution from our ~~Same Store and Redevelopment and Development~~apartment communities, which were negatively impacted by ~~the pandemic~~lower residential rental rates and ~~governmental lockdown, and lower net operating income associated with communities sold. The decrease was~~increased bad debt expense, offset partially by higher ~~contribution from our Acquisition~~ADO and ~~Other Real Estate communities.~~a recovery in commercial rents.

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Investing Activities

For the nine months ended September 30, ~~2020,~~2021, our net cash used in investing activities of ~~$356.0~~$250.6 million consisted primarily of purchases of real estate and capital expenditures, ~~and cash used in the purchase of Hamilton on the Bay,~~ offset partially by ~~proceeds from~~ the ~~disposition~~maturation of ~~one apartment community.~~debt investments.

~~Total capital~~Capital additions ~~at apartment communities~~ totaled ~~$258.3~~$126.3 million and ~~$296.1~~$226.2 million during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. We generally fund capital additions with cash provided by operating activities and cash proceeds from sales of apartment communities.

We categorize capital spending for communities in our portfolio broadly into ~~seven~~four primary categories:



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



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



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



other additions, which represent capital additions: (i) contemplated in the underwriting of our recently acquired communities; (ii) prior to the Separation, costs intended to enhance the value of the apartment community through the ability to generate higher average rental rates, and may include costs related to entitlement, which enhance the value of a community through increased density, and costs related to renovation of exteriors, common areas, or apartment homes; (iii) construction and related capitalized costs associated with the ground-up development of apartment communities prior to the Separation; and (iv) capitalized costs incurred in connection with the restoration of an apartment community after a casualty event. We expect these amounts to be significantly reduced under our business model. After the Separation, certain properties are leased to Aimco for redevelopment and development.

•

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

•

capital enhancements, which may include kitchen and bath remodeling, energy conservation projects, and investments in more durable, longer-lived materials designed to reduce costs, all of which differ from redevelopment additions in that they are generally lesser in scope and do not significantly disrupt property operations;

•

~~initial capital expenditures, which represent capital additions contemplated in the underwriting of our recently acquired communities;~~

•

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

•

~~development additions, which represent construction and related capitalized costs associated with the ground-up development of apartment communities; and~~

•

~~casualty capital additions, which represent capitalized costs incurred in connection with the restoration of an apartment community after a casualty event.~~

We exclude the amounts of capital spending related ~~to commercial spaces and~~ to apartment communities sold or classified as held for sale at the end of the period from the foregoing measures. We have also excluded from these measures indirect capitalized costs, which are not yet allocated to communities with capital additions, and their related capital spending categories.

~~Table of Contents~~

A summary of the capital spending for these categories, along with a reconciliation of the total for these categories to the capital expenditures reported in the accompanying condensed consolidated statements of cash flows, ~~for the nine months ended September 30, 2020 and 2019,~~ are presented below (in thousands):

Nine Months Ended September 30,

2020

2019

Capital replacements

$
28,330

$
27,834

Capital improvements

9,066

13,528

Capital enhancements

23,178

66,007

Redevelopment

106,873

74,666

Development

79,486

93,461

Initial capital expenditures

3,989

15,200

Casualty

7,411

5,420

Total apartment community capital additions

$
258,333

$
296,116

Plus: additions related to commercial spaces

2,391

4,221

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

356

4,362

Consolidated capital additions

$
261,080

$
304,699

Plus: net change in accrued capital spending

11,189

(11,950
)
Capital expenditures per condensed consolidated statement of cash flows

$
272,269

$
292,749


	Nine Months Ended September 30,
	2021		2020
Capital replacements	$	23,980	$	23,173
Capital improvements		6,717		7,816
Capital enhancements		82,586		19,163
Other capital expenditures		13,045		176,075
Total capital additions	$	126,328	$	226,227
Plus: additions related to apartment communities sold		2,036		20,144
Consolidated capital additions	$	128,364	$	246,371
Plus: net change in accrued capital spending from continuing operations		2,513		10,581
Total capital expenditures from continuing operations per condensed consolidated statement of cash flows	$	130,877	$	256,952

For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, we capitalized ~~$10.8~~$1.8 million and ~~$8.0~~$8.6 million of interest costs, respectively, and ~~$25.5~~$12.3 million and ~~$26.9~~$24.4 million of other direct and indirect costs, respectively.

~~We invested $23.2 million in~~Other capital ~~enhancements and $186.4 million in redevelopment and development during the nine months ended September 30, 2020. Capital enhancement spend~~expenditures decreased ~~$42.8~~by $163.0 million for the nine months ended September 30, ~~2020,~~2021, compared to ~~2019,~~2020, due primarily to ~~the delay of certain capital projects~~increased spend incurred in ~~response~~2020 related to the potential economic impacts of COVID-19 and the governmental lockdown. The increase in redevelopment spending is driven by the full redevelopments of the North Tower at Flamingo Point and 707 Leahy. Further details regarding our redevelopment and development ~~activities, including apartment communities constructed and delivered as~~ of ~~September 30, 2020, is discussed in the Executive Overview section above.~~properties that have subsequently been leased to Aimco effective January 1, 2021.

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Financing Activities

~~Net~~For the nine months ended September 30, 2021, net cash provided by financing activities was $41.5 million. Our financing cash flow is affected primarily by principal repayments on non-recourse property debt, proceeds from and repayments of our term loans, and the payment of dividends. Cash provided by financing activities for the nine months ended September 30, ~~2020 increased~~2021 decreased by ~~$423.0~~$139.4 million compared to ~~nine months ended September 30, 2019.~~the same period in 2020. The ~~change~~decrease was due primarily to ~~cash proceeds from the sale of a partial interest in the California joint venture, cash proceeds from our term loan, and lower payments to equity holders, offset partially by~~ higher principal repayments on non-recourse debt, the repayment of our previous term loan, and ~~higher payments~~repayments on our ~~revolving~~ credit ~~facility.~~

~~Equity~~facility, offset partially by proceeds from the April closing of the credit facility and ~~Partners’ Capital Transactions~~

~~The following table presents~~ the ~~Aimco Operating Partnership’s distribution activity (including distributions paid to Aimco) during the nine months ended September 30, 2020 (in thousands):~~

Cash distributions paid by the Aimco Operating Partnership to preferred unitholders

$
5,415

Cash distributions paid by the Aimco Operating Partnership to common unitholders (1)

193,139

Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships

312

Total cash distributions paid by the Aimco Operating Partnership

$
198,866

~~(1)~~

~~$183.0 million represented distributions to Aimco, and $10.1 million represented distributions paid to holders of common OP Units.~~

~~The following table presents Aimco’s dividend and distribution activity during the nine months ended September 30, 2020 (in thousands):~~

Cash distributions paid to holders of OP Units

$
15,551

Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships

312

Cash dividends paid by Aimco to common stockholders

183,003

Total cash dividends and distributions paid by Aimco

$
198,866

~~Table~~issuance of ~~Contents~~Common Stock in a private placement for $342.2 million, net of fees.

Future Capital Needs

We expect to fund any future acquisitions ~~redevelopment, development,~~ and other capital spending principally with proceeds from apartment community sales, short-term borrowings, debt and equity financing, and operating cash flows. ~~Our near-term business plan does not contemplate the issuance of equity.~~ We believe, based on the information available at this time, that we have sufficient cash on hand and access to additional sources of liquidity to meet our operational needs for ~~2020~~2021 and beyond.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, ~~2020,~~2021, on a consolidated basis, we had approximately ~~$69.5~~$14.5 million of variable-rate property-level debt outstanding in addition to $1.2 billion of term loans and $78.2 million of variable-rate borrowings under our ~~$350.0 million term loan.~~revolving credit facility. We estimate that a change in 30-day LIBOR of 100 basis points with constant credit risk spreads would reduce or increase interest expense by approximately ~~$0.7~~$1.8 million and ~~$3.0~~$12.4 million, respectively, on an annual basis.

During the nine months ended September 30, 2020, we paid an upfront premium of $12.1 million for the option to enter into an interest rate swap at a future date. This interest rate option, or swaption, provides partial protection against our refinancing interest rate risk and is intended to mitigate interest rate increases between now and 2024. We receive a cash settlement in the future if the prevailing interest rate is higher than the 1.68% strike price. The amount of future cash settlement is limited if the prevailing interest rate exceeds 2.78%. Alternatively, if interest rates were to decrease below the specified strike price, we would not receive a cash settlement.

As of September 30, ~~2020,~~2021, we had approximately ~~$268.5~~$97.1 million of cash and cash equivalents and restricted cash, a portion of which bears interest at variable rates, which may offset somewhat a change in rates on our variable-rate debt discussed above.

ITEM 4. CONTROLS AND PROCEDURES

~~Aimco~~AIR

Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There has been no change in ~~Aimco’s~~AIR’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the third quarter of ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, ~~Aimco’s~~AIR’s internal control over financial reporting.

The ~~Aimco~~AIR Operating Partnership

Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There has been no change in the ~~Aimco~~AIR Operating Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the third quarter of ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, the ~~Aimco~~AIR Operating Partnership’s internal control over financial reporting.

4745

Table of Contents

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

As of the date of this report, ~~we are updating~~there have been no material changes from the risk factors in ~~Aimco’s~~AIR’s and the ~~Aimco~~AIR Operating Partnership’s combined Annual Report on Form 10-K for the year ended December 31, ~~2019, to include the following risk factors. The risk factors as-filed remain unchanged.~~2020.

The proposed plan to separate our business into two, focused and independent, publicly traded companies, may not be completed on the currently contemplated timeline or terms, or at all, and may not achieve the intended benefits.

On September 14, 2020, we announced a plan to separate our business into two, focused and independent, publicly traded companies, AIR and Aimco, in the form of a spin-off transaction, whereby Aimco will retain the redevelopment and development business and portfolio (among other communities and assets), and AIR will own a diversified portfolio of stabilized properties. We expect to complete the spin-off in 2020, although there can be no assurance as to whether or when the spin-off will occur. The spin-off is subject to various conditions, including, among other things, declaration by the SEC that the registration statements on Form 10 are effective, the listing on the NYSE of the common stock to be distributed in the spin-off, and final approval and declaration of the distribution by our Board of Directors. Such conditions and other unforeseen developments, including in the debt or equity markets or general market conditions, could delay or prevent the spin-off or cause the spin-off to occur on terms or conditions that are less favorable and/or different than anticipated. In addition, even if all the conditions have been satisfied, if our Board of Directors determines, in its sole discretion, that the spin-off is not in the best interests of Aimco and its stockholders, Aimco may terminate the spin-off. We also are expected to incur significant one-time costs and ongoing costs in connection with, or as a result of, the spin-off, including costs of operating each business as an independent, publicly-traded company. Those costs may exceed our estimates or could negate some of the benefits we expect to realize.

The spin-off may not provide results on the scope or scale we anticipate, and we may not realize any or all of the intended benefits. For instance, it may take longer than anticipated for Aimco to, or it may never, succeed in growing its revenues through its development and redevelopment business, and it may take longer than anticipated for AIR to, or it may never, succeed in growing its business through the acquisition of new stabilized apartments communities or through its active management strategies.

Pandemics, such as COVID-19, may affect our ability to collect rents and late fees from tenants, and our ability to evict tenants, in addition to having other negative effects on our business, which in turn could adversely affect our financial condition and results of operations.

A local, regional, national or international outbreak of a contagious disease, such as COVID-19, could negatively impact our tenants and our operations. The World Health Organization declared COVID-19 to be a pandemic on March 11, 2020. The outbreak of the COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting a wide variety of measures including states of emergency, mandatory quarantines, required business and school closures, implementing “shelter in place” orders, and restricting travel. In addition, many cities and states have enacted, or are considering enacting, exceptions to contractual obligations for residents and commercial tenants, including government mandated rent delays or other abatement measures or concessions or prohibitions on lease terminations or evictions. Many experts predict that the outbreak will trigger a period of material global economic slowdown or a global recession.

Factors that have negatively impacted, or would negatively impact, our operations or those of entities in which we hold a partial interest (including our interest in the partnership owning the Parkmerced Apartments), during the COVID-19 pandemic or another pandemic include:

•

~~our ability to collect rents and late fees on a timely basis or at all, without reductions or other concessions;~~

•

~~our ability to evict residents for non-payment and for other reasons;~~

•

~~our ability to ensure business continuity in the event our continuity of operations plan is not effective or improperly implemented or deployed during a disruption;~~

•

~~fluctuations in regional and local economies, local real estate conditions, and rental rates;~~

•

~~our ability to control incremental costs associated with COVID-19;~~

•

~~our ability to dispose communities at all or on terms favorable to us;~~

~~Table of Contents~~

•

~~our ability to complete redevelopments and developments as planned; and~~

•

~~potential litigation relating to the COVID-19 pandemic.~~

Given the ongoing and dynamic nature of the circumstances surrounding the COVID-19 pandemic, it is difficult to predict how significant the impact of this outbreak will be on the global economy, our residents and commercial tenants, our communities, and the operations of entities in which we hold a partial interest (including our interest in the partnership owning the Parkmerced Apartments), or for how long disruptions are likely to continue. The extent of such impact will depend on developments, which are highly uncertain, rapidly evolving and cannot be predicted, including the ability to contain the virus, the duration of measures implemented and the overall impact of these measures. Such developments, depending on their nature, duration, and intensity, could have a material adverse effect on our operating results and financial condition. The COVID-19 pandemic also may have the effect of heightening many of the other risks described in our combined Annual Report on Form 10-K for the year ended December 31, 2019.

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

~~Aimco~~AIR

Unregistered Sales of Equity Securities

From time to time, ~~Aimco~~we may issue shares of Common Stock in exchange for OP Units, defined under The ~~Aimco~~AIR Operating Partnership heading below. Such shares are issued based on an exchange ratio of one share for each common OP Unit. ~~Aimco~~We may also issue shares of Common Stock in exchange for limited partnership interests in consolidated real estate partnerships. During the three months ended September 30, ~~2020, Aimco did not issue any~~2021, we issued 125,651 shares of Common Stock in exchange for OP Units or limited partnership interests in ~~these transactions.~~consolidated real estate partnerships.

~~Repurchases~~The AIR Operating Partnership

Unregistered Sales of Equity Securities

~~There were no repurchases by Aimco of its common equity securities~~The AIR Operating Partnership did not issue any unregistered OP Units during the three months ended September 30, 2020. Aimco’s Board of Directors has, from time to time, authorized Aimco to repurchase shares of its outstanding Common Stock. As of September 30, 2020, Aimco was authorized to repurchase approximately 10.4 million shares. This authorization has no expiration date. These repurchases may be made from time to time in the open market or in privately negotiated transactions.

~~The Aimco Operating Partnership~~

~~Unregistered Sales of Equity Securities~~

~~The Aimco Operating~~ 2021.~~Partnership did not issue any unregistered OP units~~ ~~during the~~ ~~three months ended September 30, 2020~~.

Repurchases of Equity Securities

The ~~Aimco~~AIR Operating Partnership’s Partnership Agreement generally provides that after holding common OP Units for one year, limited partners other than ~~Aimco~~AIR have the right to redeem their common OP Units for cash or, at our election, shares of ~~Aimco~~AIR Common Stock on a one-for-one basis (subject to customary antidilution adjustments). During the three months ended September 30, ~~2020, no~~2021, approximately 125,651 common OP Units were redeemed in exchange for ~~shares of~~ Common Stock.

The following table summarizes the ~~Aimco~~AIR Operating Partnership’s repurchases, or redemptions in exchange for cash, of common OP ~~Units~~Units.


Fiscal period	Total Number of Units Purchased		Average Price Paid per Unit		Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2021 ‒ July 31, 2021		1,294	$	48.75	N/A	N/A
August 1, 2021 ‒ August 31, 2021		695	$	51.24	N/A	N/A
September 1, 2021 ‒ September 30, 2021		4,365	$	50.55	N/A	N/A
Total		6,354	$	50.26

(1)

The terms of the AIR Operating Partnership’s Partnership Agreement do not provide for a maximum number of units that may be repurchased, and other than the ~~three months ended September 30, 2020.~~

Fiscal period

Total Number
of Units
Purchased

Average
Price Paid
per Unit

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

Maximum Number of
Units that May Yet Be
Purchased Under the
Plans or Programs (1)
July 1, 2020 ‒ July 31, 2020

1,393

$
38.65

N/A

N/A
August 1, 2020 ‒ August 31, 2020

9,549

36.97

N/A

N/A
September 1, 2020 ‒ September 30, 2020

2,477

36.35

N/A

N/A
Total

4,178

$
37.03

~~(1)~~

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

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

Dividend and Distribution Payments

As a REIT, ~~Aimco~~AIR is required to distribute annually to holders of its Common Stock at least 90% of its “real estate investment trust taxable income,” which, as defined by the Code and United States Department of Treasury regulations, is generally equivalent to net taxable ordinary income. Our ~~revolving~~ credit ~~facility~~agreement includes customary covenants, including a restriction on dividends and distributions and other restricted payments, but permits dividends and distributions during any four consecutive fiscal quarters in an aggregate amount of up to 95% of ~~Aimco’s~~AIR’s FFO for such period, subject to certain non-cash adjustments, or such amount as may be necessary to maintain ~~Aimco’s~~AIR’s REIT ~~status and avoid the payment of federal income or excise tax. Aimco’s Board of Directors targets a dividend payout ratio between 65% and 70% of AFFO.~~status.

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ITEM 5. OTHER INFORMATION

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

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ITEM 6. EXHIBITS

The following exhibits are filed with this report:


EXHIBIT NO. ~~(1)~~		DESCRIPTION

3.1		Amended and Restated Charter ~~– Articles~~ of ~~Restatement~~Apartment Income REIT Corp. (Exhibit 3.1 to ~~Aimco’s Annual~~AIR’s Current Report on Form ~~10-K~~8-K dated ~~February 24,~~December 15, 2020, is incorporated herein by this reference)

3.2		Amended and Restated Bylaws of Apartment Income REIT Corp. (Exhibit ~~3.1~~3.4 to ~~Aimco’s~~AIR’s Current Report on Form 8-K dated ~~January 26, 2016, is incorporated herein by this reference)~~

~~4.1~~		~~Description of Aimco’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. (Exhibit 4.1 to Aimco’s Annual Report on Form 10-K dated February 24,~~December 15, 2020, is incorporated herein by this reference)

10.1		~~Fifth~~Seventh Amended and Restated Partnership Agreement of ~~Limited Partnership of the Aimco Operating Partnership,~~Apartment Income REIT, L.P. (Exhibit 10.1 to AIR’s Current Report on Form 8-K dated ~~as of~~ July 7, 2021, is incorporated herein by this reference)

10.2		Amendment dated October 29, ~~1994, as amended~~2021, to employment agreement between Terry Considine and ~~restated as of April 8, 2019 (Exhibit~~Apartment Income REIT, L.P. (f/k/a AIMCO Properties, L.P.)( Exhibit 10.1 to Aimco’s Current Report on Form 8-K dated ~~April 5, 2019,~~December 21, 2017, is incorporated herein by this reference)

31.1		Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – ~~Aimco~~Apartment Income REIT Corp.

31.2		Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 – ~~Aimco~~Apartment Income REIT Corp.

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

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

32.1		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – ~~Aimco~~Apartment Income REIT Corp.

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

101		The following materials from ~~Aimco’s~~AIR’s and the ~~Aimco~~AIR Operating Partnership’s combined Quarterly Report on Form 10-Q for the quarterly period ended September 30, ~~2020,~~2021, 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;~~income (loss); (iv) condensed consolidated statements of equity and partners’ capital; (v) condensed consolidated statements of cash flows; and (vi) notes to condensed consolidated financial statements.

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

~~(1)~~

~~Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request.~~

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SIGNATURES

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


	APARTMENT ~~INVESTMENT AND~~ ~~MANAGEMENT COMPANY~~INCOME REIT CORP.

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


	~~AIMCO PROPERTIES,~~APARTMENT INCOME REIT, L.P.

	By:	~~AIMCO-GP,~~AIR-GP, Inc., its ~~general partner~~General Partner

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

Date: ~~October 30, 2020~~November 2, 2021

5249

Balance at December 31, 2019	$	97,064
Preferred distributions		(5,415	)
Redemption of preferred units		(17,615	)
Net income		5,415
Balance at September 30, 2020	$	79,449

Number of apartment homes		271
Purchase price	$	89,600
Capitalized transaction costs		2,506
Total consideration	$	92,106
Consideration allocated to land	$	56,251
Consideration allocated to building and improvements		34,645
Consideration allocated to intangible assets (1)		1,506
Consideration allocated to below-market lease liabilities (2)		(296	)
Total consideration	$	92,106

Aimco Special Dividend:
Cash	$	67.1
Shares of Common Stock		4.5
Cash paid in lieu of issuing fractional shares	$	0.4

Aimco Operating Partnership Special Distribution:
Cash	$	72.7
Common partnership units		4.8
Cash paid in lieu of issuing fractional units	$	0.4

	Same Store		Redevelopment and Development		Acquisition and Other Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Three months ended September 30, 2020:
Rental and other property revenues	$	171,033	$	12,498	$	17,311	$	12,531	$	2,082		$	215,455
Property operating expenses		49,146		4,919		7,103		9,706		4,055			74,929
Other operating expenses not allocated to segments (3)		—		—		—		—		126,757			126,757
Total operating expenses		49,146		4,919		7,103		9,706		130,812			201,686
Proportionate property net operating income (loss)		121,887		7,579		10,208		2,825		(128,730	)		13,769
Other items included in income before income tax benefit (4)		—		—		—		—		(40,331	)		(40,331	)
Income (loss) before income tax benefit	$	121,887	$	7,579	$	10,208	$	2,825	$	(169,061	)	$	(26,562	)

	Three months ended						2020
	June 30, 2020			September 30, 2020			July			August			September
Payments received during the period		95.3	%		95.6	%		95.8	%		95.3	%		95.7	%
Payments received after period close		2.4	%		1.1	%		1.5	%		1.2	%		0.7	%
Total payments received as of October 23, 2020		97.7	%		96.7	%		97.3	%		96.5	%		96.4	%

	Location	Homes Approved for Redevelopment		Homes Completed		Homes Leased		Total Planned Investment (1)		Investment to Date		Expected Initial Occupancy (2)	Expected NOI Stabilization (2) (3)
Short-cycle:
Bay Parc	Miami, FL		90		75		69	$	27.7	$	26.6	N/A	N/A
Flamingo Point Center Tower	Miami Beach, FL		58		18		20		16.0		7.5	N/A	N/A
Long-cycle:
707 Leahy (4)	Redwood City, CA		110		60		53		26.5		25.2	1Q 2020	2Q 2022
Eldridge Townhomes (5)	Elmhurst, IL		58		54		57		35.1		33.9	2Q 2020	1Q 2022
Flamingo Point North Tower	Miami Beach, FL		366		—		—		171.0		86.7	4Q 2021	2Q 2024
The Fremont (6)	Denver, CO (MSA)		253		98		85		87.0		85.5	3Q 2020	1Q 2023
Parc Mosaic (7)	Boulder, CO		226		226		215		124.6		123.8	3Q 2019	1Q 2022
Prism (8)	Cambridge, MA		136		—		—		73.2		51.6	1Q 2021	3Q 2023
Total			1,297		531		499	$	561.1	$	440.8

Average revenue per Aimco apartment home (1)	$	2,212
Portfolio average rents as a percentage of local market average rents		112	%
Percentage A (average revenue per Aimco apartment home $2,872)		53	%
Percentage B (average revenue per Aimco apartment home $1,951)		29	%
Percentage C+ (average revenue per Aimco apartment home $1,771)		18	%

	Three Months Ended			Twelve Months Ended
	September 30, 2020			September 30, 2020
Net income	$	(24,815	)	$	170,132
Adjustments:
Interest expense		50,519			186,503
Income tax benefit		(1,747	)		(9,052	)
Depreciation and amortization		98,249			393,558
Gain on disposition of real estate		—			(193,443	)
Recovery of losses on notes receivable		8			8
Adjustment related to EBITDAre of unconsolidated partnerships		212			846
EBITDAre	$	122,426		$	548,552
Net loss attributable to noncontrolling interests in consolidated real estate partnerships		154			69
EBITDAre adjustments attributable to noncontrolling interests		(2,771	)		(4,519	)
Interest income received on securitization investment		(2,265	)		(8,778	)
Non-cash straight-line rent		669			2,701
Pro forma adjustments, net (1)		6,828			(8,186	)
Adjusted EBITDAre	$	125,041		$	529,839
Annualized Adjusted EBITDAre	$	500,164

Cash distributions paid to holders of OP Units	$	15,551
Cash distributions paid to holders of noncontrolling interests in consolidated real estate partnerships		312
Cash dividends paid by Aimco to common stockholders		183,003
Total cash dividends and distributions paid by Aimco	$	198,866